Peter Schiff, Jim Rickards, Willem Middelkoop, Edin Mujagic: Global Sovereign Debt Crisis

We won't have World War II, so we'll be able. We've come close, but we'll be able to avoid that. But I would look for a series of large regional wars, something like the Ukraine war, but you'll see them all over the world, a pattern, that particular pattern. We could see war between the West and the East. And unfortunately, now 10 years later, we're on this path of confrontation.

When you talk to professional forecasters, it it's actually not a forecast. It's hope that the central banks will succeed. I don't think you should, you know, give any nation the privilege of providing the reserve a currency for everybody else. And I I think that, you know, currency needs to be backed by money. Um, it can't just be backed by another currency.

So, uh, gentlemen, uh, you guys don't need an introduction. I think, uh, everybody will already know you. So I would like like to start um with this first statement or question actually. How do we see the world in a bigger picture? Like if we really step uh step away way more forward from a macroeconomical view from a um geopolitical view, where are we right now? Where do we stand?

Well, it's the easy one if I um can start. I think um I I learned an awful lot and I I I need to give credit to Jim uh because Jim was one of the original uh well experts who was calling for a reset and I took a I stole uh quite a bit of his ideas and worked it out in the big reset.

But I I was very um I was I was inspired by your books and your line of thinking and I think uh we entered the big reset and the big reset is a process. It's not an a binary event and it's it's it's it's a process in which we move away from the post Breton and Woods world. You know it's 81 years after the the start of the Breton Woods conference which was the start of the dollar system. And I for me that's that's that's the main um well thesis one could say.

By the way gentlemen this is your conversation um don't mind me I'm not here I will just uh help out when we get stuck but for the rest just leave it up to you there's uh there's way enough room for that. What do you think Peter?

Well, I mean well of course it's a big question that you asked but uh I guess apart from the fact that you know just about every country in the world has too much government and it's just a question of degree. I mean some countries have more government than others and and the countries that have less government are more prosperous uh and the ones that have a lot of government you know you know are not achieving what they otherwise could and they have a lot of problems because governments end up uh accumulating a lot of debt and they do that because it's uh you know it serves their political agendas. Politicians like to get elected and they like to promise things and the way they deliver on those promises without the public realizing the cost is by going into debt and creating inflation. So those those problems exist everywhere. I mean the positives is that there's still enough capitalism left so that we can uh have progress and have the living standards that we do and look forward to uh greater living standards in the future. But I think that the main thing the main problem that really underlies the global economy and I've thought this for some time is the the role that the US dollar plays uh in the global economy as a reserve currency and the massive uh you know imbalances that are a byproduct of this system and the system benefits the United States in a tremendous way so long as it continues. And the benefit is that Americans don't have to produce, you know, anywhere near as much as as we consume. And so we're allowed to live a standard of living that really is not representative of our true productivity. Um, you know, factories uh require a lot of capital to create. Um, the work involved, you know, can be physical and, you know, difficult and there's pollution and other uh factors that are involved. And we're able to basically eliminate all that, but still get the benefit of all the products that these factories and the labor and capital produce uh by just printing money. And we print money or don't even have to print it. We just electronically create it out of thin air. Requires no resources, no effort, no pollution. And we send uh that around the world and we get all these products. And now we also get the benefit of the world just taking the money that we gave them and sending it right back to us. Uh they buy our bonds, they buy our stocks, they buy real estate. And yes, in the long in the scheme of things, we're selling off our assets. We're going into debt uh to consume. And you know, we're becoming poor as a nation. But in the short run, it makes our stock prices higher, our asset prices higher. So we feel richer. We can now borrow more money against that collateral. we can spend more money so we have a higher you know standard of living we're able to inflate the GDP uh so you know in paper it looks great for the US but the rest of the world is bearing the burden of supporting us of under consuming and having their capital that might otherwise have been invested productively in their own economies uh instead ends up getting loaned to to the US. So I think that when this system finally breaks, it's a massive relief for the rest of the world and a huge uh problem for the United States.

When the system breaks, Jim?

Yeah, first of all, I'd like to thank Wilhelm for the compliment, but I would add that any writer analyst in this field is always absorbing ideas from others and sharing them. That's a good intellectual environment. Uh Wilhelm uh as far as I know came up with the name the great reset. It's common place today. you hear it all the time, but he was the first one to, you know, put that on the cover of a book and a very good book it is. So, uh, want to certainly want to give him credit for that. On on Peter's comments, I recently returned with my wife. We were on an expedition in Antarctica. And I very much enjoyed it because there is no government. If you like a place with I mean no, I don't mean low government, low regulation, there is no government. Nobody owns it. Nobody's in charge of it. Uh, we were attacked. We were in a a black Zodiac. We were attacked by an 800lb leopard seal who we thought it was a torpedo, but he he actually uh bit a hole in the vessel. We started to sink and had to do a boat to rescue in the Antarctic Ocean. So, uh uh yeah, it's still pretty uh pretty untamed.

Um, on Peter's point, printing money is practically irrelevant without velocity. Velocity is the turnover of money. The money uh the Fed could print $10 trillion. In fact, they did. uh there was very little inflation. Uh it it just doesn't matter. The Fed's practically irrelevant. What does matter is bank money and whether it's lent and spent and whether it has what's called velocity, which is the turnover of money. Uh does $1 of printed money, let's call it that, support $10 of GDP or $2 of GDP. Well, one is a, you know, velocity of 10, the other one has a velocity of two. That that makes a big difference. And velocity is declining. That's why we don't see the inflation. Inflation is really not much of a threat.

But um Marlene to get into your kind of original question looking not just where are we today but as we stand here today looking over several ridge lines where we're going. I think the the biggest factor is um there's you know economics and markets and money etc the kinds of things we've been talking about then there's geopolitics rise and fall of countries uh you know wars etc and they've always had some interaction. Uh I think the opium war is a prominent example uh where Britain was running a trade deficit with China and they said, "Well, what do we do about this?" The uh they tried to get the Chinese to buy stuff. The Chinese said, "We don't want any of your stuff, you know, just just uh you know, you buy from us." Cuz the British wanted tea and porcelain and a lot else. Um and the British said, "What what do we have that we could sell them?" And they had control over parts of Afghanistan. They said, "Oh, we have heroin, so let's or opium. Uh so, let's just sell them that." And the Chinese said, "Are you crazy? We don't want that." and uh uh they came in with the Royal Navy and blasted open the harbor and got the Chinese addicted to opium and it's very successful and contributed to the decline of the Shing Dynasty. Um I think the Chinese are paying us back today with fentanyl. Uh that this is a reverse of the opium wars. They're they haven't sent their navy over, but they're uh well using smuggling boats to to kind of kill over 100,000 Americans a year with this very very potent opiate derivative uh you know synthetic chem chemicals. This is kind of payback for the opium wars. So there's always been some connection. But my point is it's impossible to do good market economic analysis today without blending in the geopolitical. They're really merged. They're really two sides of the same coin. You have to understand both. They have to be really good at both. And the just to kind of wrap up, um something like the Ukraine war, but you'll see them all over the world, a pattern that that particular pattern.

Um, if you're a poker player, there's an expression in poker. If you're in a three-handed poker game and you don't know who the sucker is, you're the sucker. Uh in other words, it's always two against one. Secretly, it's two. It's two against one. And there are only three countries in the world that matter. Russia, China, and the United States. Sorry, Britain. Sorry, France, Germany, your secondary powers. Others are tertiary powers.

So it's a three-handed poker game with Russia, China, and the United States. In 1971, Richard Nixon understood this, and he pivoted to China. So the US and China together could destroy the Soviet Union, which they did. Berlin wall fell in 1989. The Soviet Union was dissolved in 1991. Today, the opposite is required. The US needs to pivot to Russia and ally with Russia in order to destroy communist China. That's the big game. But the Americans uh we've we all have our Kissinger or George Schulz or James Baker or George Marshall, you know, the the kind of leadership we've had in the past is sort of missing now. But I think the Trump administration is feeling their way towards an alliance with Russia and Russia going forward, we'll be once we get rid of these sanctions, which never work. I teach at the US Army War College. I've explained to my classes why sanctions don't work and they have and they've boomeranged on us. But once we get rid of them, uh, Russia will present some excellent investment opportunities.

