Get Rich Education 571: Trump's Takeover of the Fed Will Unleash a Wealth Bonanza and a Dollar Crash with Richard Duncan
Keith discusses the potential takeover of the Federal Reserve by President Trump, highlighting the macroeconomic implications.
Economist, author and publisher of Macro Watch, Richard Duncan, joins the show and explains that central bank independence is crucial to prevent political influence on monetary policy, which could lead to excessive money supply and inflation.
Trump's policies, including tariffs and spending bills, are inflationary, necessitating lower interest rates.
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Subscribe to Macro Watch at RichardDuncanEconomics.com and use promo code GRE for a 50% discount. Gain access to over 100 hours of macroeconomic video archives and new biweekly insights into the global economy.
Show Notes:
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Complete episode transcript:
Keith Weinhold 0:01
Welcome to GRE. I'm your host. Keith Weinhold, the President has a plan to completely take over the Fed, a body that historically stays independent of outside influence. Learn the fascinating architecture of the planned fed seizure and how it's expected to unleash a wealth Bonanza and $1 crash with a brilliant macroeconomist today, it'll shape inflation in interest rates in the future world that you'll live in today. On get rich education.
Speaker 1 0:33
Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads in 188 world nations. He has a list show guests include top selling personal finance author Robert Kiyosaki. Get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com
Corey Coates 1:21
You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.
Speaker 1 1:31
Welcome to GRE from Fairfax, Virginia to Fairfield, California, and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education. The Federal Open Market Committee is the most powerful financial institution, not only in the nation, but in the entire world, and when an outside force wants to wrestle it and take it down. The change that it could unleash is almost incredible. It's unprecedented. The President wants full control. Once he has it, he could then slash interest rates, order unlimited money creation, and even peg government bond yields wherever he wishes, and this could drive wealth to extraordinary new highs, but this also carries enormous risks for the dollar and inflation and overall financial stability. And I mean, come on now, whether you like him or not, is Trump more enamored of power than Emperor Palpatine in Star Wars or what this is fascinating. Today's guest is going to describe the architecture of the takeover the grand plan. Our guest is a proven expert on seeing what will happen next in macroeconomics. He's rather pioneering in AI as well. But today, this all has so much to do with the future of inflation and interest rates. We're going to get into the details of how, step by step, Trump plans to infiltrate and make a Fed takeover.
Keith Weinhold 3:23
I'd like to welcome back one of the more recurrent guests in GRE history, because he's one of the world's most prominent macroeconomists, and he was this show's first ever guest back in 2014 he's worked with the World Bank and as a consultant to the IMF. He's contributed a lot on CNBC, CNN and Bloomberg Television. He's a prolific author. His books have been taught at Harvard and Columbia, and more recently, he's been a guest speaker at a White House Ways and Means Committee policy dinner in DC. So people at the highest levels lean on his macroeconomic expertise. Hey, welcome back to GRE joining us from Thailand as usual. It's Richard Duncan
Richard Duncan 4:03
Keith, thank you for that very nice introduction. It's great to see you again.
Keith Weinhold 4:08
Oh, it's so good to have you back. Because you know what, Richard, what caught my attention and why I invited you back to the show earlier than usual is about something that you published on macro watch, and it's titled, Trump's conquest of the Fed will unleash a wealth Bonanza, $1 crash and state directed capitalism. I kind of think of state directed and capitalism as two different things, so there's a few bits to unpack here, and maybe the best way is to start with the importance of the separation of powers. Tell us why the Fed needs to maintain independence from any influence of the president.
Richard Duncan 4:44
Central banks have gained independence over the years because it was realized that if they didn't have independence, then they would do whatever the president or prime minister told them to do to help him get reelected, and that would tend to lead to excessive money supply. Growth and interest rates that were far too low for the economic environment, and that would create an economic boom that would help that President or politician get reelected, but then ultimately in a bust and a systemic financial sector crisis. So it's generally believed that central bank independence is much better for the economy than political control of the central bank.
Speaker 1 5:24
Otherwise we would just fall into a president's short term interests. Every president would want rates essentially at zero, and maybe this wouldn't catch up with people until the next person's in office.
