Schiff Sovereign Podcast

More than 3,000 years ago, between the 12th and 13th centuries BC, the legendary king of Ithaca, Odysseus, set sail from the ancient city of Troy to begin the journey home. The stories of the Trojan War, and of Odysseus’s voyage home, have been passed down to us in the form of epic poetry from Homer. Most of it is pure fiction. But like modern film, TV, and ‘true crime’ podcasts that abuse dramatic license to entertain their audiences, Homer’s epics may in fact be “based on a true story”. The Trojan War, for example, likely happened. The bit about the horse, on the other hand, probably didn’t. It’s certainly possible (and even probably) that one of the key leaders in the war had an arduous journey back home to Greece, spurring ancient entertainers to weave elaborate tales of sirens and sea monsters. One of the most important parables in Homer’s tale of the long journey home for Odysseus is the story of Scylla and Charybdis. Odysseus’s journey took him through a particularly narrow stretch of sea; on one side of the strait was a small, rocky island where a six-headed monster named Scylla lay waiting to destroy any ship that dared to pass. According to Homer, Scylla was such a dreadful monster that “no one– not even a god– could face her without being terror-struck.” But on the other side of the narrow strait was the deadly whirlpool of Charybdis, which would swallow up the entire vessel and all the men on it. Odysseus’s impossible task, of course, was to swiftly and stealthily sail right down the middle… to just barely avoid the whirlpool of Charybdis, while somehow managing to avoid the long grasp of Scylla. For a while, Odysseus refused to believe the situation was hopeless; he was convinced that he would be able to sail, unscathed, between Scylla and Charybdis without a single loss. After all, he was a king. And an unparalleled expert when it came to sailing. Surely he would be able to succeed. And yet everyone who had ever come before Odysseus had believed the same thing. But no one had ever succeeded. Literally every ship that ever tried to sail between Scylla and Charybdis had been destroyed by one of the two evils. Eventually reality set in, and Odysseus knew that had would have to choose between the lesser of the two evils. He chose the monster Scylla. Odyssesus realized that sailing too close to the whirlpool would mean losing his entire ship and everyone on it. Sailing too close to the 6-headed monster would mean losing, at most, six men. Odysseus concluded that it was better to lose six men was than to lose everyone. And that’s precisely what happened; as his ship sailed through the strait, just barely avoiding the whirlpool, “Scylla pounced down suddenly upon us and snatched up six of my best men.” But the rest of the crew (and the ship) survived the challenge and passed through the strait. This story is one of the best allegories of the state of the global economy today. Central bankers and economic policymakers are like Odysseus. They have managed to sail the global economy into a very narrow strait. On one side of today’s economic strait is the evil inflation monster. And this monster is guaranteed to chew up and spit out incalculable quantities of unsuspecting, unprepared people. Yet on the other side of the economic strait is the full-blown collapse of the sovereign bond markets… and by extension, collapse of the global financial system. Like Odysseus, central bankers were at first in denial. They didn’t want to believe they were even in such dire economic straits. They infamously rejected the notion that inflation existed at all. Then they claimed it was transitory. Then they finally started trying to do something about it– to turn the ship around. But it was too little, too late. Now they find themselves squarely in the middle of these evils– inflation, and collapse of the sovereign bond market. And they’ll be forced to choose between the lesser of the two evils. Inflation is, by far, the lesser evil. The US national debt has doubled in the past decade, to $31 trillion. It will almost certainly double in the next decade, especially considering the massive $15+ trillion Social Security bailout that will be necessary by 2032. The US government already spent $680 billion last fiscal year just to pay interest. And that was with record low interest rates. Central bankers have been raising rates rapidly this year. But continuing to do so will bankrupt the Treasury. Remember that the US government has to refinance roughly 20% of its debt every year. Now that interest rates are so much higher, the government’s total interest payments will soon soar past $1 trillion, then $2 trillion annually. This would be devastating to national finances and potentially force a default. Central bankers know this, which is why they prefer to let inflation reign rather than risk a sovereign default. The government announced earlier this week that inflation had decreased to ‘only’ 7.7%. Don’t be fooled; inflation is still very much the major economic story of our time. This is the story of our podcast today– how central bankers find themselves between Scylla and Charybdis. This podcast was actually a live recording, taken today at our Total Access event in Mexico City. We’ll discuss why there are many forces that will continue to push prices higher for years to come, why the central banks are powerless to do anything about it, and how you can still take back control. You can listen in here. Open Podcast Transcription [00:00:01.360] I want to get started this morning with some big picture ideas, as I often do. And what I’d really like to do is synthesize a lot of things that we’ve been talking about. And as is kind of typical for me, we’ll start by going back time, this time around 70 years ago. And you can see on the map here, xmarks, the spot in the Peloponnesian Peninsula in ancient Greece. Now, this is so long ago.   [00:00:27.790] This is thousands of years before Socrates and Aristotle. This is a really long time ago. And there was a tribe of unknown origins who came down into the Peloponnesian Peninsula. They were kind of hunter gatherers and nomads. And they came down and they settled here.   [00:00:42.850] This was really not long after the Agricultural Revolution, which most of the time was more formally referred to as the Neolithic Revolution. Neolithic actually comes from Greece, neo for new, lithos for Stone. So really the Agricultural Revolution was a new part of the Stone Age, right? And the reason why the Stone Age lasted for so long, literally millions of years, is because human civilization at the time was all hunter gatherers. And as huntergatherers, they never put down the roots of civilization because they didn’t have the roots of civilization.   [00:01:16.020] They didn’t have the capacity to build new technologies and things that actually propel the species forward because they were constantly getting up and moving and going to a new place. So as the Agricultural Revolution, the Neolithic Revolution, that actually made that possible to propel human beings out of the Stone Age and into the next, which was the Bronze Age. And so we have this tribe now here in the Peloponnesian Peninsula, not long after the Agricultural Revolution, they come across a place. There’s abundant water, the soil is very fertile, and on a little hillside about 900ft above sea level, they built a fortress there. They had 360 degree views of the surrounding valley.   [00:01:53.940] It was a pretty strategic location. They could see and defend against any potential oncoming invading enemies. They were only about 12 from the coast, so they were protected from storms. But at the same time, they were only about a half a day’s journey to the coast if they needed to get there. So it was a really, really good place, and they built a fortress there.   [00:02:12.390] And that fortress in time became a great city and eventually a great power in the region. Now, these people are known as the Mycenaeans. The Mycenaeans were the Greeks before the Greeks. Again, this is thousands of years before Aristotle and Socrates and Plato and everybody like that, that we all know and have heard of. And this was a civilization that really had a lot going for it.   [00:02:43.150] They had advanced technology. They had a writing system. It was called the Linear B script. It was one of the first writing systems in the world. It was actually a very interesting writing system in that it was unlike Egyptian hieroglyphics, which were purely pictographic to demonstrate in ancient Egypt.   [00:02:59.080] They had a symbol for specific nouns, and so it was basically very noun heavy writing system, linear B. They had some symbols to convey ideas. For example, they had a symbol for horse and a symbol for donkey and pig and things like that. But they also had phonetic symbols like we do in a Latin alphabet or Cyrillic alphabet. So it was a really advanced writing system, but they had way beyond writing systems.   [00:03:23.860] They had advanced mining technology, metallurgy smelting. They figured out how to melt tin. They figured out how to smelt copper and turn that into bronze. And this is really what got the civilization out of the Stone age, is the ability to do that, to create better, more superior tools that help them to continue advance in civilization. They had advances in construction technology, advances in military equipment and weapons and tactics and agricultural advances and all sorts of things that really made them the power that they were.   [00:03:52.390] But around the year 1181, 200 BC. They just disappeared. They disappeared from history. And we know a lot of things about this civilization. We know that their cities were burned, their temples were raised, their palaces were destroyed, and the city is essentially vacated entirely.   [00:04:16.460] And thousands, tens of thousands of people in this area just disappeared and began nomadically, roaming elsewhere. There is a fair amount of archeological evidence that exists, but there’s also a great deal of legend. And pictured here, you see, is Homer. Homer tells us stories of the Mycenaean civilization, the most famous ones, obviously being the Elliott and the Odyssey. Now, a lot of what Homer has to say is complete bullshit, and we all know it, right?   [00:04:53.230] Fantastic stories about monsters and witches and all these things. But to be fair, that’s not so different than what we see in today’s. Modern media filmmakers are notorious for taking an extreme and absurd amount of dramatic license. So one of my favorite movies here, Amadeus, it literally says, you probably can’t read this here, but it says on the COVID everything you’ve heard is true. That’s actually everything you’ve heard is completely not true.   [00:05:18.070] Everything in that movie, sally ARY didn’t kill Mozart. All these things that this sort of fiction that they’re peddling, but they do it because it’s so much more entertaining. It’s so much more entertaining. And they know they need to entertain their audiences. They come up with these ridiculous stories of intrigue and murder and so forth because it makes it more interesting.   [00:05:34.500] And I actually put the Wolf of Wall Street on here. There’s a lot of dramatic license in that movie. A lot of things that they did that didn’t actually happen. And I actually put that on here because apparently Jordan Belfour was here yesterday having one of his sales conferences, so I thought I should actually be appropriate. But this was also normal in ancient civilization, the works of Herodotus had lots of fiction and we can see this obviously a lot in the Old Testament, but it’s all based on a true story, right in the Bible there’s an incredible amount of historical gold in the Bible and the Old Testament.   [00:06:10.180] They talk about all these different tribes and civilizations that did exist, the amirites and the Canaanites and the Israelites and the there’s so many of these. And of course there was an exodus. Of course the Israelites were enslaved in Egypt and they had a grand exodus. But did a guy really pull out a wooden staff and part the Red Seas? No, probably not.   [00:06:31.300] Probably not. But it’s grounded in truth, it’s grounded in real factual history. It’s based on a true story. And of course, the entertainers that they were, they had to come up with more interesting fiction to say. And then he pulled out his stuff and part of the Red Seas, but it doesn’t make the rest of it untrue.   [00:06:48.190] So we know, for example, that most likely there actually was a Trojan War. The ancient name for troi was Ilios, hence why they call it the Iliad. Ilios was the ancient name for Troy. And Troy was built in an area of modern day Turkey called the Darden. Mills Dartnells have long been one of the most, if not the most strategic location in the world because you’re basically control the trade route between the Mediterranean and the Black Sea.   [00:07:15.540] And especially in the ancient world, this was the most important place that you could control because you’ve got a lot of mining that’s taking place, for example, as far off as Afghanistan and Persia into the Neo Babylonian Assyrian empires and all that is going to go through the Dardenales. And meanwhile you’ve got to the west, the entire Mediterranean and the Levante and North Africa and everything. And so you’re right in the center of that. If you control that, you really control trade. And there was clearly a conflict, there had to have been because the Miternan civilization controlled they were the powerful force in the Mediterranean, so they controlled all the trade in the Mediterranean.   [00:07:52.240] Then you’ve got the Trojans that control the entrance to the Black Sea. And one of the most important resources in the ancient world, which was tin. Tin today is like nothing who cares about tin? But in the ancient world it was so incredibly important. It was as important in the ancient world as oil is today.   [00:08:10.310] So because of that, when there were issues with the tin trade or in the tin markets were in tin supply and tin production, it caused havoc across the ancient world and most of the tin was being mined in places like Persia and Afghanistan and Pakistan. And so it had to come across that route through the Black Sea, through the Dardanelles, and meanwhile you have in the Mediterranean where they’re actually mining the copper and the copper is coming out of Cyprus and so forth, and the Mycenaeans are controlling that. So there was a lot of reason why there would have been a conflict between these two civilizations. So most likely the war between the Mycenaeans and Troy actually happened. This probably didn’t the horse and all that ridiculous thing and the shot through the Achilles heel and all that stuff.   [00:08:55.170] Okay, yeah, that’s the entertainment part. And it is very entertaining. It’s really entertaining, you know, when you get into it. But a lot of this they probably made up. Or when they make up these stories, they make them up because they’re more parables or they’re symbols for other things.   [00:09:09.130] So, for example, in the ancient world, horses were often used as a symbology for a naval fleet. Ships were often known as seahorses. And so it could have been some acknowledgement of the Greeks, the Mycenaean superior navy and their naval forces. Who knows? But most likely I want a bunch of guys sitting inside of a horse waiting to raise the city.   [00:09:33.260] Then we have the Odyssey after the Iliad, which is the story of the Trojan War. We have the Odyssey, and that’s a very familiar theme. The theme of the hero has the voyage home. And it’s filled with a lot of danger and adventure and so forth as the hero, the war weary veteran who just won the war and saved the people. And now I got to make it home.   [00:09:55.420] And if you haven’t seen Star Trek Four, it’s a great movie, but completes the story arc from Star Two, the Wrath of Khan, where the needs of the many outweigh the needs of the few. And then in Star Trek Three, they got to go and rebuild Spock and then Star Trek Four, where they take the voyage home. And of course, it’s filled with all sorts of crazy adventures. That’s basically what the Odyssey was. It’s just a story arc.   [00:10:15.580] And if you think about it in the same way that we look at movies today, we have entire franchises with 37 different movies and so forth. That’s kind of what the Iliad and the Honesty were. It’s just a franchise and they were making it as entertaining as possible. And this concept and story home, the Voyage Home is a very familiar one. You have odysseus.   [00:10:33.940] That leaves Troy. They just sacked the city and they won the battle. And of course, he gets kidnapped by a Cyclops and he is constantly being seduced by beautiful women. Of course it’s only odysseus. It’s never anybody else on the crew.   [00:10:47.920] It’s only the hero with all these beautiful women constantly falling in love with him. And then he goes from one place to the other. Then he finally makes it home, where his wife Penelope is being courted by all these suitors that want to plunder his kingdom for all the wealth and money in the kingdom of Ithaca. And he goes home and he disguises himself and he slays all the suitors and we have a big happy ending at the end of the story. And it’s a great story.   [00:11:13.310] It could very well be based on a true story. Is it possible that there is a high ranking king or a veteran or so forth in the Trojan war that had a lot of adventure on the way, had a difficult time getting home? Sure, of course that’s possible. It’s in fact, quite likely given what travel conditions were like in the ancient world. Did it involve monsters and sirens and witches and so forth?   [00:11:33.510] No, probably not, but it makes it very entertaining. One of the very important and famous stories from the Odyssey is the story, the parable really, of Sila and Caribbeus. This is the Sila was a mythological six headed monster, and Caribbean was a Whirlpool that would destroy every ship that went through it. Historically, nobody had ever, according to Greek mythology, nobody had ever been able to navigate it properly. And this is actually quite interesting, because in the odyssey, they discuss this.   [00:12:06.070] This actually may very well be based on a true story, because modern day historians and geographers have found that off the coast of Sicily is a place called the strait of Messina, where there actually is a giant rock. And inside that rock, there’s a cave. And inside that cave, according to mythology, there’s a six headed monster. And they actually did find a rock with a cave there, and across the water is a Whirlpool. Now, the Whirlpool, realistically, is not really that dangerous, and it’s only going to negatively impact.   [00:12:33.960] It’s going to be dangerous for really small ships, and everybody else is Like, Oh, It’s no big deal, but of Course, they have to make this big deal about it in the Odyssey going, oh, anybody that Goes through There is going to get destroyed and everybody’s going to Die and so forth. And so this is the story in the Odyssey. Odyssey comes up and he’s warned in advance and said, listen, you’re going to come across this place, on one side there’s a rock, and inside that rock there’s a cave, and inside that cave there’s a six headed monster, and six of your men are going to die if you go through there. And on the other side is this Whirlpool, and Whirlpool’s going to crush everybody, and you’re all going to die if you go through the Whirlpool. Now, Odysseus odysseus was an expert, right?   [00:13:07.890] So at first he was completely dismissive about the risk. He said, come on, I’m an expert, there’s no risk here. And he denied, deny, deny. He rejected it. He said, no, there’s no risk here whatsoever.   [00:13:19.530] Then eventually he finally realized, okay, fine, there’s a risk, but the Whirlpool, it’s transitory and we don’t really need to worry about it. And he insisted that he was going to be able to properly navigate him and the crew through this risk. There was one going to be any problem. But finally he eventually realized, oh my God, this is actually a really big deal. And he knew he was forced to make a very difficult decision.   [00:13:44.560] He would have to choose between the two evils and he chose the lesser of the two. He chose, of course, Sila the 6th headed monster. And his reasoning was really kind of the as I call it, the contrapositive of the needs. The many outweigh the needs of the few in that he would rather lose six of his guys than all of them. He’d rather lose six of his guys than the entire vessel and everything on it.   [00:14:10.760] So he chose the lesser of the two evils. And this parable, again, perhaps based on a true story, the Straits of Messina exist. There’s a rule pool, there’s a rock, etc. But they made up this whole thing about the sixheaded monster etc. But it doesn’t change the parable, this very important parable of having to be forced to choose between two evils and you choose the lesser of the two evil.   [00:14:33.110] This is essentially a situation that we find ourselves in today. We have a couple more experts here on the screen. These are basically the chairpersons of the Federal Reserve in the United States since really the early 2000s. Bernake on the on the right here, Janet Yellen who took over from Bernanke and my main man JPAL, who took over from Janet Yellen. And I’m sure these are all very nice people being nothing against anybody in terms of who they are and their character and so forth.   [00:15:08.590] And I think actually, if you guys came to the event and also, I know a lot of you did. And one of the things I actually found so interesting about Dr. Malone’s remarks was he was talking about fauche. And how Fauche wasn’t really the problem so much as he was a symptom of the problem. As it was, the system itself was the problem that enabled somebody like that to be able to take this control over everyone and everything.   [00:15:33.700] And that’s, in a way, really what this is. It’s not the individuals here, it’s the system itself that has been established since 1913, since they passed a law establishing the central bank in the United States. And ever since then, they’ve anointed this to say you are going to run everything in the economy. You have supreme executive authority to do whatever it is that you want to in the economy. And when you step back and look at that, you go, that’s actually insane.   [00:15:57.670] It’s insane to think that a couple of people can sit in a room and think that something as complex as a 20 plus trillion dollar economy that has literally trillions and trillions of different units, economic units, businesses, transactions that occur every single transaction, every day. When you travel, when you buy food, when you fill up your gas tank. Think about the trillions and trillions of those transactions that take place in a given year. And to think that a handful of people are going to sit in a room and they’re going to push a button and just everything’s going to be optimized. It’s insane to think that anybody can control that.   [00:16:33.790] It is literally insane. That’s the system, these people are just representative of the system. And what they did way back, going back to the GFC, back in 2008, when the world was coming to an end because all the banks were failing and so forth. And so the guy on the right, Bernacki, he’s actually credited everybody, says, oh, he saved the world. He saved the economy.   [00:16:54.210] No, he just created a really big mess for everybody else to come behind him. So he’s the guy that slashed interest rates down to nothing. They printed gobs and gobs of money. He went to Capitol Hill, testifying in front of Congress, and I actually made a joke about it, said a trillion here, a trillion there, remember? And it was just no big deal.   [00:17:10.470] And they kept interest rates after he left, and then Jenny Ellen took over as head of the central bank. They kept interest rates at almost nothing for a really, really long time. That has consequences. Yet the whole time, they kept saying, no, no, no, it’s going to be fine. It’s going to be fine.   [00:17:24.580] We’re the experts and the experts have decided it’s going to be fine. There’s nothing to worry about. Then Janet Yellen steps down, jerome Powell comes up, and when inflation came up, these are the same people that are saying, inflation. We talk about inflation? Come on, you’re crazy.   [00:17:40.170] Inflation. Come on. And then eventually they came and they said, okay, all right, fine. There’s inflation, but it’s transitory. And then they abandoned transitory, and they said, all right, we’re going to do something about it.   [00:17:49.680] I swear to God we’re going to do something about it. But later, right? And they were saying this November, December, January, February, they’re saying, we’re going to do something about it. I swear we’re going to do something about it. And they finally did.   [00:18:00.480] And I think I honestly believe that. They honestly believe that that first raise in March, the rate hike came, and then everything was just going to be okay, and inflation was just going to dematerialize, and they’re going to say, See, I told you it’s all fine. And then it didn’t. And they go, oh, shit. And they did it again and again and again, and inflation wasn’t coming down.   [00:18:21.250] And now it switched from this conference, almost James Bond like, I got this. I got this. Don’t worry. Now it’s like, oh, my God, we have to raise rates. The world’s coming to an end.   [00:18:32.020] We’re going to do something about it no matter what the cost. And it’s turned into instead of this button down, cool, professional double seven monetary policy, now it says ultrapanicky hair on fire monetary policy. And quite interestingly now they had the inflation numbers came out just yesterday, it went from 8.2% to 7.7%. And everybody’s seeing the Hallelujah chorus about this. Now that it’s a big deal, but that’s not really how it works.   [00:19:03.010] And if you’ll forgive me a little bit for going back to Case, people slept through high school economics. We all know that price is basically the intersection of supply and demand. This is very crude and a lot of this is obviously in theory and you have elasticity and inelasticity and all sorts of things, but in short theory, sir, we’ve got supply and demand here. So we’ve got the demand curve there and the supply curve and price is where the two meet. Well, what do they do?   [00:19:31.230] If you think about to 2020, what they did here was they said everybody stay home. Everybody stay home. There’s a virus on the loose. Stay home. Sit in your basement like Joe Biden, don’t come out, don’t go outside, don’t go to work.   [00:19:48.030] Stay home, get fat, eat McDonald’s, drink booze, take your drugs, beat your kids, watch them as their educational development regresses substantially. But whatever you do, don’t go outside, don’t get fit, don’t get healthy, be afraid. Watch all the fear porn on CNN and stay home and don’t work. So obviously what you had as a result of that was a decrease in the amount of goods and services. So supply, if we think about aggregate supply across the entire economy, we can see a decrease in supply.   [00:20:17.610] That’s that shift you see from S one to S two. There basically we have an aggregate decrease in supply. But then what they did is they made it rain. They made it rain. The central bankers came out and said it’s free money for everybody.   [00:20:30.300] And so they printed lots and lots and lots of money and the government gave everybody lots of money and they came out with the most creative ways of doing it. They said, oh, we’re going to do PPP. Oh, but it’s a loan, it’s a loan, but it’s a loan that has to be repaid. So it’s free money. Then they just said, you know what, we’re just going to put money in people’s bank accounts.   [00:20:46.300] We’re not even going to pretend. We’re just going to put it right in your bank account. And they come up with the most creative ways of doing it. They gave states money, they gave foreign governments money. It was just ridiculous amounts of money.   [00:20:58.110] And so obviously that stimulates demand. And this is where we started to see issues with the supply chain. We started seeing people like, oh well, I’m trying to order this, but it’s not available. Whether it was microprocessors or shoes and then cars and all these things, lots and lots and lots of problems. And so we can see this here.   [00:21:15.430] Now we see demand from that original dotted green line to the blue line, it’s shifting up. So we have a decrease in supply and an increase in demand. And so basically this is what you end up with. You end up with you can see the red circles here where the first intersection between the green lines, that was your old price and now you’ve got decrease in supply and an increase in demand and you end up with a new price. So wow, what a surprise.   [00:21:39.300] We have higher prices. We have higher prices. This is high school economics. It’s not complicated. And so what are they doing now?   [00:21:47.710] Well, with the interest rate increases, what they’re trying to do is by raising rates, they’re trying to decrease demand, which is working, right? Because when it’s more expensive to borrow money, people borrow less, which means they spend less, which reduces demand. That’s the theory. And in part that’s actually working. But what they’re also doing is they’re kind of decreasing supply as well because you’ve got a lot of businesses that are really over leveraged, a lot of businesses that have a lot of debt that now all of a sudden their business model depends on being able to continually refinance that debt.   [00:22:21.790] And now they can’t refinance that debt anymore because capital is more scarce, the rates are a lot higher and becomes bankrupting. So you have people that are going out of business and when companies go out of business or employees get laid off, there’s less supply because there are fewer people and fewer business producing goods and services. So sure, you have less demand, but you also have less supply. And so if you kind of follow the blue lines to the purple lines there, what you basically end up with is more or less the same price, maybe a little bit less, but not a material difference in your price levels. Which is why after all of this, we really haven’t seen too much in terms of a decrease in our, in our price range.   [00:22:57.580] If you think about the Federal Reserve’s key interest rate, they have increased it literally by 75 x from five basis points to 375 basis points. And yet inflation is hardly budged. A 75 x increase in their key benchmark interest rate has resulted in very little reduction in price level. The other part of this that’s important to discuss is that you can’t really fix this until you fix the supply side. And that’s and we’re going to hear about this a lot over the course of the weekend.   [00:23:30.270] There are a lot of things that are creating problems in supply. One of those is continuing lingering issues in the labor market. The labor force participation rate still has not recovered. It’s still much lower than it was years ago. People, because of COVID and a lot of other issues have said screw it, I’m out.   [00:23:46.720] And they retired early and they quit the workforce. And meanwhile you’ve got a lot of Gen z interesting occupational choices. They’re not going into truck driving and being forklift operators and farmers, a lot of these things. Instead they’re professional video gamers on Twitch and they’re posting butt selfies on Instagram for a living and all these sorts of things that don’t actually contribute anything meaningful to the economy, right? And so you’ve got critical occupations that are being unfilled at a time when all these people are retiring and labor force participation hasn’t recovered.   [00:24:20.170] So there’s still a lot of issues in the labor market and that adversely impacts supply. There’s a big reversal in the globalization trends for the last 30 years was an era of almost unprecedented peace and prosperity, certainly in modern history, where everybody had an incentive to just get along and play nice. And sure, there was occasional flareups and you had terrorist groups and things like that here and there, but among sovereign nations, there was a great deal of cooperation. You had even China and Russia, everybody just kind of more or less got along because it was in everybody’s interest because they were making so much money. Who would want to screw that up, right?   [00:24:53.080] And so everybody’s making a lot of money. And now that’s reversed. Now you have countries that are saying, well, before we were doing winwin deals where we all got a lot of value out of it. But now, because of our geopolitical conflicts, now I want to block you. Now I’m your adversary.   [00:25:08.650] Now I’m going to take steps specifically to try and block you gaining. Therefore I only want to do a win lose deal. And if I can’t do a win lose deal, then we’ll all lose and we do a lose lose deal, which is the opposite of capitalism. Capitalism is about winwin deals where you create value and everybody gets to win and it propels everybody forward. This is the opposite of that.   [00:25:28.680] We’re going to do lose lose deals, deals that are just remarkably stupid. And we see this a lot with the even the Russian sanctions. It’s basically resulted in skyhigh oil prices that are actually benefiting some countries at the expense of others, like the United States. So we’re seeing trends with reassuring where people realized after the, after the Pandemic and people were getting things manufactured in China, said, no, we can’t do that anymore. So now we’re going to bring that stuff back to the United States where we can’t find labor.   [00:25:56.820] And the cost structure is so much higher. So it creates a lot of issues again in supply. And then you’ve got rising expenses, even for people that still manufacture overseas in places like, whatever, Bangladesh and India and different places like that, that now those costs are rising. So that was a force that for a long time had constrained inflation. But now that constraint, that force to keep inflation down, now that’s going away.   [00:26:21.580] So this is also negative for supply. But one of the biggest issues by far is energy. And I don’t. Want to talk a whole lot about energy because we brought one of the smartest guys I know to talk about energy. And you’re going to hear from Adam here in a little bit.   [00:26:33.820] But let’s just say that a man reads what he says. And I don’t want to mean to pick on any one person. It’s not polite to pick on people who have dementia anyway, so I’m not going to do that. But what I will say is these people have, from day one, targeted the fossil fuel industry. And now the outcome is exactly what they have engineered.   [00:26:57.970] Now they’re pissed off about it. And now he’s going and wagging his finger to everybody saying, you evil oil companies. And it’s like, well, this is what you were wanting. You wanted them to produce less. You wanted to put these guys out of business.   [00:27:08.220] You wanted to make life difficult for them, which is why you created a mountain of regulations, which is why you are required by law to issue concessions and leases on federal land. It’s not like optional. It’s required by law. And they just don’t do it. They just don’t do it.   [00:27:23.320] And this was actually one of my favorite ones. This is a photo from this was a couple of months ago. And he was wagging his finger again. And his favorite target was always ExxonMobil. And he was wagging his finger at Exonmobile.   [00:27:34.800] And he says ExxonMobil makes more money than God, which is actually a really bad analogy given the pitiful state of Vatican finances. I think most people at this point make more money than God. If you look at it on a free cash flow basis, viktor is hemorrhaging money. They can’t stop the bleeding. But anyways, what he goes on saying is, I’m going to make sure that everybody knows how much money Exxon makes.   [00:27:57.190] And you got to go, dude, it’s a public company. They’re supposed to report their earnings. Everybody knows how much money ExxonMobile makes because they require to report their earnings. Exxon already makes sure that everybody knows how much money Exxon makes, but he doesn’t even understand the basics of financial markets. It’s kind of embarrassing, but this is the result of it.   [00:28:17.140] The energy, the energy concerns, the energy issues that we have, it’s not really an accident. There’s so many things that they’ve done deliberately to create this situation. Whether this was the intended outcome or not, it doesn’t matter. This is exactly what they’ve engineered. And again, not to just pick on one person.   [00:28:33.790] These are all the people that are now in Egypt at the top 27 nonsense where they all pretend that apparently saving the world from climate change depends on gender identity and all this stuff. They literally have an entire day set aside at Cop 27 as gender day because apparently that’s what it’s gender studies are going to lead us out of a climate crisis. It is so completely insane. There’s not a single word about nuclear anywhere on the agenda. We can’t talk about real solutions that actually work, but we’re going to talk about gender identity because that’s apparently going to solve the climate crisis.   [00:29:06.420] It’s completely insane. So what we have here are major supply issues, long term consequences, long term implications that make supply a lot more difficult to come back to normal, right? And that’s something that we believe is going to keep inflation elevated for some time. And it takes us back to what central banks are trying to do tackling inflation by raising interest rates and raising interest rates and raising interest rates. And so those increases in interest rates have consequences.   [00:29:38.580] And one of those consequences that interest rates, higher interest rates adversely impact heavily indebted entities of any kind where you talk about individuals, businesses, or even sovereign governments and you’ve got places like Greece, like Japan and so forth that really are in a lot of trouble if rates continue to increase. And of course, you’ve got the United States where the national debts basically doubled over the last ten years. It’s been growing at an astonishing rate in fiscal year 22 that just ended on September 30. About six weeks ago, according to the government’s own financial statements, they spent $680,000,000,000 in interest in fiscal year 22, and that’s where the average interest rate was nearly at a record low. So now we’ve got rising interest rates.   [00:30:24.310] And by the way, I’ve got to say something here about this number. They pedal a lovely fiction on their financial statements where they say, oh, but that number doesn’t actually matter, and they try and report a lower number that they call the net interest. And the difference between this number, which is gross interest and the net interest is say, well, some of the interest we actually pay to ourselves. So for example, we give $800 billion to the Defense Department and the Defense Department doesn’t go and waste all that money immediately. They waste it over time, right?   [00:30:56.160] And so the money that they haven’t wasted yet, they put in treasuries, so they earn a little bit of interest and so the Defense Department takes money from Congress and then they go and actually invest it back in US. Treasuries and they actually get a little bit of interest. And so the government likes to peddle a fish and they go, no, no, no. Well that amount doesn’t matter. And you go, well, of course it matters because the Defense Department still gets that money.   [00:31:17.360] They still get the interest and then they spend that money. So it’s not like it’s just free money. The fact that the government sometimes borrows from itself and pays interest to itself doesn’t mean that it’s not actually real money that is owed and has to be paid and then later gets spent or wasted. So this money actually matters, and that number is $680,000,000,000. And that’s before we factor in significant interest rate increases.   [00:31:44.810] If we look at ten year trades. Actually, if you go back ten years ago, even ten years ago, the ten year note was almost nothing. I’m going to just think pelosi right, nothing. Right? It cost nothing.   [00:31:55.770] The ten year treasury literally costs nothing. It paid nothing. And now you’ve got a lot of these ten year Treasuries that were issued way back when. It nothing and now has to get refinanced because when that stuff comes due, when the bonds come due, the bonds mature, the government has to pay back. But of course they never pay it back.   [00:32:11.550] They just go and borrow from somebody else, sometimes even the same person. They go, okay, we’re going to refinance this. But they refinance it at a higher interest rate. Whatever the current interest rates are, they refinance it. So you go from half a percent to 4%.   [00:32:24.220] That’s a really big difference. That’s a really, really big difference. And so if you were to refinance a lot of this debt, you’re talking about easily shooting past a trillion dollars and even getting to $2 trillion just in the amount of interest that you have to pay. And that doesn’t even take into consideration the additional debt that they take on year after year after year. These people are bragging because they said, oh, the deficit was only one $4 trillion this year.   [00:32:47.320] And they think that’s a cool thing. They think they’ve done a great job because the deficit was only one $4 trillion. And by the Treasury Department’s own projections, the national debt will continue to grow higher and higher and higher and they’re going to be paying new higher rates every year. Roughly 20%. 20% of us.   [00:33:06.420] Public debt has to be refinanced because the average maturity for US. Public debt is about five years, a little bit over five years. That basically means every year 20% of the debt has to be refinanced, but it’s being refinanced at higher and higher rates. And so you can understand the problem here very, very quickly is that the amount of interest that the Treasury Department is going to have to pay is going to skyrocket and pretty soon edge out all other spending. That’s a really dangerous scenario because if the US.   [00:33:33.930] Government were pushed into default, it would create a financial apocalypse. Everybody, nearly everybody would fall. Every bank, every corporate treasury that has, every corporation that has US. Treasuries, which is pretty much every major corporation, sovereign governments, foreign central banks, the US. Central bank, everybody would suffer immeasurably.   [00:33:55.060] Financial markets, stock markets around the world would crater. It would be so devastating. And central bankers are intelligent people. They understand this risk. They understand that you cannot push the leading sovereign government in the world into a state of insolvency where it’s paying so much in interest it cannot afford to do so any longer.   [00:34:15.730] That is an actual risk. And they know this. And so therefore there is a level that they know they just can’t go beyond in terms of their interest rate hikes. They know this. Even if you take the federal government out of the, out of the equation, you’re talking about a lot of very heavily indebted businesses, state governments, et cetera.   [00:34:34.200] So there’s a lot of pension funds. There’s so many issues here because all these entities got so accustomed to zero interest rates for so long, they built up this portfolio that depends on all these things. And we’ve already seen this in the UK, if you guys remember, just over the last several weeks, where they had a major issue with the pound and UK government bonds with guilt because of pension fund issues there. Because you have so many of these funds that basically had to take on larger and larger risks because of the interest rate environment. So this is a real issue, and they know this.   [00:35:03.870] Therefore, if they have to choose between on one hand, we keep raising interest rates because we’re desperately trying to battle this chaotic adventure in battling inflation that’s not even working, and that could cause serious systemic issues, or we’re just going to accept a certain level of inflation, not at the level it is today. Probably less. You know, we’re not talking like seven, eight, 9%, maybe they get down to five and a half. I think they’d consider that probably a big victory. If they can stave off a major financial apocalypse, they’re absolutely going to choose inflation because it is the lesser of the two evils.   [00:35:38.440] So this is, in a way, a major primary thesis of our organization. We believe that there are a number of forces that will lead to sustained higher inflation. Energy is a major factor in that. And we believe as well, that is what we observe, really, that the world is shifting from an era that we’ve enjoyed for so long, where there’s been global peace and cooperation and easy trade, abundant energy, and now things are shifting. And now it’s an era of geopolitical conflict and deliberate economic antagonism and energy scarcity and so many other things that lead to a higher level of sustained inflation.   [00:36:16.760] Now, I always have to acknowledge, hey, we could be wrong. Of course we could be wrong. And there are some factors as Putin put his tail between his legs, and there may be some signs that they’re ready for a peace in Ukraine. And that may certainly happen. And I think if that does happen, there’s probably going to be some at least short term benefit in energy markets.   [00:36:36.780] But peace in Ukraine won’t solve the long term fundamental challenges, doesn’t solve the long term fundamental energy challenges. So that may happen. But even if it does, I don’t think that actually gets us out of the woods here. Is there going to be a major shift in political control in the United States? Well, we answered that question a couple of days ago, and the answer seemingly is no.   [00:36:58.910] Will there be a sudden reversal in a political ideology from the big guy? Absolutely not. And in a press conference on Tuesday, I think it was I watched it would have been Wednesday, I guess. In a press conference, he was asked by an Associated Press reporter, what will you do differently in the next two years of your administration based on the results of this election? What the people are telling you?   [00:37:22.860] And his answer was nothing. Nothing. Because he believes that he has, because they didn’t completely get their asses kicked, that he has a moral mandate to continue doing exactly what he’s doing. And so I don’t think we can probably count on this sudden shift and everything’s going to be so much easier in energy markets, and they’re going to cozy up with the oil and gas companies now, et cetera. I don’t think that’s very likely.   [00:37:46.510] Possible, but unlikely. Does China put down its savory, completely abandoned, zero COVID policy? No, probably not. Just yesterday or today, they announced that they were going to loosen up the restrictions. So instead of Kimberly locked down for ten days, now it’s going to be eight days.   [00:38:02.660] Things like this, you go, all right, maybe that’s a little baby step in the right direction, but it doesn’t really move the needle in terms of opening up a global economy and creating more supply. When you lock down millions and millions and millions of people across the entire province and one of the most important manufacturing hubs on the planet, you’re going to have a decrease in supply, and you don’t get out of an inflation situation until you can fix the supply problem. So China is definitely a major factor in this. Will it be a major oil discovery? Could be, but given the sort of political and regulatory headwinds, it makes, it a little bit unlikely they’d be able to exploit that.   [00:38:36.570] Are they going to suddenly change their minds and embrace uranium and nuclear power? Possibly, but doesn’t really look like it at the moment, given what’s happening at Cop 27. So there’s all these issues where I fully acknowledge and say, well, hey, we could be wrong about some of these things, and there may be some things that we’re not even thinking of, but we feel like we’re on pretty safe ground in assessing an outlook that is more inflationary. By the way, an inflationary outlook coincides with literally 50 years of human history. History is inflationary, period.   [00:39:07.760] And don’t forget about Social Security. We have eight years before there’s going to have to be a massive multi trillion dollar, probably ten to $20 trillion bailout of Social Security. Nobody wants to talk about it. Nobody acknowledges it. The only people that actually do are the people that write the Social Security Annual trustee reports, including the Treasury Secretary of the United States.   [00:39:29.700] Don’t take my word for it. Just read the Social Security Annual Report of the trustees, and they say, in black and white for anybody that actually cares to want to read this stuff. They say we are going to run out of money in this year. Circle a date, put it on your calendar and it’s probably going to be accelerated given that now they’re having to pay the highest cost of living increases in history, in the history of the program. So that’s probably going to accelerate the date that the entire reserve and the trust funds are depleted.   [00:39:58.980] That’s going to be a huge problem. And so either they’re going to say, well, tough luck everybody, we’re going to have to cut your Social Security benefits. And they actually say this in their report. They say, oh we can slash it something like 30%, 40% and we could slash everybody’s benefits and then it won’t keep up for inflation, obviously, because they won’t have the money to do that. So over time it’s going to be less and less and less, which is going to cause a major social crisis in the US.   [00:40:18.870] Given how tens of millions of people are dependent on Social Security. Or they got to figure out a way to bail it out and they’re just going to print the money to do that because they don’t have the money. They don’t have the money. They don’t have any financial assets. The only few financial assets they have on the government balance sheet are student loans and you got the stooges there trying to get rid of it.   [00:40:36.280] So no, no, we don’t want this asset. Fortunately, they’re actually blocked by a federal judge just yesterday, I think. So we’ll see what happens with that. But this is a huge issue. So if we think about over a longer period of time, literally over the next decade, and you factor in things like Social Security and the need to actually bail out this program, the argument for inflation again feels like you’re on even much more solid ground.   [00:41:04.690] So when we think about this, I’m just going to go ahead and call it stagflation because everybody’s talking about recession. It’s up to the National Bureau of Economic Research. Nobody else is entitled to an opinion. There’s a bunch of experts that sit in a room and decide whether or not we’re in a recession or not. Maybe we are already, maybe we’re not.   [00:41:21.750] But if we are or we’re heading that way and we’re in inflation, that means stagflation. What works well in stagflation? Well, we’re going to talk about a lot of these things this weekend, but real assets really make a lot of sense. Energy makes a lot of sense. Adam is going to tell you a lot about this and I’m really excited for those remarks.   [00:41:39.880] Agriculture makes a lot of sense. Mining makes a lot of sense. Productive technology, which is different than consumer technology, the things that people just sort of swipe and scroll and actually make us less productive because you got an entire generation of people staying on the phones all day can’t look up swiping and scrolling, scrolling and swiping like zombies, right? That makes us less productive. I’m talking about productive technology that makes things better, faster, swifter, cheaper, just overall propels our civilization forward.   [00:42:06.610] There’s a lot of really interesting technology out there. You’re going to hear from somebody about that today who’s got a hell of an idea of what they’re already doing and just killing it. Businesses that produce valuable goods and services, there’s a lot of really great ways to invest. And this isn’t uncharted territory. We’ve seen this before.   [00:42:22.600] We saw what happened in the 1970s. Real assets did very well. Energy companies, all companies, did pretty well. Exxon stock, this was back when they weren’t combined with ExxonMobil. Exon stock did pretty well.   [00:42:32.680] Exxon between dividends and cap, gains average about 12% a year during the 1970s, precious metals did phenomenally well. Precious metals were up 20 x and more. Agriculture, farmland did extremely well in the 19th century. So this is not something that we have to be clueless about. We can look to history and see the things that have worked in the past.   [00:42:52.010] I want to leave you with a simple message in saying that this is not the end of the world. It is not the end of the world. I actually just finished this book called 1177 BC the Year Civilization Collapsed. Remember when I told you that the Mycenaeans faded into history around 1180 BC? This was a real thing that happened in history.   [00:43:14.520] And I actually I’m so fascinated by this period. And it’s really almost prehistoric because of very few records that exist. There are some records in the Egyptians. We owe a lot to the ancient Egyptians and the scribes that they had in the writing system that were really, really on it. And there’s a lot of what we know actually comes from the Egyptians.   [00:43:31.630] And this is a really fascinating period of history. It’s called the Bronze Age collapse because you had all these civilizations right around the same time. And the author of this book, they picked 1177 BC as the year, but it was happening over a period of really of several decades, but over a relatively short period of time, you had literally the collapse of multiple civilizations. The Hittite Empire, the Mycenaeans, the Minoans, the Trojans, the Babylonians, the Amarai. There are so many different cultures and tribes and kingdoms and civilizations that just ended.   [00:44:02.850] They just ended. They ceased to exist. And a lot of historians have studied this and tried to figure out why. And the record, both the historical record, the archaeological record a little bit shy of details, which is why there are so many different theories about this. But the Bronze Age collapse is often cited for with a number of different reasons.   [00:44:21.060] One was climate change. They point to climate change. There were volcanic eruptions that caused really significant declines in agricultural output because they didn’t have enough sunshine, literally not enough sunshine in order to produce their food. And so there were people that caused mass starvation and famine and so forth. They had a very powerful enemy, one of the most mysterious enemies in human history.   [00:44:40.060] A group that historians referred to as the Sea Peoples, some people actually claim might have just been refugees, possibly from Troy. They just started combing down through the Levant in the Mediterranean, just destroying kingdom after kingdom after kingdom. They were angry and they were very powerful. There was also a lot of some evidence that there was a pandemic. And the pandemic could have wiped out a lot of people and a lot of civilizations.   [00:45:01.800] A collapse of trade that there may very well have been an issue with the tin trade. And tin again was the most important commodity at the time, like oil is today and scarce resources, et cetera. We don’t really know for sure exactly what it is, but we can look to history and see that there were possibly quite a lot of forces that literally pushed all these civilizations out of existence. But the good news is it wasn’t really the people so much that went into decline. It wasn’t human civilization itself that went into decline.   [00:45:34.110] It wasn’t the system. It was the empires. It was the governments. It was the systems that were in place to say we’re going to have a king and the king’s going to make all the decisions. We’re going to have this ruler and the ruler’s going to make all the decisions.   [00:45:43.860] We’re going to have a pharaoh, we’re going to have a whatever, and this person is going to make all the decisions. It’s crazy. It doesn’t work. And that was the civilization that was the system that collapsed of giving all the power and all the authority to one person, to a single expert that gets to lord over all the peasants and the commoners and say, I and I alone can tell you what to do. I and I alone can deliver us from this crisis.   [00:46:06.340] That’s the system that collapsed. It wasn’t like everybody just spontaneously combusted. The people were okay. It was the system itself that collapsed and most notably was replaced by a new system because after this happened, 1177 BC. Over time, a new system developed.   [00:46:23.530] What we consider the classical Greek civilization of ancient Greece, of ancient Athens world. This is where we do have Socrates and Plato and Aristotle and Pythagoras and Hippocrates and all of the people that made a major impact on all the future. Human civilization came out of the came out of the collapse of the system from the Bronze Age collapse and the democracy, the new system where it wasn’t all of a sudden one person gets to lord over everybody else. It was everybody else got to decide in a new system that flourished, a new civilization that flourished, where intellectual property flourished, where the economy flourished, where trade flourished, and everybody was better off because the old system collapsed and it was replaced by a new system. And I think, absolutely, that is what we’re in for.   [00:47:03.940] I think that is absolutely what we’re in for. Because there have been so many examples of the last few years of the system that we have right now that is just not working. And our future story won’t look exactly like this. It will take its own story arc. There will be all sorts of fantastic things, and perhaps future storytellers will insert their own elements about what happened in monsters and beautiful women and all sorts of things.   [00:47:28.030] But most likely, we’re on a much, much higher trajectory with a new system in place where, just like the ancient Greeks, they had a new system of government, they had a new system of delegation, they had a new system of trade. That a new system of money. That a new system of economy. Everything was new, and it worked. And they flourished.   [00:47:44.430] And so will we. And that’s why when we see everything happening in the world, look at energy or we look at climate, we look at politics or whatever, it’s okay. It’s okay because there’s something better coming. We don’t know exactly what it looks like, but it will absolutely be based on a true story. And those are my remarks.   [00:48:01.140] I appreciate your time and attention, as always.   Close Podcast Transcription

Today’s podcast starts off in the year 1175 BC, where the legendary Pharaoh Ramses III was readying himself for battle against one of the most mysterious enemies in all of human history. Ramses was literally fighting for the survival of his kingdom, and for all Egyptian civilization. And fortunately for Egypt, he won. But it came at a great price. Ramses’ treasury was depleted from costly battles (not to mention the vast numbers of expensive monuments and temples that he built). And so to make ends meet, he did what any politician would do– he raised taxes. The ancient Egyptians were legendary record keepers; we have detailed accounts of their commercial activities, financial transactions, and even tax receipts. And we can easily observe the trajectory of Ramses’ economic frustration: tax receipts were declining, evasion was becoming rampant, and production continued to decline. It’s ironic that, even though Ramses III saved his civilization from marauding invaders, his dynasty soon collapsed due to economic mismanagement. This is an important lesson that politicians have to relearn over and over again: taxation is a huge disincentive. Whenever you impose a tax, you get less of it. Policymakers understand this in theory; as Mayor of New York City, Mike Bloomberg famously imposed a ‘soda tax’ on sugary drinks. He knew that imposing such a tax would curb people’s behavior and they would purchase less soda. This is also why taxes on cigarettes and alcohol exist; politicians understand very well that people will consume less of something that is heavily taxed. But for some reason, they fail to apply the same logic to productive economic activities. They fail to understand that if you place heavy taxes on capital gains, you’ll end up with fewer investments. If you increase corporate tax rates, businesses will leave for lower tax jurisdictions. And if you impose absurd taxes on oil companies… then oil companies won’t invest or produce as much. Duh. Yet this seems to be the new rallying cry of the ruling mob; they claim that “war profiteering” oil companies are benefiting from the “windfall of war” and generating “excess profits”. And their solution, naturally, is an ‘excess profits’ tax. There is actually precedent for this. The US government started passing excess profits tax as early as 1916. And it still ranks as one of the most complex, bureaucratic, incomprehensible taxes in history. Trust me, if you think your taxes are complicated now, try being a US company during World War I. They rolled it out again during World War II, charging a tax as high as 95% on ‘excess profits’. Obviously the concept of ‘excess profits’ raises a number of questions: ‘excess’ according to whom? But naturally the people who come up with these ideas have no understanding of business of finance. A few months ago, for example, the President of the United States was whining about Exxon-Mobil’s profitability, and he proclaimed: “We’re going to make sure that everybody knows Exxon’s profits.” Now I know the guy is a bit slow and doesn’t usually know where he is half the time. But apparently he doesn’t even realize that Exxon is a public company, i.e. Exxon’s profits aren’t some closely guarded secret. They HAVE to report their profits. Exxon already makes sure that everybody knows Exxon’s profits… Yet even the most basic understanding of capital markets and financial reporting remains elusive to the people who set economic policy. Now there’s obviously an election next week, so I’m not terribly concerned about an Excess Profits tax becoming reality. But here’s something they could (and would) probably do. There’s a rather obscure tax called the Accumulated Profits Tax that’s already on the books. This is a tax that corporations are supposed to pay if they hold ‘excess’ (there’s that word again) cash profits. This tax is rarely enforced. But that’s more of a policy choice than anything else. They could change that policy overnight. And since the tax already exists, they could enforce it immediately as a way to penalize oil companies. Obviously this would be heinously stupid. Penalizing energy companies means creating more long-term problems with energy supply. And problems with energy supply will keep energy prices high, which will keep inflation elevated. Will that stop them? Probably not. Bad ideas and terrible outcomes never seem to matter. So they may very well plow ahead with enforcing the Accumulated Profits Tax, or as I like to call it, the Excess Stupidity Tax. This is the topic of our podcast today, which you can listen to here. I hope you enjoy. Open Podcast Transcription [00:00:00.610] Today we’re going to go back in time to the year 1175 BC to northern Egypt along the eastern portion of the Nile River Delta. It was the 11th year of the reign of the pharaoh Ramses III. And in 1175 BC, ramses was getting ready to fight the battle of his life. He was literally fighting for the survival of his kingdom, the survival of Egyptian civilization, against probably one of the most mysterious enemies in all of human history. This is a period of history known as the Bronze Age, and you’re probably familiar with the term.   [00:00:33.600] Historians often refer to prehistory or early history in Stone Age, Bronze Age and Iron Age terms. It goes in that order. The Stone Age was first. It lasted literally millions of years. Archeologists have come across sites of excavated crude tools and evidence of bone and stone tools dating back three and a half, 4 million years ago.   [00:00:54.060] They found in places in Africa, et cetera, but along the way where human beings again, this is going back millions of years, hundreds of thousands of years with human beings with very, very crude, very rudimentary tools. Eventually, people learned how to mine. They learned how to extract rock out of the ground or off of mountainside, etc. Or and then they learned smelting the art and science of extracting metal from rock ore using heat. And one of the most important metals that they are able to extract was tin, simply because tin had a melting point that was easily achievable to very ancient prehistoric people.   [00:01:30.090] Ten melts at about the same temperature as you might bake bread in your oven about 450 degrees Fahrenheit. And this was a temperature that was very easily achievable just with fire and wood as a fuel. And so, little by little, human civilization figured out in different pockets in different regions around the world, little by little started to figure out between five and 100 years ago, they said, oh, well, we can actually take this rock, take this ore. We could smelt the tin and we could mix it with copper. And the alloy of the two of those together created something that we call bronze.   [00:02:02.100] And this ushered in, again, what historians refer to as the Bronze Age. The Bronze Age was a big deal because the first time ever we actually had metallic tools and metallic weapons, and we could use it for everything from warfare to building construction. And so it was a really big deal and was a major advancement in human civilization. But tin was actually a pretty scarce resource back then. They had to literally scrape it from it was a rock called cassidorite.   [00:02:27.550] And this considerate rock was just scraped off of mountainside and some Luyu fields from Afghanistan and a lot of stan countries in Uzbekistan and Tajikistan, in Central Asia, as well as in southern Turkey. The copper came from Cyprus, the tin came from kind of faraway places, and it was a very, very scarce resource back that it was very difficult to acquire and had to go a really, really long way to get it. Ironically, even today it’s still the same. A lot of people in the ten industry talk about peak ten and that the world is running out of ten. And some people predicted about 20 years ago that the world was going to run out of ten in 20 years.   [00:03:05.320] Having said that, they are constantly making new discoveries, have been new discoveries of ten in places like Colombia and Mongolia. Top producers today are China, Russia, places like that. But again, back then they didn’t have our globalized economy and they were just pulling rocks out of the ground and it was really, really hard to find. And curiously enough, that one of the places in the ancient world that may have been very, very connected to this was the city of Troy. Troy, of course, is located in the Dartnells in modern day Turkey.   [00:03:34.870] This is the narrow strait, that very narrow area that basically connects the Mediterranean to the Black Sea. That was a really important, very strategic location back then, because if you think about it, if you were mining tin in Afghanistan or northern Iran, basically it would be carted to the Black Sea, put on a boat from the Black Sea into what is today modern day Turkey, across through the straits, through the Dardanelles and into the Mediterranean. So that was an incredibly strategic location. The Dard mills have always been a very, very strategic location throughout history. So Troy, the city of Troy, which is right there in the Dardanelles, was sitting right in that all important trade route you had.   [00:04:13.260] Just to the west you had the island of Cyprus, where they reminded the copper, and to the east and to the south they had the tin mines. And so Troy very well may have been the main, one of the main trade routes, main trade arteries in a very strategic point in that trade route for the tin and the copper. Trade very important in the Bronze Age. And it’s entirely possible. And there’s been obviously a lot of speculation over the past several thousand years about the Trojan War and why it occurred and whether or not it did occur.   [00:04:40.480] And there’s a lot of historical agreement now that it did, in fact occur probably around the same time, around 1200 BC. So just really a few decades before Ramsey III came around and may very well have been about trade, could have been about ten, it could have been a territorial war where somebody came in and said, we want to take over the ten trade and the ten mines that are nearby. And of course, according to legend, the legend and the Elliot that was handed down by Homer Troy was famously vanquished after Odysseus, the king of Ithaca, came up with this fantastic idea about, let’s give him a horse and let’s all hide in the horse and then we go in and slaughter all these people. Who knows if that actually happened? But according to legend, of course, Troy was vanquished and there might have been this widespread migration of all the Trojans leaving their city that had been destroyed.   [00:05:29.680] And that leads to this group of people that again, historians refer to as the Sea Peoples. This is this very, very mysterious group that there’s intense historical and archeological debate about who these people were, what are their origins, and there are so many theories. And there are some people that historians who believe and archeologists who believe that the Sea Peoples were the remnants of the defeated Trojans, that after their city was destroyed and sacked, they fled and they migrated. And they sort of cobbled together in this band, this multinational mob that just sort of came together as an army that just viciously raided all across the Mediterranean. Some people say it might have been Italians that were fleeing famine from the Italian Isles.   [00:06:10.560] Some people might say it was people from different regions in the Balkans and so forth. But this is a very, very mysterious group of people because there’s very scant historical and archeological evidence about their origin and who exactly they were and where they came from. But we do know that they existed because they referred to over and over and over again. And the Sea Peoples were terrifying. They were like the Mongols at a certain point.   [00:06:33.130] When the Mongols came over thousands of years later and just destroyed everything in their path. This is what the Sea Peoples were doing. The Sea Peoples were vanquishing kingdom after kingdom after kingdom, but they didn’t stop and settle. They’re more like scavengers. And they took Cyprus, which again was where the copper was.   [00:06:49.000] They took Turkey, which is again where a lot of the tin was. They destroyed the city of Hattusa, which were they burned it to the ground. This is the capital city of the Hittite Empire, which is in modern day Turkey. You hear a lot of these lot of these terms in ancient Assyria, they took canaan, a lot of these terms. If people read the Bible or heard some of these stories, you hear a lot of these.   [00:07:09.300] You hear about the Hittites and the Canaanites, etc. So the Sea Peoples were vanquishing all these kingdoms and they’re spreading down through the Mediterranean, going south towards Egypt, and they were terrifying. Everybody was terrified of the Sea Peoples. And we hear there are some historical records of this talk about these people that were coming down and they were absolutely terrifying. And so Ramsay is the third now, it’s 1175.   [00:07:32.220] Ramsay’s the Third now knows he has to face the Sea People. He had faced them before, a couple of years prior, in 1078 BC. But he needed one. But it wasn’t a decisive victory. He had fought them and he had taken his army all the way up to modern day Lebanon and had fought the Sea Peoples there in 1178 BC.   [00:07:48.700] But it wasn’t a decisive victory, and the Sea Peoples were returning, and he knew it. And so Ramsay’s hatched a plan. And the plan was, let’s lure them into the Nile River Delta. This is our turf. We know this ground very, very well, and we can lure them in their ships into the Nile River Delta.   [00:08:04.410] And from what we can tell, it was a really interesting battle. Tactically. Ramsays used his navy to pin Sea Peoples to the coast so that they couldn’t actually proceed down the river. That would have been actually very bad because then they could have taken over the rest of the Nile Valley. So Ramsay’s actually used his navy to blockade them and pinned them to the coast.   [00:08:23.140] Meanwhile, on the coastline, he had a combined arms force. He had infantry, he had cavalry, he had archers there ready. And they just really destroyed the Sea People, neutralizing the Sea Peoples before they could even get off of their ships. And it was a very, very decisive victory. And Ramsay is supposedly to have settled whatever remaining Sea Peoples had survived the battle to settle them said, look, we defeated you once and for all.   [00:08:47.280] You’re done. You’re no longer a threat. Those of you who survived, as long as you live in peace, you can stay, but I’m going to tax the shit out of you. And that’s what he did. And of course, Egypt at the time had actually a very, very well advanced tax system, and taxation, tax revenue was really important to them because this battle really the war against the Sea People, and there were so many battles, and Ramsey III had to fight lots and lots and lots of battles.   [00:09:11.940] And by the time they finally defeated the Sea Peoples and it wasn’t their only adversary, but by the time they finally defeated the Sea Peoples in 1175 BC, the Egyptian treasury was pretty much depleted. They were all out of cash. They had to completely rebuild that, rebuild a lot of things in their civilization, their provincial security. So many things had been just a tremendous disruption. And at the time, Egypt had, which was very common in the ancient world, a very agrarian economy.   [00:09:37.420] It was a very advanced agrarian economy. Egypt was legendary for its aggregate economy, for its yield, because it had predictable flooding. They had managed to harness the flooding of the Nile River Valley and turn that into incredibly advanced agrarian yield, very productive and fertile fields. But you have to think about and today we think about agriculture as just purely food. But back then, agriculture, I mean, that was it.   [00:10:02.410] But it wasn’t just food, right? Agricultural production was food, but it was also industrial products. So papyrus would be grown. They would turn it into paper, reeds and straw that would be turned into building material. They would grow textile products for clothing, they would grow different berries and things like that, that they would turn into dyes.   [00:10:22.960] And so these are all actually industrial supplies. Agriculture in the ancient world wasn’t just about food. Agriculture was everything. And even the industrial economy was powered on agriculture. It was basically, it had agriculture and they had mining.   [00:10:36.790] And those two things, they would develop all the raw materials that they needed because they didn’t have chemical industries and things like that, that we have today. So all that basically came from mining and it came from agriculture. And frankly, most of it really from agriculture. But the wars, the wars against the sea people, the battles of the sea people, and all the different battles that they had against their adversaries and maintaining security in Egypt in this period of the new kingdom, really resulted in a decline of production. Their agriculture was in decline, and that was a normal thing.   [00:11:04.200] Enemies that would come into Egypt, anytime there would be an invading enemy, really anywhere in the ancient world, usually the first thing they would do is destroy the fields. They would destroy the fields, they would destroy the crop production. A lot of times, armies would go in and they would sow salts into the soil to make sure that nothing is ever going to grow here again. So they would devastate, and that was really a tactic to devastate the local economy. And if they devastate the local economy, they knew they would deplete whoever they were invading.   [00:11:29.610] They would deplete their ability to resist and deplete their ability to fight. And this is what happened in Egypt in the war. The battles, all the military conquests resulted in a decline in production. And that decline in production meant lower tax revenue, because Egypt was taking the Egyptian government was taking a portion of its agricultural production as tax revenue. So now they’re getting lower tax revenue.   [00:11:49.140] What do governments do when they have lower tax revenue? They raise tax rates. They say, oh, well, our 10% tax rate isn’t generating enough tax revenue, so now we have to double the tax rate to 20% just so that we get the same amount of tax revenue we were getting before. And this is the period of time where we start seeing literally some of the first historical evidence, at least in recorded history, of tax evasion. People were literally disappearing with gold and corn and things like this.   [00:12:13.900] And we actually know this to be true, because the Egyptians, the ancient Egyptians were incredible record keepers. They had a really great scribe system, they had a really great accounting system. Egypt had well developed the Egyptian language and the hieroglyphics that was very noun heavy, which is really great when you’re trying to look at records, because that’s essentially what you’re looking at. You’re looking at nouns and you’re looking at numbers. And in the system that they had the writing system and the scribe system, they had lots of nouns and lots of numbers.   [00:12:40.910] The Egyptian numerology was very interesting because they didn’t have a zero, at least in the same way that we think about it today. They had a symbol, for example, the number one, that was just a vertical hash, just a straight line, a vertical line that meant number one. You see 12345 ones and that meant five. They had a different symbol for ten and 1010 and so forth, and they would go on. And so if you wanted to represent a symbol for like 1110, you would show the symbol for 1000, the symbol for 100, and the symbol for ten.   [00:13:12.300] So it was a little bit maybe like Roman numerals, where they didn’t have a zero and you’d have C, DXI, that sort of thing that you would see written out. So it was a little bit like that. The funny thing is the symbol for a million, all the rest of them are sort of more, a little bit more sort of lines and squares and things like that. The symbol for a million is literally a little pictograph of a guy holding his hands above his head as if exasperated that a number that big would even exist. That’s the symbol for 1 million in ancient Egypt.   [00:13:44.010] And we know all this because we have so many records. And we can see in one of these Bronze Age societies, there are several of these like this. We can go back and we could see even ancient Sumerian tablets in the code of Hammurabi and Babylonian records and so forth. Very, very well developed accounting systems. And the Egyptians were no different.   [00:14:03.220] Their tax system was kind of an inkind system. So it wasn’t just money. They would actually go and collect grain. They would actually collect the agricultural products that they were growing and say, hey, a portion of that belonged to the state. And they would put it in granaries and they would put it in temples and they would keep very detailed records.   [00:14:19.570] And we can actually see people disappearing. And in some cases the tax collectors themselves were the ones that were going and doing this. There was one story of a ship captain. This was actually even a couple of decades after the defeat of the Sea Peoples. And there was a ship captain who was sailing, he had all this grain and gold and so forth that they had taken.   [00:14:36.960] It’s supposed to be a tax revenue. This guy just disappeared with the money, he disappeared with the grain, and nobody ever found this guy ever again. And so we start seeing the records of the tax receipts and the shipments and so forth, and we can see tax revenue in decline, we can see the decline. And of course, tax rates start going up and we get inflation and we get declines in production, we get tax evasion, we get internal conflict, all these sorts of things that creates really a lot of economic turmoil, in fact, during the rain and the 29th year of Ramses III, to be actually very specific, this is just to tell you how good the record keeping was. It was literally the 10th day of the second month of the 29th year of the reign of the Pharaoh Ramses III.   [00:15:16.470] There was the first recorded labor strike in human history. It was a place called Djarrell Medina. And there were construction workers that were building a vast complex. And the construction workers weren’t getting their rations, and they were just tired of it. They were sick of it.   [00:15:30.570] They were tired of not getting what was owed. They were tired of the inflation. They were tired of the corruption, the incompetence, the taxes, and they went on strike. And you actually read this. There is a story.   [00:15:41.130] There are written records of the workers, and they go past the guards, they go past the administrators and say, we’re not working, and it’s a standoff. And the administration actually caved after just two days. But the strike went on for another three months. After two days, the administration said, okay, fine, fine. We’re going, we’re getting rations for you, and here you go, here’s your food, here’s your rations.   [00:15:58.210] But the strike went on because it wasn’t just about the rations. It wasn’t just about the food. People were just sick and tired of all of it. They had reached their breaking points. They were tired of the inflation, the corruption, the incompetence, and they retired of the high taxes.   [00:16:10.380] And we can see this, the longer term consequences. We can see that eventually even the pharaoh himself, Ramsey III, was assassinated, led to a succession crisis, which led to even more taxes. New taxes. New taxes. They just started taxing new things as, oh, now we’re going to tax this, we’re going to tax that.   [00:16:27.600] They just came up with new products and everything they could get their hands on to tax that’s. What they were taxing. We start seeing because of these new taxes, we start seeing declines in more production, we start seeing more and more economic turmoil. And eventually this period in Egyptian history, this particular civilization, the New Kingdom, just vanished into the history books. This is a very important lesson, and it’s a lesson that governments have to relearn from time to time.   [00:16:53.610] And the idea is very simply, that taxes, taxation itself creates disincentives. And politicians know this. They know this in theory, and they apply this. This is why they have cigarette taxes, because they want to discourage smoking. And so they tax it.   [00:17:07.500] They tax it very, very heavily. They also tax it because they know that people are addicted to it and they’ll just pay it. This is why when Mike Bloomberg was mayor of New York City and he imposed this soda tax because he’s trying to create disincentives, so they said basically any sort of liquid beverage that’s like really high in sugar and really high in Carbs, we’re going to put a tax on it in New York City. It is very paternalistic behavior, but he did that because he knows that taxes are a disincentive. And the idea is that if we tax something, it will obviously influence behavior.   [00:17:37.620] And politicians know that, and that’s why certain of these taxes exist. But for whatever reason, they say, oh, if we apply a soda tax, people will consume less soda. But they don’t apply that same logic to productive economic activities. They don’t apply that same logic to capital gains taxes and taxes on financial transactions and taxes on really just any productive economic activity, even income, the production of goods and services. They don’t apply that same logic and realize, well, jeez, if we tax something beyond a sort of normal rate, particularly a rate that people are accustomed to, and we start taxing something too much, it’s going to cause a backlash.   [00:18:10.560] It’s going to cause people to gain the system, it’s going to cause people to produce less. It’s going to have an adverse impact. And this is what happened in ancient Egypt. This is what happens over and over again throughout human history. And you reach a point of diminishing returns, and it really creates a vicious cycle of diminishing returns.   [00:18:28.660] Higher taxes mean less production, less production means less tax revenue. And just like in ancient Egypt, less tax revenue means, oh, now we have to raise tax rates because our overall tax revenue is lower. So again, since 10% wasn’t getting the job done, now we’ve got to raise tax rates to 20%. Well, higher tax rate means even less production, which means less tax revenue, which means higher tax rates. And you end up in this cycle, this really, really vicious cycle.   [00:18:51.930] Governments always seem to forget that lesson. They also vastly underestimate human creativity to avoid taxes that are unnecessarily high, completely unreasonable. Egypt learned this the hard way. Many governments had to learn this the hard way. Many governments have to relearn this lesson over and over again.   [00:19:08.440] As an example, I’m going to pick on jolly old England for a little bit. In the year 1660, the British government, this wasn’t really British back then, so the English government passed something called the Hearth tax. So the Hearth Tax is a tax on fireplaces. So what do people do? They just ripped in their fireplaces.   [00:19:24.300] So there were tax collectors that went to people’s houses and said, okay, I see one, two, three fireplaces, so this is how much you’re going to be taxed. It was a per fireplace tax. So people just bricked in their fireplaces, or they built elaborate facades around their chimneys and around their fireplaces to disguise them as something else. It was a piece of art and not a fireplace. People do all sorts of crazy things to try and get around the tax, and yet even still, they weren’t really collecting any revenue from it.   [00:19:48.610] But the tax remain on the books for three decades. Even dumber, still jolly old England. Now this is, I guess, technically now we’re getting into Great Britain and eventually into the United Kingdom. They passed a candle tax in 17 seven. Now, the candle tax was an excise tax and excise tax is also essentially a per unit tax on the production of a particular good or service.   [00:20:11.050] So every single candle or certain number of candles was taxed. And so what ended up happening? People said, I’m not going to pay that tax. They just switched fuel sources. Instead of lighting their homes with candles, with wax candles, they switched.   [00:20:24.150] And they actually end up switching to a less efficient fuel source, something called rushlight. Rushlight is like dried brush, basically something that you could grow dry out and dip in lard or, you know, some kind of animal fat or oil or something like that and light it on fire. It was actually a much less efficient source of fuel. Rush light would burn out usually in about 30 minutes. Candles could last hours and hours, days, weeks, potentially, depending on the candle, but people just start using a less efficient source.   [00:20:55.780] So the candle industry plummeted. People just stopped buying candles to avoid the tax. And even still, the law remained on the books for 126 years. In 1710, they started texting playing cards and all that did was it led to widespread forgery of playing cards. So official playing cards had to come with some tax stamp and people said, I’m not going to pay that crazy tax.   [00:21:15.660] So people just started using forged playing cards. The government then even threatened a capital punishment. You would literally be hanged if they caught you with forged playing cards. And people did it anyways because they weren’t willing to pay the tax on playing cards. People thought, that’s ridiculous, I’m not going to pay tax on playing cards.   [00:21:30.430] In 1745, they passed a tax on glass. This was a tax that was based on the weight of the glass. So heavier glass was taxed more than lighter weight glass. So what do people do? The glass manufacturers across England just started hollowing out the glass.   [00:21:43.240] So they had the pain in the front, the pain in the back, and inside it was just hollow, which is obviously lower quality glass. And people didn’t like the low quality glass. So what happened? The entire glass industry moved to Ireland, because in Ireland, they didn’t tax glass. So basically, England lost its entire industry to a place that didn’t tax it.   [00:22:01.030] Bang up job government. By passing this stupid tax, you essentially destroyed an entire industry. Your country could have benefited from this, but instead it moved overseas and went to Ireland. And the Irish economy flourished because of the glassmaking industry. In 1784, they passed a brick tax.   [00:22:17.610] This was really hilarious. They said, okay, we’re going to charge four shillings for every thousand bricks. So what ended up happening? Bricks just got bigger. So instead of the normal small bricks, manufacturers started making really huge ultrasized bricks to get around this with the people.   [00:22:32.080] Instead of having to buy a thousand bricks to build a house, they could buy 100 bricks and not pay the tax. So the government then started reregulating and said, no, you have to make bricks a certain size and all these sort of things. And then people said, okay, screw it. I’m going to switch. And they switched building materials, they switched to timber, and they switched to straw.   [00:22:48.510] And again, that lasted decades until well into the 18 hundreds. And they realized, wait a minute, this is stupid, and this is really holding back our industrial development. But this is the thing with taxes, that they pass taxes. The taxes never generate the revenue that they’re supposed to. People engage in all sorts of behavior to avoid the tax, and they learn the lesson that all it does is actually hold back industrial development.   [00:23:12.130] All it does is actually cost the economy. And yet these laws still remain on the books for years and years, if not decades. And that brings us to today. We’ve been hearing a lot about new taxes. We’ve been hearing a lot of people whine and complain about excess profits, windfall profits, war profits, even.   [00:23:29.260] And this is quite interesting, because, of course, all that ire is directed at energy companies. Energy companies been raking in big profits because, oh, wow, what a surprise. Oil prices are high, supply is constrained. Well, duh. There’s a reason for that.   [00:23:42.370] There’s a reason why oil prices so high. There’s a reason why supply is constrained. Of course, the politicians, the people in charge, love to blame Vladimir Putin, and obviously Putin has a significant impact on oil markets, but it goes way beyond that, because, if you remember, oil prices are rising, and gasoline prices, they think we’re so stupid that we don’t remember that. We don’t remember that oil and gas prices were rising way before the invasion of Ukraine, way before Putin was gallivanting around the border with his army. That all.   [00:24:10.240] Throughout, even early 2021, prices were rising. And they think we’re all so stupid that we don’t remember that. But that’s the deal. The truth is, is that oil prices, gasoline prices, were all rising in 2021, way before Putin was even a problem. Why is that?   [00:24:23.650] Well, it’s because especially in the United States and a lot of places around the world, you’ve got a lot of government action specifically against oil and gas companies, against energy companies. They’re canceling pipelines. They’re refusing to lease federal land and provide oil concessions, which it’s not an optional just so you guys understand, it’s actually required by law that the federal government is supposed to lease land that has these mineral resources, that has these hydrocarbon resources. You’re supposed to have an auction. You’re supposed to lease them to the old company.   [00:24:54.090] It’s required by law. It’s not optional. But they just refuse to do it anyways. They create mountains of regulations, not only at the federal level, but the state local levels as well. They create new laws, but they passed a methane tax.   [00:25:07.800] Now they say, oh, now we want you to put the SEC comes and they want you to put your CO2 emissions as liabilities on your balance sheet. All these sorts of things that just make it more and more and more difficult. And it’s not even just governments. You’ve got even private industry. You got people like Larry Fink who are sitting on $10 trillion, $10 trillion at BlackRock.   [00:25:28.230] If it were its own economy, it would be one of the largest economies in the world. $10 trillion in other people’s money. That’s not Larry Fink’s money. That’s other people’s money. And he uses this and he’s weaponized other people’s money to push a very much anti fossil fuel agenda, forcing banks to reduce their loans to oil companies, forcing investors to turn their backs on oil and gas companies, pushing activist hedge funds into taking over boards of directors.   [00:25:52.690] You’ve got major super, major oil producers now that have these activist hedge fund managers that are trying to push them into green energy initiatives. So instead of actually drilling for oil and gas to say. Oh no. We should go and invest in cornbased ethanol. Which is really one of the dumbest inventions.   [00:26:09.580] One of the dumbest things you could possibly do. Because cornbased ethanol. By most objective calculations. Is actually a negative return on investment. Meaning that you actually spend more energy producing cornbased ethanol than you actually get out of the cornbased ethanol.   [00:26:23.890] So it’s one of the dumbest things you could do. But, hey, it’s green because it’s not oil. But it’s just these stupid economically irrational things. And that’s not even the government. This is private industry.   [00:26:36.270] So you have these people that have weaponized other people’s money to push a completely economically irrational agenda, and the end result is DA. Oil prices are high. You end up with less oil, less investment in oil, less production, fails to keep up with rising demand. Demand rises and rises and rises every year. So just to keep oil prices the same, you’ve got to continue to increase oil production in line with rising oil demand.   [00:27:03.760] If you want oil prices to come down, then oil production, the growth in oil production has to exceed rising demand. I mean, that’s just basic common sense. It’s basic economics. But none of these people seem to figure it out. So instead they have this very vocal war against oil companies.   [00:27:19.380] The President of the United States incredibly vocal against oil companies. Just in the last couple of days, he’s been talking about oil companies having the windfall of war, war profiteering, excess profits, and all these speeches that he give. My favorite one, though, was from a couple of months ago where he talk about he says, oh, Exxon Mobile. They made more money than God. And actually what he said, they make more money than God.   [00:27:40.110] And he says, and I quote, we’re going to make sure that everybody knows exxon’s profits. And to be honest, we got to file that away under no shit. Exxon is a public company, dude. It’s a public company. They’re supposed to report their profits.   [00:27:54.910] Everybody knows Exxon’s profits because they have to report them. It’s required. Every public company reports its profits. They have earnings calls every quarter. They wave their hands, say, here’s how much money we make.   [00:28:04.390] And they want to make more money and makes their stock price goes up. But the President United States doesn’t even seem to understand basic financial markets, saying, we’re going to make sure everyone knows exxon’s profits. Yeah, Exxon makes sure that everybody knows Exxon’s profits because they’re a publicly traded company. How does he not know this? It’s just so embarrassing.   [00:28:20.650] But now the thing that they’re talking about is something called an excess profits tax. You’re hearing a lot more people. It’s the usual suspects. We don’t need to mention their names. It’s the usual suspects talking about excess profits, and we need to tax those excess profits.   [00:28:35.560] And frankly. This goes back to this goes back to even I remember watching when one senator. Hillary Rodham Clinton was running for president back in 2008. 2008. Not even 16.   [00:28:51.780] And she was talking about all the money that the oil companies were making. Because if you remember. This was before the global financial crisis. And oil prices had reached what was at least a high back then.   [00:29:02.230] Close to $150 a barrel. And of course, oil prices were high, and the oil companies are making lots of money. And Hillary Clinton said, all these companies are making so much money and they’re making so much profit. And what I want to do is I want to take those profits, and I want to put them in a fund run by the government. This is what she said.   [00:29:18.400] So this is a person that was advocating for the confiscation of privately generated profits. And this is now what people talk about again today, an excess profits tax. They’re complaining that oil companies are making excess profits, failing to understand the reason why they’re making excess profits is because oil prices are high, and they’re doing everything they can to prevent oil companies from actually investing in more production and producing more oil. So that’s why oil companies are making so much money. Their own deliberate actions on the part of the government and the private sector are making it so that oil companies are making record high money.   [00:29:51.370] But instead of saying, oh, you’re making excess profits, and now we want to tax those profits, this is called an excess profits tax. And it’s a real thing. You have to look at in the United States what the Constitution says about taxation. There’s terminology. You might have heard this before if you’ve ever studied the Constitution, people talk about direct taxes and indirect taxes.   [00:30:09.600] Direct taxes are taxes that are generally directly on the consumer. From a constitutional perspective, sometimes direct taxes are referred to as would be direct taxation of the states themselves. Indirect taxes are so an income tax, for example, is a direct tax. Now you’re directly taxing individual people, as opposed to an indirect tax, which would be something like an excise tax. Again, an excise tax would be per unit.   [00:30:32.370] Very famously, right after the Revolutionary War was won, the federal government passed an excise tax on whiskey. And this was hugely unpopular, right? So this is now everybody that produces whiskey, there is a tax that has to be paid per unit on every barrel of whiskey that gets produced. Well, back in the late seventeen hundred s, the US. Was a whiskey nation.   [00:30:51.550] It was, it was in the same way that, you know, the French love their wine, americans loved their whiskey. Whiskey was so prevalent in the United States, it really even at an economic level, that whiskey was often used as a currency. It was a store of value and even a medium of exchange that people would trade whiskey with each other to settle debts and things like this. It was a really big deal. And excise taxes are called an indirect tax because like a whisky tax, where they say, we’re going to tax every barrel of whiskey that’s produced, well, obviously that tax is eventually going to be born by the consumer.   [00:31:23.050] The producers are going to pay the tax, but then they’re just going to raise their price and the consumers are going to end up paying for it. So this is why they call it an indirect tax. So indirect taxes, like excise taxes, those are constitutional and they were actually authorized by Article One, section Eight of the Constitution. Direct taxes are like an income tax. This was a big no no, and this was one that they actually had to pass the 16th Amendment to the United States in order to be able to legally pass an income tax.   [00:31:47.520] Prior to that, the Constitution said that these things had to be apportioned among the states and done based on state population, based on what the census said, but they never really bothered to do that. There were a couple of very small instances of income taxation, but the permanent income tax came about because the 16th Amendment was passed in 1913. And right on the heels of that was the Revenue Act of 1913. So initially the tax rate that was set on corporations was just 1%. And that was based on corporations with income of about $5,000 a year.   [00:32:18.640] So if you had a corporation making $5,000 a year in today’s money, that would be $250 to $500,000. It depends on how you look at inflation. So $250 to $500,000, if you make more than that, then you’re getting taxed at 1%. Well, literally the next year. In 1914, world war I broke out.   [00:32:39.960] They didn’t call it world war I, obviously. They called it the great war eventually. But as the great war broke out, there were a lot of US. Companies that were making a lot of money. The US.   [00:32:48.570] Was not in the war, obviously, at the very beginning, but there are a lot of companies in the US. That were trading with German companies and British companies, and potentially even both german and British companies. They were on both sides of it, and they were making lots and lots of money. Originally, this tax was kind of nicknamed the goulash tax because a lot of the trade was based on food. Ghouls is a stew that’s very popular in central Europe.   [00:33:10.480] And so they called it the goulash tax because a lot of the tax, a lot of people doing the trade, they were trading with Germany and the European nations and so forth, they were making money, were foodrelated. So they called the Gulash tax. But a lot of people, the ones making most of the money, as you can imagine, were munitions factories, people that are manufacturing weapons and ammunition and selling them overseas. And so all of a sudden, you have these companies that are making a lot of profit. And there was a lot of talk, and it was global about saying, hey, there are too many companies making too much money here, and we need to tax that.   [00:33:38.380] And the idea of an excess profits tax took off very, very quickly. By 1917, there were 13 civilized industrialized countries that had passed something similar to an excess profits tax. So it was not just in the United States, but this happened. It happened in 1916 with the revenue act in 1916, and followed up in 1917. When the US.   [00:34:00.810] Actually did enter the war. They had a war revenue act in 1917. There was a consolidated revenue act in 1918. They kept obviously adjusting it and so forth. It was extremely confusing.   [00:34:11.370] If you think your taxes are complicated now, you should try being a corporation in 1918. It was utterly bewildering. I think back to the hieroglyphic of what the Egyptians used as a symbol for 1 million. A guy just throwing his hands in the air, exasperated. That’s what taxes were in 1918.   [00:34:28.470] Think of the Egyptian hieroglyphic for 1 million. So the basic idea, what they were trying to accomplish, let’s say you were making whatever, I’m just going to use a big round number. Say you’re making a million dollars before the war. Now it’s the war, and you’re making $1.5 million. So they’re going to say, okay, that $500,000 is excess profits, and we’re going to tax that.   [00:34:46.200] What they actually had was two profits taxes. They had an excess profits tax, and they technically also had a war profits tax. They were peddling a fiction that was only one tax. But the truth is, there are actually two taxes. An exosprofits tax and a war profits tax, and they were calculated differently.   [00:35:00.540] But you can kind of see, you start looking at different examples. You go, okay, hold on. So I made a million dollars before the war. I’m making one five. The difference between the two is $500,000.   [00:35:10.540] We call that excess profits. But what about inflation? What about a new company? What if I was a new company? I didn’t even exist before the war.   [00:35:18.070] Now I’m a new company during the war. How do we know what my excess profit was? Because I wasn’t even making any profit before it’s. Excess according to whom? Based on what standard do we go back and look at the year before?   [00:35:29.670] Do we look at two years before? Do we average the last five years? Do we average the entire history of our company? And then what about other basic things? What if I had been building a factory?   [00:35:40.690] What if I’m a manufacturing company and I’ve got a lot of demand for my products? And so I say, okay, I’m going to start building a factory. And, you know, I spent three years building my factory, and right when I finished my factory, now the war kicks off. So now there’s a war. But I just invested so much money in this new factory.   [00:35:58.330] So now that I have a new factory, of course my revenue is going to increase. Of course my profit’s going to increase because I had invested in my business. But it’s not like that profit really has anything to do with the war. It has to do with the fact that I invested in my business years ago. So now all of a sudden, I’m recouping some of that investment, the return on that investment that I made in my business, but now I’m making more money.   [00:36:18.370] But you’re saying, oh, this is an excess profit. It’s not an excess profit. I invest in my business. What about a gold miner? You think about back then, in 17 1918, gold was a fixed price.   [00:36:29.550] So a gold miner is already selling his product at a fixed price that can’t go up. So how can you say a gold miner is generating excess profits or war profits when the price of gold isn’t changing at all because of the war? So all these weird, different things. Of course the politicians didn’t think of any of this stuff because they’re politicians. They’re not business people.   [00:36:49.680] They’ve never run a business in their life. But they tax and they regulate businesses. You would think that doing that would require some knowledge of the thing that you’re regulating. It would be like me, who doesn’t know anything about open heart surgery, sitting on some medical board saying, here’s what open heart surgery is supposed to be. It would be a disaster.   [00:37:05.590] I don’t know anything about open heart surgery. And you’d think you would leave that to the surgeons, but instead you have a bunch of politicians who don’t know anything about business. They don’t know anything about the private sector. Say, oh, we’re going to have this war profits tax. We’re going to have an excess profits tax.   [00:37:18.990] Technically, there are two different taxes. We’re going to pretend that they’re the same. We don’t have a clue about how we’re going to implement it. And so then businesses started saying, well, wait a minute, I don’t even know how to calculate this. How is this even possible?   [00:37:29.280] And so that’s why they kept revising the law. They came up with new, more and more and more regulations, totally bizarre solutions. They tried in some respects and said, okay, if you make investments in your business and that’s going to grow your revenue, that’s going to grow your profits and your cash flow, then we’re going to assume that we’re going to cap out a rate of return. We’re going to say you can make 8%. So if you invest in your business, we’re going to say you can make 8% on any investment that you make in your business, and above 8%, that’s going to be considered excess profit.   [00:37:58.060] All these really, really bizarre solutions, every single one of them obviously had consequences. So when you for example, when you cap somebody’s rate of return, especially at a rate that’s relatively low, like 8%, well, 8% is okay if you have if you’re in a relatively low risk business. But if you’re in a really speculative business, 8% is crazy, right? So imagine something like back then, the big speculative industry of the day was the motion picture industry, charlie Chaplin and all that, right? Motion picture was very speculative.   [00:38:30.520] You could put money into a motion picture and you could lose 100% of your money, or you could make a hundred times your money, right? But everybody knew that motion picture was really, really speculative. It was high, high, high risk speculation. So who’s going to risk 100% loss when your investment return is capped at 8%? So what happened?   [00:38:47.370] People just stopped investing in motion picture. They stopped investing in this new thing, this new technology. So, again, it was so complicated and so completely stupid. And the law that they passed in 1918 was actually the dumbest one of all because that’s the one where they told everybody, they said, okay, we’re consolidating all of this stuff and there’s going to be the tax, and this is actually going to go away. So after another year or two, we’re going to suspend and then repeal the tax altogether.   [00:39:13.360] And they told everybody that. So now just imagine you’re a producer, you’re a timber producer, an oil producer, or any kind of industry. You’re saying, all right, you’re telling me that if I invest in my company now and I produce and I actually do my best to generate a healthy profit, you’re going to tax me today, but if I wait and do all that stuff next year, then you’re not going to tax me next year. Well, duh, I’ll just wait until next year. And that’s what happened.   [00:39:38.710] Coal companies, oil companies, agriculture businesses, timber companies, factories, anybody that had the ability to delay their production did so. So what happened? You got less there was less supply in the US. There was less production. And of course, you have the consequences that you got a lot of debt, you got a war going, you’ve got less production.   [00:39:58.600] You end up with inflation simply because you create all of these obscene economic disincentives. This is what happens. And it brings us back to oil supply. We already have a lot of problems with oil supply. You’ve got the countries in the we will call OPEC plus Nigeria, and all these countries that are already failing to meet their oil production quotas simply because most likely they just don’t have enough capacity.   [00:40:21.600] Saudi Arabia has already told the world we’re tapped out once we get to 13 million barrels a day. We just don’t have the ability to raise our capacity. That is the limit of our capacity. And these factors. Energy prices are one of the most important drivers of inflation.   [00:40:37.000] It is impossible to overstate how important energy prices are in reining in inflation. If you have high cost of energy, you will have the high cost of everything, because literally everything that we do, every product that’s made, every service that’s rendered requires some kind of energy. And if energy production costs are high, those high energy prices get passed on in the form of higher prices to consumers. So high energy prices, high oil prices are absolutely inflationary. And high oil prices are a result of demand and supply.   [00:41:09.790] We already talked about demand is growing. It grows year after year after year. There are more people in the world, and the people that are in the world are consuming more energy because they’re getting wealthier. And all these things that are happening driving energy demand higher and higher and higher. What’s happening with supply?   [00:41:23.350] The Saudis are tapped out. OPEC plus is already below its quota levels. There are lots of supply problems. And then you’ve got all these idiotic politicians that are saying they’re being demonizing. The oil companies, the investors, and the bankers and the stupid activists and everybody that are creating problems for the oil companies.   [00:41:42.210] And now the oil companies in a scenario where they’re damned if they do, damned if they don’t, if they do produce more than the environmentalists want to kill them. And if they don’t, then the President of the United States is saying that you’re greedy. So it’s an impossible situation to be in. And now the solution is, oh, now we’re going to tax them, as if that’s going to be helpful. We already have a problem where we have shortages of a really important critical resource, and now we want to go and tax the companies with some excess profits, tax the people that are responsible for producing the thing that we need more of and we’re going to create economic disincentives.   [00:42:14.230] It is literally the opposite of what any rational person would do. But we all know these people are not rational. So an excess profits tax, we have to say in fairness, is hardly a foregone conclusion. There is an election next week in the land of the free, so a lot of things could change. But there is a very important thing that I wanted to raise and bring to your attention.   [00:42:32.890] And this is something called an accumulated earnings tax. Now, you probably know the term, but accumulated earnings are what a corporation retains once it pays out dividends to its shareholders. So again, let’s use round number example. We’ve got a company that makes a million dollars and a million dollars in profit. So that’s profit even after tax, right, pays it’s got a million dollars left over.   [00:42:56.730] Well, what does it do with that million dollars? A company, a corporation could decide that either. They say, you know what, we don’t have anything to do with this money. We already have some cash on our books. So you know what, let’s just distribute the whole million dollars and pay a dividend to our shareholders.   [00:43:13.870] And so that million dollars, which again, the profits have already been taxed at the corporate level. The company pays corporate profits tax and then it’s got a million dollars left over. And then it passes that whole million dollars to its shareholders. The shareholders then receive a dividend. Well, guess what?   [00:43:27.130] The dividend is taxed. Again, the shareholders have to pay a dividend at 15% 20% plus the Obamacare surcharge and all that. So that money is basically the corporate profits are taxed twice. Once at the corporate level and once at the individual level when the dividend is paid. But a corporation could also decide, hey, you know what, we actually have a lot of opportunity.   [00:43:47.910] There’s a lot of really cool things happening in our industry. We could invest in our company. We could invest in more production. We could invest in more research and development. We could do a lot of things to invest back in the business.   [00:43:58.440] And so that’s what we’re going to do. We’re going to invest in the business and so we’re going to hold on to that million dollars, right? And so that’s what’s called retained earnings. And over time, year after year after year, a company has its accumulated earnings. So this is over time that a company that has generated a lot of profit and has accumulated all these earnings has retained all those earnings.   [00:44:18.810] And so imagine a company that’s made a million dollars a year, year after year after year, and after ten years it’s got $10 million in cash, right? Ten years of these profits that it’s never paid to its shareholders. It’s just building up this big cash reserve. So those are its accumulated earnings. Well, guess what?   [00:44:36.160] There actually already something on the books called the accumulated earnings tax. And it’s a little bit weird, but basically the accumulated earnings tax, the rules say that a corporation can hold a certain amount of money in cash, it can accumulate a certain amount of earnings, right? And the amount is actually ridiculously low. It’s laughably. Hilariously low is the amount of money that they say a corporation can accumulate in earnings.   [00:45:02.790] And that technically anything above that level, which is literally as low as $150,000, so that anything above that level is subject to a tax. The idea is they don’t want companies to earn a profit. They pay corporate tax. And corporate taxes are lower than, in many respects, individual tax rates. And they don’t want companies to accumulate a bunch of profit and then just sit on that profit because they want to get the second tax revenue, right?   [00:45:28.950] They want to get the dividend tax revenue from the individual. And so they want to create the idea here is to say, well, it’s a penalty. If you don’t distribute this money to your shareholders, then we’re going to tax you 20% of your accumulated earnings. So this is a law that is actually on the books, the accumulated earnings tax, it’s on the books. It’s not a law that needs to go through Congress.   [00:45:50.220] It’s nothing they need to pass. It’s already on the books. The thing is though, it is really almost never enforced because when you look at companies like Apple, right, there are tech companies that have hundreds of billions of dollars of cash on the books. Realistically, they don’t need that money. Of course, like a company could make an argument and they could say, no, no, we need that money because we’re going to do some future investment.   [00:46:11.950] We need that money because of X-Y-Z. And they make a case for why they need to keep that money. And it’s just sort of been a thing that over time, the Treasury Department, the executive branch, the IRS, has just turned a blind eye and said, okay, fine, Apple, you can have your hundreds of billions of dollars in the books and it’s fine. But that’s literally a policy that could change overnight. They could decide, you know what, we’re going to go after accumulated earnings now.   [00:46:36.810] And the laws on the books, they don’t need to do anything different. They don’t need to pass a law. They could just start doing that and they could go to all these companies that are sitting on hundreds of billions of dollars. They could go to the oil companies in particular. They could single out oil companies and say, you know what, the accumulated earnings rules say that you can hold a large cash balance if you can demonstrate their specific need for you to have that cash balance.   [00:46:59.890] And so they could say, well, we believe the tech company, we believe that Google and Facebook and all these tech companies, they have a legitimate need for their cash. But Exxon and chevron, oh no, you don’t have a need for your cash, so we’re going to tax you at 20% literally on your cash balance. So in a way it’s almost like a corporate wealth tax. And they could absolutely do this clearly will be challenged in court. And because it defies, it’s legally dubious, it defies precedent, etc.   [00:47:25.080] But this is obviously an administration has been very happy to ignore legality and precedent and constitutionality, etc. And so it’s entirely possible that this is an approach. The consequences will be nasty if they start passing accumulated profits taxes, they start implementing accumulated earnings taxes. I mean, we could see big stock market declines, huge share declines, I mean, really, really nasty disincentives to production. It be really just another horrible idea, but it would give you a really good idea of what these people are thinking.   [00:47:59.910] Their whole approach has been create hassles for the energy companies and then whine and complain when energy supply actually suffers as a result of it. But all these things is just really bad for energy supply. It’s bad for energy companies, which is bad for energy supply. Bad energy supply is really bad for inflation. And you’ve got, in the meantime, a Federal Reserve that is hell bent on raising interest rates to the moon, whatever it takes.   [00:48:22.950] Very panicky monetary policy that just raised rates by three quarterback 75 basis points, three quarters of a percent earlier this week. And it’s early November 2022. They just raise rates again. And then it wasn’t enough just to raise rates. Then the chairman of the Fed had to go out and give a speech and say we’re going to keep doing it.   [00:48:41.200] By God, we’re going to keep doing it. We’re going to raise rates until the end of time and really just scared the shit out of everybody. And yet it’s not bringing inflation down. That’s because they’re not solving the fundamental issues that are really driving inflation, which is the supply side of things, including and especially energy supply. Instead they’re making things more difficult for the energy companies and they’re threatening the energy companies and they want to tax the energy companies.   [00:49:04.170] And now they have this wide open approach through the accumulated earnings tax, which again is already on the books. So I wouldn’t be surprised if they rolled this out and all these things just because they are completely clueless in everything that they do. And at the end of the day, it seems very obvious that none of this, none of this is about excess profits. It’s really about excess stupidity. And there is so much of that and I think I’m going to go ahead and stop there.   [00:49:28.840] I appreciate, as always, your time and attention and we’ll talk to you again soon.   Close Podcast Transcription