I heard you said some say something similar yesterday, Eden, like, uh, do you do you agree? Is it like, um, are we a no one as being the Euro zone or?

I'm a huge fan of history. Uh, because one of the reasons is you you can learn so much from looking back in time. And um when you look back in time, one of the things you'll see is that from time to time, there's a large number of years between those things. But from time to time, you get these disruptive periods where everything shifts. And um um usually it takes 15, 20, 25 years. uh many things in the society with your money uh um everything changes. It's not a revolution. It's evolution. It goes slowly. And looking back in history at those times um I have this strong feeling that back in 2007-2008 we have started um on another one of those uh revolutions and this is the first one we are actually seeing with our own eyes. I don't know what the future will bring. But what I know from looking back in into history is that um the world before 2007 and the world after this has been completed will not be the same place. Either way you look at the market economy whether we will have a market economy uh but also uh the future of your money monetary systems evolve monetary systems change and we are in the midst of a new change.

What will will it look like the new?

The new monetary system?

Well, I I I think it will be centered on gold again. I think that's the only monetary system that works. I don't think you should, you know, give any nation the privilege of providing the reserve currency for everybody else. And I I think that, you know, currency needs to be backed by money. Um, it can't just be backed by another currency. Um, and you know, when when the world first went on the the dollar standard, it was because the US dollar was not only backed by gold, but fully redeemable on demand into gold. So, gold was still at the center of the global monetary system. And I think it worked much better than what we have today. But you know, I just wanted to mention something quick as to what Jim said about the fentanyl problem. Um, kind of blaming it on on China. But um, you know, I blame the problem on on us on the United States and the ridiculous drug policy that we have. You know, we're here in the Netherlands, which has a much more sensible policy. But if we decriminalized narcotics in the United States and people could legally buy them, maybe with a prescription or something, there would be no fentanyl. Um, so it's all because we've decided to criminalize this activity and and turn what could be a health problem into a criminal problem. And that and and that's it. I mean, we came to the we could try to blame the rest of the world for satisfying the demand that's coming from the United States, but the demand is there and it's there because of the drug laws.

So you you don't think it's a deliberate strategy like Jim says to ruin the US?

No, I I I look I just think that the players involved are just trying to make money.

And and that's you know and there's you know there's demand for illegal drugs in the United States because there is no demand for legal drugs and so the only way to get drugs is is is illegally. There's no other quality control. There's no other standards. There's no reputation. There's no real brands. There's no legal recourse. you can't sue, you know, if I buy drugs and they're laced with something, I can't sue the man. So, you have you have no free market type of protections uh that would exist if the government simply allowed adults to make a choice as to what they want to consume and allow the market to regulate the quality and the parents the parents of the half million dead might disagree.

So, going back to?

Be dead if we didn't have a loss. So going back to money uh money backed by gold you just mentioned Peter but uh Jim you might have some insights um being very close I think to the current administration um Trump is a huge supporter of of crypto.

Mhm.

So and gold uh we we all know that.

Only as a decoration for.

He does he doesn't have any financial interest like he now does in crypto. Their entire family business is now crypto. So what are your your thoughts on this Jim?

Uh Trump is a huge fan of making money and he'll do whatever works. Uh right now at least for the time being crypto works and they've the family members have sponsored some.

Works for him.

The family members have sponsored some crypto coins of their of their own. Uh the thing about crypto is once you sell it, you actually get to keep the dollars. You know, let let the sucker take the token. You take the dollars. And so they issued all these coins. They were bought up. They were bit up on paper. There was a huge profit. A lot of them have crashed in the meantime, but the Trump family members got to keep the money. It's the people who bought the coins who were the losers. So, uh um it was um no a hustle. Timing was good. And I don't think I don't read much more into it other than it was just another opportunity to make money.

What's his take on gold from? Because he's been tweeting about gold. He has the gold makes the rules. He been tweeting that. Yeah. um he's been very supportive on silver a few years back. So it it tells me he understands the dynamics.

What's what's your take?

He he probably does. Um but uh you know I separate words in action. He has said those things and tweeted those things, but when the Treasury announces they're increasing the US gold reserves, I'll sit up and take notice.

Yeah. Yeah. I think um the the main interest that the president had in crypto was it was politically expedient for him to be pro uh Bitcoin because he needed to get elected. You know, when he was president the first time, he called it a fraud, a scam. Uh basically, he said the same things about Bitcoin that I did.

But he found out when he was trying to get reelected that by then uh the crypto industry had a lot of money and what they wanted most was more buyers. So that they could sell the tokens they had, right? Because the whole dynamic of this pyramid Ponzi scheme is you need more buyers. And what better way to do it than to have the US government either buy the Bitcoin directly using taxpayer money or at least, you know, pump it up a lot, get people excited and and and wanting to buy it because they were running out of suckers. You know, they they went to Wall Street and they got all the ETFs and then, you know, once they got all that money in, uh, they were kind of looking for another source. So they cozied up to the president and were the biggest donors to the 2024 uh campaign. I mean more than pharmaceutical, more than defense, you know, uh, you know, more than you know tobacco or any of the you know usual suspects for donating big money to politicians. Uh, they they were number one and and so when Trump won, I guess, you know, he he was paying back the people that helped him win uh and brought a lot of crypto people into the cabinet um and was kind of, you know, and then also his family took advantage of the hype by getting into the crypto business themselves. Do we know like a a similar a similar um, you know, a lot about history William in the past. Has has there ever been a private money that kind of interrupted with the normal?

System?

Private money was like the standard a few centuries ago and it's it's it's fascinating to see that private money because all crypto is is private money as long as it's not a central bank digital currency and actually private money is coming back into the system. It's becoming more successful. Peter might not not agree, but um I think this this fight, this clash between private money and public money is is one of the main themes for me. Yeah. And when I think when you try to to to to make a picture of the history of money because you need that picture in order to say something about the future of money.

Um, if we put the history of money in one day, so in 24 hours.

Um, all of us have been living in this modern system for the last 50 years. And for all of us 50 years is a long time. But when you put it into perspective, this financial system we are used to.

Within those 24 it has only started at 11:45 in the evening. So for the uh for the large part of history, money was uh private money was backed by something instead of trust in those who are uh dealing with how much money will be out there. Mhm.

So that's the kind of a point you you always have to keep in mind. Something we consider almost natural state of things is everything except natural state of things. This is relatively new.

Yeah. Private money is is is much better than than government created money. But also money doesn't have to be backed by anything. It's currency that has to be backed by money. We always have to have a distinction between money which is a commodity and currency which is a more useful and convenient way to transact in that commodity where the commodity sits with a custodian and in place of money circulates currency. Um, you know, what circulates today is fiat currency because there's no actual money that backs it up. And to the extent that private actors want to coin their own money or tokenize their own money that's that's great. I mean governments will be against that uh because they don't like competition with what they create. But I do not believe that Bitcoin or any of the uh cryptos constitute private money. I think they constitute uh private uh gambling tokens. Uh they're not used as money. Uh the the they they're traded and they're acquired by people who believe that they will get very rich if they just hold on and to this crypto. That's why people that own Bitcoin uh won't won't try to use it to do anything. They don't want to buy anything with it because they don't want to give it up because it's going to make them rich if they just hodal it and and never sell. And so that's not, you know, money is not there to to make you rich. It's there. It's there so you can conveniently transact with other people without barter. Uh, you're not just supposed to hoard money to get rich. It's good to save some money so that in case you need it, it's there. But you're supposed to get rich by hard work and enterprise and and things like that. But a lot of young Americans today think there's a shortcut to getting rich and they just it's just you buy Bitcoin.

I'm curious to hear Jim's take on Bitcoin because we know Peter's take on Bitcoin.

Well, but before we get there just Peter's take on money. Peter, why do you talk about Fed money printing if it's not money?

Well, because that's the conventional way it's understood. I should say uh Federal Reserve note printing. Uh, and they're not even notes because they're not even redeemable. So, it's hard to describe. You know, I can say fiat printing instead of money printing, but when I say money printing, everybody kind of knows what I mean, so I don't need to be that specific. But yes, technically, you're correct. They do not print money. They print fiat.