Richard Duncan 5:35
That's right. He sort of wants to be Fed Chair Trump. That's right, president and Fed Chairman Trump on the horizon. It looks like won't be long, Now.
Speaker 1 5:45
that's right. In fact, even on last week's episode, I was talking about how Trump wants inflation, he won't come out and explicitly say that, of course, but when you look at the majority of his policies, they're inflationary. I mean, you've got tariffs, you've got deportations, this reshaping of the Fed that we're talking about the hundreds of billions of dollars in spending in the one big, beautiful Bill act. It is overwhelmingly inflationary.
Richard Duncan 6:12
It is inflationary. And he may want many of those things that you just mentioned, but what he doesn't want is what goes along with high rates of inflation, and that is high interest rates, right? If interest rates go up in line with inflation, as they normally do in a left to market forces, then we would have significantly higher rates of inflation. There would also be significantly higher rates of interest on the 10 year government bond yield, for instance. And that is what he does not want, because that would be extremely harmful for the economy and for asset prices, and that's why taking over the Federal Reserve is so important for him, his policies are going to be inflationary. That would tend to cause market determined interest rates to go higher, and in fact, that would also persuade the Fed that they needed to increase the short term interest rates, the federal funds rate, if we start to see a significant pickup in inflation, then, rather than cutting rates going forward, then they're more likely to start increasing the federal funds rate. And the bond investors are not going to buy 10 year government bonds at a yield of 4% if the inflation rate is 5% they're going to demand something more like a yield of 7% so that's why it's so urgent for the President Trump to take over the Fed. That's what he's in the process of doing. Once he takes over the Fed, then he can demand that they slash the federal funds rate to whatever level he desires. And even if the 10 year bond yield does begin to spike up as inflation starts to rise, then the President can instruct, can command the Fed to launch a new round of quantitative easing and buy up as many 10 year government bonds as necessary, to push up their price and to drive down their yields to very low levels, even if there is high rate of inflation.
Keith Weinhold 7:58
a president's pressure to Lower short term rates, which is what the Fed controls, could increase long term rates like you're saying, it could backfire on Trump because of more inflation expectations in the bond market.
Richard Duncan 8:12
That's right. President Trump is on record as saying he thinks that the federal funds rate is currently 4.33% he said it's 300 basis points too high. Adjusting would be 1.33% if they slash the short term interest rates like that. That would be certain to set off a very strong economic boom in the US, which would also be very certain to create very high rates of inflation, particularly since we have millions of people being deported and a labor shortage at the moment, and the unemployment rate's already very low at just 4.2% so yes, slashing short term interest rates that radically the federal funds rate that radically would be certain to drive up the 10 year government bond yield. That's why President Trump needs to gain control over the Fed so that he can make the Fed launch a new round of quantitative easing. If you create a couple of trillion dollars and start buying a couple of trillion dollars of government bonds, guess what? Their price goes up. And when the price of a bond goes up, the yield on that bond goes down, and that drives down what typically are considered market determined interest rates, but in this case, they would be fed determined interest rates Trump determined interest rates.
