Transcription
One of the most important things about this war is it flies in the face of everything Trump stood for, everything he campaigned on. Um, Trump promised to keep us out of wars, to end the wars. He was very critical of US involvement in Iraq, in Afghanistan, and he said if he was president, we wouldn't have been in any of those wars.
And in fact, in the past, he had criticized Obama because he accused him of potentially launching a war on Iran as a political distraction. He was like, "Oh, he's going to declare war." And they often talked about the prospect of war with Iran as one of the negative consequences of electing a Democrat. Oh, don't vote for Kla Harris because we might end up going to war with Iran. So, the fact that we're now at war with Iran, uh, you know, is a real betrayal.
And Donald Trump tries to claim, "Well, I didn't start this war. It's been going on for 50 years. You know, they had it coming." All right, then. Why didn't you campaign on that? Why didn't you say, "When I'm elected, I'm going to start a war with Iran cuz they got it coming." You know, all the stuff that they supposedly did to justify the war. Trump knew that long before he started it. He knew it long before he was reelected. So why why why didn't he embrace that? Why didn't he say vote for me and I'm going to kick some Iranian ass? You know, he didn't do that.
Uh so I, you know, I was always a critic of Trump's economic policies, but I supported his foreign policy until now, you know, until he started a war. So he took away one of the only one of the few things that I liked about his presidency was his first presidency. He pretty much kept his word on that.
I mean, you know, >> what are the key economic indicators that you're watching to assess how this evolves and how it impacts the US economy? Because the inflation is obviously resurging um the labor market is weakening, but what other things are you looking at to see how this impacts the US economy and whether it does have long-term impact?
>> Well, I think I like to look at the money supply and the Fed's balance sheet, both of which are now growing at a pretty healthy pace. or not healthy, unhealthy because it's an inflationary pace. I look at the price of gold which has gone to record highs. It's had a bit of a pullback but the the trend is very clear. The breakout is very clear. Uh that signals a loss of confidence in the US dollar and US sovereign debt. I look at long-term interest rates which have remained stubbornly high despite the Fed's efforts to reduce rates. Long-term rates have not gone down. In fact, they've gone up. So that's more indication of a loss of confidence in the dollar.
You know, I'm paying attention to the surging debt numbers. Looking at some of the popularity polls where the president is the most unpopular president in history when it comes to the economy, that says a lot. Uh because you know the economy is all about a pocketbook. You know, you when somebody polls you and says, "Are you satisfied? Do you approve of how the uh president is handling the economy, they're not looking at it from the perspective of everybody?" They're looking at it from their own perspective, you know, their family's economy. How how are how are you doing? You know, are things getting better for you or are they getting worse for you? And when you have a record number of people saying, "I don't approve. I'm not I don't have confidence." It's because things are getting worse for them and and and and things are going to continue to get worse.
I mean, I no matter how much Trump wants to shove this false narrative down our throats that this is an economic boom that he has presided over the greatest economic turnaround in the history of the of the world. Um, you know, those lies don't erase the truth that people actually live in on a day-to-day basis. And so I I think that this is going to be very problematic in November with these midterm elections that are going to heavily swing Democrat, which is problematic for the country because their policies are even worse than the Republicans usually. I mean, this time around, the Republicans have had some pretty bad policies, too. But it it could get even worse with Democrats.
>> You mentioned US dollar, so let's turn to the dollar for a minute. The US dollar has been of course widely regarded as a safe haven. It is a global reserve currency. But in recent years, central banks have been diversifying assets away from the dollar. And interestingly enough, the dollar rallied after the Iran war began, despite the fact that it's been on a downward trajectory before the war for probably more than 12 months or so. Will the dollar regain its status as a safe haven? or is this just sort of a short-term rally that effectively is doomed?
>> Yeah. Well, you're you're correct that a lot of people have regarded the dollar as, you know, safe haven. I was not among them. I I I've always looked at the dollar as a risk that you want to avoid. You need safety from the dollar. You shouldn't be seeking safety in the dollar. But the dollar had a very weak 2025. It was one of the worst years it's had. And so the fact that it bounced a bit in 2026 with the war as a catalyst is not surprising. Just like gold, you know, gold when the war started, gold was at 5,500 and now it's 4,800. It went down as low as 4,100. So the fact that people took profits on gold after a big run, you know, I don't think that destroys the idea that gold's the safe haven. It's just that it had gone up so much in advance of the war uh that it gave some of it back when the war started. You know, you buy the rumor and and sell the fact. Same thing with the dollar. You had some short covering of the dollar. You had a little bounce in the dollar, but it's not a significant bounce. And in fact, the dollar has lost most of that gain. the dollar index is, you know, 98 and a half and it was about 98 when the war started and it and it rallied above 100, you know, two two and a half% rise and that was that was it. That was all the dollar, you know, could could get. And so to me, that's a very muted uh safe haven move. I think had we started this war 10 years ago, 20 years ago, you would have seen a much bigger rise in the dollar. Uh and so that's not happening now because the dollar is losing its appeal and it's going to lose a lot more of that appeal in in in the years ahead.