Well, I think they do print money. You said money is commodity back. The thing is, that's your definition.

Well, that's not my definition. That's just a definition. I mean, people just like we've argued about what inflation is. Inflation is an expansion of money and credit. Uh, it's not rising prices, but governments like to define it as rising prices to confuse us as to the source. But you know, the government just can't change the meaning of something uh by redefining it. And inflation is not rising prices. It's an expansion of money supply. And money is not currency and it's not fiat currency. They have different meanings.

Yeah. It's it's hard to debate when people come up with their own definitions.

I'm.

It's not my definition. I was just trying go get an old dictionary. Look.

On the slow kid in class. I'm just trying to keep up. Um, so, uh, I would say what the Fed prints is money. It's a kind of money. I certainly agree that gold is a kind of.

It's a fiat money.

Well, let me finish. Uh, well, sorry. No, carry on.

No, you go.

No, I'm just correct. I I just wanted to state that one thing. I don't want to, you know.

Right. Uh, so, uh, I think what the Fed prints is money, I don't think it's important. And I don't think it's inflationary because there's no velocity and they give it to the banks to buy securities and the banks give it back to them and it's held by the Fed in the form of excess reserves. So all they're doing is inflating both sides of the balance sheet but they're not providing any stimulus or anything that's of any real use. I would agree money uh Federal Reserve notes uh it's a debt at least where I went to law school a note was debt. We learned that early on. It uh it's per perpetual non-interest bearing debt which is interesting. You're right. It's not redeemable. Uh, but uh it it's a kind of money and so are many other things. Um, and uh money doesn't have to be backed by anything. It can be backed that might be a better system. That's a fair debate. But it doesn't have to be backed. All money in any form is backed by one thing which is trust. Meaning if I have it and I trust or I rely on the fact that you'll accept it, other people accept it in exchange for goods and services. And in turn they receive it and they trust the fact that they'll be able to exchange it with others for goods and services. Then it's money. Now money systems fail. Absolutely. Eddie's right about that. Uh, some forms of money are better than others. But uh, these are all different kinds of money. Most money throughout history and again I think Eddie put it very well. Um, is actually it is private money but it's a system in which the government which we're always always in debt always trying to borrow always etc. The the government gives its debt to banks and then banks create money which people use as everyday money. So the banks are a critical part of the system. That's why I really dismiss the Federal Reserve as having much influence at all. It's kind of a joke. They're really just a puppet show. But but the commercial banks and the EUR dollar banks in particular are the heart of the system. I um retired as a senior officer at City Bank some years ago, but I was there in the late 70s and early 80s uh under our CEO Walder Riston and I had a number of one-on-one meetings with him. He was a great uh tutor. Created the negotiable certificate of deposit which is a big breakthrough in terms of creating euro dollars that could then be traded like securities and added to liquidity and of course we talked about being involved in the creation of the of the petro dollar so I was very much very much at the heart of that system that is still true today now pardon me the um the euro dollar system doesn't even doesn't always function perfectly and I agree with Annie the 2007-2008 was what uh scientists call phase transition or a paradigm shift. We didn't come out of that the way we went in and the difference. Milton Friedman who was you know interesting got wrong about most things. He came up with a theory called the uh the the pluck the string theory and the idea was if you have a stringed instrument you pluck the string you pull a string and you let go strikes a note but it goes back to where it was. So when you have a recession GDP declines that's kind of the definition of a recession. Then you hit bottom and then you come out of it and you can have a period of above trend growth. 1981-82 was the worst recession since the great depression up until that time. We had a worse one in 2007-2008 but that was the worst one up until that time. But from 1983 to 1986 coming out of that the United States had 16% real growth. Not inflationary growth real growth. That's way above trend but it was it was the other side of the recession. So a sharp recession, sharp growth, got back on trend, which was consistent with what Milton Friedman says. That was the an example of the string theory. What happened in 2008, we went down sharply, but we did not come back. We growth resumed. Growth did resume, but it was it was a new trend. It was not the old trend. We didn't get back to the line. So under Friedman's theory, uh it's basically a timing difference. You go down, but you come back strong and you get back on the trend. And it is is you make up the difference. In other words, it's a timing difference. That is not true coming out of 2007-20.

Well, you have to look at the difference between what the you how the Fed responded and what the government did with this, you know, slashing interest rates to zero and quantitative easing.

I've said it before, I'll say it again. The Fed's irrelevant, but.

You're dramatically underestimating the influence and the power the Fed has. They're not irrelevant at all. Unfortunately, they're very relevant. And, you know, especially considering the fact that all the players realize that the Fed is there and has their back. They have the Fed put. Uh, if the Fed was not there and people knew that interest rates ultimately would be set by market forces and that the Fed would not intervene, the situation would be extremely different right now. Well, the Feds the Feds I'm making the point the Fed's irrelevant when it comes to money and stimulus. There is no stimulus. I mean the you know I talked to Bernanke about this and other governors. The um so the Fed cut interest rates to zero held them there for about six years between kind of 2009-2015. Uh printed uh at that point five or six trillion dollars. They got they printed more in in the 2020 recession, but at that time they printed five or six trillion dollars. Had no impact at all. Compound.

Mean no impact.

Compound growth in two Peter the difference between I like to use actual hard data. Uh that compound growth in 2009 to 2019 was 2.2%. That's pathetic. That's a depression. Yeah, it's probably lower than that if you had a if the if you actually used a more accurate GDP deflator. I think I think I think it was definition.

I'm not making up any definition. What am I making up?

I use actual GDP. You have Peter Schiff GDP.

No, I'm just saying that the government GDP overstates growth because I don't believe that they accurately measure inflation. And so I think that the real GDP is actually lower than the government claims because I believe inflation is higher than the government admits. That's all. I'm not making up data and I don't actually know what uh the GDP would be if we measured it more accurately. All I know is that the economy was a lot weaker than the government pretends. And that's by design. I mean, all government statistics that you like to rely on are calculated in a way to make things look better. That's how the government wants to present things to voters.

Listen to yourself. I said growth was weak and you said it was weaker than I said. That that proves my point.

How what does it prove? You you said that.

It proves that the Fed's irrelevant, there was no stimulus but you amplified my point. I said no. Okay. You misunderstand.

You said it was weaker. Oh, tell me why.

All right. Because I think the what the Fed did undermined economic growth. I think had the Fed done nothing, first of all, the Fed created the whole financial crisis by by keeping rates at 1% and inflating a housing bubble. But had the Fed done nothing and allowed a much deeper decline in 2008, a bigger wash out in housing, more bank failures, had we had a worse initial recession, we would have come out of it much stronger with better growth. It's because the Fed intervened and went to zero and did all that QE and we had all the bailouts. That is the reason we had such slow economic growth. And that is the reason that we're now positioned for a much worse crisis than the one we had in 2008 because the Fed and the government intervened and refused to allow the free market to fix the problems that led to that crisis. And now those problems are bigger than ever. And so the next crisis is going to be much worse than 2008.

When you expect the next crisis to hit?

I've been expecting it for some time now. And uh, you know, we've been able to kick the can down the road. But all the years that I've been expecting it um and that it hasn't happened, the problems have gotten much much worse.

What what will cause the next crisis, financial crisis?

Oh, I I don't know what ultimate anything could cause it. But I mean, you know, it could just be a big drop in the dollar or a rise in long-term interest rates. I mean, a lot of things that could happen.

What do you think, Aiden?

What What will cause the next financial crisis? Um, well, let me just go back uh for a while to something you said. There was a time both in the US and in Europe where the politicians uh said it's good policy to employ a lots of people lots of money to prevent forest fires because that was a good thing to do. And after a long time they concluded, you know what?

It's really a bad thing to do because if you prevent forest fires and you're successful, you say, look at me doing good thing. But the fact of life is if you are successful in preventing forest fires, you're really making sure that the forest will die out because by preventing forest fires, you're preventing the cleanup that is needed once in a while. And the same applies to the politicians who react in panic mode on the first sign of something resembling a recession. We always have to stop it. We always have to make sure it doesn't happen and if and if if it does happen, it should be as shallow as possible. This is just preventing the cleanup the economy needs once in a while. And if you prevent that, you gain something on the short term because you prevent people losing jobs. But the only thing you create in the long term is economy just winding down and winding down.