Speaker 1 9:28
Inflationary, inflationary, inflationary, and whenever we see massive cuts to the Fed funds rate that typically correlates with a big loss in quality of life, standard of living, and items of big concern. If we look at the last three times that rates have been cut substantially, they have been for the reasons of getting us out of the two thousand.com bubble, then getting us out of the 2000 day global financial crisis, then getting us out of covid in 2020, I mean, massive rate cuts are. Are typically a crisis response
Richard Duncan 10:02
yes, but if we look back, starting in the early 1980s interest rates have have trended down decade after decade right up until the time covid hit. In fact, the inflation rate was below the Fed's 2% inflation target most of the time between 2008 the crisis of 2008 and when covid started, the Fed was more worried about deflation than inflation during those years, and the inflation rate trended down. And so the interest rates tended to trend down as well, and we're at quite low levels. Of course, back in the early 1980s we had double digit inflation and double digit interest rates, but gradually, because of globalization, allowing the United States to buy more and more goods from other countries with ultra low wages, like China and now Vietnam and India and Bangladesh, buying goods from other countries with low wages that drove down the price of goods in the United States, causing goods disinflation, and that drove down the interest rates. That drove down the inflation rate. And because the inflation rate fell, then interest rates could fall also, and that's why the interest rates were trending down for so long, up until the time covid hit, and why they would have trended down again in the absence of this new tariff regime that President Trump has put into place. Now, this is creating a completely different economic environment. President Trump truly is trying to radically restructure the US economy. There is a plan for this. The plan was spelled out in a paper by the man who is now the Chairman of the Council of Economic Advisors. His name is Steven Moran, and the paper was called a user's guide to restructuring the global trading system. It was published in November last year, and it very clearly spelled out almost everything President Trump has done since then in terms of economic policy. It was truly a blueprint for what he has done since then, and this paper spelled out a three step plan with two objectives. Here are the three steps. Step one was to impose very high tariffs on all of the United States trading partners. Step two was then to threaten all of our allies that we would no longer protect them militarily if they dared to retaliate against our high tariffs. And then the third step was to convene a Mar a Lago accord at which these terrified trading partners would agree to a sharp devaluation of the dollar and would also agree to put up their own trade tariffs against China in order to isolate China. And the two objectives of this policy, they were to re industrialize the United States and to stop China's economic growth so that China would be less of a military threat to the United States, which it is currently and increasingly with each passing month. So so far, steps one and two have been carried out very high tariffs on every trading partner, and also threats that if there's any retaliation, that we won't protect you militarily any longer. And also pressure on other countries to put high tariffs against China. The idea is to isolate China between behind a global tariff wall and to stop China's economic growth. So you can see that is what President Trump has been doing. And also in this paper, Stephen Marin also suggested that it would be very helpful if the Fed would cooperate to hold down 10 year government bond yield in this environment, which would naturally tend to push the bond yields higher. So that paper really did spell out what President Trump has done since then.
Keith Weinhold 13:59
This is fascinating about this paper. I didn't know about this previously, so this is all planned from tariffs to a Fed takeover.
Richard Duncan 14:08
That's right, the idea is to re industrialize the United States. That's what President Trump has been saying for years. Make America Great Again. And it's certainly true that America does need to have the industrial capacity to make steel and ships and pharmaceutical products and many other things in his own national self defense. But there's a problem with this strategy since the breakdown of the Bretton Woods system, and we've talked about this before, so I will do this fast forwarding a bit when the Bretton Woods system broke down up until then it broke down in 1971 before then, trade between countries had to balance. So it wasn't possible for the United States to buy extraordinarily large amounts of goods from low wage countries back then, this thing that's caused the disinflation over the last four decades, trade had to balance because on the Bretton Woods system, if we had a big trade deficit. Deficit, we had to pay for that deficit with gold. US gold, and gold was money. So if we had a big trade deficit and had to pay out all of our gold other countries to finance that deficit, we would run out of gold. Run out of money. The economy would hit a crisis, and that just couldn't continue. We'd stop buying things from other countries. So there was an automatic adjustment mechanism under the Bretton Woods System, or under the classical gold