First, I am really grateful for all the well-wishes and congratulations we received on the birth of my son. He’s doing great, and I’m over the moon. I decided to record a podcast about the experience– why my wife and I decided to have our first child here last year, as well as our second child this year, and tell you how great the experience was. Naturally, though, we start with a historical perspective. Today’s episode begins in ancient India with one of the most famous figures in human history. It turns out that, in addition to being a spiritual icon, he was also an extreme biohacker. We talk about the evolution of medicine, and how healthcare used to be a ‘patient-first’, science-driven field. Individual healthcare practitioners today are still that way. Doctors, nurses, and medical researchers have answered a noble calling to help the sick. But the healthcare industry itself is now ruled by insurance companies and political hacks who have managed to increase the cost of care, make it much more bureaucratic, and severely dilute the doctor-patient relationship. I share a story of my step father, who died several weeks ago after being chewed up by a healthcare system that did not seem designed to help him. This is one of the big reasons why we had our children in Mexico; it’s a much more liberated healthcare system. In Mexico, we have a very close relationship with the physician, who is unconstrained by bureaucratic policies and idiotic regulations. And if some stupid rule ever does come up? It’s Mexico. We ignore it. The births of my children were both fantastic experiences. The hospital was great. The physicians and nurses were great. And the cost? Imagine Nany Pelosi closing her thumb and index finger into a small circle saying, “It costs nothing.” Frankly it’s almost embarrassing that the all-in cost of my child’s birth was about $1,750, including the ‘Presidential Suite’ at one of the best private hospitals in the country. My children are both Mexican citizens (in addition to the four others that they receive from mom and dad). Plus parents AND grandparents are both entitled to permanent residency in Mexico. This proved especially useful for my in-laws; my wife is from Ukraine, so we were able to get the family out of Kiev and relocate them here to Cancun– because they now have permanent residency. I tell you the whole story in today’s episode, which you can listen to here. Open Podcast Transcription [00:00:01.140] Today we’re going to go back in time more than 2500 years ago to the mid 500 BC. To the Kingdom of Kashi on the Ganges River in northern India. Now you might not have heard of the Kingdom of Kashi, a lot of people haven’t, but it’s actually quite historically significant for a couple of reasons that we’re going to get into. At the time, in the mid 500s, there was a guy in his mid thirty s, a guy that some of you might know. This name Siddharta Gotama.   [00:00:27.520] And if you don’t know his name, you will in a moment. But this is a person who was born into wealth and power and money and status and he renounced it all. As a young man he said, I’m not interested in the money. What I am interested in is spiritual enlightenment. And that might sound a little bit hokey today, but back then that was actually quite a popular social value.   [00:00:49.210] A lot of people said, you know, I want to seek spiritual enlightenment and their culture and their civilization. That was a prized value. And he walked away from all of his worldly possessions and decided that the way he wanted to do that, he was going to hit the road. And he became essentially a wandering beggar. And during that time he experimented with some really extreme conditions.   [00:01:07.920] At the time, in fact, there was a commonly held belief that if you starved yourself that eventually you would achieve spiritual enlightenment. And this seems crazy to us, but back then that was a common belief. That was the conventional wisdom, starve yourself to spiritual enlightenment. And he almost did. According to legends and the stories, there actually a period of time where he was so emaciated his bones were practically popping out of his skin.   [00:01:29.760] Until he finally realized, you know what, this isn’t working. And he stopped doing that. He realized, if I keep doing this, I’m probably going to die of starvation. And if I don’t die of starvation, I’m going to be so weak, I’m not going to be able to go a single step further and I’m never going to get to be able to achieve my goals. So he decided to find a better way and he applied what we would consider today, the scientific method.   [00:01:52.030] They didn’t call it that back then, but his whole approach was hypothesis, experiment, results. Look at the results, come up with some conclusions, and those conclusions then create, you know, form new hypotheses that we again experiment and analyze and so forth. And through that cycle, that scientific process, that scientific method, through that cycle, he created a body of knowledge, achieved his goals, and actually created a sciencebased evidence to show this is what actually works. And according to legend, in the year 528 BC, just a few miles from the capital city, again in the Kingdom of Kashi, on the road he came across five monks who were of this acidic discipline of self denial and extreme deprivation. And he came up to these guys, he said, fellas, I promise you it’s not going to work.   [00:02:37.260] I was in your shoes and I practically starved myself to death. That’s probably what’s going to happen to you. But here I had spent years and years coming up with a new system, a new method. Here’s all the evidence I can share with you, everything I can teach you what I know, everything that I learned, all the data, all the conclusions, and you can figure this out for yourself and help you achieve your own goals. And they said, oh my God, it’s perfect.   [00:02:56.910] And they became followers of his method. And again, according to the legend, this is now known as the first sermon of the historical figure that we now know as the Buddha. The Buddha obviously is a major icon in religion and philosophy, but in this respect, he was kind of like a modern day biohacker. Biohackers are people that have very specific goals, usually looking for some kind of medical or physiological optimization and experiment heavily, usually on themselves and do things taking the plunges and ice baths and those all sorts of things, red light therapy, all these sorts of things to try and advance the body of knowledge to seek physiological or medical optimization. The Buddha did the same thing.   [00:03:40.860] He hypotheses, experiment, results, conclusion, new hypotheses, new experiments for the goal of spiritual optimization. Different goals, but really the same process. Really all about the scientific method prior to that. If we go back even farther in ancient history, we see a lot of instances of, especially in science and even more particularly in medicine, where everything was governed by mythology and stories of somebody gets sick because they’ve been possessed by demons and all these sorts of things. But now, in the mid 500 to BC, there’s this flurry, this growth of progress in science, in particular medicine, because of the scientific method, and curiously enough, right here in the kingdom of Kashi.   [00:04:21.610] So the Buddha was actually the first example of this major figure here in the kingdom of Kashi. And the second was a guy that very few people have heard of, but really a very prominent person who factored heavily throughout history. He was a physician, a guy named Sharota, also in the kingdom of Kashi, right around the same time, by the way, in the mid 500s BC. This is a really big time for science and medicine in particular. And this guy Sharoo, a really, really, really impressive human being.   [00:04:47.910] This is a guy that was performing rhinoplasty, nose surgeries, I mean, lots of different types of surgeries and operations, but even, particularly rhinoplasties. 2500 years ago, he wrote a medical textbook. His body of knowledge, through his own experiences and his own experimentation had become so vast, he wrote a medical textbook that was so accurate and so insightful, it was actually used for thousands of years even up until a couple of hundred years ago. That’s pretty impressive feat when you think about it. So thousands of years of people think this is right, and even today, if you look at it, obviously there are things he didn’t have access to our equipment and technology.   [00:05:21.870] So there are things we can look at today, and we know that it was wrong. But it’s amazing at how much he got right. And his textbook covers so many things, ranging from obstetrics, neonatal care, dental hygiene. He talks about treating things like epilepsy, urinary tract infections, ulcers, snake bites, fractures, and dislocations. He made tremendous advances in the development and manufacture of medicines.   [00:05:47.050] Not one of these sort of Hippie medicine men that just crushes some herbs and says, Here, drink this. This was a guy that actually was able to specifically customize medicine and manufacture, produce it for specific ailments and treat them successfully. And he wrote about it in this textbook. Really, really impressive. And one of the more impressive things was actually, in addition to advancing the body of knowledge through the scientific method, was a standard of professional ethics.   [00:06:15.190] He had kind of a Hippocratic style oath, a professional standard. He would say, look, if you’re going to practice medicine, you don’t do it for yourself. You don’t do it for a financial gain. You don’t do it for your reputation. You do it solely for the good of the suffering people.   [00:06:26.860] If you’re not in it because you’re trying to help sick people, you just shouldn’t be in this profession. And of course, it was only a couple of decades later on the other side of the world, in ancient Greece, hippocrates would come along, and he would say, similarly, do no harm, which is still the Hippocratic oath that physicians take to date. Hippocrates another very impressive guy, very much based on the scientific method. Hippocrates was a guy who actually also said, you know what? Maybe we should look at the cause instead of just the solution and try and figure out if there’s something that’s causing a problem to the human body.   [00:06:57.510] Let’s just eliminate that problem. And Hippocrates was a guy who was a major advocate for diet and exercise. And he said, well, before we start cutting somebody open or pumping them full of medicine, let’s actually see what are you putting in your body that might be causing a problem, or maybe you actually just need to go for a walk or go climb go climb a mountain or something like that, get some exercise, and you’re probably better off. He’s a major advocate for diet and exercise. But overall, if you look and see a lot of these progressive, these advances in the ancient world, medicine was essentially a product of the scientific method and an ethos of patient first Hippocratic oath or the you know, even going back to ancient India to Sharuto saying, do it for the good of the people.   [00:07:39.850] The people that are sick. That’s the whole point. And, you know, in modern times, obviously, look, healthcare practitioners are great. It’s not a profession. It’s a calling.   [00:07:49.470] It’s obviously a calling. It’s a very noble calling. You have to think about the kind of person who wants, who’s willing to be, even be around sick people. I mean, that takes a very special kind of person to even be willing to be around sick people in the same way that you do that because you want to do it in the same way that a veterinarian becomes a veterinarian, because they want to help sick animals, doctors become doctors, nurses become nurses, because they want to help sick people and help people improve. It’s a very, very noble calling.   [00:08:14.020] But this product of the scientific method and the patient first ethos, it’s really been distorted over the years, particularly in recent years. And now what we see and again, this is really nothing about doctors and nurses and even medical researchers. It’s really about the giant bureaucracies that have taken over. I mean, we see now the insurance companies that are really in charge of the system, determining what they will and will not pay for and denying treatment, et cetera. And not just the health insurance companies, but the medical malpractice companies inundating people with the forms and the waivers and all that paperwork.   [00:08:47.670] A lot of that comes from medical malpractice because everybody’s terrified of frivolous lawsuits and so forth. Then, of course, there’s the government bureaucracies and so much of the stiff regulation, regardless of intention, a lot of this stuff obviously has very nice intentions. But despite the intentions, if you look at something like the Affordable Care Act the Affordable Care Act, Obamacare, they said, oh, there’s too many people who don’t have medical insurance. We need to fix that. And so they created this 900 page law that now, after more than a decade as well, what do we see?   [00:09:16.990] Well, health care costs have increased. Health insurance premiums have increased. Now even the number of people who are uninsured is increasing. Again, it was like the whole idea behind the Affordable Care Act was to reduce the number of people who didn’t have medical insurance. Now the number of uninsured is actually increasing.   [00:09:31.920] And you can look at a lot of studies. There’s actually a very interesting study by Wharton School at the University of Pennsylvania that shows no clear evidence of any improved health outcomes whatsoever. There is no decrease in avoidable hospitalizations, no real decrease in mortality that can be linked to the Affordable Care Act. So what you have here is a lot of cost and not really any clear evidence of benefit. The end result here basically, is you end up with an extremely bureaucratic and expensive healthcare system that has sacrificed the patient first mentality, because again, you got the insurance companies and the government bureaucracies and big systems and so forth in charge of this, as opposed to simply the doctor and the patient.   [00:10:13.390] But in addition to this loss of patient first mentality, we also have to talk about the science end of it. Again, we talk about the ancient world very patient first and very reliant on the scientific method. And this is not I hope this is this isn’t any kind of conspiracy theory. I hope this is not taken as even a controversial statement. Research is about debate.   [00:10:34.760] That should be a noncontroversial statement. There’s obviously a lot of really great research happening and a lot of really brilliant researchers and new research comes out every day. And it’s exciting. But research is about debate and debate and further research. And rarely are arguments and debates able to be settled conclusively and quickly even to this day.   [00:10:54.300] I mean, literally, after thousands of years we go back to ancient India or Hippocrates. Even after all that time, there’s still no consensus among, let’s say, mainstream medicine of whether or not eggs are healthy for you. Different physicians in different fields have different opinions about this. And something as basic as whether or not eggs are healthy for you is kind of an indication about research and debate and really how important that is. And yet, a couple years ago, along came COVID and the public health experts and doing experts and air quotes, as always, asserted their authority over all of science.   [00:11:29.560] But then they actually failed to follow the scientific process. They failed to create hypotheses, conduct experiments, analyze the results of their experiments to come up with conclusions that would then form new hypotheses. Instead, they only looked at data which supported their sort of predetermined conclusions and they suppressed intellectual dissent of any other conclusion that disagreed with their own conclusions. And the famous example, obviously, the Great Barrington Declaration where a bunch of scientists got together and said this is a bad idea. Lockdowns are bad ideas.   [00:12:00.930] You’re going to destroy the children in particular are going to create major medical issues, mental health issues, substance abuse problems is a bad, bad, bad idea. We need to find a better way. And of course, in the United States, the public health authority said that we need to do a what was it? A quote? A quick and devastating published takedown of the Great Barrington Declaration.   [00:12:21.070] And wouldn’t you know it, now, three years later, we find that the science actually backs the Great Barrington Declaration. Just actually, I think the last week in the United States, the education system came out with its own report card showing how bad children in the United States and the education system has really how they’ve regressed as a result of the lockdowns. Academically, they’re behind socially, they’re behind mental health, et cetera. All the issues and again, the substitute problems, all the things that people predicted and the great barrier to declaration the results have completely vindicated their view. Has there been an apology?   [00:12:56.980] Have any of these public health people stood up and said, wow, we were totally wrong about that. We apologize to the people that we demonize in the Great Barrington declaration. No, absolutely not, because they never follow the scientific method. It was never about objectively forming hypotheses. And wherever the experiments, wherever the results took you, that was the conclusion you didn’t have.   [00:13:14.880] You didn’t have any skin in the game. You didn’t have any kind of political stake in it where we have to do this particular thing because it’s politically palatable or whatever the case may be, that you just follow the science. But they didn’t do that. They didn’t do that. And of course, the media is fully culpable in this whole circus.   [00:13:31.030] They turn vaccines and masks into political statements. They really helped descience the science. They elevated certain people into positions of power and authority that they never should have and all these things altogether. Again, the combination of the sort of dynamic of this, the polarization and then the reduction in this patientfirst approach has really created a regression in healthcare and healthcare outcomes, even in developed countries, including the United States. Now, I have a personal story with this.   [00:14:07.610] It’s been several weeks now, but not long ago, my father died, and my father died in a really terrible way. And he one day just he felt really bad. He felt kind of just fever, and it just wasn’t feeling well. And within about 24 hours, he got to the point where he was delirious and confused and was stuttering and stammering and didn’t know just basic things anymore. So they went to the emergency room, and the place they went to, the first hospital in this emergency room, completely failed to diagnose him, and they didn’t do anything.   [00:14:46.170] I mean, you think about a guy, especially in his age, in his 70s, walking into a hospital, delirious and confused, not even really sure who he is, where he is. You’d think they would have done that, would have triggered somebody to go, we should do some kind of imaging, check out his brain, and just actually do some real investigation here. But no, they didn’t do that. They sent him on his way, and they gave him a 13 page booklet of incredibly generic safety tips, things like make sure you wear your seatbelt when you drive and don’t smoke and don’t drink to excess and all these things. And my father wore a seatbelt, and he didn’t smoke and all these things.   [00:15:25.920] It’s like, how in any way is this helpful, but this is the sort of CYA, cover your ass, I don’t want to get sued liability nonsense that comes from a healthcare system that’s dominated by insurance companies and bureaucrats, as opposed to physicians who genuinely want to help patients. In no way. If there’s if the system was sort of run by, you know, physicians who generally want to help patients, would he have left that hospital? Certainly without being properly diagnosed? And what he ended up actually having was a very severe case of viral meningitis and encephalitis.   [00:16:03.490] A couple days later, he ends up back in the Er, this time at a different hospital. And the new hospital had just a whole bizarre series of their protocols. They would constantly rotate physicians in and out. This guy barely had the same doctor for more than 24 hours. And they all kept saying that they were following the protocol.   [00:16:24.490] Protocols, basically, it’s like a standard operating procedure. These are things that oftentimes come from big bureaucracies like the world health organization. They put up protocols to say, this is how you deal with XYZ disease or affliction or whatever. And so the physicians are all saying, oh, we’re following the protocol, and that’s policy, that they have to follow the protocol, and they’re just simply unable to break protocol. The problem, of course, is that if you break protocol and if you’re not following the protocol and something goes wrong and there’s a bad outcome for the patient, then the hospital gets sued and the physician gets sued and all these things.   [00:16:57.820] And so the insurance companies just won’t allow you to break protocol. They just keep following the protocol. Even though the protocol clearly wasn’t working. My father continued to get worse and worse and worse, and eventually he died. And wouldn’t you know it, what a coincidence.   [00:17:14.370] He died at precisely 1 minute after midnight, 1 minute after midnight, which actually meant that the hospital was able to build medicare for one more day because of that 1 minute into the next day into the next 24 hours period. So they had to build medicare for an extra day. And also, wouldn’t you know it, the cause of death was listed as COVID. So never mind the fact that he went to the hospital with encephalitis and meningitis caused a death was COVID. So my family and I were still dealing with this.   [00:17:43.870] We actually ended up having a private autopsy conducted. And there’s a lot of really bizarre things about this. I could go on and talk about this for a really. Really long time. But I think there are so many things I think it was a really terrible example of things that have just gone really wrong in the healthcare system that put limitations on physicians creativity and their ability to actually go out and fight disease.   [00:18:05.650] Creating really bizarre incentive structures and bureaucracies that are not patient first. And I think, frankly, my father was a victim from this. And again, we’re still dealing with this, and it’s really sad state of affairs, and I could talk about it for a long time, but I want to actually get to the good news of this. And in my time, as you know, all of you know, probably I’ve traveled to 122 countries, I’ve seen medical care, and many, many of them even experienced firsthand myself. And the way that I always think about health care and medical care and outcomes is I look at a number of things.   [00:18:40.050] I look at, for one, honestly, comfort is important. And my sort of best example of that is there’s a hospital in Thailand I’ve been to many times called Booming Boomerang International Hospital in Thailand. I’ve been to many hospitals in Thailand, and my experience with all of them has really been fantastic. I’ve had some even emergency care, urgent care issues there. I’ve gotten into accidents and things like that, where I’ve had to go into the Er and just really incredible level of care and comfort.   [00:19:12.300] Just boomer. Grad International looks more like a really nice hotel, honestly, when you go and check in, I mean, it’s just a really nice facility. It’s comfortable when you’re there. It’s not one of these places where you’re sitting on plastic chairs and steel tables and it feels really run down. It’s really advanced, super, ultra modern, very, very nice, comfortable place.   [00:19:35.530] There are plenty of places like that in the world, but that’s just an example. And I do think that’s important level of sophistication equipment, availability of drugs, these sorts of things. I mean, there are places around the world you’d be surprised. Actually, there was one time I was in Chile also with my parents. My mother fell down, broke her arm.   [00:19:53.230] We had to go to this little rickety clinic, and we were in this very, very rural area, and she broke her arm. She was in horrible pain. They didn’t have painkillers in this clinic. And that’s a hard thing to do, to watch my mother in that much pain and having to get her the bone reset and everything like that without any painkillers. It’s a really, really terrible experience for her, because that clinic, they just didn’t have that.   [00:20:15.300] And so the availability of things, basic things, really advanced things, it makes a really big difference. And the last thing, obviously, and probably the most important are the people. And when I talk to physicians, and actually the reason I wanted to talk about this is because my wife and I have now had two children here in Mexico, and Mexico really takes all these boxes. The hospitals have been very comfortable. The level of sophistication, the equipment, the things they have available are really great.   [00:20:42.730] The availability of drugs in some respects is even better than it is in North America. I remember one point my parents came down here, I think, last year, and my pops had forgotten a lot of some of his medication. They were able to find everything here in Mexico very, very quickly. Even stuff that was sort of more specialty medication. And so that really ticks the boxes.   [00:21:02.370] But the people also, and I interview physicians again, like I’m hiring somebody asked very detailed questions about their experiences and success rates and things like that. So with pregnancy, I interview somebody and talk about what kind of experiences you have. Tell me about patient outcomes. How many times have you how many pregnancy you’ve done, how many of them have kind of gone off the rails, or you had to do an emergency C section and these sorts of things to try and really get a sense of these. And to be honest, yes, education, all that stuff is obviously really important.   [00:21:30.930] You would be surprised, actually how many people overseas have studied in the US. Or Europe, or they’ve had fellowships or even board certifications in the US. And Europe. So there’s really a great amount of talent often hidden overseas when you wouldn’t even think about it. Another thing I really look for in people is, especially in doctors, is their availability and their flexibility, their willingness to have a conversation and not just dictate, this is how it’s going to be, but their availability.   [00:21:58.440] And that’s actually been one of the great things here in Mexico and a lot of other places. This is being able I mean, you get everybody’s phone number and you’re texting back and forth of them. You have questions, you know, text people, you have calls with them whenever they really make themselves available at all times, anytime. Very flexible. And again, willing to really customize listen to the patient and understand your needs and decide together what’s the best course of action, help basically educate and inform you.   [00:22:25.420] And it’s been a really, really good experience. And these are the ways that, again, that I like to assess quality of healthcare. I live in Puerto Rico, and that’s generally where I spend most of my time in Puerto Rico is great for a lot of reasons, but from a healthcare perspective, my own personal experiences, it’s been really, honestly, not a great place. And I could go into that for a while, but I’ll just for our own personal other people might say, oh, I have a great experience in Puerto Rico. That’s great.   [00:22:53.380] I had a terrible experience. My wife and I have consistently had pretty bad experiences. And so we knew, especially the first time that she got pregnant, we just didn’t want to have the baby in Puerto Rico. And that was actually a great decision for us because we had colleagues and friends that did have babies in Puerto Rico. We were hearing their stories about, you know, they were making mom wear a mask in the delivery room and keeping dad out of the delivery room and all these sorts of things.   [00:23:15.730] And that was one of the reasons why we decided to do in Mexico. We had an event for our Total Access group in our organization and Sovereign Man, which I guess now we call Sovereign Man. It’s our highest level group. And we had an event here in Cancun, Mexico, in early 2021. And after that part of that we actually talked about health care and medicine.   [00:23:38.460] I end up touring a hospital, touring a facility, and I thought, actually, everybody is nice. At least everybody is nice is the place that my father went in Texas, outside of Dallas, Texas, and it was a nice private hospital there. And the hospital here, it was a very, very nice hospital. Again, the availability of drugs, all these things in Mexico, we decided, okay, this is going to be our plan B for having the baby. And very quickly ended up being our plan A.   [00:24:05.660] We came to Mexico a couple of months later to have the baby. The lifestyle, I got to say, in Cancun was really special, really great. I mean, it’s just a nice place to be when you’re pregnant. It’s warm and sunny and it’s nice restaurants, nice lifestyle. In 2021 in particular, this is early 21.   [00:24:25.330] There was no COVID nonsense. We could just live our lives freely without having to worry about anything like that. And the birth that we had for our first child last year was an exceptional experience. The physician was by our side the whole time. Actually came over to our house initially and stayed with us the whole time.   [00:24:42.220] And we went to the hospital together, literally did not leave our side except to go to the bathroom for the entire labor. And it was just a really, really special experience. It was exactly as we wanted. There were a lot of complications along the way, really a lot of complications. But the physician was extremely skilled, and the whole team around her was extremely skilled.   [00:25:01.780] We were able to actually deliver the outcome we wanted, which was a natural birth to an extremely healthy baby, and everything was great. So when my wife got pregnant again last year, 910 months ago, we knew it was a no brainer to do it again exactly the same as we did the first time. So now that my son’s been born, a few weeks ago, we had a very similar experience. It was a fantastic frankly, was a little bit easier on my wife. That was a shorter labor, but it’s a really wonderful experience.   [00:25:31.800] Again, great hospital. They have all the equipment, the facilities, the medication. You can do the water, birth, all that stuff. And the team with a very, very, very impressive skill set. Things didn’t go exactly right.   [00:25:41.980] There were complications, and they were able to summon their skills and achieve exactly what we were looking for. And we have very healthy, strong baby boy, and everything was great. People always ask me how much this is really the meat of it is how much did you pay? Well, in the US. I found out, according to the Kaiser Family Foundation, which obviously has a significant background in healthcare, the average cost of baby delivery in the United States.   [00:26:11.280] And this actually doesn’t even include a lot of the things like the drugs and whatever else. And it certainly doesn’t include if there’s a cesarean, which is really on the rise. In the US. Kaiser Family Foundation estimates the average cost of delivering a baby in 2022 is 18,865. Now, I paid here at a private hospital in Mexico, $35,000.   [00:26:33.000] Technically 35,088 and 36. But that number is in Mexican pesos. So the actual number in US. Dollars is about one $750, $1,750. So that’s more than 90% less than what it would cost in the United States.   [00:26:51.100] So one $750. This is a private hospital with the presidential suite in the private hospital with a fantastic team and everything that you need soup, to, nuts, the whole nine yards, one $750. So if you can imagine me right now holding my thumb and my index finger together, making a small circle, channeling my inner pelosi, saying it costs nothing. It really is. It’s almost embarrassing how little it costs to have a baby in Mexico.   [00:27:19.630] And it was a really great experience. Very nice facility with very comfortable, nice facility. All the stuff that you would need with a really great team of people. Very knowledgeable, really had the skills, delivered the outcome that we wanted. And we paid 90% less than it would cost in the United States.   [00:27:37.390] One $750. What a deal. But if that weren’t enough, on top of all of that are the sort of extra benefits. And so, for example, under Mexican nationality law, all children born in Mexico are entitled to Mexican citizenship. So my kids are both Mexican citizens.   [00:27:52.560] My daughter already has her Mexican passport from last year. My son will get his in a couple of weeks. That’s on top of the additional four other citizenship that they get from mom and dad. But the cool part about Mexico as well is that if you have a kid in Mexico, the grandparents actually get residency. And we did this for my inlaws.   [00:28:10.020] My wife is Ukrainian, and we actually got my inlaws out of Ukraine, and they’re here in Mexico right now. We got them permanent residency. And in Mexico, that’s actually really nice benefit because permanent residency in Mexico is in fact, permanent. And it’s not anything that has to be renewed or anything like that. It’s permanent, it’s lifelong.   [00:28:27.630] It’s a really nice benefit. Obviously, parents of a child born in Mexico also get permanent residency. And on top of that, you also get fast track to citizenship. In just two years, you have to spend 18 months on the ground. But after two years, if you spend the 18 months in Mexico, you can apply for citizenship if you have a child in Mexico.   [00:28:44.950] So there are a lot of benefits. Again, talking about something that’s a great experience. It’s inexpensive, and you get all these other benefits. And before I leave, I just want to highlight this as an example of the ethos that we talk about so much on our website. Yeah, there are a lot of really bizarre things happening in the world. [00:29:00.030] But the reality is that we do have a lot of control over our lives, the decisions that we make. We don’t need to be constrained by geography or idiotic politicians the world is a big place. It’s full of opportunity. There are so many possibilities, and you could really accomplish just about anything. You will absolutely accomplish whatever it is that you prioritize, and that starts with deliberate thinking and very deliberate decision making.   [00:29:21.490] I’m going to go ahead and sign from here. Really appreciate, as always, your time and attention, and we’ll see you again in the next episode.   Close Podcast Transcription