But to come back on the next crisis, Jim, you're a great predictor of crisis. You have a good track record. What will cause the next one?

Um, the thing that will cause the next crisis is the thing that no one has thought of.

And no, seriously, January 1994, no one is something new.

Well, that's that's right. The in January 1994, no one knew that Mexico would be broke by the end of the year.

In January 1998, no one knew that long-term capital management would take markets to the brink of total collapse by September. Uh, and I can think of many other examples. In January 2020, no one knew that there would be a one of the greatest pandemics in history just a few months away. So my point is these things that do have dramatic impacts on markets are the things that no one has thought of but they have.

Except 2008 was extremely easily predictable and an unavoidable consequence of obvious errors that the Fed had made and that were being made by Fanny and Freddy and well so that was the only the crisis that was so easy to spot which was amazing to me that I had to argue with people in the years leading up to it uh who didn't see it because to me it was so crystal clear what was going to happen.

So sometimes they make it very easy.

Yeah.

Yeah. I met with Bush administration officials, Treasury officials in September 2007 and I told them this crisis was coming. Now it came in 2008, but this was September 2007 after uh the uh bank body shut down one of their money market funds in August 2008. That was when Jim Kramer and uh Aaron Bernett had the he had the famous rant, you know, you know nothing. That was 2007. That was a year before uh they really got tough. And I explained this to the uh again no need to mention his name, one of the senior Treasury Department officials. And I said, "Look, um you don't have to do anything. Basically, put out an order to all the hedge funds and all the big banks, give you all of their derivative positions, hire a firm like IBM, which is used to dealing with classified information, put it in a secured environment, you know, create whatever spreadsheets or analytics you want. Get all that information at your fingertips. You don't have to do a thing. When it happens, you'll know how this is going to play out. You'll see where the danger is. You'll you'll spot the weak links like Lehman Brothers. It'll be very a very straightforward exercise. Something I learned 10 years earlier in 1998 when I negotiated the bailout of long-term capital management and I had lawyers working 24 hours a day go through swap agreements looking for the uh looking for the loopholes. But um and this official, very nice guy, he was generous with his time. He said, "We don't do that. We're the Bush administration, free markets for free men. Uh, we don't intervene." And I said, "This is not intervention. This is information." I said, "It's going to end up in your lap anyway.

Get the information now.

Except and you'll know what to do.

And but my point was that and I agree with Peter and and Wilham on this. That one you could see coming.

But you know, even by 2007, it should have been obvious to everybody because that's when subprime blew up. And even then, because before subprime blew up, years before I was saying that it was going to happen. I mean, it was and that was going to be the the, you know, the straw that breaks the back of the camel and that would lead to the financial crisis. So I was warning about it uh in 2003 and 2004 and I I wrote my book in 2005 that came out in 2006 or or actually came out in early 2007 but I finished writing it by mid 2006 uh where I laid out, you know, why we were going to have a financial crisis and and what was going to happen to the mortgage market. But in 2007, it should have been obvious because the whole subprime market collapsed and and if you understood anything about the mortgage market, you would have known what that meant. But even then, even then, uh I was arguing with people that didn't think it mattered. And the Fed was saying, "Don't worry, Subprime is contained. It's no big deal." And I was going on these financial shows even through the middle of 2008 when we were already in the great recession because they ultimately backdated it to December of 2007 and people were saying I was crazy to even think we were going into recession that everything was great and the economy was great when even though we were already halfway through the worst recession. Looking into this, you mentioned something yesterday, vim. Um, what something about sovereign debt?

Yeah. Well, it's it's my thesis that the next um crisis will be on on severe debt. We're on the verge of several sovereign debt crisis. Look what's happening in Japan. Look what's happening in in France, the UK. Uh, even US could be in a severe sovereign debt crisis. And uh I'm very interested in in in your take on on this risk.

But Wilhelm, when you say sovereign debt crisis, what specifically do you mean? The reason I'm asking, are you talking about default? Uh inflationary response, illiquidity because we did.

Situation in which countries need to call up the IMF for help.

Yeah.

Um, another near meaningless institution. Yeah. The that's the IMF.

Well, the US can't call it the IMF.

The the US runs.

Japan.

The US runs the IMF. The uh the uh the IMF is only good at giving money that to Ukraine that will never be repaid. That's about all they're good for these days.

Well, let me reframe the question. Which country will have well a sovereign debt crisis?

Well, yeah. What I would say is the the the most important question to ask is is the debt in a currency that you print? Yes or no? Japanese debt is in yen. US debt is in dollars. Uh German debt the Germans are a little better off at least financially is in euros. So as long as you can you do have to ask Christine Lagarde to help you out, but uh as long as it's in the currency you print, you'll be okay. Now that you might get.

Not when you reach hyperinflation but.

You'll be okay as in the government bill will be okay but the price to pay is we owe will not be okay. Well, I I agree that so interest rates might be higher. Inflation might come along. There are consequences. I'm not saying there are consequences. I was making the point that there's you'll never default on a debt in a currency you print because you'll just print the money.

But that's just another way of defaulting. It's really that you really it's just another way to arrive at the same destination.

Okay. See now we're back to the definition of default. I I mean like you'll get paid, but will the money be worth anything? That's mention that doesn't really count as I mentioned sovereign debt crisis.

Yeah, that could mean any forms.

If you avoid a sovereign debt crisis by creating a currency crisis, you know, you actually make it worse. Yeah. I mean, I think in in in in reality,

If you legitimately repay with a haircut, if you acknowledge that you have borrowed too much money and there's no way to honestly repay it, and you work out an arrangement or you say, "Look, we're going to pay 50 cents on the dollar because that's what we can afford." And the uh lender receives 50 cents on the dollar that actually buys 50 cents worth of stuff, yes, he's lost some money. But if instead of doing that, you just run the printing presses and pay 100 cents on the dollar, but it's lost 90% or more of its purchasing power, the lender is actually worse off. The country is most at risk.

Well, I mean, I think the United States is is significantly as far as major countries at risk of having to print a tremendous amount of money inside the US. And you know when when you actually loan if you're a European and I loan the US money, I bought treasuries. I'm not even thinking in terms of dollars. I'm thinking in terms of euros. And so if I converted $100,000 to dollars and bought treasuries and then when my treasury matures and I get my dollars back, I can only buy 50,000 euros. I've lost half my euros. So I think it's like, you know, it's just to me, you know, it's like a 50% default because I didn't get back all the euros that that I loaned. Um, but I I I think that is the real risk and I think you know when when you know uh S&P or Moody's when they rate sovereign debt that's what they should consider. They shouldn't just consider is the is the issuer going to default but what are the odds that they're going to have to resort to inflation rather than taxation to repay these obligations. And you know the larger the obligations are in relation to to your tax base um the more likely it is and you know so the the there's a there's a significant risk that that happens. We'll see what happens in Japan because the Japanese bond market is really looks like it's you know falling and and there could be a problem there and that the problems exist in Europe as well.

We have seen this over the last couple of years. If you look at the French debt, uh, back in 2021, it was almost 150% of the French GDP. It has declined actually to only 117%. They haven't repaid nothing. It has declined because of the fact that the inflation has been high since 2021. So, if you want to sneak a peak into the future,

Look back. And if you look back just a couple of years, you see what the effect is of letting inflation just go a little bit wilder than it used to. It it it it really matters a lot for those countries, almost all all European countries with high debts.

What was your Peter mentioned Moody's. They're the same people who rated his mortgage securities AAA. So they're a joke. I don't I wouldn't put any weight on any anything they say.

But uh again, I'll come back to the point I've been making, which is the key metric is debt to GDP. Uh, if it's going up, you're going to have slower growth or worse. If it's going down, you're moving in the right direction, the market will give you credit.