standard itself that prevented trade deficits. But once Bretton Woods broke down in 1971 It didn't take us too long to figure out that it could buy extraordinarily large amounts of things from other countries, and it didn't have to pay with gold anymore. It could just pay with US dollars, or more technically, with Treasury bonds denominated in US dollars. So the US started running massive trade deficits. The deficits went from zero to $800 billion in 2006 and now most recently, the current account deficit was $1.2 trillion last year. So the total US current account deficit since the early 1980s has been $17 trillion this has created a global economic boom of unprecedented proportions and pulled hundreds of millions of people around the world out of poverty. China is a superpower now, because of its massive trade surplus with the US, completely transformed China. So the trade surplus countries in Asia all benefited. I've watched that firsthand, since I've spent most of my career living in Asia, but the United States also benefited, because by buying things from low wage countries that drove down the price of goods, that drove down inflation, that made low interest rates possible, that made it easier for the US to finance its big budget deficits at low interest rates, and so with Low interest rates, the government could spend more and stimulate the economy. Also with very low interest rates, stock prices could go higher and home prices could go higher. This created a very big economic boom in the United States as well. Not only did the trade surplus, countries benefit by selling more to the US, but the US itself benefited by this big wealth boom that has resulted from this arrangement. Now the problem with President Trump's plan to restructure the US economy is that he wants to bring this trade deficit back down essentially to zero, ideally, it seems. But if he does that, then that's going to cut off the source of credit that's been blowing this bubble ever larger year after year since the early 1980s and we have such a big global credit bubble that if this source of credit has been making the bubble inflate, the trade deficit, if that were to significantly become significantly lower, then this credit that's been blowing up, the bubble would stop, and the bubble would implode, potentially creating very severe, systemic financial sector crisis around the world on a much, probably a much larger scale than we saw in 2008 and leading to a new Great Depression. One thing to think about is the trade deficit is similar to the current account deficit. So the current account deficit is the mirror image of capital inflows into the United States. Every country's balance of payments has to balance. So last year, the US current account deficit was $1.2 trillion that threw off $1.2 trillion into the global economy benefiting the trade surplus countries. But those countries received dollars, and once they had that 1.2 trillion new dollars last year, they had to invest those dollars back into us, dollar denominated assets of one kind or another, like government bonds or like US stocks, and that's what they did. The current account deficit is the mirror image of capital inflows into the United States. Last year was $1.2 trillion of capital inflows. Now if you eliminate the current account deficit by having very high trade tariffs and bringing trade back into balance, you also eliminate the capital inflows into the United States, and if we have $1.2 trillion less money coming into the United States a year or two from now, that's going to make it much more difficult to finance the government's very large budget deficits. The budget deficits are expected to grow from something like $2 trillion now to $2.5 trillion 10 years from now, and that's assuming a lot of tariff revenue from the tariffs, budget deficit would be much larger still. So we need the capital inflows from these other countries to finance the US budget deficit, the government's budget deficit. If the trade deficit goes away, the capital inflows will go away also, and with less foreign buying of government us, government bonds, then the price of those bonds will fall and the yield on those bonds will go up. In other words, if there are fewer buyers for the bonds, the price of the bonds will go down and the yield on the bonds will go up. In other words, long term interest rates will go up, and that will be very bad for the US Economy
Speaker 2 14:08
the yields on those 10 year notes have to go up in order to attract investors. Mortgage rates and everything else are tied to those yields.
Richard Duncan 19:36
That's right. And cap rates. When people consider investing in tech stocks, they consider they'll buy fewer stocks if the interest rates are higher. So this is why it's so important for President Trump to conquer the Fed, to take over the Fed. That's what he's doing. Technically, he's very close to accomplishing that. Shall we discuss the details?
Speaker 1 20:29
Yes, we should get more into this fed takeover, just what it means for the future of real estate markets and stock markets. With Richard Duncan, more, we come back. I'm your host, Keith Weinhold
Keith Weinhold 20:41
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Speaker 1 22:31
Welcome back to get Education. I'm your host. Keith Weinhold, we're talking with macroeconomist Richard Duncan about a Fed takeover. I think the President wants to be Fed Chair Trump, Richard. Talk to us more about this, because this is really part of a grand plan.