>> Many are arguing that the petro dollar is dying or is already dead. Of course, with the straight of Hormuz being sort of in this questionable state, open, closed, open, closed, blockaded, uh we are also seeing reports that indicate that Iran could charge a tall, effectively set up a tall booth and charge a tall for non-Chinese, non-Russian, non- US, and Israeli ships to cross. Um, but that would of course be transacted in the yuan. So what are your thoughts on the petro dollar effectively losing its it its uh ground and the broader implications on the US dollar as a reserve uh reserve currency in the world?
>> Yeah. Well um it's obviously very important that the petro dollar be there. I mean, if you go back to the origin of how it all came about, it was shortly after the US went off the gold standard when the dollar was, you know, backed by gold and redeemable in gold. And when we went away from that, you know, the dollar had lost any, you know, real value other than you could spend it, but it didn't have anything backing it up. And when we got the OPEC nations to price oil in dollars and tell the world, if you want to buy our oil, you need US dollars. We created another reason for the world to need dollars and we also created a situation where a lot of the OPEC countries that received dollars in exchange for their oil kept those dollars and invested them in US treasuries lo you know loaned them right back to the US government. So, it's been a very powerful enabler of, you know, our deficit spending and our trade deficits. And I do believe that that's going away and that's going to be a huge problem for the United States that depends on this. But it's going to be a huge benefit, I think, for the rest of the world that has had to bear the burden of of of this because the relationship ends up enabling Americans to live beyond our means. We could spend more than we produce. We can borrow more than we save. But that's only because the rest of the world takes the other side of that bargain. They produce more than they consume and they save more than they borrow. So we get to live beyond our means. They have to live beneath their means. That's what makes it possible. And so when the relationship ends, things will balance out. Our standard of living will go down. The rest of the world will go up. You know, if you measure it by consumption, how much stuff you can buy and and how much you can invest in your own economy. So I think the world comes out ahead and and America loses this exorbitant privilege that we have relied on for so long.
>> You mentioned the bond market, Peter, and I would love to get your thoughts on on the bond market today. It has been flashing red signs lately. Treasuries auctions have seen a decline in demand. What is your reading um of these moves in the bond market and what how do you interpret them?
If you go back to when the Fed first started cutting rates, you know, from its peak, the the peak in the Fed funds was around five and a quarter up there. And and the reason the Fed started cutting rates, it wasn't because we had won the war against inflation. We basically surrendered. Inflation won. It was because banks started to fail. And so the Fed was trying to take the pressure off uh the bank's balance sheets by by by cutting rates. But before the first rate cut, I predicted that when the Feds started cutting short rates, long rates would rise. And very few people had that forecast. And that's exactly what happened. The first 75 basis points of cuts related resulted in 75 basis points higher on the long end. And so that also is an indication the Fed is losing control of the bond market. And today, uh, central banks, foreign central banks are thumbming their nose at, you know, at a 4% yield on treasuries and they'd rather own gold and get no yield. And and that says a lot. And I think that it's an important market indicator of of of what's going to happen. I mean, in fact, former Treasury Secretary Hank Pollson just last week came out and said the US should have a contingency, you know, emergency break the glass plan for how to deal with, you know, the severe consequences of a loss of demand for treasuries, which yeah, of course, what he should be telling the administration is do something now before we have a crisis like that. Cut back on spending. do something to instill confidence so that we don't have a a collapse in demand for treasuries. Instead, his advice was, we're going to have a collapse eventually, so let's just brace for it, right? Let's just figure out what we're going to do, which, you know, to me is bad advice. I mean, what are you going to do? I mean, I I my joke I said on my podcast was the only plan I could think of at that point would be to have a a revolver behind that glass. And when you break the revolver, you just shoot shoot yourself in the head. That's the only solution uh at that point. So, um but but when you have a former Treasury Secretary saying what I've been saying, maybe some people should pay attention.