The now Marlene asked us to uh look forward and project, and so Peter and Wilhelm, you're talking about various crisis scenarios, which is exactly what we're here for. The only thing I would add to that is there's not one bit of data that supports anything you're talking about as of today. Things could change, but interest rates are going down. Uh, the dollar is solid. Uh, except against gold, different story. If you use gold as your measuring stick, the dollar is collapsing.

>> All currencies are collapsing.

>> Well, that's correct. But but but this is the point. People ask me, well, is the dollar going up or down? And my answer is a famous song at the Montro Jazz Festival in 1969 called "Compared to What?" And when people say, "Is the dollar going up or down?" I say, "Compared to what?" In other words, what's your measure? If you're talking about the euro, it's been pretty steady. If you're talking about the uh uh Japanese yen, the dollar is getting stronger. If you're talking about gold, the dollar is getting weaker. So, in a given day, the dollar can be stronger, weaker, or flat depending on what you're using as certainly.

>> What's your main reason?

>> I don't worry. I think uh but um the uh uh I think one of the uh well, one potential, I just said whatever it is, we won't know. It'll be the thing we haven't thought of. But since we're here to think of things, uh, I do think stable coins are a a potential risk because they're they're basically unregulated money market funds. That's all they are. You know, I give you a token, you give me a dollar, I take the dollar, I buy a treasury bill, I sit on it, I collect interest, I pay nothing, I leverage it, I make a lot of money. It's like free money. So it's one of the best business models around. Uh, and uh, as long as that continues, that's fine. But the danger comes when there's some other catalyst. Could be a lot of things. And people, you know, the best definition I've ever heard of of financial panic is everybody wants their money back.

>> Just doesn't priv private equity, stable coins, you know, stock market, everybody wants their money back. You sell everything, get your money back. And that's behavioral and it feeds on itself. So in that world, uh, whatever the catalyst, uh, if people call up the stable coin issuer to say, "Okay, here are my stable coins. Give me my dollars back." Well, what does the sponsor have to do?

>> They, well, first of all, they might have treasury bills. They're supposed to. There's zero transparency. No stable coin has ever been audited. No stable coin has ever revealed their holdings. Uh, you get glimpses, but not much more than that. The only, there was a fraud case settled uh about six or seven years ago against New York State attorney general brought the case and they settled it by showing what they had where they put the money and it was a pie chart. It was just a pie chart and it had big slices, but over 50% of it was commercial paper. Now, what is commercial paper? And the uniform commercial code, at least in the United States, it's an unsecured corporate IOU with a maturity of one year or less. That's what commercial paper is. And we saw it fail. The Fed bailed it out in in 2008 because General Electric was the biggest issuer and that was uh in jeopardy of failing. So, okay, unsecured IOU, maturity to one year or less. Who's the issuer of the commercial paper? It could be a corporation owned by the people running the thing and they took all the money. Uh, they could steal the money. You wouldn't know. They could issue worthless paper. You wouldn't know. Now, I'm I want to be clear. I'm not accusing anyone of doing that. What I'm saying is we don't know. And I'm almost certain there's at least one issuer out there that is doing exactly that, even if the others are honest. But allow for the fact that they have treasury bills. I spent 10 years um in one of the primary dealers. Primary dealer is uh has permission to deal directly with the Fed. You talk to the Fed every day. The open market operations desk at the Federal Bank of New York. They buy or sell securities, but they have an approved list. There about 20 banks on it. My firm was I was on the executive committee was one of those banks. And as I say, we talk to the uh talk to the Fed every day. The US Treasury securities market is huge, liquid. It's about the safest market there is, but it's not that big. Try selling 10, 20 billion dollars of treasury bills uh in one go. No way. It's not big enough. You'd have to shut down the Treasury market. So that's it might be one of the greatest potential.

>> Have we seen something similar in the silver market?

>> Yeah.

>> In the past couple of weeks. Well, when trading stopped because of a cooling problem in one of the data service of the CME.

>> >> I thought that was highly suspicious because uh we might remember we had a nickel short squeeze in what was it March 2020 and then the official reason that they stopped trading was a technical glitch. Uh it later turned out that they wanted to stop the short squeeze and and stop trading and kill trades and and and so I I if if markets stop trading for over 10 hours, I think Jim is is best informed in the dynamics of Wall Street and the tech. What's your take, Jim, on that story?

>> Uh I think it's a very good question. People go, "Oh, they would never shut the markets, etc." I'm sorry. The New York Stock Exchange was closed. Closed from August to December 1914 after the outbreak of World War I. That was 5 months.

>> >> That wasn't a cooling problem.

>> No.

>> >> That was World War I.

>> It was World War I. No, but my point is the idea that markets don't close. You can't shut down markets is not true. You'll do what you have to. And again, I pardon me. I, you know, as a as council to a number of securities firms, investment banks, hedge funds, etc. I've dealt with all the major exchanges and their um their their their CEOs etc. and had to read all the rule books so I knew what I was talking about.

>> But do you take the excuse of a cooling problem of the server?

>> Uh not at all. No, it's a joke. Uh it's like at in the 2020 election in the middle of the night in the Atlanta polling place, there was a broken toilet and a flood and they had to shut down the the polling place and kick out the observers at which point they went under the tables and pulled out boxes and cases of preprinted ballots and help Biden win the election. So no, these things are frauds.

>> Well, one thing we know for sure that if the reason was what you suspect, they would never admit that. So they'd have to come up with some excuse to explain it. So that's the but I wanted to mention one thing that Jim said that I I I disagreed with on looking at the 10-year Treasury one.

>> >> Well, there's more than one, but this one in particular, but on the to say that there's no evidence of an issue because the long-term Treasury market yields you know 4% on the 10-year Treasury and it's about 4.15%. Right.

>> Two things. One, a lot of people expected the yields to be much lower than that and and they're not. Uh and so a, we didn't get the type of decline that everybody expected uh once the Fed started to cut rates and people are complaining that the yields are too high. And even after the most recent rate cuts, they still were not able to uh sustain a move below 4% in in the 10-year Treasury. So that's number one. But number two, I think the main reason that Treasury yields are not much higher right now is because of the expectation, which I believe is is incorrect. But the expectation that the US economy is weakening and that part is correct that the Fed is going to continue to cut rates and the fact that quantitative easing is around the corner and it has been around the corner for some time. They finally stopped quantitative tightening. So the next step would be quantitative easing. And so I think that is responsible for the bid in the Treasury market because the Fed is there expected to cut rates, buy bonds, push prices higher and so rates are not much higher already. But I think that rates could soarly just like you know the bond market started to get killed after liberation day. And the reason that Donald Trump did the about face and the pause was the bond market. I mean, he even admitted it that they were getting yippy, but it was a lot more than getting yippy. And yields were in, you know, exploding at that time. And something like that could happen again. Yields could move up even faster. And and and uh tariffs may not be the catalyst. I mean, all of a sudden, people could realize that, you know what, if the Fed goes back to quantitative easing, maybe it's bearish for bonds. Maybe all the money they're going to have to create to buy all those bonds is going to weaken the dollar, spark inflation, cause a run on the treasury. So, I think that just looking at the fact that the yields haven't spiked and thinking, hey, everything is good because, you know, the yields could spike at any moment. And I think a better indicator is looking at what's happening in the price of gold uh and saying, you know, this is gold doesn't just go to $4,200 an ounce. Gold doesn't move at at this magnitude unless there's a problem. I mean, because this is not normal that gold would be moving up this much.

>> But you have to realize when you spend some 50 years building your GDP on debt, the last thing you can afford is increasing interest rates. So I don't know how and when, but I'm sure that they, the Fed, the government, that they will do everything they can to try to suppress increase in yields because that's one thing you can't have. The other thing you have to have is what we are seeing in over the last couple of years. You have to have inflation because if you build your house on debt, you can't afford higher interest rates and you need inflation. And when you look at the last 50 years, one of the things you see is this steady fall of inflation since the late '70s. And couple of years ago, they even had sleepless nights worrying about inflation being too low.

>> So um when you talk with the people working at the central bank, they will always say it's because of us. We know how to fight inflation and we were ready to fight inflation. Have a look at the last couple of years since the summer of 2021. We are here sitting at the end of 2025. It's been over four years now. Inflation is still a little bit too high. It's not too long.