Richard Duncan 22:57
So the Federal Reserve is in charge of monetary policy. That means it sets the interest rates on the federal funds rate, the short term interest rates, and it also has the power to create money through quantitative easing or to destroy money through quantitative tightening. So the Fed is in charge of monetary policy. The Fed makes its decisions at its it meets eight times a year, the Federal Open Market Committee, the FOMC, meets eight times a year, and they take votes. They discuss what's going on in the economy. They make a decision about what they should do about interest rates, and in some cases, decisions about creating or destroying money through quantitative easing or quantitative tightening. They take a vote. The structure of the Federal Reserve System is as follows. There are seven members of the Federal Reserve Board of Governors, so there are seven fed governors there. The Federal Reserve Board is in based in Washington, DC. In addition to that, there are 12 Federal Reserve banks around the country, like the Federal Reserve Bank of St Louis, for instance, or the Federal Reserve Bank of Kansas, the Federal Reserve Bank of New York. Each of these Federal Reserve Banks have a president, so there are 12 Federal Reserve Bank presidents now at the FOMC meetings where interest rates are decided, all seven fed governors get a vote, but only five Federal Reserve Bank presidents get to vote, and they rotate their votes every year they the following year are different. Five fed presidents get to vote. The Federal Reserve Bank president of New York always gets the vote because New York is such an important financial center, but the other four other presidents keep rotating year after year, and the presidents, 12 presidents, serve five year terms, and they can be reappointed, and their terms expire all at the same time, all on the same day, all of their terms will expire next year on February 28 and they will perhaps be reappointed and perhaps. Be reappointed. So that's the structure, seven Federal Reserve Bank governors and 12 Federal Reserve Bank presidents. All the governors. All seven get to vote at every FOMC meeting, but only five of the Presidents get to vote. So that's a total of 12. The Governors of the Federal Reserve System are the most important the seven. Those seven include the Chairman, Chairman Powell, and this is why they're the most important. They're important because if four of the seven have the power to fire all of the Federal Reserve Bank presidents, if four fed governors vote together, they can fire all 12 Federal Reserve Bank presidents. It only takes four. Only takes four. Then those Federal Reserve Bank presidents would have to be replaced, but the Federal Reserve Board of Governors has to approve the replacements. So if President Trump has four fed governors who will do what he tells them to do, then they can fire all the Federal Reserve Bank presidents and only replace them with other people who will do what President Trump tells them to do. Gosh. So what this means is, if the president can get four Federal Reserve Bank governors out of seven, then he has absolute control over monetary policy. He can do anything he wants with interest rates. He can do anything he wants with quantitative easing. So how many does he have now? Well, he has two that he's appointed, Christopher Waller and Michelle Bowman. They voted to cut interest rates at the last FOMC meeting. That was a dissenting vote, because the rest of the voting members voted to hold interest rates steady. Those two have already voted with the President, so they're on Team Trump, and they're going to stay on Team Trump, because both of them would like to become Fed Chairman when Jerome Powell term expires in May next year, very suddenly and very unexpectedly. A month or so ago, another fed Governor resigned. Her name is Adriana Coogler. Her term was not due to expire for another six months, and she'd not given any indication that she was going to resign early, but she did this now gives the President can nominate the Federal Reserve Bank governors. So he is nominated Stephen Moran, the one who wrote the paper the grand plan. Grand plan. He's nominated him to replace Adriana Coogler, yeah, and he's going to vote on him on his appointment, perhaps within very soon, and it only takes 51 senators to vote him in. And since the Republicans control the Senate, he will be approved, it seems very likely that he will be approved, and that will give President Trump the third vote on the FOMC. He will have three out of the seven governors. He only needs one more, and this is where at least the cook comes in. So on the 26th of August, I think President Trump announced that he was firing Lisa Cook, a Fed governor, because she allegedly had made misleading statements on some mortgage applications that have not been proven yet, that they are alleged. So he says that he has fired her. She has said he does not have the right to fire her. The legal cases that the President does have the right to fire a Federal Reserve Bank Governor, but only for cause. And so there's a real question whether this qualifies as being for cause or not, especially since it's only alleged at this point, but assuming that he does get control. So if he does succeed in firing her, he will be able to appoint her replacement, and that will give him four members, four governors out of the seven. And as we just discussed, with four out of seven, he will have complete control over monetary policy, because with four out of seven, that would give him the power to command those four to vote to fire all 12 presidents of the Federal Reserve Banks, and then to appoint new presidents of the Federal Reserve Banks who would vote along with whatever President Trump tells them to vote for. So in that case, with four fed governors, he would have those Four Plus he would have the five presidents that he would appoint from the Federal Reserve Banks voting for him. So five plus four, that is nine, nine out of 12 voting members on the Federal Open Market Committee. He would be guaranteed nine out of 12 votes on the FOMC, and that would give him complete control over monetary policy, and that's what he needs, because his policies are inflationary. They're going to drive up inflation. They're and that's going to push up the 10 year government bond yield, and it would normally make the Fed also increase the federal funds rate, because higher inflation should the Fed in. Increase the interest rates to cool down the higher inflation. But now that's not going to happen, because he is going to take over the FOMC one way or the other. Just by firing Lisa Cook, he's sending a very clear message to all the other fed governors and to the 12 existing Federal Reserve Bank presidents, you do what I tell you or you may be investigated too. You're next, one way or the other, the President is going to get what the President wants, and what he wants is control over monetary policy, and what that means is much lower short term interest rates and probably another very big round of quantitative easing to hold down long term interest rates as well.
Keith Weinhold 30:41
That was an amazing architecture and plan that you laid out for how a President can take over the Federal Open Market Committee. That was amazing to think about that, and what we believe he wants you talked about it is potentially quantitative easing, which is a genteel way of saying dollar printing. Is it lowering the Fed funds rate down to, I think 1% is what he desired, and we're currently at about 4.3%
Richard Duncan 31:08
that's right. He said he'd like to see the federal funds rate 300 basis points lower, which would put 1.3% we could see a series of very sharp interest rate cuts by the Fed in the upcoming FOMC meetings, so we could see the short term interest rates falling very quickly, but as we discussed a little bit earlier, that would alarm the bond market and investors, because they would realize that much lower interest rates would lead to much higher rates of inflation by overstimulating the economy. And so the 10 year bond yields will move higher for fear of inflation, and that will then force President Trump to command the Fed, to create money through quantitative easing on a potentially trillion dollar scale, and start buying up government bonds to push up their price and drive down their yields, so that the 10 year bond yields and the 30 year bond yields will fall. And since mortgage rates are pegged to the government bond yields mortgage rates will fall, and credit card rates will fall, and bank lending rates will fall, and this will kick off an extraordinary economic boom in the US, and also drive asset prices very much higher and create a wealth Bonanza,
Keith Weinhold 32:15
right? And here, Richard and I are talking interestingly, just two days before the next Fed decision is rendered, therefore, with eminent cuts, we could very well see soaring stock and real estate markets fueled by this cheap credit and this quantitative easing, at least in the shorter term.
Richard Duncan 32:36
But timing is something one must always keep in mind, there is a danger that we could actually see a sell off in the stock market in the near term. If we start seeing the Fed slashing interest rates, then the 10 year bond yields will start moving higher. That would ultimately lead to quantitative easing to drive those yields back down. But when the falling short term interest rates start pushing up interest rates on the 10 year government bond yield because investors expect higher rates of inflation, that could spook the stock market. The stock market's very expensive, so before QE kicks in, there could actually be a period where raising expectations for higher rates of inflation drive the 10 year bond yields higher before the Fed can step in and drive them back down again. We could actually see a sell off in the stock market before we get this wealth boom that will ultimately result when the Fed cuts the short term rates and then quantitative easing also drives down the long term rates. I hope that's not too confusing. There could be a intermediate phase, where bond yields move higher, and that causes the stock market to have a significant stumble. But that wouldn't last long, because then President Trump would command the Fed to do quantitative easing, and as soon as the president says on television that he's going to do quantitative easing, between the moment he says quantitative and the moment he says easing, the stock market is going to rocket higher.
Keith Weinhold 34:05
And here we are at a time where many feel the stock market is overvalued. Mortgage rates have been elevated, but they're actually still a little below their historic norms. The rate of inflation hasn't been down at the Fed's 2% target in years, it's been above them, and we've got signs that the labor market is softening.
Richard Duncan 34:25
That's true. The labor market numbers in the most recent job number were quite disappointing, with the revisions to earlier months significantly lower. But of course, with so many people being deported from the United States now, that's contributing to this lower job growth numbers. If you have fewer people, there are fewer people to hire and add to job creation, so that may have some distorting impact on the low job creation numbers. The economy actually is seems to be relatively strong the the. Latest GDP now forecast that the Atlanta Fed does is suggesting that the economy could grow by three and a half percent this quarter, which is very strong. So the economy is not falling off a cliff by any means. If the scenario plays out, as I've discussed, and ultimately we do get another round of quantitative easing and the Fed cuts short term interest rates very aggressively. That will create a very big economic boom with interest rates very low. That will push up real estate prices, stock prices and gold prices and Bitcoin prices and the price of everything except $1 the dollar will crash because currency values are determined by interest rate differentials. Right now, the 10 year government bond yield is higher than the bond yields in Europe or Japan, and if you suddenly cut the US interest rates by 100 basis points, 200 basis points, 300 basis points, and the bond yields go down very sharply, then it'll be much less attractive for anyone to hold dollars relative to other currencies, and so there will be a big sell off of the dollar. And also, if you create another big round of quantitative easing and create trillions of dollars that way, then the more money you create, the less value the dollar has supply and demand. If you have trillions of extra new dollars, then the value of the dollar loses value. So the dollar is likely to take a significant tumble from here against other currencies and against hard assets. Gold, for instance, that's why we've seen such an extraordinary surge in gold prices.