>> >> We broke out of the downtrend, the 40, 50 year downtrend.

>> My point is if if the central banks know how to fight inflation, then surely they would have been able to beat inflation over the last couple of years. They didn't because they are they are creating this u this picture for all of us that they are fighting inflation.

>> >> They're closing.

>> >> While they're creating it.

>> They are creating it because you need >> uh inflation year on year if you built your GDP.

>> We don't need it. The government needs it to to to maintain this this illusion that they've they've created. But we need to get rid of the inflation. We need to, you know, we need the great reset. We need to let asset prices come down. We need to let debts default uh so we can rebuild a viable economy.

>> >> Thing they would allow.

>> Yeah. And and so that that's why they they won't.

>> So what what does that look like? A situation where countries default on debt. We have seen it in uh with Greece. Um uh how will it look like?

>> More money printing.

>> Greece Greece never default.

>> >> Never defaulted.

>> They came extreme restructuring.

>> Sorry. They came extremely close. And there was that restructuring had to be bailed out, but they never defaulted.

>> So could there be a situation where countries would default?

>> Uh well they.

>> >> How will that impact us?

>> Certain countries. I'm sorry, certain countries default all the time. But again, it goes back to what I said earlier. They default in a debt denominated in a currency they don't print. So Argentina borrows in dollars.

>> >> When it happens in what used to be Yugoslavia.

>> So >> I've been through a country defaulting. What it means is you become very rich.

>> >> In extremely rich.

>> >> In nominal terms because we had wonderful bank notes with five and 11 zeros on it. So I was a multi multi multi and then still some multi-billionaire um it was worthless. So that's how default looks like. And my fear, my biggest fear is that if a default in any form happens in the West, in the US, in Europe, whatever, it will not take the form of the default of Yugoslavia because if it takes that form, the fact that you're losing money is the least of your problems.

>> I have a friend who now lives in the Cayman Islands, but he's Serbian. He lived through the war in the 90s. I recently returned from Bosnia Herzegovina. I certainly born in Bosnia. Okay.

>> >> Beautiful country.

>> Um, and uh, so he lived through this hyperinflation that you're discussing and uh, he said, well, we all we all wanted gold, but you couldn't get it. We we would have bought the gold, but you couldn't get it. We wanted euros, but or you couldn't get them. So, uh, so to kind of answer your question, Marlene, I think we have to give humans some credit for uh creativity and adaptive behavior. And in the absence of real money, they'll invent money and and make it real. So we said we couldn't get gold, we couldn't get euros, we couldn't get dollars. What do we do? The main strategy was if you had a septic tank, you drained it and filled it with gasoline, put a top on it because the gasoline was going to retain its value. It was a hard asset. A couple of them blew up. But basically, they bought gasoline with local currency and stored it in tanks until the war was over and then they could pump it out and it was valuable. But um, so that's the short answer to your question. What what what does a real default look like? It looks like people. When I was a when I was a kid, there was an expression I never understood at the time, but they said, you know, like a great uncle or somebody would say, "Hey kid, don't take any wooden nickels." And I'm like, "What's a wooden nickel?" Well, in the depression, they actually had wooden nickels, states and localities, because there was a shortage of money, basically dollars would print tokens. They were little round wooden coins and they have something printed on them. And as long as the barber shop or the grocer would accept them and somebody would pay you in them, they they created money out of thin air. It wasn't backed by anything, by the way, but it was backed by trust, which is what I said earlier.

>> Yeah. But you know the problem when you point out that uh when you have an economy built on debt, the one thing that you can't have is higher interest rates. Well, that's the one thing that we're going to get, right? I mean, Murphy's law is anything that can go wrong will go wrong and at some point that's going to happen. So, it means you've built an economy that is destined to collapse because there's no way to prevent ultimately interest rates from rising because the way they do it is to create inflation. But ultimately inflation means nominal rates have to go up if the lenders perceive the inflation that's there. So, the key is to create inflation while the creditors don't realize it's happening. So they don't demand higher interest to compensate them for it. But at some point, you know, you can't fool all the bondholders all the time.

>> You're saying now, you know, this this when you listen that to the Fed or to the ECB, they they always say, um, we don't worry because the professional forecasters are forecasting 2% inflation down the line.

>> Um, when you talk to professional forecasters, it it's actually not a forecast. It's hope that the central banks will succeed.

>> >> But.

>> >> Yeah. In fact, you know, the Fed.

>> >> But you get this kind of a weird loop where the forecasters are saying uh basically I I I I hope you will succeed as a central bank. The central bank >> takes that and says they are forecasting 2% inflation so we don't have to do anything right now. And you get into this weird l of things where the byproduct of all of that is a lots of people outside are actually thinking that they will succeed.

>> Yeah, it's even worse than that. And because and I was surprised that uh Pal admitted this in a press conference and nobody thought of anything. But somebody asked them, they said, "Look, you know, uh a year ago, whatever it was, you forecast that inflation would be 2%." And here it is, it's higher than that. Um, why should we have any confidence that your new 2% forecast is going to be accurate? And what his answer was, he said, "Well, the reason that we forecast 2% is because that's our goal." Yeah.

>> And so we just assume that we're going to succeed and therefore we forecast 2% because we want 2%. So basically Pal admitted to their journalists at the press conference that the Fed really has no idea where inflation is going to be. It just hopes it's going to be a set and that's what it builds the forecast on.

>> And he's not the only one because back at the end of 2021, the European Central Bank said to all of us, rest assured inflation will be down to 2% in 2 years' time. The same message was repeated in 2022, 2023, 2024. It always gets.

>> >> That's why I stopped listening to press conferences of central bank 10 years ago.

>> Yeah. And what was even worse though is when the inflation was under 2%. When they were saying it's 1.5, 1.6 and they said this is a problem that needs to be solved. We need to get higher inflation. And they're just you know, holding interest rates negative and and doing all their you know, their quantitative easing programs. What did they what asset purchase? What have they called it in Euro zone? And I remember just being very critical going back to Mario Draghi when they were saying, "We need to get higher inflation. We need to get higher inflation," which they needed like a hole in the head. But it's like, okay, you're going to do you're going to do all of this to get 1 and a.5% inflation up to two. What are you going to do when you overshoot and is 2 and a half or three, right? How you going to solve that problem, right? Which you can't do.

>> So, Jim, um what we always say is the market is always right.

>> Mhm. So uh and you indicated okay there could be an event unknown event that sparkle uh this um how critical is the situation right now?

>> Well, I disagree a little bit. You're right about people saying the market is always right. That is what they say. I disagree with that. I don't think I don't think of the market as right or wrong. I just say the market is the market. It is what it is. It's data. It's an input you can put into your analysis. You can make a forecast. I do that all the time, but I don't really think of it as being right or wrong because it is driven um very little by fundamentals. It's very much by behavioral psychology, crowdfollowing. Uh I know the people run the top hedge funds, they'll do things that fundamentally make no sense, but their view is well, everyone else is doing it, so we'll ride that. We'll get out on time, you know, at the top. And and there some of them are pretty good at it, some not. But uh so so the market to me is just a data point. And you know, it pays not to get you know, too emotional about it.

>> Um, but uh, you know, in terms of uh um crisis, I mean, I would you know, just I'm I'm doing some interviews lately on people want to know 2026 forecast uh but and uh and we're we're kind of getting at it here a little bit. I see you know the major stock market indices in 2026 coming down for the US, that is down 10% but uh or more. I'll take the I'll take the over on that. You're down 10% or more. But um for the AI sector in particular, it's Nvidia, Apple, Microsoft, uh Oracle, a few others may be down 30%. Uh that that's not the end of the world. I mean, stock market major stock market indices dropped 30% in a single month uh in March well over the course of two months in March and April 2020. So, you know, we've survived 30% crashes before and it hit new all-time highs later that year.

>> >> So quickly.

>> >> Because of the Fed.

>> >> Uh um.

>> >> Yeah.

>> >> Continue, Jim.

>> Yeah, they the the irrelevant Fed, but um uh but you could see that kind of price action in 20 uh um in um in 2026 and but there's.

>> >> That's a strong.

>> >> Yeah. Well, just but just to kind of broaden the aperture a little bit, um one of the reasons for that and I just wrote a book on on AI. Uh it's called Money GPT. So it's it's basically the impact of artificial intelligence on capital markets banking and I have a chapter on nuclear war fighting if you want to talk about that. But um basically this uh there's so much less there than meets the eye. AI is a big deal. It's everywhere. It's in my refrigerator. It tells me to change the water filter. I completely ignore it. It's on the dashboard of your car. So AI is here to stay and it will do some good. But the amount of money that's being spent, there will be no super intelligence. There will be no artificial general intelligence. Um, they, you know, they talk about this this guy Sam Altman seems in my view very unimpressive, kind of a not really a tech guy, kind of a salesman and a promoter. He said the other day was interested investing in a rocket company. I'm like, what are you, an Elon Musk wannabe? I mean, you're supposed to be running OpenAI with your trillion-dollar IPO or whatever they're doing. Um, but the amount of money they spent on these data centers, they have some serious problems. First of all, it takes a a couple years or longer to build the kind of data centers they're talking about. Then they got all these Nvidia chips like the H200. Uh, but they can't deploy them fast enough because they have an energy bottleneck. They can't get the energy to run the data centers to employ the chips. The technology moves on. A lot of those chips are going to be they were cutting edge when they bought them, but they're going to be obsolete by the time they actually get the electricity to turn them on, which means they're going to have to write them off and they're going to have to write off a lot of this expenditure as well. So um, so right now GDP is driven in part by not so much by consumption but by fixed asset investment coming from hundreds of billions upwards of a trillion dollars being spent on what we just described and a lot of that's going to have to be written off. So that's a timing difference. This gooseing GDP for the moment, but that's that's going to reverse. That's part of where I get into my recession scenario. But these companies are going to have take massive write ups. They haven't made any money. They make money on other things. I mean, yeah, Google and Meta and all that and Microsoft, they make a ton of money. They they haven't made any money on artificial intelligence. They just keep spending money. It was a um last summer um kind of in the August time frame companies were announcing their quarterly results because in the US we have to report quarterly. So the June 30, you know, second quarter closed and the results were coming out mid-August and these stocks were going up, but they were going up by who spent the most money and I thought, well, what happened to who made who made the most money? No one cared about that. It was who spent the most money. You're going to see massive writeoffs, a slowdown in that area, declining GDP, and that's why the stocks could go down 30% or more. And my main worry is that in the end, we might reach a point that we have a worldwide monetary crisis, a currency crisis because if we look at the past, all currency crises were quite national, local, Yugoslavia, Zimbabwe, but we're in this global village now where we all use the same fiat money printing uh well uh techniques and and in the end, you could reach uh um lost the trust in all paper currencies and people are starting to flee towards hard assets. All the government can't print. You see that in your company. You see it with all these precious metal companies and and I'm worrying a lot that we don't we might not have an answer when we reach that point that um um people really start to lose trust. I'll demar a little bit. Um, a few years ago, I briefed the head of uh a group called Bilderberg. So if you want to get into conspiracy theories, they're like the heart of the beast, so to speak. But I I briefed the head of it um at Rockefeller Center, which I thought was an appropriate place, a small room. Really nice guy. But he was uh at that time, you had Nouriel Roubini, Paul Krugman, Joe Stiglitz running around with a hair on fire saying, "This is the end of the euro. Greece is going to be kicked out. Spain is going to quit. Germany and Netherlands are going to form a northern tier and come up with their own new currency." And and he, you know, he kind of owns Sweden, so he was, you know, concerned about this. And I said, um, here's what's going to happen. The euro is going to be fine. No one's getting kicked out. No one's quitting. They'll actually expand the Euro group. And I say, you know, it'll fluctuate, but the euro will be fine. I was right about everything. Greece was not kicked out. At the time, there were 16 members, today there are 19 members. And the euro is right about where it was when it was issued in 2001, 6. Uh, he was it was he was relaxed to hear it. I think I made his day and he gave me a very nice Swedish vase as a gift. Interesting because it's kind of a vortex. I try not to get sucked into it. But um, my point being, I think we need to calm down about currencies. They do they do fluctuate. You uh currencies are not the key to being a so-called reserve currency. It's securities, bonds. You don't hold money. You hold notes. Uh, treasury notes or treasury bills in particular, they're denominated in dollars. That's where people get this dollar notion, but they're securities. And so before you talk about a new reserve currency of some kind, you have to ask yourself a more important question. Do you have a bond market? Because you can have a currency, but there's no Chinese government bond market. I mean, there there is, but it's illiquid and there's no rule of law and it no one has any interest in it. So you have to ask, is there a securities market big enough to absorb global savings? And there's only one in the world. Euro. The problem with the euro-denominated securities is there are 10 different issuers. So Germany issues bonds, Italy issues bonds, Spain issues bonds. They're in euros, but there's no euro issuer. There's no single uh where you have the guarantee of basically the whole um European monetary zone. Um, so it's not big enough. Japan comes close. Italy is pretty big, but the US is the only one. So the dollar isn't going anywhere as a reserve currency. Now, will it go down against gold? Yes. That's a that's a completely different analysis.

>> Yeah. I don't think though to look you can't really look at it as a bond market because bonds are are simply a way to generate yield on your dollars. Um and if the interest is insufficient to recoup the loss of purchasing power of the dollar, then the bonds are no good. Um it doesn't matter, you know, how deep the liquidity is, how much debt we issue. If the yield is 4% and inflation is five or six or seven.

>> >> Actually three Peter, that's the point. The yield is four and inflation is three, you have a positive return of 1%.

>> Yeah, but what okay, but if inflation is three, but I don't think it's three and I think the long-term likelihood that is going to be substantially higher than three. And and so ultimately.

>> >> Sell that with your forecast that the Fed's going to cut rates.

>> >> What do you mean?

>> >> Well, you said the Fed is going to cut.

>> >> Yes. Despite rising inflation.

>> I showed you Q. We we.

>> >> Yes. Yes. Of course. Yeah.

>> Think well, so where's the inflation coming from if velocity is declining and raising.

>> The Fed is is creating the inflation. It's expanding the money supply to buy buy bonds. And look, prices prices in the United States are probably at least 50% if not double what they were, you know, 5 years ago. I mean, general price level has gone up a lot more than what the government recognizes. I mean, I see that in in my life when I buy things. Look, I just um had to redo my my pool in Connecticut. And when I met with the pool guy and he said, "Look, everything is twice what it was five years ago. All the raw materials, all the labor, all, you know, I had to pay more to repair the pool than it costs to build it from scratch." But I mean, but all I you know, you can see what it costs to just go to McDonald's and and get French fries or a hamburger. I mean, prices have gone up a lot. But and and so lenders are not going to want to park dollars in low yielding treasuries when the real inflation rate is significantly higher than what governments acknowledge in the indexes that they that they choose. Look, I did a a thing. I remember I did this in 201 and 13 um and I did a video on YouTube about it. According to the CPI, the price of newspapers and magazines from 2003 to 2013 was up 30%. That's what the CPI claimed. And I thought, gee, that doesn't seem right. So, I actually went back and I took like 20 of the most popular magazines and newspapers. And I just looked on the cover to see what the price was in 2003 and what it was in 2013. And the actual increase was 130%. Not 30%. So the question is, what happened to the other 100%? Right? Because it went into the CPI but it never came out. So there's all kinds of things that they do to take away adjustments.

>> >> These increases in in in prices.

>> But when from a reserve currency perspective too, when people are measuring um the value of their dollar reserves in their local currency, when they realize that they can't get enough yield on treasuries to break even in their own currency, they're going to move out of dollars and they're going to move out of treasuries. And I'd rather have gold as my reserve and earn nothing on it than have a negative real yield on dollars. And the more debt that we issue, the bigger our bond market gets, the the more value the dollar is going to lose. So at some point too, the the size of our bond market works against us because we have too much debt and we can't possibly not only can't we repay the debt, we can't even pay the interest on the debt, which we can't because right now we have to borrow money just to pay the interest on our debt. We don't even have enough tax revenue to do that.