Speaker 1 36:38
right? Gold prices soared above three $500 and Richard I'm just saying what I'm thinking. It's remarkable that Trump continues to be surrounded by sycophants that just act obsequiously toward him and want to stay in line and do whatever he says. And I haven't seen anyone breaking that pattern.
Richard Duncan 36:59
I'm not going to comment on that observation, but what I would like to say is that if this scenario does play out, and it does seem that we're moving in that direction, then this big economic boom is very likely to ultimately lead to the big economic bust. Every big boom leads to a big bust, right? Big credit booms lower interest rates, much more borrowing by households, individuals, companies. It would while the borrowing is going on, the consumption grows and the investment grows, but sooner or later, it hits the point where even with very low interest rates, the consumers wouldn't be able to repay their loans, like we saw in 2008 businesses wouldn't be able to repay their loans, and they would begin defaulting, as they did in 2008 and at that point, everything goes into reverse, and the banks begin to fail when they don't receive their loan repayments. And it leads to a systemic financial sector crisis. The banks lend less when credit starts to contract, then the economy collapses into a very serious recession, or even worse, unless the government intervenes again. So big boom that will last for a few years, followed by a big bust. That's the most probable outcome, but I do see one other possibility of how that outcome could be avoided, on the optimistic side, and this is it. If once President Trump slash Fed Chairman Trump has complete control over US monetary policy, then it won't take him long to realize Stephen Moran has probably already told him that he would then be able to use the Fed to fund his us, sovereign wealth fund. You will remember, back in February, President Trump signed an executive order creating a US sovereign wealth fund. And this was music to my ears, because for years, as you well know, I've been advocating for the US government to finance a multi trillion dollar 10 year investment in the industries and technologies of the future
Keith Weinhold 39:01
including on this show, you laid that out for us a few years ago and made your case for that here, and then Trump made it happen.
Richard Duncan 39:08
Let's try my book from 2022 it was called the money revolution. How to finance the next American century? Well, how to finance the next American Century is to have the US, government finance, a very large investment in new industries and new technologies in things like artificial intelligence, quantum computing, nanotechnology, genetic engineering, biotech, robotics, clean energy and fusion, create fusion and everything, world where energy is free, ultimate abundance. So I was very happy that President Trump created this US sovereign wealth fund. Now that he will soon have complete control over his US monetary policy, he will understand that he can use the Fed to fund this, US sovereign wealth fund. He can have the Fed create money through quantitative easing and. And start investing in fusion. We can speed up the creation of the invention of low cost fusion. We could do that in a relatively small number of years, instead of perhaps a decade or longer, as things are going now, we could ensure that the United States wins the AI arms race that we are in with China. Whoever develops super intelligence first is probably going to conquer the world. We know what the world looks like when the United States is the sole superpower. We've been living in that world for 80 years. Yeah, we don't know what the world would look like if it's conquered by China. And China is the control super intelligence and becomes magnitudes greater in terms of their capacity across everything imaginable than the United States is whoever wins the AI arms race will rule the world. This sort of investment through a US sovereign wealth fund would ensure that the winner is the US and on atop it, so it would shore up US national security and large scale investments in these new technologies would also turbocharge US economic growth and hopefully allow us to avoid the bust that is likely to ultimately occur following The approaching boom, and keep the economy growing long into the future, rather than just having a short term boom and bust, a large scale investment in the industries of the future could create a technological revolution that would generate very rapid growth in productivity, very rapid economic growth, shore up US national security, and result in technological miracles and medical breakthroughs, possibly curing all the diseases, cure cancer, cure Alzheimer's, extend life expectancy by decades, healthy life expectancy. So that is a very optimistic outcome that could result from President Trump becoming Fed Chairman Trump and gaining complete control over monetary policy. And this is all part of the plan of making America great again. If he really followed through on this, then he certainly would be able to restructure the US economy, re industrialize it, create a technological revolution that ensured us supremacy for the next century. That's how to finance the next American century.