>> Has has the US ever defaulted on the interest on the debt?

>> Well, we defaulted on our obligations to pay gold and we know that. So, that's a default in 1971. We we defaulted. It's.

>> >> A technical default.

>> >> Um and and so we've defaulted once and I don't put it past us to default again. Um and especially and we we mentioned we discussed this I think you the other day but I certainly could see the government defaulting selectively on different creditors, particularly non-US creditors, foreign holders of US debt. Uh the government could default on those obligations without defaulting on obligations to pay Americans.

>> I asked you one question. You answered a different one. That's fine. I agree with you. 1971 was a kind of default measured in gold. 1933 was a kind of default measured in gold. We're back to gold and I think you and I agree on that. I asked a different question which is has the ever has the US ever not paid the interest on the debt.

>> >> Well, other than I guess the uh the Confederate debt was probably defaulted on, not the US.

>> I forget what happened with the with the continental debt and I know the continental currency. You know, I tell you what happened. Alexander Hamilton said, "Let's pay it off and then we'll issue more debt to pay that off." And we've been going strong for 23 years.

>> But but you are correct in that we have not technically had to default on our debt because we've been able to accumulate more instead. It's like, you know, Bernie Madoff kept his Ponzi scheme going for a long time because every time somebody wanted their money back, there was somebody else willing to give him more. So the US government's debt Ponzi scheme has has been able to go on. But with the US centric guys, the Germans defaulted three times in 100 years. The Russians defaulted three times in 100 years. So that's my why my main is so in depth.

>> The thing is just because the US hasn't defaulted yet doesn't mean it won't default when you know push comes to shove. And again, I believe and I would rather see the government default than inflate. I think default is is the lesser of the evil.

>> Okay Peter, here's my question. You gave a uh the very clear expanded uh version of why inflation might be closer to 6% than three. I don't put words in your mouth, but I think that's what I heard. You gave some anecdotal evidence to support that, etc. Okay, if that's true, how come the smartest people and the biggest money in the world don't agree? In other words, why is the yield to maturity in the 10-year note not six or 7% as good was calling for the other day? It's actually 4.1, give or take.

>> Well, I mean, that's look, the smartest people in the world didn't see the 2008 financial crisis coming. They didn't see the bursting of the the.com bubble. I mean, sometimes the smartest people in the world uh don't see some of these things until it's too late. I don't know. I mean, there are probably other smart people who do. I mean, there's got to be some smart people that are buying gold up to $4,000 an ounce. They see something. Um um, but you know, um yeah, I think that the conventional wisdom is typically wrong. Uh and then when something that should have been predictable happens, they say, "Well, nobody could have predicted this. This is a 100-year flood. Nobody could have seen this coming, so you can't blame us." You know, it's not in their interest. I I don't know. Maybe I'll find.

>> Speaking of Speaking of smart people, yesterday it was exactly 6 years ago that Paul Volcker died. And um he was the guy uh who uh said to President Nixon in 1971, well, if you really want to stop the outflow of of gold, you either have to increase the interest rates, which Nixon didn't like. So the other option, the only other option he said is to close the gold window. And I have the enormous privilege to meet with him since 2008 almost every year just to talk about inflation, monetary things etc. And the one thing he kept saying year after year after year, he said, "Yes, it was my idea." But up until his last day, he had uh regrets. Not about what he proposed because it was the only option, but he said, "My regret is it has been misused from that day on."

>> Okay. So.

>> >> So he was a smart guy who didn't see this going the way it went. So, we're we're we're nearing the um end of the conversation. You also have a very important uh interview later on. Um Aiden, uh I would like to to to move hopefully to a a bit more positive note. So, uh Aiden, I know that you have have your views on uh on this. Are we entering the next golden age? I've started this conversation by saying that I'm a huge fan of history because there's lots of things you can learn from history and one of those things you can see when you look back is uh these kinds of periods we are in right now since 2007, we have seen this before and every single time the world afterwards was a different world than the world the world before that and every single time it became a better world. So the only thing I'm saying is history has the tendency to repeat itself. I wouldn't be surprised if after this when we take a look back in 5 years' time, 10 years' time when I look back, we would say yes, it was a nasty time. Maybe we haven't seen the worst yet. But the darkest hour is always just before the dawn. So it wouldn't surprise me if the future 10, 15 years from now uh turns out to be a lot brighter than you would assume from looking at the things right now.

>> You would say we will have a new currency by then. I assume.

>> Backed by gold.

>> Well, I think I think that more people are going to start using real money again, regardless of what governments do. Um, I think that, you know, private industry has the ability, you know, just like, you know, a lot of people don't use taxi cabs anymore. They use Uber. I mean, taxi cabs are highly regulated, you know, government monopolies and they're not very efficient and they're expensive and and Uber is a lot more efficient and a lot cheaper. So, taxi cabs are still here, but a lot of people choose to use Uber. Same thing with you know, FedEx or you know, DHL or you know, people you could send something by the post office or you can you could use a free market uh competitor. So I think the same thing will happen uh with money to the extent that governments are not able to stifle it through excessive regulation uh under the guise of you know, usually money laundering or you know, tax evasion. And they'll try to, you know, really crack down and make it more expensive for uh private issuers of of a alternative to government-created money. But I think that's going to happen. But I do think that, you know, over that period of time um the world can move away from the dollar and that will be a significant uh you know, weight lifted off the the world that they won't have to support American consumption anymore. Uh, we'll see how uh the US deals with that. But you know, I am a lot more optimistic than Jim is I think on AI. I think there's some tremendous potential there. I agree that uh the companies are overspending and the stocks are overpriced and that's why I don't own them. Um uh but you know, just from my experience using the technology myself, I mean, I think there is so much potential there uh to increase human productivity um dramatically, both for you know, intellectually uh and you know, and through you know, robotics uh that we could have a tremendously abundant supply of of labor that doesn't exist today, physical labor, mental labor, uh so that humans don't have to work as hard and that we have a we can have you know, we we have to get through uh the short-term problems, but I think there there is a lot to be optimistic about at you know, the other side.

>> You believe in that we are in the overtime.

>> >> Yeah. I'm less optimist.

>> >> We're going for the big reset.

>> William.

>> >> I I'm less optimistic on the last page of the big reset, which is now called the great reset. But I'm perfectly fine with that. Um, I wrote we actually have two scenarios left and I wrote that around 2015, 2016. One is that we um there's a great cooperation between the East and the West and we can sit around the table and um decide how we move to the next phase of international monetary system by helping each other. But the other scenario is that there would be a conflict. We could see war between the West and the East and unfortunately now 10 years later, we're on this path of confrontation and I really worry about uh the rising tension between the West and the East, NATO and BRICS. And I can't envision a scenario where we start helping each other on on monetary matters, on a monetary reset. So I I'm afraid that will end up into an even greater confrontation, um even greater wars. And how can the US um be in a position to try to help China and Russia? And how can you expect China, Russia to be in a position to help the West? As Russia defaulted three times in 100 years, we in the West, we think we can't be in that position. We can keep printing money, but people are starting to boost trust. I was a speaker at the conference in May this year here in the Netherlands. Over 1,000 company owners, business owners were discussing how to move away out of Europe, how to move away out of uh the Netherlands. Uh all the rich people are starting to flee towards Dubai. I've been investing in in the real estate there. So I can't envision how this works out fine and in five to 10 years we have a brighter future. But but maybe I'm too pessimistic.

>> I'm only saying that's what what I see when I when I look back into history time and time again, uh we end up in a better world.

>> >> So.

>> >> I hope you're right.

>> Jim, you you mentioned next year some fireworks on the stock market. So um we have to buckle up for that. So but any final take? Are we okay in 10 to 15 years and what will happen in between?

>> Uh 10 to 15 years is a uh is a long time period. There's good reason to believe from a lot of sources that um uh 2040 give or take, so that's 15 years forward, it will not be the end of the world, but it will be the end of an age. Uh and the other side of that will be wonderful, maybe a golden age. But between now and then, I would expect uh a lot of turmoil.

>> Okay. Yeah.

>> Thank you, gentlemen. This a pleasure and um looking forward to tonight.