Speaker 1 42:23
Oh, well, Richard, I like what you're leaving us with here. You're giving us some light, and you're talking about real productivity gains that really drives an economy and progress and an increased standard of living over the long term. But yes, in the nearer term, this fed takeover, there could be some pain and a whole lot of questions in getting there. Richard, your macro watch piece that caught my attention is so interesting to a lot of people. How can more people learn about that and connect with you and the great work you do on macro watch, which is your video newsletter
Richard Duncan 43:00
Thanks, Keith. So it's really been completely obvious that President Trump was very likely to try to take over the Fed. Nine months ago, I made a macro watch video in December called Will Trump in the Fed, spelling out various ways he could take over the Fed, and why he probably would find it necessary to do so. So what macro watch is is it describes how the economy really works in the 21st Century. It doesn't work the way it did when gold was money. We're in a completely different environment now, where the government is directing the economy and the Fed, or seeing the President has the power to create limitless amounts of money, and this changes the way everything works, and so that's what macro watch explains. It's a video newsletter. Every couple of weeks, I upload a new video discussing something important happening in the global economy and how that's likely to impact asset prices, stocks, bonds, commodities, currencies and wealth in general. So if your listeners are interested, I'd encourage them to visit my website, which is Richard Duncan economics.com that's Richard Duncan economics.com and if they'd like to subscribe, hit the subscribe button. And for I'd like to offer them a 50% subscription discount. If they use the discount coupon code, G, R, E, thank you, GRE, they can subscribe at half price. I think they'll find that very affordable. And they will get a new video every couple of weeks from me, and they will have immediate access to the macro watch archives, which have more than 100 hours of videos. Macro watch was founded by me 12 years ago, and I intend to keep doing this, hopefully far into the future. So I hope your listeners will check that out.
Keith Weinhold 44:46
Well, thanks, both here on the show and on macro watch Richard gives you the type of insight that's hard to find anywhere else, and you learn it through him oftentimes before it makes the headlines down the road. So. Richard, this whole concept of a Fed takeover is just unprecedented, as far as I know, and it's been so interesting to talk about it. Thanks for coming back onto the show.
Richard Duncan 45:08
Thank you, Keith. I look forward to the next time.
Speaker 1 45:17
Yeah, fascinating stuff from Richard in the nearer term, we could then see interest rate cuts that would go along with cuts to mortgages and credit card rates and car loan rates and all kinds of bank lending rates. This could pump up the value of real estate, stocks, Bitcoin, gold, nearly everything a wealth bonanza. Now, in polls, most Americans think that the Fed should stay independent from outside control. You really heard about how the President is dismantling the safeguards that protect that fed independence, the strategy he's using to bend the Federal Open Market Committee to His will. And this is not speculation, because, as you can tell, the takeover of the Fed is already underway. A fed governor has been fired. New loyalists are being installed, and key votes are lining up in the President's favor. But as far as the longer term, you've got to ask yourself, if these policies will inflate a giant bubble destined to burst down the road. I mean triggering a crisis as bad as 2008 I mean, these are the very questions that every investor should be asking right now, if you find this in similar content fascinating, and you want to stay on top of what is forward looking what's coming next macroeconomically, check out Richard Duncan's macro watch at Richard Duncan economics.com for our listeners, he's long offered the discount code for a 50% discount that code is GRE, that's Richard Duncan economics.com and the discount code GRE next week here on the show, we're bringing it back closer to home with key us, real estate investing strategies and insights, a lot of ways to increase your income. Until then, I'm your host. Keith Weinhold, don't quit you Daydream.
Speaker 3 47:20
Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively.
Speaker 1 47:40
You You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why this is the golden age of quality newsletters. And I write every word of ours myself. It's got a dash of humor, and it's to the point, because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream letter. It wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text gre 266, 866, while it's on your mind, take a moment to do it right now. Text gre to 66866,
Keith Weinhold 48:59
The preceding program was brought to you by your home for wealth, building, get richeducation.com you.