We start our podcast today more than 2,500 years ago at a time when the dominant superpower in the western world was the Achaemenid Empire of Persia. Their civilization had reached an unfathomable level of wealth and sophistication; historical records show that, at peak, the Persian treasury had more than $300 BILLION in savings (in today’s money). They had an intricate road network, a highly-functioning postal system, impressive engineering works, and had even invented a crude form of refrigeration and air conditioning. Most of all they had a fearsome military. It was huge. And it was terrifying. Simply put, an invading Persian Army had never been defeated. And yet, early in the 5th century BC, when they went to war against a rapidly rising power in Greece, the Persians suffered a humiliating defeat. Then again. And again. And again. The losses changed the perception of their Empire forever. Practically overnight their reputation sank, and they were no longer viewed as a terrifying superpower able to dominate the world. We’ve seen this story over and over again throughout history, from Ancient Rome to the Mongols to Imperial Portugal in the early 1800s. Simply put, dominant superpowers almost invariably have an equally dominant, fearsome military that inspires awe and intimidation in the rest of the world… and especially in the superpower’s adversaries. But superpowers have a life cycle. They rise, peak, and decline. And at some point during the decline, the military begins to show signs of weakness. Often times there’s some specific event– something happens that’s so humiliating to the superpower that it shocks the world. This is what happened to the Persians in 490 BC. And it’s what happened to the United States in 2021. As a West Point graduate and US Army veteran, I still hold in my heart that the US military is the finest fighting force on the planet. But facts are facts, and the US military is showing clear signs of decline. Most of it is due to incomprehensible failures of leadership. Today we discuss that decline; I reference a brand new report by the Heritage Foundation, its 2023 Index of US Military Strength, which provides an extremely honest (and distressing) analysis of the US military’s capabilities, capacity, and readiness. The report spells out in nearly 600 pages of painstaking detail how the US military is rapidly losing (or has already lost) its technological advantages. It shows how there are not enough forces to defend American interests against a major adversary like China. And most importantly, the report concludes that the military is simply not ready. These conclusions have far-reaching implications. History has shown over and over again that once a superpower’s veneer of invincibility is pierced, it rapidly loses its status. And that’s even more true when another competing power is on the rise. Loss of status as the world’s sole superpower goes far beyond reputation and military conflict. The economic consequences are devastating. That’s because dominant superpowers also tend to own the world’s primary reserve currency– in this case, the US dollar. Being the world’s reserve currency means that commercial and financial transactions around the world are conducted primarily in US dollars. So for example, a Brazilian merchant and its supplier in India do business with each other in US dollars. Futures contracts for gold, copper, crude oil, etc. that are traded in foreign commodities exchanges (like the Dubai Gold & Commodities Exchange) are denominated in US dollars. The dollar is so dominant that when Airbus (a European aircraft manufacturer) sells its jets to European airlines, they typically close those deals using US dollars instead of euros. And giant European companies (like Nestle, BP, and Volkswagen Group) issue corporate bonds in US dollars. You get the idea. All of these USD financial and business transactions around the world mean that foreign investors, corporations, governments, and banks HAVE to stockpile US dollars, simply because the dollar is the global reserve currency. And foreign institutions tend to hold the majority of their dollar assets in US government bonds (which is the largest and most liquid USD asset class in the world). In total, foreigners collectively own $7.5 trillion worth of US government bonds, equivalent to 25% of the national debt… because they HAVE to own the world’s reserve currency. This allows the US government to get away with the financial equivalent of murder. The US government can run outrageous budget deficits, fund endless wars, and pay people to NOT work… and foreigners will still hold US dollars and buy US government bonds. But this unparalleled privilege would dry up very quickly if the US dollar loses its status as the world’s dominant reserve currency. I wrote about this briefly earlier in the week. But in today’s podcast, we put all the pieces together. Specifically, I show you how US military dominance is linked to US superpower status… and the US dollar’s position as the world’s reserve currency. We look at the lessons from history to examine the trajectory of a superpower in decline. And we try to connect the dots to see where our currency trajectory will lead us. This fate is not necessarily imminent; strong leadership and better performance from government could arrest the decline. Unfortunately, the US government seems completely incapable of solving problems. Their entire approach to problems, in fact, is very cyclical. It goes something like this: 1) The government does something stupid that creates a problem. 2) They ignore the problem they just created and let it fester. 3) When the problem becomes obvious, they offer a symbolic gesture– ‘thoughts and prayers’ 4) When the problem becomes so extreme, they panic and do “whatever it takes” 5) “Whatever it takes” is reckless, expensive, and usually destructive, causing the cycle to start over again. We cover all of this, and more, in today’s episode, which you can download here, or access in iTunes and Spotify. Open Podcast Transcription [00:00:01.590] Today we’re going to go back in time to the twelve of September in the year 490 BC, about 40 km outside of the ancient city of Athens in the province of Attica. We’re on that day roughly 10,000 Athenian hoplites. These are the ancient Greek warriors who fought in phalanx formations, were facing down a vastly superior army of Persians. By some historical estimates, as many as 1000 Persians. They had cavalry, they had ships, they were terrifying.   [00:00:34.260] And that’s the important thing to understand back then. This was 2500 years ago that the Persian known as the Achaemenid Empire was the dominant superpower, particularly in that part of the world, stretching from modern day India to the eastern Mediterranean, basically, to Turkey today. And at the time, at that time, 2500 years ago, there had been other empires that had come before Persia, like the Assyrian Empire, the Babylonian Empire, etc. But at the time, Persia was the biggest empire that had ever existed in world history up to that point in history, 2500 years ago. And it was built by a guy named Cyrus the Great.   [00:01:15.370] And Cyrus is a pretty legendary historical figure who got together as peoples and they defeated the neoBabylonian empire and the medieval empire and so forth, and built this achievemented Persian empire. And it was really impressive. Even by today’s standards, it was incredibly wealthy. The Persians were an incredibly advanced civilization. They had a vast network of roads and bridges and very impressive works of engineering.   [00:01:45.990] They had an opulent capital, they perfected landscape architecture, they had gorgeous gardens and parks and things everywhere. They had made substantial technological improvements and things ranging from naval propulsion to windmills and had even developed actually a sort of crude form of air conditioning and refrigeration. They could store ice and cool food underground using basically they built, they carved a deep hole in the ground where the temperature is a little bit cooler. They put a windmill over it and use wind power. So it wasn’t even human beings muscle power, it was wind power to suck up the cold air and blow out the hot air and keep things cool underground.   [00:02:25.890] Pretty impressive kind of technology for 2500 years ago to be able to have that. They had a postal system to be able to send and receive mail and packages across the empire. They had a very efficient government bureaucracy. They had a professional class of clerks and bureaucrats who made the whole thing go. They had a very fair and simple tax system, to be honest.   [00:02:53.100] They had a very sort of early form of human rights. Cyrus was really big into this. He formally created a system where people had freedom of religion, freedom of speech, due process with a fair trial, they had equal treatment of women and they were really rich. They were super rich. If you read books, texts of ancient history, including even the Bible and ancient religious text, you might come across this word that uses a unit of measurement called a talent.   [00:03:21.540] And a talent was a unit of weight. In the ancient world, that’s equivalent to today, about 30.2 modern day kilograms. So by the historical account that we have available to us, there are certain points where and at certain points probably had more than this, but we know at a certain point, they had at least 188,000 talents, right? So based on modern day gold prices, that’s about $300 billion. $300 billion in today’s money.   [00:03:51.390] That’s a lot of money. To give you an idea, there are a lot of days where the US. Treasury department actually doesn’t even have $300 billion in its primary treasury bank account. So $300 billion was a lot of money, even by today’s standards. The Persian, the accumulated empire of ancient Persia, would be today one of the wealthiest countries in the world.   [00:04:10.680] They had about 20 million people in the empire. So $300 billion, that works out to be, during the top of my head, that’s about, what, $15,000 per capita? That’s a pretty big deal. And one of the biggest things as well is that the Persians, it was a very stable place, it was a very stable government. The Persians used to like to brag that their laws would never change.   [00:04:31.950] Royal decrees were irrevocable because they felt that the emperor was descended from their gods and their god was never wrong. So if, if the laws came from the emperor and the emperor comes from god, then we can’t change the law, because that would mean that the gods are wrong. And that’s inconceivable to the Persians. And so they were very stable in their government. They weren’t capricious, and this actually goes into their social values.   [00:05:01.990] Persians were socially, they were actually quite conservative. Just to give you an example, one of the worst crimes that somebody could commit was to have an abortion, which a lot of people are surprised, but yes, they actually did that in the ancient world. But the worst crime of all, the worst crime was to tell a lie. Honesty as a social value was prized above all else in ancient Persia. They had a very high rate of literacy, they had a high rate of education.   [00:05:29.040] But Persia was essentially kind of a war society, a war economy. This is how they expanded. This was commonplace in the ancient world. And children went to school and they’re basically taught two things how to fight and to tell the truth. And this is one of the reasons why, when I mentioned before that the government was actually so efficient, it’s because they didn’t have corruption, they didn’t have the waste and the fraud and all the things that are rampant in modern governments and really a lot of governments throughout history, because they were so honest.   [00:06:00.060] They were so honest. And again, to tell a lie was the worst crime to talk about death penalty for people that were considered liars. But at the same time. They were again conservative people. They frowned upon sexual promiscuity and these sorts of things, but they’re also very warm and generous people.   [00:06:17.190] They loved the Persians, ironically, were actually the first people to formalize birthday celebrations. This was not uncommon in ancient history where people would celebrate, for example, the birth of the king or the birth of the emperor or something like that. But in Persia this eventually trickled down into just celebrating everyone’s birthday and having parties and all these things. And they were very warm with each other. They would give gifts, they loved wine.   [00:06:41.980] They love to drink wine. And their dedication to the truth was so extreme that they even would say that somebody makes a deal and they’re completely hammered because they’ve been drinking too much wine. The deal is a deal. They wouldn’t undo things if somebody made a decree or whatever and they had drunk a bunch of wine something. Plans that they made and decrees that they made and promises they made while they were drunk were still honored.   [00:07:07.590] This is a really, really big deal in Persian society. Their standards of etiquette were extremely formalized. They had social ranks and social status just like a lot of people even today. And for example, just to say hello to another greetings between two people of equal social ranks, they would kiss on the lips. If there were differences in social status, then there would be kisses on the cheek and all sorts of things in their customs.   [00:07:30.990] In Persian society, for example, it was considered very rude to eat or drink anything in public out on the street, or God forbid, you spit or blow your nose in public. That was considered incredibly rude. So the Persians, again, they had a very high standards for themselves, their social values, and they did well. Remember, they were very wealthy, $15,000 in sort of net national wealth per capita. It was a lot of money.   [00:07:55.530] And the typical Persian was very well off. They had luxurious homes. And remember, the landscape architecture had been very well developed. So they had beautiful gardens, they had expensive furniture, things that were imported from all over the empire, all over the world. They had very intricate rugs and furs and clothes and textiles that jewelry, gold and silver and precious gemstones.   [00:08:18.220] And one of the actually, the things about Persians that a lot of you may appreciate is that they loved, they loved their dogs as pets. They had dogs, everybody had a dog. They had severe penalties for the mistreatment of animals. And this was life in Persia, and life was really good. And again, above all else, they had this fearsome military.   [00:08:38.430] The Persians had literally, as an invading army, had never lost, ever. Now, on the other side of this, though, were the Greeks. The Persians were again stretching all the way from India to modern day Turkey to the coast of Turkey. Places today that would include places like ismia if you spend any time in Turkey, essentially on the west coast of Turkey back then, the west coast of Turkey, turkey in general, particularly the European portion of Turkey today was considered in the ancient world. It was all considered to be part of Greece.   [00:09:08.950] That part of that western Turkish coast today was considered Ionia in the ancient world. Ioni was essentially a region of Greece and Ionia in the ancient world was actually part of Persia. It was a Persian province. But the Persians sort of stopped there. They didn’t go into sort of mainland Greece and to where Athens was in Attica.   [00:09:28.140] And so Athens and Greece in general sort of controlled a lot of the Mediterranean trade. Athens was a rising power, the first really truly democratic power. And they controlled trade in the Mediterranean. The Persians controlled trade from the Silk Road all the way to the Orient in China. They controlled trade up to the Mediterranean, including the Black Sea.   [00:09:46.870] And then the Greeks controlled a lot of trade in the Mediterranean. So it sort of seemed like these two trade powers were eventually going to go to war with each other. And of course it ended up happening. But this is we’re talking now as we started this podcast, talking about 490 BC. This is preglden age Greece.   [00:10:02.590] This is before Socrates and Plato and Hippocrates and sophocles Euclid, Thucydides, this is before the real, the true golden age of Greece. But there were some people that Pythagoras, we studied high school geometry and the Pythagorean theorem. Pythagoras was actually an ionian. So he was on what we consider today the west coast of Turkey, which again the Ionian area was the province of the Persian Empire at the time. But the Greeks were rising.   [00:10:33.210] It was before the golden age, but they were rising. They were very well funded. They too were very wealthy. They had access to a place called Larian which is where there were a lot of silver mines, which even at that point in history, remember, this is 2500 years ago. The silver mines of Lauren had already been in operation for more than 2000 years up to that point.   [00:10:52.950] Right? So this is a really, really old mine. And the Athenian treasury, this is in 490 BC, 500 BC. They had over 3000 tons of silver, which today would be worth billions of dollars. The Athenians were very, very small place.   [00:11:08.460] So this is again about probably $10,000 per person in today’s money. So in many respects you had the Greeks, they had a strong military, they had perfected the Phalanx formation and the way that the hoplites would fight with each other, shield walls, spears and swords being able to work in unison, in tactical formations. They had excellent ships that they could be used for trade or combat. They had a lot of money. So this is really a rising power.   [00:11:33.360] It’s a relatively small place, but it’s a rising power. And of course the inevitable happened in starting in 522 BC. So this is a couple of decades before you’ve got a guy. Cyrus has passed campaigns past other emperors before had passed. And the guy now who’s the emperor, what they called king of kings, his name was Darius, now known to history as Darius the Great.   [00:11:56.580] But it was a series of mishaps that got Darius involved with the Greeks. And sort of a long story short, as a lot of these stories usually do, it comes down to one idiot, and in this case, the idiot in question is a guy named Aristocrais. Aristocras was a guy who was in Ionia. He was kind of, let’s call him sort of a low level politician, a guy that nobody really cared about, but he was an incredibly ambitious person. And this guy, he’s on one island, he looks over to another island and he goes, oh, that other island is pretty weak.   [00:12:28.630] I think I can take them over, but I can’t do it myself. I need some support. Now granted, all these different islands in Ionia, they all fall under Persia. So they all have some local nobleman, some local ruler. But the local rulers on these different Ionian islands, they all kick up to the Persians, they all kick up to the Persian governor, who kicks up to the Persian emperor.   [00:12:49.450] So the Persians don’t really care which local is in charge of the island. They don’t really care as long as they’re getting their tax revenue. But Aristocras, he’s a really ambitious guy. So he goes to his buddy, he makes buddies with the Persian governor, the regional provincial governor, and he says, hey, I think I can take over that island. What do you say?   [00:13:05.380] Will you help me out? Will you back me on this? And the Persian governor says, yeah, whatever. It doesn’t really matter to us which one of you guys is in charge, but that’s fine, you’re my buddy, I’ll go ahead and back you on this. So the Persians backed Aristocrats and they sent some chips and they sent some troops to basically take over this neighboring island of Aristocrats.   [00:13:24.580] But Aristocrats was so stupid, he tried to actually manage this is a very powerful military, they know what they’re doing. But Aristagoris tried to commander the whole thing, tried to direct the operation, essentially tried to manage the whole thing. And so the invasion ended up failing, the whole scheme ended up failing. And now aristocracy is going, oh crap, now I’m screwed because now the Persians are angry at me because now they look stupid. And now all the other Greeks, the Ionians, are going to be angry at me because I just tried to basically take over my neighbor.   [00:13:56.290] Everybody hates me, so I got to do something. And so what Aristocrats did to save his own skin as he started inciting rebellion, he went to all the ironies and said, we got to be free from the Persians. We got to be independent. It basically incited insurrection across Ionia. And the Persian was like, Wait a minute.   [00:14:15.220] We just backed you and you screwed it up, and now you’re trying to incite rebellion? What is this? This is crazy. But Aristocrats again, the whole thing, he was out to save his own skin. He thought, If I can convince people to make Persia their enemy, then they’ll forget all about me.   [00:14:29.520] They’ll forget all the ways that I just tried to screw them over. They’ll forget about that, and they’ll try and go to war against Persia. So Aristagorus went allin he went all in. And so he goes to Athens, which again was a rising power. And he knew also of Athens and the Athenian military power and the sea power that they had.   [00:14:47.010] And he convinced the Athenians and said, hey, we’re revolting against the Persians. And he made a case, he made an argument. He said, if you don’t help us against the Persians, and someday the Persians are going to come for you, and this is in your best interest to just sort of help us become free of Persia, and that’ll keep them busy with us, and they won’t ever concentrate on you. And the Athenians said, yeah. Okay, fine.   [00:15:04.990] We’ll get involved in your little conflict. And so the Athenians sent a bunch of ships over to Ionia with Aristocrats, and they burned down the capital, the Persian provincial capital. This was not the main imperial capital, but the provisional capital, the provincial capital in Ionia. So now this gets to Darius’attention, right? Now, Darius, he hadn’t really been involved before, because, again, he doesn’t care whether Aristocras or somebody else is in charge of some island that’s way below his level.   [00:15:35.880] But now he finds out, wait a minute, somebody’s burned down my provincial capital in Iona. And Darius basically had two questions. Number one, remember, Athens was well known, but to Darius, they weren’t so well known that they had made their way all the way to Persian. Darius was way up in the clouds as the emperor, so he didn’t get involved in the DayToday details, including even who the Athenians were. So his first question was, who are the Athenians?   [00:16:02.800] And the second question was, how quickly can we get our arm together? Because I want to go vanquish those guys, like, right now. And that’s what happened. They got their arm together really fast. Darius was so angry that they burned down his provincial capital, he considered that to be a personal insult.   [00:16:18.250] So he sent one of his most capable commanders, his own son in law, a guy named Meredonius, to command the invasion. We’re going to Greece. Whoever those people are, those opinions, we’re taking them out right now. And remember, Persia had a terrifying reputation. They had a professional military that they’ve invaded a lot of places.   [00:16:35.380] They had conquered the Babylonians, they conquered the medieval, they conquered Egypt, they conquered the Levant. They conquered Ionia. They had never been defeated. They were huge. They were wealthy, they had a massive army.   [00:16:44.550] And they were sending their most capable commander, the soninlaw of the emperor himself, guy named Meridonius, to command the invasion. And naturally, off the bat, their initial campaign was incredibly successful. They went across the mainland of Greece, subjugating every city state that they passed. Meredonius was a very, very capable commander. And eventually Darius realized, we didn’t have to go to battle with these people anymore.   [00:17:08.910] We can just start demanding their surrender. And there were a lot of city states. Remember, Greece was a very decentralized place, so it wasn’t like there was one government or one power. They had all these individual city states. They were all Greek.   [00:17:19.860] They were culturally Greek and linguistically Greek and Ethnically Greek. But they had their own individual governments and their own individual city states. And along the way, these city states were surrendering. And then Darius just started sending them letters saying, hey, my army’s coming for you. Meredonius is coming for you.   [00:17:36.090] Just surrender and we can just avoid any bloodshed. And of course, people started surrendering, but then it got to the Athenians and the Athenians didn’t want to surrender. The Athenians said, you know what? We’re strong. We think we can put up a fight.   [00:17:50.230] We need some allies. We’d like to have some allies, but we think we can put up a fight. And this takes us to back to the 12 September in the year 490 BC. Now, again, we’re about 40 km outside of Athens on a vast flat field of farmland. Basically, they grew fennel there in this farmland.   [00:18:09.630] Fennel, if you ever seen it, it sort of a little bit like a cross between a carrot and maybe an onion or something like that. It’s a sort of a root vegetable, some bulbs. And they grew fennel on this field about 40 km from Athens. And the Athenians were there again, without they were vastly outnumbered, vastly outnumbered. And they knew they needed some support, so they actually sent who they felt would be the best ally they could have in this battle, the Spartans.   [00:18:37.330] Spartans had a fierce military themselves. And so they sent a runner, a guy named Philippides, and they said, Philippines, we want you to literally run as fast as you can. This guy was the most famous runner in all of Greece. And they sent Philippides to run to Sparta. Run as fast as you can to Sparta, which is almost 250 km, mind you, but this guy ran all the way to Spartan and said, you got to help us.   [00:18:59.140] The Persians are here, the Athenians are going to fight. We’re totally outnumbered. You got to help us. And the Spartan said, we’ll look into it. Maybe we can get there.   [00:19:06.510] And over the next, some of the the next couple of weeks, good luck. And if we get there in time, then we’ll see on the battlefield. Otherwise godspeed. Philippines runs all the way back and says, sorry, the Spartans aren’t coming. And the Athenians realize they’re all alone here, they’ve just got to do it.   [00:19:24.010] And so now we’re september 12, 490 BC. We’re on a farm field 40 km outside of Athens, and they go to battle. And the thing that the Greeks had going for them, they had home field advantage, but they also had superior tactics. Remember, the Persians were a fierce army, but the Persian army were essentially a collection of individual warriors who fought as individuals, not as a unit. They didn’t have unit tactics, certainly not as refined to the level that the Greeks had.   [00:19:53.130] And so the Greeks again in their falcons formations, were able to march closer and closer and closer to the Persians, most of whom were basically archers. They had ranged weapons and that was the way they typically vanquished their enemies, as they would have volleys of arrows that would darken the skies. And these arrows would come down and just rain arrows on their enemies. And their enemies would just get terrified and they would run away and they would route the enemies this way and then send in the imagery to cut down a retreating enemy. But in this case, the Greeks, they could form a shield wall both in front of them as well as above their heads.   [00:20:22.690] And this rain of arrows that came down from the Persian archers didn’t really penetrate the Phalanxes. And so the Persians now listening, they’re saying, oh my God, the Greeks keep coming, they’re advancing and they keep advancing and we can’t stop them. And finally the Greek failings has got all the way up, right up in the Persian lines, and they had handtohand mealy combat and the Persians weren’t ready for that. And the Greeks just destroyed them. The Greeks vanquished them.   [00:20:47.200] And despite being vastly outnumbered, the Athenian forces lost about 192 men. This is literally the historical record shows 192 Athenians felt the Persians lost thousands and thousands and thousands of people. They were humiliated. They were absolutely humiliated. And again, after the victory, it was a lengthy battle, it was a difficult battle, but after it was over, it was shocking to the rest of the world.   [00:21:08.580] And they went back to the same guy. Philippines said, you gotta go to Athens. Now, I know you just came back from Sparta, I know you ran 250 Sparta and 250 km back just to tell us that they’re not coming. Now we want you to run to Athens. It’s only 40 km.   [00:21:20.590] We want you to run to Athens now and spread the news of our victory. And that’s what Philippines did. He ran all the way 40 Athens. And according to legend, he storms into the building, the generals are there eagerly waiting word from the battle, and he says, Rejoice, we conquer. And then, according to legend, collapsed and died.   [00:21:38.360] Now remember, this battlefield was actually a farm, you know, giant farm fields where they’re growing fennel. It turns out the Greek word for fennel, at least in the ancient world, was Marathon, and this is known as the Battle of Marathon. And, of course, the commemoration of the battle and the run of Philippides to go back and tell the Athenian generals and the Athenian people that we won the battle. This became the sport, the Marathon sport, according to the legend, that was commemorated in the Olympiads and further later, subsequent sporting competitions. But for the Greeks, it was a major victory.   [00:22:13.900] For the Persians, it was a humiliating defeat. It was completely humiliating. People couldn’t believe it. The entire world was shocked. And this was really a major turning point in world history.   [00:22:27.270] This was the start of the Greek golden age. This is the time that especially Athens beat started becoming the dominant power. Now, Darius, of course, having just suffered this major defeat, embarrassing, humiliating defeat, he vows revenge. Now, he doesn’t last, really, to seize that vengeance. But his son Xerxes did take up the task.   [00:22:45.810] And a decade later, Darius died a couple of years after Marathon. But ten years later, in 480 BC, his son Zerxis takes up the task. And now Xerxes is furious. And he takes an army of more than two 6 million troops. He’s got armies, he’s got navy, he’s got sailors, he’s got people from all over the empire.   [00:23:08.200] He’s got Phoenicians, he’s got Egyptians, he’s got Assyrians all over the known world. He’s got dozens and dozens of different ethnicities and languages and cultures and so forth. Two 6 million people. He said, we’re going to go get them. We’re going to go take them out.   [00:23:23.170] We’re going to wipe them off the face of the earth. And he sent two 6 million people over to Greece. And when they would have their encampments, usually this is even in modern military warfare, and certainly in ancient military warfare, whenever an enemy spy was caught, of course, everybody always used to send spies to try and see what’s the enemy doing, where they going, how strong are they, et cetera. Usually, spies would be caught, arrested, immediately executed, but not with the Persians. Zerksis would say, no, no, don’t kill the spies.   [00:23:52.660] Invite them into our camps. I want the spies to see. I want them to see the 2.6 million people that I brought to vanquish their nation. I want them to see it. And he would take the spies and he would walk them through the camps and say, look upon all of this.   [00:24:08.490] Look at this sea of people here that’s come to vanquish you. Now go on about your way. Have a nice meal. Now go on about your way and tell everybody what you saw here. Because he knew it would be so intimidating and so terrifying, and yet it didn’t go well.   [00:24:22.780] It didn’t go well. Jerkses. They had some initial success. They took some Greek cities. They even actually got to Athens.   [00:24:28.530] The Athenians knew they were coming and the Athenians evacuated. So sort of a little bit of you could call it a Pyrrhic victory because he burned Athens. He burned Athens. And there was some damage there, but overall, it didn’t go well. And there are a lot of issues there for them.   [00:24:44.610] Number one, for the Persian army, they had with all these different peoples they had dozens of different languages and it was very difficult to communicate. They had no command and signal in the Persian military because there were just so many people and they couldn’t understand orders and so forth. Two is like, let’s be honest. The soldiers didn’t care. If you’re an Egyptian fighting in the Persian army, do you really care if you take Greece or not?   [00:25:05.440] It doesn’t really matter to you. The Greeks, on the other hand, they know they’re fighting for survival. The Persians, it’s just basically mercenary armies. They didn’t really care. The most important issue, though, facing the Persians that it was impossible to supply them.   [00:25:17.530] Jerks are used to brag that whenever my army drinks, it dries up the river. And then to a degree that was probably true when you’re dealing with 2.6 million people you very quickly outrun your supply lines. You have to constantly be on the move because whenever you sit in camp you basically suck up all the agricultural resources, all the food, all the wild game. Everything that’s in the area within 15, 20 basically destroy that. You take all the game, all the food, all the water, everything is all done because you’re feeding two, 6 million people at a time.   [00:25:49.980] So you constantly have to pick up and move and go somewhere else. And that’s actually puts you at a disadvantage because you don’t really have ever the time to say okay, what are our spies? What are our scouts telling us? Where are the Greeks? What’s the best approach, et cetera.   [00:26:02.890] You don’t really have the time to do that. You’re constantly moving and you’re making haphazard decisions instead of well planned tactical decisions. And this is how they ended up, for example, in the famous Battle of thermopole in 480 BC. We have a very narrow mountain pass that according to legend, of course, there were 300 Spartans. History always focuses on the Spartans.   [00:26:21.660] There were other people there. There were several hundred, possibly in a couple of thousand Greeks from other groups. But of course, 300 Spartans there and stood down this army of two 6 million Persians. And all the Persians basically had this very narrow mountain pass. The Persians marched through there.   [00:26:37.120] They had to get past the Greeks and the Persians who were very impressed with the Spartans and their courage. And of course, the famous story where the Persians stood up and said if you lay down your weapons, we’ll give you everything you want. We’ll give you riches and power and then we’ll do a. Deal. It will be really great for you.   [00:26:54.300] Just lay down your weapons. And the Spartans, who were famously this is actually where the word laconic comes from, they were very terse in their speech, and the word laconic actually comes from the word the Spartans are also known as they were known as the Lacedaemonians, and the word laconic being very terse and abbreviated with your speech. And the Spartans said, Come and take them. And that’s, of course, the legend. And this is sort of an Alamotype battle where the Spartans very bravely fought and cut down an unknown quantity of Persians before they themselves came and the Persians marched through.   [00:27:30.120] There were actually two Spartans who survived. One of them ended up falling at a later battle, and the other, who was so ashamed that he survived all of his comrades Paris, that he ended up hanging himself out of shame. But this is something this Battle of Thermopoly really depleted the Persian morale. You got all these soldiers again, you got soldiers that basically mercenaries. They’re not Persian.   [00:27:49.770] They’re from some other tribe, some other language. They don’t even understand what the other people are saying. They don’t know why they’re there. They don’t really care. They constantly have to move.   [00:27:58.060] It’s a pain in the ass. And now they just watch a bunch of their buddies die because 300 people wouldn’t get out of the way in a narrow mountain pass. So, you know, this is something that really depleted a lot of the Persian morale. And then eventually after thermopoli the Persian military was embarrassed yet again at the Battle of Salamis, and then finally the Battle of Plateau in 479. And after the battle, pateas, the Persians were done.   [00:28:24.120] They went home for good. And this is now the clear sign that the Greeks are the dominant superpower, and the Persians practically overnight went into secondary power status, and the consequences, obviously, were extreme. Imagine being a Persian at the time, right? Imagine being a Persian. You go from you’re the dominant superpower, you got this great life.   [00:28:46.060] You got this nice house and nice rugs and beautiful wife and beautiful clothes, and your kids are in school and everybody’s happy and this well functioning government and so forth that you’ve never lost. And you hear news, all of a sudden, 490 BC, you lose the Battle of Marathon. Now you lose Plateau, and the Persian army comes home. And just imagine hearing the news. Imagine being in Persia and hearing the news, and you’ve got to be saying, Are you kidding me?   [00:29:10.140] Are you kidding me? First marathon, and now this. We sent 2.6 million people and we lost. Are you kidding me? Imagine you would be furious, you would be furious if you were a Persian knowing we’re supposed to be the dominant superpower.   [00:29:26.340] We’re supposed to kick everybody’s ass. We’ve never lost. And now we’ve suffered multiple humiliations, one after another after another at the hands of the Greeks. The greeks. Are you kidding me?   [00:29:39.460] You would be furious. It would be such a humiliation. And yet it happened. And the result of all this, again, we’re talking about in a very short period of time, this aura of invincibility, of the Persian military was pierced. And all of a sudden, all these different territories, whether it was in Europe or Ionia or Egypt, there were provincial revolts broke out and people were going, I’m not afraid of these people.   [00:30:05.260] The Greeks beat them. We can beat them too. We don’t have to be afraid of these guys. And to make matters worse, the Greeks went on the offensive. They formed an alliance called the Delian League.   [00:30:14.760] It was sort of like a kind of like a NATO type organization where people pretend that NATO is a multinational organization, but it’s really dominated by the United States. So the Delin League was supposed to be this sort of multi tribal, multi city state organization, but it was really dominated by the Athenians. So the delegates sort of code for this Athenian alliance, and the Athenians, through the delegate, they went on the offensive and they took Persian territory. So Persians were losing territory now to the Athenians in the Delian League. They’re losing territory to all these revolts.   [00:30:45.120] They had to go and take their army, which had just retreated, once again with a tail between their legs, and they had to go back and reconquer territory, just trying to keep the empire together, which was very expensive and humiliating. It was so humiliating. And everybody looking at Persia now, it was supposed to be the dominant supermarket said, you’re not so bad, you’re not so tough. And Persia languished. It also fundamentally changed the culture, whereas once there was a very orderly government, very orderly succession and transition from one emperor to another, from one government to another, now you had assassinations became rampant.   [00:31:20.760] Turkses himself was assassinated. His grandson Zerksei II was assassinated. About half a dozen other emperors ultimately were assassinated before finally the Persian empire just disintegrated into the dustbin of history. When it took about 150 years. These declines and falls oftentimes take a while.   [00:31:38.310] About 150 years later, here comes Alexander the Great. And this is actually an interesting story because Alexander grew up I mean, this is 150 years later, right? So Alexander as a kid grows up reading about, learning about the Persian, attempted Persian invasions of Greece as a kid. Now alexander is Macedonian. But the Macedonians and Alexander himself view themselves as Greek.   [00:31:59.310] They were culturally Greek, they were ethnically Greek, viewed Macedonia as part of Greek. It was just greater Greece. And so he’s thinking, these Persians tried to invade Greece, tried to invade my homeland. He grew up hating, hating the Persians. Alexander the Great hated the Persians.   [00:32:15.580] When Alexander came of age and took control of the armies and so forth, one of the first places he went was to Persia, and he crossed the Jellispant, which is basically the Dardanelles in Turkey and crosses the Hellespont and goes into Persia. And the Persians were at that point, they knew they were about finished, and he was conquering Persian land and Persian territory left and right, and it was just unstoppable. And the Persian emperor at the time knew it. I think it was Darius III, but don’t quote me on that. Anyways, the emperor the emperor goes, and he sends an emissary, and he offers Alexander the Great 10,000 talents, 10,000 talents, which is about $25 billion in today’s money.   [00:32:53.500] He offers Alexander $25 billion. He offers him recognition, sovereign recognition of all the territories you’ve conquered, that I will recognize your sovereignty over all this land. That used to be mine, now it’s yours. I recognize your sovereignty, and I’ll even give you my daughter’s hand in marriage if we can just be friends, and you, please leave us alone. And there’s a famous story where Alexander’s second in command, a guy named Parmeno, they look at this deal and Parmenio says, wow, that’s a pretty generous deal.   [00:33:19.620] I would take that deal, said Parmenio. And Alexander, who used to travel everywhere with his own scribes and his own historians and historical account of this, basically, Alexander says, yeah, I would take that deal, too, if I were you, Parmenia, but I’m not you. I’m Alexander the Great, and I don’t need the Emperor of Persia to recognize my sovereignty. I already kicked his ass all over his own empire. I already seized his lands.   [00:33:43.560] I don’t need his recognition of what I’ve already done. I don’t need his $25 billion. I don’t need his 10,000 talents. If I want his 10,000 talents, I’ll go take his £10,000. If I want to marry his daughter, I’ll go marry his daughter.   [00:33:54.640] I don’t need this guy. So, no, I’m not going to take that deal. And Alexander march straight into the capital, and he took Persia, and that was it. Poof. No more Persian empire.   [00:34:03.730] Now, all this is really a familiar story. The whole story really goes back to the idea that you’ve got a dominant superpower, and then something happens, usually because it’s a military weakness, something happens. The empire is embarrassed, humiliated. That veneer, that aura of invincibility is pierced. And then everybody else says, we don’t need to be afraid of these guys.   [00:34:26.080] They’re not so tough. It happened to the Romans in 378 Ad, the Battle of Hydrianopoulos, in which the Romans were humiliated by the barbarian Goths. And all of a sudden now it was signified the loss of Roman humiliation. The loss was so bad, they didn’t just lose, because you can lose. You can lose a battle here and there.   [00:34:44.580] It’s not a big deal to lose an occasional battle, because you can always have an excuse. You can always blame. The general was incompetent, and now we’ve sacked him or we executed him, or whatever. There was, you see, in some cases, an ancient battle where there was a solar eclipse. And in the middle of the battle, there was a solar eclipse.   [00:35:00.820] And people freaked out and ran away because they thought the gods were angry at them. And the world’s going to come to an end. All sorts of things that might happen over the course of an empire, and you can lose an occasional battle, but it’s when you get humiliated. And that’s what happened to Rome and that’s what happened to Persia after Marathon was coming to Rome in the Battle of Adrianopoulos in 378 Ad. And the barbarians said, these people aren’t tough.   [00:35:22.230] We don’t have to be afraid of them. Of course, the barbarians said, OK, let’s do it. And so they crossed into Roman territory, and western Rome at that point was basically finished. Rome itself had been sacked and Rome was done. There’s another, actually interesting example.   [00:35:37.590] On November 27, 1008, seven, Napoleon is on the march going into Portugal, and the Portuguese were so terrified at this point, portugal was technically an empire. They had colonies all over the world, and the Portuguese, the entire imperial court, not just the Emperor and his concubines and so forth, but everybody, about 100 people from the Portuguese imperial court had to flee Lisbon because Napoleon was at the gates. And they got on ships and they left Lisbon and they went to Brazil, which was one of their colonies. They went to Brazil and they set up their entire they basically created a new capital of their empire in Brazil. Now, you could imagine if you’re the Brazilians, you’ve been subjugated by the Portuguese empire, the Portuguese Empire, which just had to flee to your place because they had to flee Napoleon.   [00:36:24.850] That’s probably not going to impress you very much, right? You’re going to look at this and see the entire imperial court just showed up because they’re running away naturally in Brazil, ended up declaring independence against Portugal about 15 years, right? So the Portuguese empire, they suffered a humiliation. It was even really before the battle, they they were so afraid, they didn’t want to have a battle with Napoleon, and they and they ran away. And so that basically caused this disintegration of the Portuguese Empire, and they lost Brazil and a lot of the colonies after that.   [00:36:53.760] So, again, this is a very familiar story, and it starts with weakness. Weakness. It’s when enemies see adversaries, see weakness. And a lot of times that weakness tends to come from the military. Now, military weakness, a lot of reasons for that could be because the military is exhausted.   [00:37:09.960] We’ve seen many examples of this throughout history, obviously a lot of examples from Rome, etc. Where you’ve got a military that’s just been so overused and so overextended, the military is just exhausted. Another obvious reason that we’ve seen over and over and over again from Rome to the United Kingdom is when funding dries up due to economic decline, they just don’t have enough money anymore. To be able to pay the military, keep everybody up to date with the latest equipment and so forth. They can’t pay the troops as much anymore.   [00:37:35.830] And so economic decline drives weakness in the military. And another one, obviously, is internal dissent, social changes, social conflicts, changes in social priorities that end up bleeding into and infecting the military. And there are numerous examples of this throughout history. A lot of people know about the Russian revolution in the early 1900s. In 1917, that was obviously the successful revolution.   [00:37:57.330] But there are actually failed revolutions, unsuccessful revolutions before that. There was one in 1905, a socialist Russian revolution, 19 five. Before that, Russia, you had the Russian empire and the tsar and all of that, but socialism was on the rise. The works of socialism and socialist thought leaders had really gravitated in Russia. And we’re gaining ground.   [00:38:19.510] And there was an unsuccessful revolution in 19 five. And in 19 five there was an incident where the battleship, there’s a Russian battleship naval ship named the pumpkin and the pumpkin crew mutinied against their officers because of these social conflicts. The social conflict was so strong and so dominant that actually took over order and discipline in the military. And the crew mutinied against its officers because of the prevailing social conflict we see later on in Russia. 1937.   [00:38:46.050] There was a great purge in the red army where soldiers are riding each other out and officers are being executed and so forth to figure out who is a good communist and who wasn’t a good communist because they couldn’t tolerate any different social or economic or political ideology. That was the sort of prevailing social trend. We must be of all one mind in our ideology. And anybody that isn’t, we’re going to literally execute. And that infected the military as well.   [00:39:10.780] So they deliberately weakened the military in order to have this singlemindedness in there, you know, singleminded ideology in the ranks. And so they deliberately weakened their military and they executed officers and soldiers who had a lot of combat experience and so forth going into world war II. This is 1937, right? So we’re going into world war two, and we’re literally going to execute people that have a lot of combat experience and weaken the military at a time we really can’t afford to do that. The Iranians did the same thing.   [00:39:40.160] 1979, after the Iranian revolution, the Islamic revolution in Iran, they did the same thing. They had to purge the military. And a lot of people don’t realize this, but before that, before the Iranian revolution, iran was a very strong country, a rising country. And the shah of Iran knew that they had so much money and they were going to make so much money because of their oil wealth, vast oil wealth that still exists to this day. And the shah knew that because of all this money they were going to become a great power in the world, a major global power, not necessarily to the level of the US.   [00:40:10.420] But they were really going to be a major global power. And because of that, they should have a modern and fierce military force. And so they were buying weapons and equipment from western countries and training their military. And so for the building up, really, the iranians had a lot of very strong military capabilities going into the late 1970s, but then they had the purge after the islamic revolution. They said, nope, we must be single minded in the ranks, and we cannot tolerate any kind of intellectual dissent.   [00:40:38.380] And they had a 60% desertion rate, and they destroyed a lot of their weapons and equipment because it came from western countries, and they executed their officers and all these things. And then right after that, they ended up going to war with their neighbor, with iraq and saddam hussein. And by the end of the war, the iranian army had been so depleted because of this purge in many respects, that they were practically fighting with sticks and stones, human waves and bayonet charges and so forth. They had deliberately depleted and plundered their own military and made it weak. So this is, this is something we’ve seen over and over again throughout history, a military that gets weak.   [00:41:16.050] Various reasons, again, could be because of over exhaustion, could be because of economic decline, also because of social issues that bleed into the military. But either way, this kind of weakness and the loss of military power is a hallmark of a superpower and decline. The loss of military power creates a loss of reputation, pierces that aura of invincibility, and it is a hallmark of a superpower and decline. Usually it happens because there’s an event that’s followed by another and another and another, and then adversaries start to probe those weaknesses. I think clearly the United States already had this in 2021.   [00:41:52.930] The utter humiliation of the withdrawal from afghanistan was so shocking. And that’s the thing that’s also that, like I said, there’s an event. And the thing about the event, it’s not just that somebody loses a battle, right? Because you can lose a battle. It’s something that is so shocking.   [00:42:11.100] The superpower is humiliated. They don’t just lose, they’re humiliated like the persians at marathon or again, xerxes with two 6 million people and got humiliated. It pierces the veneer of invincibility. And suddenly people go, really? I’m supposed to be afraid of these guys?   [00:42:29.310] And you got to imagine world leaders adversaries to the United States, watching the withdrawal of Afghanistan, watching the US. Military abandon billions, tens of billions of dollars of military equipment, tanks, armored personnel carriers, military aircraft, abandoning that stuff, walking away, running away from the bases, leaving all that stuff behind for their sworn enemy to just take over here. Taliban have billions and billions of dollars of helicopters and aircraft. I mean, you got to imagine the chinese watching this going, are you serious? I’m supposed to be afraid of these guys looking at human beings clutching the landing gear of aircraft, trying to fly away?   [00:43:09.560] It was so shocking to everybody that saw it. Just like Persians in 490 and 480 BC going, are you kidding me? We’re supposed to be the superpower. You take two 6 million people to Greece and you lose people around the world, especially in the United States, watching these horrible, the horrible footage we saw on TV from the withdrawal of Afghanistan, people going, are you kidding me? People are furious.   [00:43:32.580] They are irate because it is so humiliating. But it wasn’t just Afghanistan. Again, one loss you can deal with and you can sort of explain that away, but then it’s like it’s another and another and another and another and another. And it’s so many of these things that we’ve seen over and over again. It’s been, for example, with the Navy, it’s been amateur night with the Navy, they had the USS Vs Gerald and the USS John McCain.   [00:43:55.500] Nine weeks apart, two United States naval vessels colliding into other ships, just crashing into other ships because they determined that the bridge crews were incompetent and not doing their jobs. And the Navy, during COVID, where the USS Theodore Roosevelt and the captain was screaming to the world, we have COVID. We have COVID on the ships and basically telling all adversaries of the United States, well if we get a virus on board, then we’re just going to scream and yell and we’re going to be weak and we’re not going to be able to do our jobs. And all these things that you see over and over again, the super woke recruiting ads from the CIA and the US army will be talking about recruiting here in a minute, or the fact that they’ve shifted from focusing on national security to focusing on these social issues now that frankly, don’t have any business with national security. So the Department of Defense decided that their aptitude tests are, need, need to be, to be changed.   [00:44:52.110] And they’re changing their physical fitness test and they’re changing the Special Operations Command, creating an Office of Diversity and Inclusion, as if diversity and inclusion should have anything to do with special operations. Does anybody honestly think, even the most progressive person in the world, that you honestly think that the Chinese give a shit about how diverse and inclusive special operations in the United States are? Are they really going to tremble in fear about our diversity and inclusion? And these are the sorts of things you start it’s more than Afghanistan. You start with a withdrawal from Afghanistan, and then you hear the Chinese and you see that, then you see some woke recruiting ad, then you see, you see naval ships colliding into each other and you see the Office of Diversity and Inclusion and you see all these things.   [00:45:38.680] And then the biggest one of all, if I’m really honest about it, the biggest one of all was in 2020 for at least nine months that we know about, possibly much longer than that, but at least nine months, hackers had access through an exploit in software from a company group called SolarWinds. SolarWinds is software that basically underpins almost every major Fortune 500 company, almost every department in the US. Government, including the Defense Department, the Department of Homeland Security, and SolarWinds got hacked. How? Because the update server, right, when you have software on your system, and then from time to time, if you have any software, basically you probably seen this comes, you get a little window that says, oh, you need to update your software.   [00:46:23.560] So it goes out to there’s a server that has the update software, and so the update server for SolarWinds, the password for the update server, this is 100% true. Feel free to verify this yourself. The password for the SolarWinds update server was SolarWinds, one, two, three. And now imagine you’re a hacker, right? You’re a hacker that penetrates the system if you’re going, are these people serious?   [00:46:45.790] These are supposed to be the tough guys. These are supposed to be the big shots. These guys are supposed to be the most advanced people on the planet. Their passwords solo in one, two, three. And they got access to the national security of the NSA, the Department of Defense.   [00:46:58.540] And what did the US. Do about what did the military do about what the government do about it? Nothing. Nothing? Absolutely nothing.   [00:47:06.630] So this is the sort of thing, if you’re an adversary of the United States, if you’re a Chinese, and you’re looking at all of this in totality, in the context of all this, are you really going to be afraid? Is the rest of the world really going to look at the US. And say, oh, those guys are the baddest guys around? It’s totally ridiculous. But to add to that is just a little bit more detail.   [00:47:27.790] Just came from the Heritage Foundation. The Heritage Foundation, again, this is more of a rightleaning. It’s not some nonpartisan totally objective group, but definitely more right leaning. So you got to take everything they say with a grain of salt. But they just put out an annual index of military strength this fiscal year 2023, and the government now so it’s called the 2023 index of military strength, the US military strength.   [00:47:48.280] And the thing about it is, while this is definitely more of a rightleaning organization, it’s not really a partisan or highly biased work. It’s 600 pages. I read through it, and it’s just something that came out very recently, literally just in the last week. And I got to say it’s not something that really smacks of bias. They actually use the military’s own ranking and the military’s own data in assessment.   [00:48:14.290] So essentially all they’re really doing is aggregating what the military itself is already putting out. And they rate us. Military strength based on three things capability. Capacity and readiness. And in short, capability is what you can do, right?   [00:48:28.170] If you think about, let’s say, you’re, I don’t know, building a house, right? You need certain capabilities. You need to know how to lay a foundation, you know how to put on a roof. You need to know framing, electrical work, plumbing, et cetera. You need to know how to do these things.   [00:48:40.780] These are all capabilities. Plumbing and electrical work and roofing, these are all capabilities in the military, missile defense and light infantry tactics and long range stealth bombing and cyber warfare, these are all capabilities. Depending on the mission, you would use certain capabilities and not have to use certain capabilities. So if you’re going on a peacekeeping mission to the Balkans, for example, as they did so much in the 1990s, you don’t necessarily need your missile defense or your nuclear capabilities, but you might need your security and logistics capabilities, for example. So that’s the idea of capabilities and so their rating capabilities and capabilities has a lot to do with the sort of breadth of what you can do.   [00:49:18.960] It has a lot to do with technology. Obviously, the better tech you have, better capability you have. Capacity is based on how much of it you have, right? If you have sure, we might have the ability to engage in missile defense, but if we only have one missile defense system, then we’re actually not so great. So that capacity is how much of you have and readiness is are you ready to go?   [00:49:41.080] Do you have the ability to go at a moment’s notice? And obviously, ideally, you want to have a lot of high tech equipment, wide variety of branches and capabilities, cyber warfare, light imagery, missile defense, long range stealth, nuclear, etc, etc. All of it ready to go at a moment’s notice. Highly trained, ready to go at the drop of a hat. That’s what you want.   [00:49:58.840] High capability, high capacity, high readiness. But empires in decline have to make tradeoffs. And that’s kind of where the US military is right now. And what the Heritage Foundation is doing is taking the US military’s own assessments, internal assessments that they’ve already put out and they’ve already published. They’re aggregating it and putting in a lot more analysis, a lot more detail.   [00:50:17.460] And in general, the US military ranks very, very poorly across the board, with one exception, and that is unsurprisingly. The US Marine Corps. The US Marine Corps ranks pretty well, pretty well in this ranking system, but everybody else is just pitiful. Just, just pitiful. And to kind of get into it a little bit and I’d encourage you at least to read the executive summary and it really spells it out a lot.   [00:50:40.350] The executive summary is a couple of pages. I went through the whole almost 500 some odd pages of this. It’s a lot, but there’s a lot of detail in there. And for example, if you look at the US army, the tanks the US Army has this is 40 year old technology. 40 year old technology.   [00:50:55.910] The army and this is in terms of capabilities, right? In the Air Force, the average aircraft age in the Air Force is 30 years old. The army has now focused so long on counterinsurgency that according to the Army’s own internal assessments, they’re rapidly losing their capabilities to conduct conventional combined arms warfare. Actually, when you think about sort of World War II going out with large mass amounts of troops in a battlefield and meeting another enemy head on in a battlefield, whether it’s a tank battle or an infantry battle and so forth, they kind of lost the ability to do that. And if you’re planning a war with a major adversary, possibly like the Chinese, that might be a capability that you want to maintain, right?   [00:51:34.170] And they’re losing that capability to be able to do that. From a capacity perspective, get capacity a minute. From a readiness perspective. We got training resources been slashed. The Air Force, the Air Force ranks the worst, by the way, in all of this.   [00:51:48.130] Not to take anything away from anybody, but the truth is what it is. And Air Force flight hours, for example, training time, training hours, the pilots tracked by how many hours they’re flying and so forth, really at historic lows. It’s been in decline for years, and in 2020 and 2021 hit historic lows. The army has been exhausted from so much warfare. Navy and Air Force equipment, the ships and the aircraft and so forth have just been plagued by constant maintenance.   [00:52:14.530] Part of that because they’re so old. And after a while, when military equipment gets old and it’s over utilized, it’s just hard to keep it going. And so readiness suffers as a result of that. The Air Force actually had a mandate for a while that they were going to reach an readiness rate. And then they just kept missing it and missing it and missing it.   [00:52:32.160] And then after a while they just abandoned and stopped tracking that statistic. They certainly stopped publishing that statistics. And now we’re going to focus on other priorities. So if at first you don’t succeed, just stop even counting what you’re not successful at, and then the problem goes away. It’s kind of a ridiculous way to do it.   [00:52:48.610] And then the last thing you think about capacity. Capacity is shrinking. Right. Ten years ago, the Army’s measurement for capacity is a unit size they call a Brigade Combat Team or BCT. This is actually a relatively new thing.   [00:53:01.560] They started the BCT concept about 2025 years ago. And about a decade ago, the army was aiming for to have 50 BCTS, 50 Brigade Combat teams. But because of budget cuts and so forth, due to economic decline, etc, or budget cuts being have reduced that now, now their goal is to get to 30, 31 BCTS. That’s a lot lower than the 50 that. They were going for.   [00:53:24.490] So the navy at the same time is unable to build enough ships to meet its congressionally mandated fleet size. Not only can they not meet their own internal goal, they can’t even meet the minimum fleet size that is required by law, the air force. The whole F 35 debacle is such a joke. There’s a massive pilot shortage, and this is really a problem that plagues the entire military, is that recruiting in general is down big time. Big time.   [00:53:51.760] I have to say, all of this doesn’t take anything away from the fighting spirit of the US military. I’m a West Point graduate. I’m ex army. I’m an army veteran. I still believe my day to my dying days, I believe that the US military fighting spirit is second to none.   [00:54:06.670] But facts are facts. Truth is truth, and it’s important to look at these things as an objective appraisal. And one of the things that is so obvious is that capacity is falling because recruiting is down so much in the army. For example, recruiting is the lowest it’s ever been since they did away with a draft. As soon as soon as an all volunteer force, they were still able to actually draw from an all volunteer force.   [00:54:30.660] People volunteered to serve in the army, but now recruiting is down to the lowest level that it’s been since they ended the draft. And that’s a really, really big deal. And it’s not hard to see why. If you look at, for example, just really bad priorities. If you look at the national priorities, they put national security behind other things like we talked about earlier.   [00:54:50.910] They say, oh, no, we’re all about diversity and inclusion now, or your vaccination status or all these sorts of things now that they put ahead of national security. One of the things, though, that’s interesting is that there’s a significant decline of the population of the United States that even qualifies to serve in the military whether or not they sign up. It’s just at a certain point, you’ve got people that have to be medically and physically qualified to serve. There’s been a 20% proportional decline in the people that are even qualified to serve. The qualified to sign up mostly because of obesity.   [00:55:21.490] Young people have become so obese, and then you’ve got mental health issues, etc. And so there’s such a major, honestly, crisis in obesity and mental health in the United States. Gee, I wonder how that could happen. We’ve locked everybody in our homes, everybody’s eating, you know, goddamn Big Macs all day being stressed out and depressed out of their minds, and now we have this crazy proportion of people in decline that’s even qualified to serve because they’re overweight and they’re overstressed. And that has serious national security implications.   [00:55:51.490] Through the course of these podcasts, since I’ve resurrected this and started doing these again, I’ve been talking about these things I call the four forces of decline. We did an entire podcast on the forces of energy, and we’ll continue to talk about that because it’s so important and how energy is becoming more expensive, not just in dollar and currency terms, but in energy terms itself. Net energy is getting lower, energy return on energy, investors getting lower, and that has a serious, serious implication on future prosperity. We also talk a lot about forces of economy, the debts and the deficits and pension funds like Social Security that are going insolvent and are underfunded, et cetera. The forces of society, the anger and the vitriol and the Twitter feuds, and the censorship and the mostly peaceful protests, and all these things that happen with people just at each other’s throats, and the failure to be able to have a rational conversation, the fact that you can’t go to an airport anymore without seeing a fist fight because people just so tightly wound about stuff.   [00:56:47.500] And these are forces of society that contribute all the forces of decline. This one today that I’m talking about is part of what I call the forces of history that lead to decline. The forces of history are these things like the life cycle of empires. Empires, like people, have a lifespan. Everybody is different.   [00:57:09.030] Every human being is different. We all have a different life. Empires, they’re all different. They all have different lives and different life cycles. But just like human beings, there are similar characteristics.   [00:57:17.520] Most people, a lot of people share certain things. We’re all born. People go to school, they have careers, they get married, they have kids, they retire. Not everybody follows that, but most people kind of follow that. The individual details along the way obviously change and are radically different for people.   [00:57:32.140] But there are certain events and milestones and so forth throughout people’s lifespans and lives that are very similar across the world. And that’s the way we’ve seen across empires throughout history. Empires are born, they rise, they peak, they decline. And there are certain things that happen. We see empires start to spend too much money.   [00:57:49.360] We start to see them go into debt. We start to see them debate their currencies. They start losing the military battles, they start looking weak to their adversaries, they’re borrowing more money. There’s internal conflict and the social priorities change, and there’s internal descent and all these things that happen, those types of milestones, they’re very, very common throughout the life cycle of an empire. And so you can sort of see these things in the course of an empire.   [00:58:15.040] When empires are born, people are hungry, they’re productive, they work hard, there’s unity of purpose. Imagine being a Persian running around with Cyrus, right, and you look at it and you can see it, you can taste it. You know, wow, we are becoming something, we’re becoming powerful. You can feel it in your bones as your empire grows and grows and grows every day. And people are working hard.   [00:58:35.760] They’re putting their heads down. They’re not complaining and whining and moaning about stuff. They’re working because there is unity of purpose, increase in productivity, the education, technological development that grows. And then, you know, things peak, right? As they rise and rise, they get better, and suddenly there’s another generation, another generation, and suddenly you’ve got these later generations that they didn’t have to put in the work.   [00:58:56.910] They weren’t around when they weren’t the dominant superpower. That’s all they’ve ever known, is this wealth and luxury and superpower status. That’s all they know. And so they don’t have the same values, they don’t have the same unity of purpose. And I’ve mentioned an economist many times in these podcasts, a guy named Robert Triffin, and he’s not one of these Nobel Prize winning people, although I would argue that the Nobel Prize is not so cracked up, is not as cracked up as opposed to be.   [00:59:24.220] But Robert Trifon’s main theory, the theory that he posed, was actually called Trifon’s Dilemma. In short, essentially posits that a superpower cannot last simply because as it grows and becomes dominant and so wealthy, it becomes too expensive to produce everything that it needs. At a certain point in the United States, it became too expensive to produce little things like socks and underwear, right? You just can’t compete with Mexico or China or Bangladesh or whatever cheaper countries that can produce it for a lot cheaper because they’re not paying their labor as much and all these things. And so you start to import things, and you import more and more and more, and you start running trade deficits and eventually budget deficits and so forth.   [01:00:05.530] And this is what Trifon’s Dilemma is all about, is that as the economy becomes so successful, it becomes a victim of its own success and starts running these big deficits, which takes away the power and eventually causes the decline. And again, that’s what happens in decline. People take their wealth for granted. They lose the edge. There’s changes in social priorities, internal discord range, because they don’t have basic problems anymore.   [01:00:26.020] They’re not trying to grow because it’s already a rich country. They don’t have to worry. They’re not a poor country. They don’t have to worry about how am I going to feed my family? And all these sorts of things that people in very, very poor countries have to deal with.   [01:00:38.660] Problems that people have in rich countries pale in comparison to problems that poor people have in very poor countries. Very poor people in very poor countries don’t have mobile phones. They can’t go on Twitter and bitch about their problems because they don’t have electricity, they don’t have any basic things. And when you’re in a rich country, even when it’s on the decline, you know, people just don’t have the basic problems anymore. And so they start finding things to be outraged about.   [01:01:06.710] And again, it doesn’t take anything away from the problems. I’d say there aren’t other problems but it is part of the life cycle of empire. And I brought up that great John Adams quote before, which I’ll paraphrase, where he’s writing to his wife Abigail, and he says, I must study politics in war so that my sons can study science and math, so that their sons can study art and literature and philosophy and so forth. And I always have to add the part in the end would say so that their great great grandchildren can study diversity and inclusion and gender studies, right? This is the sort of thing, and again, not even to take anything away, not even to pass judgment on anything that people do.   [01:01:41.980] But it is the lifecycle of empire where people take away from the things that made the empire great to begin with, and suddenly priorities just change. And it’s now, instead of unity of purpose, it’s internal discord, populism, socialism, debt jubilee’s, all these sorts of things. The overspending, the currency debasement, and yes, decline in military capabilities. The reason this is all so important is because, as we talk about quite often in notes in the field, reserve currency status is usually one of the other hallmarks of being the dominant superpower. The reserve currency is the thing that the rest of the world uses for global trade and commerce and financial transactions.   [01:02:20.700] If you go to, if you go to not even in the United States, if you go to London, if you go to Dubai, if you go to major financial centers, you will see commodities contracts, you’ll see gold contracts and copper contracts and coffee contracts denominated in a foreign exchange traded by foreign investors, denominated by denominated in US dollars, right? That’s what it means to have the reserve currency status. If you’re a company, you know, company in New Zealand and a company in Argentina doing business with each other in US. Dollars. I made some comments about this in a letter, and I was like, it’s actually so ridiculous that when a European aircraft manufacturer like Airbus sells jet planes to a European airline like Air France, instead of closing that deal in euros, they do the deal in US.   [01:03:06.570] Dollars. It’s weird. It’s weird. Huge companies. Nestle, BP, Volkswagen Group.   [01:03:13.090] They sell corporate bonds in US dollars. You have sovereign governments that issue government bonds in US dollars. That’s what it means to have the reserve currency. And because of that, because so much is done in US dollars, it basically means that the rest of the world has to have US. Dollars.   [01:03:27.580] The rest of the world has to stockpile US. Dollars and us. Dollar assets. And typically what that means is they buy US. Government bonds.   [01:03:35.490] Why US. Government bonds? US. Government bonds is essentially us. Debt.   [01:03:38.890] It’s government debt, right? And because there’s so much of it, u. S. Debt is 30 plus trillion dollars. So there’s so much of it.   [01:03:46.300] S. Debt is basically the biggest, most liquid us. Dollar asset in the world, right? So this is what it is, extremely liquid.   [01:03:55.480] You can sell US government bonds at any time. There’s always a market for them all over the world. And so this is what people own. And basically it means that there’s this constant market of foreigners that has to buy US bonds, it has to buy US debt, that has to loan money to the US government. And this means you can basically get away with murder.   [01:04:14.760] If you’re the US government. You can do ridiculous things like pay people to stay home and not work. You can go into debt and pay people to stay home and not work and people will still buy your bonds. Foreigners go, okay, I’ll loan you money for that. I mean, can you imagine going to the bank?   [01:04:31.450] Go to your bank, just try it. Go to your bank and say, hey, I want a loan because I want to pay my kids to stay home and not work. Good luck getting that loan, right? Nobody in their right mind would ever, ever do anything like that. But the US government can do it.   [01:04:45.030] The US government can do it because they have all these foreigners there that have to own US dollars, which means they have to buy US government debt. So the government says, OK, we’re going to issue a bunch of bonds so we can pay people to stay home. We’re going to issue a bunch of bonds so that we can go and have some multi trillion dollar spending program, so that we can go on TV and close our thumb on our index finger together in a little tiny circle and say it costs nothing. Trillions of dollars cost nothing. And they can actually put that bullshit out there to the world.   [01:05:12.550] And then we’ll go, okay, we’ll buy the debt. Now you would never be able to do that anywhere else. No other government can get away with that except the United States because they have all these foreigners, honestly, all of these suckers that have to buy US government bonds, because they have to, because the dollar is the reserve currency. And this is an incredible, incredible benefit to the United States. If you don’t have the reserve currency, it’s a pretty big deal if you think about it.   [01:05:40.570] And I wrote about this recently, I wrote about it actually today. I wrote about it earlier this week. The best example that we have of not being the reserve currency and the trouble that you can get into, look no further than the United Kingdom. The United Kingdom used to be the dominant superpower in the 18 hundreds of Victorian England. They had British Empire, largest empire ever in the history of the world, queen Victoria.   [01:05:58.600] The British pound was the dominant reserve currency. Everybody around the world was using British pounds. And they lost it, right? They lost it. They had years of decline, decay, economic decline, over, exhaustion of the military.   [01:06:11.740] They got embarrassed. They got embarrassed big time in the Suez. And over and over and over again we see it’s the same story of history. Rise, peak decline, and now they’re no longer the reserve currency. Now look what happened a couple of weeks ago.   [01:06:23.310] You got a new Prime Minister, a new government that comes in and says, here’s our economic plan. And among other things, they said that they wanted to cut taxes. Frankly, I think it was a I actually think it was quite a reasonable plan. The whole idea was they wanted to deregulate the economy and basically empower British people and British businesses to be productive. That’s actually the problem.   [01:06:41.360] One of the major economic problems that we have in the world is that people have been constrained to be very unproductive in the US. They paid people to stay home and not work. It is the antithesis of productivity in the UK. They were trying to solve that problem by unleashing productivity and saying, let’s make people as productive as possible. And one of the ways we want to do that is to incentivize productivity and cut taxes.   [01:07:01.240] But it’s not up to the government, right? It’s up to the lenders. Because the government needed to borrow money in order to do this. They were going to run deficits and so forth. And their lenders, the bond market, right, investors in the bond market, including a lot of foreign investors, they looked at the planet and said, no, no, I’m not going to do I’m not going to loan you money so that you can cut taxes.   [01:07:20.740] I’m not going to do that. And so the bond market had a complete fit, started the bond market, investors started dumping UK government bonds. They called gilts. They started dumping the pound. The pound went into free fall.   [01:07:31.150] The guilts went into free fall. The Government looked like a bunch of idiots. They ended up sacking. They fired the chancellor based on the Finance minister. Now the Prime Minister has resigned.   [01:07:39.280] They walked back, they canceled the tax cuts. The entire government now is in turmoil. The Central Bank had to step in and bail everybody out. The whole thing was a disaster because the bond market didn’t like the plan, the investors didn’t like the plan. This is what happens when you don’t have the reserve currency, right?   [01:07:56.370] If the US does that, then you have all these suckers overseas that have to hold US dollars. So I go, okay, we’ll buy the stupid bonds because we have to, right? But nobody has to own UK Government bonds. They don’t have to own you don’t have the Government of China or New Zealand or Tanzania that has to own British pounds, so they don’t have to buy UK Government bonds. So the only reason they buy UK Government bonds, because they have to look at it and say, I like this plan, I like this government.   [01:08:27.820] I think it’s low risk, it sounds good and I feel like the risk is worth the reward. So I’m going to go ahead and buy this. So essentially, when you’re not the reserve currency, you have to compel investors by good old fashioned results and performance in order to get in order to entice people to loan you money. And this is the issue if you’re not the reserve currency, and so if the US loses its reserve currency status, you end up basically like the UK. Can you imagine a time in the US where you’ve got Nancy Pelosi or whoever standing up there, closing her thumb and her index finger together saying, it cost nothing, and the rest of the world just laughs at her and said, yeah, right, lady, we’re not buying that.   [01:09:06.490] No chance. You’re not getting a penny of our money. And the entire US bond market collapses and the dollar goes in the free fall because the bond market doesn’t like what the US government is selling. Can you imagine that scenario? Well, you’re going to have to, because it’s coming and it might not be Pelosi and hopefully, hopefully it’s not hopefully she’s long gone by the time this happens.   [01:09:27.870] But it is going to happen. It’s inevitable at some point, because no currency lasts forever as the reserve currency. No country lasts forever as the dominant superpower. Now, essentially what that means is that this is inevitable, but that doesn’t mean that it’s imminent. Those are two separate things.   [01:09:44.640] No currency has ever lasted forever as the reserve currency. No power has ever lasted as the dominant superpower. But it doesn’t mean it’s going to happen tomorrow. And they’re on a trajectory. When you look at it right now, you look at Afghanistan, you look at the finances, I mean, the Treasury Department, they just came out with their budget projections and they said they’re going to lose another trillion dollars more than that next year and the year after that and the year after that, it’s just trillion dollar, multi trillion dollar deficits are now it’s just normal, right?   [01:10:09.880] And just imagine that when you’re no longer the dominant reserve currency and the bond market no longer has to have your bonds, the bond market no longer has to hold your currency, that’s going to be a different story. And you can have a really hard time selling multi trillion dollar deficits year after year after year. But again, it’s not imminent. And I would actually submit to you that I think the rest of the world is actually, if I’m very honest, I think the rest of the world is actually rooting for the United States. I don’t think the rest of the world really wants China or to be the dominant superpower, the dominant reserve currency, or to be in a position where there’s not a dominant superpower reserve currency.   [01:10:46.710] The US has been that for so long. I think everybody’s used to it. I think Europe clearly wants to prefer to deal with the US. And I think with this whole thing with Russia and people are worried about China and invading Taiwan and all the turmoil that that’s caused, I think people would prefer to stick with the US. But the US.   [01:11:01.770] Just keeps shooting itself in the foot over and over and over again. And in a way, it’s sort of like, yeah, there have been so many problems, but it’s kind of like getting your life together after you have a heart attack. You’ve been chain smoking and drinking yourself onto the table and eating horrible food every single day for your entire life. Now you’re 58, and you have a heart attack, and you’ve got a couple of options. You can either just keep drinking yourself under the table and keep chain smoking and all of that, or you can engage in healthy habits and you can get fit and get exercise and get your life together.   [01:11:35.960] And if you do that, you might have still decades to go. And that’s the situation that the US. Is in right now, is that they’re basically a patient that’s just been wheeled in to the hospital with a massive coronary failure. And with the right choices, some of this decline can be arrested, and some of the effects of this could be delayed by years, possibly even decades. The key problem, of course, is their inability to solve problems.   [01:12:04.650] And this has been an issue for so long, for so long. And this gives rise to the complete lack of what I call this the cycle of problem solving. And I have to do that in air quotes in the government. And it starts like this. The government does something stupid, and by doing something stupid, they create a problem.   [01:12:22.420] And then what do they do? They completely ignore the problem. And then it festers, infestures and festers. Then finally, when people start saying, hey, there’s this problem here, they quote unquote solve it by offering some completely empty gesture thoughts and prayers, right? Then the problem continues to grow, and it festers and festers.   [01:12:39.870] And finally, by the time they finally tackle it, at that point, it’s such a huge problem. Now it’s a full blown panic. And they do whatever it takes, whatever it takes to solve the problem. Whatever it takes is terrifying because whenever you hear politicians talk about whatever it takes, what it ultimately means is we haven’t done a rational cost benefit analysis. We’re not doing anything rational, economically rational, socially rational.   [01:13:02.230] We’re just panicking. We’re having this very panicky policy. And when they do something very panicky, it’s usually, frankly, destructive, it’s irresponsible, it’s reckless, and usually probably contains a couple of things that are really stupid. And that stupidity means the government is doing something stupid, and the whole cycle starts new. The government does something stupid, they create a problem.   [01:13:21.570] They ignore it. It festers. Thoughts and prayers, whatever it takes, and they create more problems. And this is the cycle, and they cannot break that cycle. And this is why I think the US.   [01:13:32.320] Is on a really nasty trajectory. It doesn’t look like anything is really going to change. The trajectory that we’re on right now is continuing the status quo of creating more problems, not solving problems. More debt, more social conflict, more weakness, more perception of weakness. The piercing of the veneer of invincibility that causes a decline, causes a decay in our superpower status, in the status of the US.   [01:13:57.420] Dollar, all these things. That’s the trajectory we’re on. That’s a pretty rapid trajectory. It doesn’t look like at the moment anything is going to change. They do create lots and lots of problems.   [01:14:06.420] Lots of times they create problems for optics. If you think about Afghanistan, why the hell I’m not one to argue that they should have stayed in Afghanistan or et cetera, but did they really have to abandon tens of billions of dollars of military equipment because they had to get out right then at that exact moment, no matter what the cost? Why did they do that? Why? Simply because the 20th anniversary of 911 was coming up.   [01:14:29.730] And so you had a political decision because it was because of the optics of it. It would be this nice, convenient way to put a bow around the entire war on terror to say, oh, we got out of Afghanistan by the end of the 20th anniversary of 911. What does that have to do with anything? Who cares if it’s 20 years or it’s 20 and a half years? What difference would an additional six months have made?   [01:14:49.180] Well, it wouldn’t have looked as pretty, wouldn’t have had a nice red bow on it if it hadn’t been exactly 20 years. So they rushed it and they screwed it up. And it’s these sorts of things that for optics, they create problems. They also create enemies, right? You’ve got people that are completely incapable of cooperation.   [01:15:05.890] As an example, I would point to this, the relationship that in the United States, in the in the guys that were from two different political Ideologies, one guy’s named Daniel Inuit, the other guy was Bob Dole. Bob Dole was a more conservative guy, right leaning guy. Danny, in a way, was a very left leaning guy. Both of them actually served very honorably and admirably in World War II, in a way, himself. Who was the more leftleaning guy.   [01:15:34.510] I mean, talk about one of the toughest human beings in the history of the world. This was a guy who won the Medal of Honor, who fought in World War II, stormed the machine gun nest, got shot, got his arm blown off. He was trying to throw a hand grenade into the machine gun nest, got his arm blown off, pryed the hand grenade out of his severed hand, and threw the grenade into the machine gun nest, killed the guy, saved the day, waved off medical attention, continued to fight and stabbed people, picked up some guy’s rifle. It gets gory, but you get the idea this guy is tough and won the Medal of Honor, became a senator, sat across the aisle from a guy who had a completely different political ideology and yet these guys constantly they were friends, they were able to come together and make good rational decisions about find common ground where they cooperate on things. And that’s just the sort of thing that doesn’t exist anymore.   [01:16:29.100] It’s either this or it’s that. And it’s either it’s very much you’re either with us or you’re against us or you’re an enemy or whatever and you’re either an ally or you’re an enemy. And there’s no common ground, there’s no gray area. And it’s in many respects the politicians themselves that continue to plant the seeds and agitate for these types of feuds and dissent and conflict because they get more donations and they get all these things that they do. And this staged Twitter feuds and the AOC, you know, pretending to be arrested at the abortion protest and the prime time specials that they have to put together, they hire Emmy awardwinning producers to have primetime government specials and all these sorts of things that none of these things solve any problem.   [01:17:16.170] They’re not solving problems, they’re just creating spectacles and keeping themselves in power and there’s no cooperation to solve any problems. And this is the trajectory that the United States is on. So it’s hard to really look at the trajectory if we’re trying to think about where is the puck going to be and we’re connecting the dots and looking at this and saying. Well. You got pierce the veneer of invincibility.   [01:17:38.740] Then this has the debts and the deficits and all these different forces decline and what this means for things like the reserve currency and the loss of reserve status. Boy, if you want to talk about economic decline, you haven’t seen anything yet. Because when you start losing reserve status, suddenly you don’t have all these foreigners now that are going to say sure we’ll buy 25% of your debt. It’s actually the opposite. They start dumping your debt.   [01:17:59.830] Now you’ve got to not only now you don’t have to fund multi trillion dollar deficits, now you got to pay back 25% of your debt to take care of the foreigners who don’t want to own your debt anymore because they don’t have to and they don’t want to be part of this anymore. And you’ve got more adversaries that don’t want to own your debt. And so that’s a really, really big problem and most likely there are a lot of implications for that which we can devote entire podcast to the retail and asset price inflation that will probably ensue from that and so forth. But the important thing to really remember is that all of this and the trajectory that the United States is on and as we look at things right now, the loss of power and loss of status. Probably looks like it’s coming sooner rather than later.   [01:18:42.260] Certainly based on the trajectory that the US is on right now, this is nothing new. Governments have failed to act. Governments have failed to solve problems throughout all of human history. Nobody’s going to spontaneously combust. It doesn’t mean that the world is coming to an end.   [01:18:56.230] We have seen this over and over and over again. Even when the barbarians marched south in 476 Ad and took over Rome, it wasn’t like the world came to an end. Actually, people view that as a good thing. It was bad for the Roman government, but for everybody else it was great. And I’m not even suggesting that it’s going to be some great thing for the US.   [01:19:13.240] To be in decline. What I am saying is that in fact, I think most people would probably prefer that the US. Remain in the position that it is and we can maybe hope that they get their act together and start acting like a bunch of children. However, we certainly cannot plan on that because governments have failed throughout history to act and do what is necessary. The point I’m trying to get across is it’s not the end of the world.   [01:19:33.610] We’re not going to spontaneously combust here. And ultimately the real story here is that you are in charge of you. The government is not responsible for your life and your livelihood and your prosperity. We are in charge of ourselves. I’m in charge of me.   [01:19:51.360] You’re in charge of you. Everybody is responsible for their own future and you are really all you need. The government sets conditions, but they’re different. All around the world there are always options and opportunities. If there’s inflation, it creates opportunities in asset prices and business and so forth.   [01:20:06.490] Everything that happens, there are always opportunities. And if you can have a basic understanding of what’s going to happen, you can at least start thinking about skating to where the puck is going to be. And these things are we’re talking about forces of history. Every empire in the history of the world has gone through a similar life cycle. It’s almost uncanny of how similar some of these things happen over and over again.   [01:20:29.140] We’re seeing this in the United States. And so for now, this isn’t anything to despair about. It’s a thing to just understand and recognize first and foremost, most importantly, that you are in charge of you. If the government has problems, it’s unfortunate for the government, but you’re in charge of you. There are a lot of options and opportunities in the world that will result from it.   [01:20:50.520] And most importantly, just recognize, understand there will be a postolar, post Usdominated world. It’s going to happen. And we might not like it, we might not be happy about it. But to ignore that very, very, very real trend is to literally ignore and reject 5000 years of human history. It’s absolutely going to happen.   [01:21:12.420] And it’s something that. I think everybody needs to get on board with that idea. I’m gonna go ahead and stop there. I really appreciate everybody’s time and attention. I hope you enjoy this, and we’ll speak to you soon.   Close Podcast Transcription

In the mid 1400s, the head of the Byzantine Empire was a career politician with decades of experience who most people thought would be a capable leader. Instead, through a series of hilariously terrible decisions, he managed to take his already weak empire off the cliff, and into the dustbin of history, in just a few short years. And one of the ways he did that was by deliberately giving up the most strategic resource his empire possessed. We’re seeing a similar story play out today– the people with decades and decades of experience are doing all the wrong things to vanquish one of the most strategic resources in our modern world: energy. Think about it– the people in charge have demonized an entire industry. They punish oil companies with creative taxes and insane regulations. They refuse to follow the law and lease federal lands to oil and gas companies. They drag their feet in the permitting process. They constantly antagonize energy companies and blame high fuel prices on the industry’s “greed”. In short they do everything they can to destroy a critical resource that the nation depends on for growth and prosperity. This is our topic for today’s podcast. We start off walking through the comical incompetence of Emperor Constantine XI from the Byzantine Empire… and then go through some key issues to know about in the oil and gas sector. In short, supply is tight… and probably not getting better. Demand is increasing. It’s a really important trend to understand. But we leave with some good news. This is fixable, both long-term and short-term. But the short-term fix is going to rely on a few surprising characters from our past that may become some of the most exciting economies in the world. Open Podcast Transcription [00:00:00.610] Today we’re going to go back in time to January 6 and the year 1449 to the city of Mistress and the Peloponnesian Peninsula of Greece. Now, at the time, Greece was a pretty important part of the Byzantine Empire. Byzantine Empire, as you probably know, was really just the continuation of the the ancient Roman Empire that had been around for a really long time. And at its peak, the Roman Empire encompassed virtually the entire known Western world, from Hispania, North Africa, central and Eastern Europe, Britannia, all the way to the Dardanellesh and modern day Turkey. At a certain point in the third 4th century, there was a formal demarcation of the Roman Empire.   [00:00:40.510] And they said, you know what? There’s going to be two empires are going to be an Eastern Empire that’s based in Constantinople, modern day Istanbul, and a Western Empire that’s going to remain in Italy. And the two empires were basically two different empires. They had two different emperors, imperial courts, imperial armies, their own palaces. Everything was totally separate and distinct.   [00:00:57.840] The thing is that while the Western Empire was in decline, right, the original Rome was in serious, serious decline. With the barbarian invasions and the tax farmers and the desertions and everything that they were suffering there, the Eastern Empire was thriving. It was growing. It was getting better and more powerful. And even by the time the Western Empire collapsed in 476, the Eastern Empire was really just getting started.   [00:01:19.380] It hadn’t even peaked yet. The Eastern Empire wouldn’t peak for more than a century after the fall of the west, and it stayed very powerful for a very, very, very long time. We can actually tell this because the Eastern Empire, they minted a special coin. It’s called the gold solidus solidst coin. And the solids gold coin was something like reserve currency.   [00:01:38.610] It was like the US. Dollar. Today we’re in the same way. You might have a merchant in India doing business with somebody in New Zealand, and they’d conduct that transaction in US. Dollars.   [00:01:48.810] It was the same way that a merchant in China in the nine hundreds would do business with somebody in India, and they would transact in Byzantine gold solidus coins. So that’s a pretty powerful statement about the prominence of your empire when you have everybody around the world using your currency. And on top of that, they had still the cachet of Rome. And it’s actually a little bit confusing because it’s called the Byzantine Empire because the area where Constantinoble was built in ancient Greece was known as Byzantium. Byzantium is really the area, again, modern day Istanbul.   [00:02:25.290] And it was a very strategic location. And the reason why it was so strategic is because Byzantium is on the Turkish Straits, where you’ve got essentially where the Mediterranean and the Black Sea meet. You’ve got this very thin strip of land that today you can drive across the bridge and you’ll see a sign that says, welcome to asia and you do a U turn and you go back the other way, it says welcome to Europe. This is essentially the land bridge between Europe and Asia. And across is a very narrow body of water that passes and you can pass all the way to the Black Sea.   [00:02:53.160] Now, in an ancient world, this is a really critical transportation route whereas trade and everything really went through there. And so if you controlled the gardeners you really controlled a lot with respect to global trade at the time, really as far off as China. So people as far off as China could trade with Hispania and Britannia and everything. And if you control the Darden mills, you control that. That was really, really, really critical.   [00:03:15.340] It was the strategic resource. And in ancient Greece’s era was called Byzantium, which is why it’s known as the Byzantine Empire. But really they consider themselves to be the Roman Empire because that’s how it got started was as the Eastern Roman Empire. And really after the fall of the west, they just viewed themselves as we’re the Roman Empire, we’re the second Rome. It just happens to be in Constantinople.   [00:03:37.110] The other part to sort of add a little bit of confusion to that is that sort of culturally the Byzantine Empire was Greek. They adopted Greek ways, Greek customs, Greek culture and so they consider themselves they call they refer to themselves as Greek, yet they were the Romans, yet they were the Byzantine Empire. So it’s a little bit confusing. But for that context Byzantine Rome and Greek sort of all means the same thing in that case. So again, we’ve got the Byzantine gold, solidus coin as the reserve currency is a very powerful empire in the east based in Constantinople.   [00:04:09.310] And it stayed powerful for a very long time. And then the crusades came. The Crusades started in 1095 and a lot of the Crusades really went through Constantinople. Constantinople was sacked and they also found themselves suffering a lot of the same bad leadership, bad policies, too much spending, too much corruption that had really plagued the Western Roman Empire hundreds of years before and a couple of hundred years after that. By the 14 hundreds, there’s hardly anything left.   [00:04:33.720] To be honest, it’s amazing that it lasted as long as it did. When you think about the Eastern Empire, you know, the Western Roman Empire, western Rome and from the time it was republic to the time the Western Roman Empire collapsed was about a thousand years almost. And then you got the Eastern Empire lasted another 1000 years. That’s really impressive. Even in spite of all the bad policies and the spending and the currency debasement and everything that lasted as long as it did, it’s pretty amazing.   [00:04:57.580] And the 14 hundreds, there was hardly anything left. Their big rival at the time, the big scary rival, was the Ottoman Empire. Everybody was terrified of the Ottoman Empire. And in 1422 the Ottomans actually laid siege to Constantinople. They said, we’re coming for you.   [00:05:12.300] We want Constantinople. But they lost. The Byzantine were able to fend them off. They had very strong walls, and the Ottomans weren’t quite ready for it. And at the time, there was a pair of brothers.   [00:05:21.760] There was Constantine and his brother John. Palai Logos was actually the emperor, sort of the de facto emperor was two brothers that were emperors. The other brother was kind of incompetent. So John was really the emperor, and his other brother Constantine was sort of like vice president, right? He was the guy sorry, constantine was the guy that ruled when his brother, the Emperor John, was away.   [00:05:43.010] And he was away a lot. He was constantly in Europe trying to shore up support, saying, hey, guys, the Ottomans are coming. We need your support, we need allies. This is going to be a big deal, and it’s going to affect Europe. If we go down, this is going to be a big deal for Europe.   [00:05:54.820] And so John was in Europe a lot, and so his brother Constantine was acting as the regent again. He was sort of like vice president. And even when John was back in town, back in Constantine noble ruling, constantine was, you know, he appointed him as head of certain armies. He set up trade missions and diplomatic missions and so forth. And so again, as we start our story on the 6, January 1, 2009, emperor John’s older brother had died.   [00:06:20.220] And John, everyone knew that Constantine was his favored successor, and so they decided to make Constantine emperor. Now, ordinarily the coronation of the emperor of the Byzantine Empire was a really big deal. It would take place in the capital city and the famous cathedral, the Hajja Sofia. If you’ve been to Istanbul, you might have been to the Hagia Sophia. Today it’s a mosque, because, you know, the end of the story, it’s a mosque today, but back then, it was a cathedral, and so it would be all the people and all the nobles, everybody would show up for the coronation of the emperor.   [00:06:50.400] But instead, on January 6, 1449, constantine pale locos was crowned emperor of the Byzantine Empire, way outside of Constantinople and city of Mistress and the Peloponnesian Peninsula in Greece. And it was a small ceremony, it wasn’t even a religious ceremony, where they normally have all the religious people come out and do a big coronation, and I placed the crown on thy head and all. It didn’t even do any of that. It was just really a civil ceremony. It was no big deal.   [00:07:18.030] And they didn’t even put a crown on his head. Poor Constantine had to go out and find his own little wreath and put it on his own head to make himself the emperor. That sort of gives you an idea of the state of the Byzantine Empire at the time, where even the crowning of the emperor was just sort of no big deal, and it wouldn’t be long. He was obviously the last emperor, and it wouldn’t be long after that before the Byzantine Empire was done. The interesting thing about it, though, is if you look at Constantine, remember I told you he was basically kind of like vice president?   [00:07:48.090] He ruled in place for his brother quite often. He was always he had a lot of experience, really decades of experience in trade and defense and foreign policy. He knew all the foreign leaders. Everybody knew him. He had this big reputation.   [00:08:00.940] And so you kind of think, well, he’s a guy who knows what he’s doing, turns out, wasn’t really the case. And when Constantinibi was crowned Constantine II of the Byzantine Empire, and so the first thing that he did, and this was, you would think, maybe a reasonable move to make. First thing it is, he went to their adversary. He went to the Ottoman Empire, and he went to the guy who was the sultan, the head of the Ottoman Empire. His name was Mehmed II.   [00:08:22.690] He went to Mehmed II, said, look, what are your intentions here? I don’t want to fight. I don’t have a problem with you. And mehmed said, you know what? I have no quarrel with you, sir, and I swear to Allah it will not be me who breaks the peace.   [00:08:36.400] I won’t come after you if you don’t come after me. Don’t threaten my sovereignty, and we’re not going to have a problem. And you think, wow, okay, that’s great. I really dodged a bullet on that one. Now I can just kind of focus on shoring up my own internal economy and trying to survive here.   [00:08:50.980] But no, Constantine said they went and they signed a little peace treaty, and before the ink was even dry, he said, I don’t trust that guy McMed, which really makes you wonder, if you don’t trust the guy, why would you even go through the trouble of signing a peace treaty to begin with? What’s the point? But they signed the peace treaty. Then immediately after, he went and said, I got to find another ally because I don’t trust this guy. I think he’s going to come after me.   [00:09:11.040] So the interesting thing about it is that Constantine and the Byzantine Empire, they actually had another rival. Not just the Ottoman Empire. They had a lot of rivals. One of the other major rivals was the Republic of Venice. Venice was a major rising power at the time.   [00:09:28.310] Dennis have really had a really peak. They were huge trade power. They’re huge economic power. They had a powerful navy. I mean, Venice was really something to be reckoned with, and they decided, well, maybe we can go to Venice and we can get them to be our ally.   [00:09:41.940] But wouldn’t you know it, right before they went to Venice and started asking for an alliance, they actually went and raised a bunch of taxes specifically on venetian goods. And they said, all goods and all ships that come specifically and only from Venice are going to be subject to this huge tax, these huge tariffs. So any Venetian ship that comes into Constantinople is going to be this big tax, but only for Venice. And so, obviously, if you’re the Venetians, you’re thinking, hey, what the hell, man? That’s not cool.   [00:10:09.340] And then all of a sudden, this guy comes with hat in hand and says, please back me up in my alliance, be in an alliance with me against the Ottoman Empire. And they say, no freaking way. In fact, we’re going to go do our own deal with the Ottoman Empire, and you can go pound sand. And that’s exactly what the Venetians told Constantine, the guy with decades of experience, who went to the Allies, all these people that he knew, that he had a reputation with, but he wasn’t able to actually negotiate a deal with them. So then he did something actually really petty, constantine, after he was snubbed by Venetians, which, you know, in fairness, the Venetians constantly just levied a big tax against them.   [00:10:45.310] And so they weren’t particularly interested in doing a deal with a declining power when they could do a deal with the Ottoman Empire. So then Constantine went and tried to, quote unquote, retaliate by signing a new trade deal with this completely irrelevant city state that nobody has ever heard of. It’s called ragusa in Dalmatia. If you’re Croatian, you might have heard of it. But aside from that, nobody’s ever heard this.   [00:11:05.770] This is kind of an irrelevant city state at the time. And it was just petty revenge that Constantine was playing. But he said, oh, this will show the Venetians, I’m going to go sign this sweetheart deal with this other city state. But the Venetians didn’t care, and the Ottomans didn’t care. So after he completely screwed up his relationship with the Venetians, then he went and really screwed up the deal with the Ottomans.   [00:11:24.810] So remember, the Ottomans had already said, you know what? We don’t have any quarrel with you. We’re fine. We’re not going to invade you. Don’t worry about it.   [00:11:30.400] But there was this kind of interesting card that Constantine was holding. There was a distant cousin of Mehmed, a guy who had originally come from the Ottoman royal family, and he was actually held captive in Constantinople. So this is a guy that Mehmed from the Ottoman Empire. He was actually paying a fee every year to Constantine and to the Byzantine Empire, and saying, hey, this guy’s my distant cousin. You guys.   [00:11:58.420] Keep him in constant noble. Keep them out of sight, out of mind. Don’t let him anywhere near the Ottoman Empire. Don’t let him come anywhere near us, because if he does, it might be a civil war, and there are going to be people who think that he’s the rightful sultan, and I just don’t want to deal with that. So you guys keep him in constant noble, and here’s some money for your troubles.   [00:12:15.790] And so Konstantin, after he had signed a peace treaty with the Ottomans theory, takes that risk off the table. Then he goes and gets snubbed by the Venetians, goes and raises a bunch of taxes on them, really pisses them off, hampers their economy. That goes with Hattonhand, tries to sign a license with them. They snub him. They go to the Olives.   [00:12:31.480] Then he goes back to the autumn and says, hey, Mech Med, I got your cousin, but I want more money. And thinks that, like, oh, I got this guy over the barrel. I’m going to extort him into giving me a whole lot more money. Otherwise, I’m going to threaten to release his cousin, and then he’s going to have to deal with the civil war, and boy, won’t he be sorry. And he’ll just bend over and give me that money.   [00:12:51.190] Well, it turns out that the guy with decades of experience, Constantine, completely misjudged the diplomatic reaction of Mehmed II. In fact, Mehmed sent a and this is actually a direct quote of the English translation of the response of Mehmed II. This is in 1051. And he said, quote, and remember, when we say Greeks, we’re talking about the Byzantine Empire. He says, literally, you stupid Greeks, I’ve had enough of your devious ways.   [00:13:17.140] The late sultan, which was Macmed’s predecessor, was a lenient and conscientious friend to you. The present sultan, meaning himself, is not of the same mind. You are fools to think you can frighten us. If you think you can start something, then do so. But know this.   [00:13:30.930] You’ll make no headway in any of these things, and all you will achieve is to lose what little you still have. So, needless to say, the guy with decades of experience gets this response back from his adversary and goes, oh, my God, we completely misjudged that. I can’t believe we are so stupid. And all of his advisors and counselors and consultants are standing and go, oh, jeez, you should do this or you should do that. But now the thing about Constantine is he was constantly waffling.   [00:13:56.950] He could never make a decision. He was completely incapable of making a decision. And this is actually something that was very, very costly for them, because while he was twiddling his thumbs trying to figure out what to do next and not able to make a decision, mech men knew exactly what to do next. And he told Constantine. He said, well, you’ve threatened my sovereignty by making threats against me and giving me this ultimatum.   [00:14:18.060] You’ve now threatened our sovereignty, so you’re in violation of the peace treaty that we signed, so I’m going to do what I’ve got to do. So Mechmed went and sailed a whole bunch of guys up right next to Constantinople and began working on basically a fortress. It’s called the Rumal Hissari Castle, and they built it literally across the river from Constantinople, right in, like, literally an ice shot right in front of Constantine. They built the Ottomans came and built this fortress, and by doing so, they took over. Control the Dardanelles.   [00:14:49.750] Now, remember the Dardanelles this is this geographic location. The fact that you control the only waterway connecting the Black Sea to the Mediterranean, this is one of the most important geographic resources in the world, is a very, very, very precious resource. It is the source of your tax revenue. It is the source of your prominence and your power and your prestige. You must protect it at all costs.   [00:15:13.110] The one thing that you cannot afford to do as the emperor of the Byzantine Empire is let control the Dardanelles. Go and that’s exactly what they did. It was right in front of his face. They literally built a fortress right in front of his face. And once you know it, as soon as that happened, they blockaded trade and Resupply and everything.   [00:15:30.070] Because of their fortress, the Ottomans had in the garden ills. They blockaded all Resupply and so forth going into Constantinople. And it wasn’t long after that that, sure enough, the Ottomans and mechmed came with more than 800 troops in April of 1453 and laid siege to Constantinople. And it was you know, it was about six weeks. And by the end of May, on May 29, constantine himself fell along with his city, along with his empire, and the Byzantine Empire was no more, and Constantinova became the seat of the Oman Empire.   [00:16:02.360] Now. That is by far not even begins to scratch the surface of being the first example of history where you’ve got somebody with decades and decades of experience that screws up the most critical. Most strategic. Most lucrative resource you have. The most important resource you have in your entire empire.   [00:16:21.940] Your kingdom or your nation state. Your city state. That somebody with decades of experience goes and screws that up. Whether it’s deliberately or because of bad policy or whatever. We’ve seen this over and over and over again throughout history.   [00:16:34.060] In ancient Mesopotamian. Ancient Babylon. We have Hammurabi and all of Hamurabi’s experts advising him on what to do with Sumerian agriculture. And it turned out they completely over irrigated Sumerian agriculture to the point that they intoxicated the soil with all these terrible minerals and ailments and completely destroyed the most critical resource they had in ancient Sumeria, which was their agricultural production. We saw the same thing in ancient Egypt, in the old kingdom, in the Six dynasty, completely destroying, failing to invest in the necessary irrigation technology at the time to make sure that they could maintain their agriculture production.   [00:17:09.030] Completely screwed that up again, this was another leader of the Fare at the time who had decades and decades supposedly ruled until he was 94 years old. Decades and decades of experience managed to screw this up. We see this all the time, and of course, we see it today in our modern world. This is the situation we find ourselves with now with respect to energy, the people in charge, the experts with their decades of experience, are not only not doing the things that they should to prevent a crisis, they’re not doing the things that they should to fix a crisis that they’ve created, and they’re actually doing all the wrong things to make it much, much worse. We talked about this before.   [00:17:42.180] This idea of something that I call this is sort of my thing. I categorize things into what I call the four forces of decline. You have the forces of history which speak to the natural rise and fall of empire, the forces of economy, the three DS debts and deficits and debasement of the currency. The forces of society are mostly peaceful protests and the intense social divisions and the censorship, and all the things we get from big tech and the cancel culture and all those things. But then there’s the forces of energy.   [00:18:10.990] And we talked about this before. We did a whole podcast on this where we talked about uranium and nuclear energy. The importance of energy cannot be overstated. It’s so important. I considered a major part of the forces of decline because there is such a clear link between having cheap and abundant energy and human prosperity.   [00:18:30.480] Those two things go hand in hand. We did a whole podcast about this before, but I am going to recap very briefly, sort of the history of energy. You can go all the way back to the agricultural revolution. It’s called the Neolithic Revolution. This is now 1012 13 00:150 years ago where people realize, oh, my God, I could actually plant stuff in the ground and it’ll grow.   [00:18:50.670] And I don’t have to be a hunter and gather anymore. I can plant the seeds of agriculture and plant the seeds of civilization, and this is where civilization comes from. But for most of the last 150 years, since they figured out how to do this, all that work that was being done was being done with human and animal muscle. They used humans and animals to plow the fields, to work the fields, maintain the fields, to harvest the fields. They didn’t have machines.   [00:19:17.200] They didn’t have drone irrigators and all that. They didn’t have any of that stuff. It was human beings in the fields. And remember agriculture back then, even to this day, but much more back then, it wasn’t just about food. Agricultural farms grew not only food, but they grew industrial commodities.   [00:19:34.530] They grew papyrus and flax and cotton, things that you could make textiles and business products from. They grew hanna from which they could extract dyes and herbs for their medical industry and all these things. And they could use all those industrial commodities to trade with other civilizations. And so, really, the wealthy civilizations in the ancient world were those that had a lot of production. They could produce way more than they needed to consume.   [00:20:02.130] And that excess production, that excess the excess stuff that they produced that they didn’t need to consume, they could trade with other tribes and other kingdoms and so forth. And that excess trade that made everybody wealthier and better off. And so the truly wealthy civilizations that could produce a whole lot meant basically that they had access to the cheapest muscle and the most muscle available, the most people and the cheapest people available. And you probably imagine this is basically this is where the idea of slavery comes from. It goes back more than 150 years.   [00:20:33.360] We can see this stories in the Bible. The Egyptian slaven of the Israelites, the code of Hammurabi, etc. Talks about all these things. And this is an institution that has been around for thousands of years. And it was primarily because of this energy system that people said, we need labor.   [00:20:49.770] We need lots and lots of people working in the fields for very, very cheap. And so this is where this came from. And it was obviously a terrible scourge on humanity because there was no other form of energy. And all this finally changed in the Industrial Revolution. And suddenly the Industrial Revolution, there was, for the first time, an inanimate material coal, wood, something that could combust inside of an engine, that could power a machine, that could power a motor to make a machine go, or power a generator to produce electricity for the first time ever.   [00:21:23.470] And they had entire factories. He had electrical generation plants and so forth, being able to do things to produce energy, to do things that used to require hundreds and hundreds of human beings, and now you can do it with a machine. And that growth, the ability to take coal or wood, and then later on oil and gas and so forth, to be able to produce electricity or to be able to power motors and machines, led to an unparalleled growth, an exponential growth in human development and wealth. So this is the link, really, between prosperity and having cheap and abundant energy. When we have cheap and abundant energy, we have prosperity.   [00:22:01.570] We have everything. One of the most important ingredients in prosperity is having that. But now we don’t, because the world is on the cusp of a major energy crisis that the people in charge have been engineering for quite a long time. We’ve seen prices skyrocket. And if you’re in Europe already, that a lot of people in Europe that are worried about the wintertime thinking there’s not going to be enough energy or supply of fuel sources to actually make sure that people don’t freeze in the wintertime.   [00:22:26.760] And that is not an invalid concern. And it’s easy. And all these world leaders, you see, everybody blames Putin, and he certainly didn’t help, and he made the situation much, much worse. But it goes a lot deeper than that. And it is so intellectually dishonest to just go, oh, Putin is bad, and therefore, this is why I have this energy crisis, because this was in the making for a long time, bad ideas and bad policy from people who have decades and decades of experience.   [00:22:52.300] This is this is one of the one of the biggest reasons behind this. We’ve seen. For example. In Europe. If you’re in Germany.   [00:22:58.080] You know. You’ve got all these environmental fanatics that have been in charge of your government for a long time that have been pushing people to get rid of a lot of different power plants and say. Oh. We need to spend billions and billions and billions of euros on solar panel technology in a place where the sun hardly ever shines. Because that makes a lot of sense.   [00:23:15.270] No, it’s a terrible idea. And in exchange for that, you wouldn’t shove all these power plants, including the really clean and efficient nuclear power plants and all the coal power plants and all the conventional power plants, in exchange for things that don’t actually work. And now Germany’s facing a situation where they’re not going to have enough gas for the winter. So this is really a result of a lot of very, very bad ideas and policy decisions that go back 1520 years or more. They’ve dumped mountains of cash in places that are really bad energy investments that now, when it’s being stressed, it’s clear that that system doesn’t work in the United States.   [00:23:52.160] I think you could probably argue it might probably even be worse. The President of the United States, while he was still a candidate, was already threatening the oil and gas industry. Then on day one of office, he said, well, we’re not going to do any more oil and gas leases on federal land. Well, here’s the funny thing about that. It’s actually required by law.   [00:24:11.800] It’s not freaking optional. Title 30, section 226 of US. Code requires by law that the Interior Department of the federal government auction off mineral leases on land that is known to have proven oil and gas reserves. It’s not an option. It is literally required by law.   [00:24:25.990] It’s been law of land for a really long time. So someone just comes in and obviously says, I’m just not going to do that. Then he gets sued. A federal judge says, yep, sorry, buddy. You don’t just get to decide.   [00:24:36.750] You got to lease that land and lease it off to oil and gas companies. But he still decided not to fall. They still dragged his feet. And 20 months into the administration, there’s been very, very few leases awarded. In fact, they appealed the ruling, and they actually won a very bizarre victory back in August in federal court that said, yeah, it’s fine for the Interior Department to drag its feet and not actually wore these leases.   [00:24:59.140] That doesn’t even scratch the surface. At the same time, I should say that the White House responds to this and says, well, Oil and gas companies already have a lot of acres that they’ve been leased by the federal government, and all that land is not being utilized yet. So why should we lease them more land if they’re not utilizing the land that they’ve already been leased? Spoken like people that have no idea how the oil and gas business works. If you’re in the oil and gas business, you don’t go, oh my, well just ran out.   [00:25:28.870] So I guess I better start the process of trying to get a new lease and develop a new project like now that my other field just ran out. No, of course not. These people are responsible executives and they need to plan years and years and years in advance and so they know that we’ve got one project. So we need three years from now, we need to get this other project up and running. So we need to raise capital for it.   [00:25:49.800] We need to get the leases, we need to get the permits, we need to start working on that now and then three years after that, five years after that, ten years after that. And they have long schedule for that. So of course there’s going to be land and there might be some land that they lease. They start jill and go, oh, it turns out there’s not really anything here, or it’s not as economically viable as we thought. There’s not enough infrastructure here.   [00:26:07.630] We need to make more investments. We need to go and raise capital for that. There’s a million reasons why an oil and gas company might not be using all of the land that they have. And in fact, if oil and gas companies were using even 75% of the land that they have under control that they’ve been leasing, that would be a record for them to do that. It’s very, very common in the business and there are obviously a lot of very normal, common sense reasons why that would be the case.   [00:26:30.280] They don’t use all the land that they’ve been leased, but that’s not a reason for the government to say, well, we’re just not going to follow the law then that’s completely ridiculous. But it just scratches the surface of all of the backlash and the pain that the oil and gas sector in the United States, the energy sector, really faces. I think you could look at permitting timelines, for example, which are up more than 80% to 80%. More time went from less than 100 days to more than 180 days to get a permit from the federal government. Then you’ve got state permits, local permits, and all these other things and it’s constant threats.   [00:27:02.760] More taxes. They just passed this methane charge for oil and gas companies in the Socalled Inflation Reduction Act. That’s not a charge, it’s just a tax. And it’s a tax that specifically goes against oil and gas companies. They’re also talking about there’s actually legislation that has been introduced into congress for a windfall profits tax for oil and gas companies.   [00:27:22.900] Just go and take privately acquired profits and turn them over to the government because we just don’t like this sector. Probably the most hilarious one was if you remember last year when gas price was really going up and the government said, ah, we figured out what the problem is. The problem here is greed. And so what we’re going to do is we’re going to take the Federal Trade Commission, we’re going to send the Federal Trade Commission to go and harass all these energy companies and oil and gas companies. And they decided actually the problem was that there were too many mergers and acquisitions of momandpop gas stations, as if apparently the last line of defense of higher gas prices was some momandpop owned gas station.   [00:28:00.250] So we need to send the federal government in to prevent a momandpop gas station being acquired by Berkshire Hathaway. And this is the reason why energy prices are going up. It’s so completely out of touch and disingenuous. It’s obvious. Either these people are completely making it up and shouldn’t be trusted, or they have no idea what they’re doing, in which case they shouldn’t be trusted.   [00:28:19.080] But all this is clearly a very inhospitable environment for oil and gas producers and yet and yet despite this inhospitable environment, the constant threats, the regulation, the taxes, the threats of more taxes, all these things they got to do with being demonized in the media, all the things with the pandemic that they deal with because of public health policy. Now you can’t get any of the infrastructure, you can’t get any of the labor anymore, and yet the government has the nerve to blame the oil companies. Citing greed is the reason why gas and oil prices are so high. And then even still, then they go and say, okay, but we really need you to produce more. It’s like, so the government created this problem and then they demonize the industry and then they demand that the industry go and solve the problem that the government created.   [00:29:01.020] It is completely and totally ridiculous. But even with all that, it’s not just the government. And one of the other major problems is that you’ve got all these green woke capitalist fanatics, starting with the poster child for all this, larry Fink, who runs BlackRock. BlackRock has more than $10 trillion under management. $10 trillion under management.   [00:29:22.110] That’s 40% of us. GDP. And it’s not their money. It’s not like they’re just a super rich firm. It’s not their money.   [00:29:28.740] BlackRock manages other people’s money. It’s their clients money, pension funds, banks, etc. You might have money invested in BlackRock without even knowing it. If you have an IRA or 401K or a pension or something like that, a lot of that money might be investing some BlackRock’s funds. BlackRock has a lot of ETFs, etc.   [00:29:44.700] People go and they buy into those SP 500, ETFs, something like that. Well, guess what? BlackRock now is managing your money. And they weaponize this money. They weaponize your money and everybody else’s money that they have under management to bend businesses to their will.   [00:30:00.000] So they decide, we like Green. We like all this woke capitalist nonsense. We want to make sure that everybody, every board of directors has to have a hearing impaired, pansexual Muslim eskimo on your board of directors. Otherwise we’re going to take the money away. And this is the constant threat of we’re going to take the money away.   [00:30:20.950] We’re going to torpedo your stock price. We’re going to dump your stock and make sure nobody ever buys it ever again. And of course nobody wants to do that. So everybody just goes along with it. And so one of the things BlackRock has been responsible for is the demonization of the oil and gas companies.   [00:30:34.890] And so they push big banks say, hey, we don’t think you should be lending as much to these oil and gas companies. And the banks complied. So you’ve got J. P. Morgan, Wells Fargo, they cut their oil and gas lending by at least 20%.   [00:30:46.080] UBS cut their oil and gas lending by 70%. Ing in the Netherlands ended oil and gas lending altogether, 100% decline in their oil and gas lending. Then you’ve got, which I think is hilarious, the European Development Bank, which is a multinational kind of sovereign development bank that’s owned by the sovereign member states of the European Union, germany, France, Italy, etc. They all own the European Development Bank. These governments.   [00:31:10.390] And the European Development Bank said, we won’t make any loan to any oil and gas company. So even if an oil and gas company wants to go green and make like a huge wind farm somewhere and wants a loan from the EDB to do it, european development mixes, nope, we’re not going to give you that money even to do some big green project. It’s so completely ridiculous. It’s impossible to take these people seriously. We also have seen a big decline in not just lending, but private equity.   [00:31:34.390] So private equity is private money that goes into private companies, private equity funds that invest money into private companies. This has been previously traditionally, it’s a big source of capital for oil and gas companies because a lot of them are private, especially at first. They’re exploration, discovery companies that go out and they discover a big fine. They need capital to develop that into an actual producing field. And so they go to private equity companies and banks and so forth.   [00:32:00.610] Private equity companies, just like banks, have been pulling their money out of the industry. So for example, in the first half of 2021 saw the lowest private equity activity with respect to mergers and acquisitions in the oil and gas sector in a decade. And it just got worse. If you compare, for example, 2019, the second quarter of 2019, there were 30 private equity deals valued at a total of $32 billion with oil and gas companies. By Qtwo of 2022, it was seven deals and $2 billion.   [00:32:26.970] So it went from $32 billion in private equity to $2 billion in private equity. That’s a major decline in the amount of capital in this industry. And so this is an industry that needs money. It needs capital because it’s very capital intensive. It takes a lot of money to find oil and gas, to produce oil and gas, to actually develop the infrastructure and everything that’s necessary for that stuff.   [00:32:48.270] It’s very capital intensive. It needs the cash. And the cash has been running away from the sector. Meanwhile, you’ve got all these stakeholder woke capitalism ESG funds, which ESG stands for Environmental, Social, and Governance. It’s just code for woke capitalism.   [00:33:03.490] And you got all these record number of ESG funds that are investing in whatever Greta Thunberg’s dreaming up. But all this money going out of the oil and gas sector and into the ESG funds. And, you know, obviously this this doesn’t apply to China. All these big companies, no BlackRock, they do whatever in China, doesn’t matter. They don’t wag their finger at the Chinese and say, oh, you’ve got to get out of oil and gas.   [00:33:25.620] You got to be green. You gotta do this stuff. They don’t do that in China because they know they would get laughed. That would be their last day that they ever operate in China. And everybody, they got to just bow to the Chinese, oh, we can’t offend the Chinese.   [00:33:36.820] And so they don’t ever say any of that stuff. They save it for the United States. They say, oh, America, you’ve got to do these things that are economically disastrous for you. Only the United States has to do these economically ruinous things. The Chinese, of course, can keep on doing what they’re doing.   [00:33:53.960] If we look around actually, the last thing I want to mention about this I should mention this before this is actually completely absurd. On top of this retraction of capital that’s coming out of oil and gas companies, so people don’t want to invest in oil and gas companies. Banks aren’t lending. Private equity is not coming in. Then you’ve got these funds.   [00:34:12.000] And these funds now are becoming activist investors in oil and gas companies, trying to turn oil and gas companies into green companies. And there’s this really, to me, bizarre case of a hedge fund called Engine Number One. That’s the name of the hedge fund company. And they bought this tiny, tiny, tiny piece of ExxonMobil, literally zero zero 2% of ExxonMobil stock, a very teensy, tiny little piece of ExxonMobil. And yet they made such a stink, they jumped up and down and they waved their hands and said, oh, oil and gas, evil, green, green, and we got to save the world, and so forth.   [00:34:47.440] And so what did they do? They made this big stink and this election for directors and they put their own directors in front and nominate their own directors for the board and they won. And they got so this company that owns 0.02% of ExxonMobil was able to get three out of eleven board seats. So almost 30% of the board seats went to a company that owns Zero, went to a single shareholder that owns Zero, 2% of the company. It’s completely obscene.   [00:35:13.830] And of course now they’re agitating to get the ExxonMobil board to push the company, do all this green stuff, and then they go and they set their sights on all these other energy companies too. And now we can see Total and Chevron and Shell and all these companies that are saying, oh, we’re going to go green now, we’re eliminating our carbon footprint, we’re switching purely to green sources of energy, we’re going to be completely renewable, we’re getting out of the oil and gas business and so forth. So the big oil companies are feeling the existential threats to their business and they’re shifting with what they feel like are the times. And the times they think are, well, we’ve got to go to green energy now. So they’re getting away from fossil fuels and going to green energy.   [00:35:51.870] And that’s really a terrible idea. And the reason that’s a terrible idea is because I’m not antienvironmental, I’m extremely proinvironmental. I like the idea of having clean energy, clean water, clean air, clean everything. I like this. But there are smarter ways to do it.   [00:36:09.130] And what we have are policymakers that seem to deliberately ignore the intelligent ways to do this. And again, they just go to these really dumbass ways that they think are saving the world and they’re not. They’re actually making it much, much worse. We’ve talked about energy economics again in that previous podcast I did a couple of weeks ago. This concept of energy return on energy investment.   [00:36:28.860] The basic idea is you’ve got to put energy into something if you want to get energy out. There’s no such thing as free energy, right? So if you have solar panels, well, you got to put energy into mining the minerals that go in and producing the photovoltaics and transporting the solar and installing them. All that takes a certain amount of energy. If you’re drilling for oil, you’ve got to have enough energy to run the pumps and run the generators and all that stuff takes energy.   [00:36:53.700] And the idea is that you put some energy in and you get a lot of energy out with oil, basically, for every unit of energy you put into oil, you hope you should get around 20 to 30 units of energy out of it. So that’s a really high return on investment, basically getting a 30 to one benefit on the energy return on energy investment. With solar, if you’re being actually really honest about it, you’re looking at five to one, six to one, maybe eight, nine to one energy return on energy invested. Biofuels, by the way, are even dumber biofuels. You’re getting less than one to one.   [00:37:25.350] So when people take, for example, corn, and they turn corn into fuel that you put in your car, not only you’re destroying your engine by putting a bunch of corn ethanol in your car, but you’re also actually losing energy in the process. Corn ethanol is one of the dumbest ideas. It’s a terrible, terrible idea. And you’re also contributing to you’re taking food at a time when grain supplies are really tight and there’s not enough of it. In a lot of countries right now, you’re taking grain out of the agricultural supply and putting into something that loses energy.   [00:37:52.740] It’s a horrible idea, but Greta Thunberg likes it, so I guess everybody has got to go along with it. So the end result of all this, if we think about oil and gas companies, we’ve got all these government challenges, the taxation, the regulations, the permitting, the complete rejection of the rule of law with respect to landlords, and say, oh, we’re not going to follow the law, we’re just not going to lease any land to you because that’s what we feel like. You’ve got all the pandemic related issues we talked about with labor shortages and supply shortages. You’ve got the loss of capital from banks, the loss of capital from private equity funds. You’ve got activist investors that are going out and saying you’ve got to be a green company now because I own zero zero 2% of your business, so forget about the other 99 8%, 99, 98% of your investors.   [00:38:35.370] Forget all those people, you know, the minority rules and we say you’ve got to be green, so you’ve got to be green because we own zero 0%. Totally insane. Then you’ve got all the constant negativity in the media and the stigma. And of course now the big oil companies are bowing to all of this and oil and gas companies are trying to still make it happen, yet somehow they’re still being blamed for this and say you’re greedy and this is all your fault. It’s so ridiculous.   [00:38:59.130] Again, it’s impossible. I think when you actually look at the data and the fact to take any of these policymakers seriously, the next thing we need to talk about, if we’re trying to figure out where is the puck going to be, is longer term supply and demand issues. And if we’re talking about supply, one of the big things that we’ve really got to recognize is that OPEC, the one that everybody thinks of really is Saudi Arabia. You’ve got OPEC, which you’ve got Kuwait, and you’ve got UAE, et cetera. But really, we’re talking about Saudi Arabia.   [00:39:26.560] Saudi Arabia’s pretty tapped out and they quite shockingly revealed that they could increase their production, their production capacity. Not they were going to increase their production. They actually said they were going to decrease production, but they want to increase their capacity. They want to have the ability to produce more if they want to. But even then their ability to produce more, their capacity, they said they could only get to 13 million barrels a day, which is only a little bit more than where they are now.   [00:39:50.260] And what they said is, once we get to 13, we’re done. We have no ability to produce more than 13 million barrels per day. And that was a pretty shocking revelation because Saudi Arabia is not transparent about anything. And so for them to sort of come forward and say, we can only get to this much and then we’re done, that’s a pretty big deal. And people ought to be paying attention to that.   [00:40:07.510] And it does show that these places that people thought for long and ever that they’re going to have oil and they’re going to be pumping out oil and very cheap and inexpensive oil forever and ever, until the end of time, well, that’s absolutely not true. Then you’ve got one of the other ones that people have always have relied on for really most the last ten to 15 years. If you think about us. Oil production back in the 1970s was quite high and then started enter a period of decline. And really by 2007, oil production in the United States was just 5 million barrels per day.   [00:40:40.320] And this was going to to be, be a pretty big problem because a lot of the conventional fields in the US. Were just mature and it dried up. But in the late 90s they came up with this idea of hydraulic fracturing and horizontal drilling and so forth. And by the early two thousand s, this was really leading to a new renaissance in oil production because of what they could extract through the shale fields. And this shale bonanza created really just a boom in oil production in the US.   [00:41:06.480] Production doubled. It got up to now it’s 12 million barrels per day. And most of that growth from 5 million in 2007 to 12 million today, most of that growth in 15 years was really because of shale. The thing about the shale though, is that a lot of these shale regions are actually mature and they’re declining or about to decline from their peaks. And so the idea that we can rely on in the United States, all this extra shale coming online, is actually not entirely true.   [00:41:33.640] And so the two sort of big forces, saudi Arabia and shale oil in the US. Are not two things that could really be counted on in terms of constantly creating more and more supply, especially in the United States. When you consider that you’ve got all these headwinds with the regulation and the lack of capital and so forth in the industry, and then we want these shale producers to produce more, it’s just not feasible, it’s not a realistic expectation. Then you’ve got actually even moving on from the actual production itself, moving into refining. Refining is when we actually take the crude oil and we turn it into a usable product by consumers in the end.   [00:42:09.970] So we take crew and we turn into gasoline or diesel or jet fuel or heating oil or whatever else. And that refining capacity is really, actually falling. Refining capacity is really important because the more refining capacity there is, the more oil can be processed into finished goods. Refining was always a fairly low margin business. People had to have a lot process, a lot of volume in order to make up for it.   [00:42:33.450] It was very steady, but fairly low margin business. Nobody was going to have some big tech company valuation being a refiner, but it was a very important business. But now refiners starting to realize, you know what, oil and gas and gasoline is not an industry with a big future. You know, we look at Gavin Newsom in California decreeing that there will be no gasoline cars sold in California after 2030 or whatever. I mean, this sort of thing, who would want to be a refiner knowing that your product that you make is going to be obsolete?   [00:43:03.360] Nobody’s going to want it by 2030. So we’re starting to see refining capacity decline in the US. This is a big deal. In April, there’s a big refiner in Houston. That refines has a capacity for 2630 barrels a day.   [00:43:15.670] And they said we’re going to close next year in 2023, in May, the following month, a Phillips 66 refinery, I believe, in the state of California that has 1200 barrels per day capacity, said now we’re going to shift to biofuels again, the fuel that you literally lose energy on, that’s what we’re going to do, though it doesn’t make any sense. Only to Greta Thunberg does it make sense. But that’s what we’re going to do, because that’s the idiotic direction that the world is headed. Because these people with decades of experience who are making decisions, are making all the wrong decisions. So little by little we’re losing refining capacity in the US.   [00:43:46.980] It’s definitely worth thinking about. Do the shale fields, are they peaking? Maturing a lot of oil company executives, if you read the Dallas Fed Quarterly Oil survey, there’s a lot of executives in the field talking about the shale fields that are peaking. And we’re starting to see some of this in the data from the Energy Information Agency of the federal government. So this is another concern really to think about longterm supply and demand.   [00:44:10.260] It’s not even just on the crude side. It’s actually further down the value chain where you’re talking about the ability to refine the crude into a finished good that the consumer can actually use. So losing not only the ability to produce crude, but the ability to refine it. So this is a pretty big deal. And then if we think about demand, obviously demand tends to rise over time because of population, wealth and changing demographics and so forth.   [00:44:34.860] And to illustrate that in 1952, global oil demand, global oil consumption was twelve, 4 million barrels per day in 1952. Today it’s 101,000,000, right? So that’s an eight times as much difference, right? We consume eight times as much oil today as we did in 1952. The population has also increased, but the population has only increased by three x, from two 6 billion to seven 8 billion.   [00:45:02.170] So that’s a three times growth in population, but an eight times growth in oil consumption. The difference, of course, is that we have other countries now that are wealthy. So it’s not just the US. And maybe the UK and Canada, et cetera, back in 1952. Now it’s China and people across India and all over Africa, etc.   [00:45:22.060] They have air conditioners, too, and they have computers and they have devices and so forth. Technology helps bring that down. If you think about the electrical consumption of an individual appliance, a refrigerator, a television, etc. Back in 1952, they probably consumed a lot more power than they do today. Today our appliances are a lot more energy efficient, but we have so many more of them, right?   [00:45:46.240] Instead of just having a refrigerator and a toaster in the kitchen, we got 100 different things, and coffee machines and juicers and all those things, and they all take electricity. Instead of just having one TV in the house, we got five TVs and 18 different electronic device. Instead of one car for the family, we’ve got three cars in the household and all these things. So we end up, even though technology helps us consume less per device, we have so many more devices because that’s one of the effects of wealth. And we have so many more people that have entered into that wealth, into the middle class, from developing countries.   [00:46:18.420] And that’s why we go from a three x increase in population to an eight x increase in energy consumption. And this trend, you can only imagine, will probably continue. And so if we have a supply that’s basically flat or decreasing, and we have demand that keeps rising, that pretty much tells you what’s going to happen with energy prices. You can make a very strong case that energy prices probably going to continue rising, and it’s not because of Putin and all those sorts of things. Although, again, he has definitely made the situation a lot worse.   [00:46:49.650] He’s another guy with decades of experience that managed to screw it up for everybody. But it’s not just that. And it’s not to say that I would bet you that if the war in Ukraine ended tomorrow, that there would be a significant decline in oil prices and so forth. But it doesn’t solve the problem because you still have these major supply constraints. You still have the fanatics and all these issues and the rising demand and so forth.   [00:47:11.850] That’s a big problem. And it’s something that absolutely has the potential to continue making energy prices much, much more expensive. The good news is there are some ways out of this, so I don’t want to leave you feeling really dark about it. I would think if we’re skating to where the puck is going to be, I think we should probably expect higher energy prices. But there are some ways out of this.   [00:47:31.720] And one of those I can’t have a discussion about energy without mentioning nuclear. Again, that technology already exists. We’ve got generation two, generation three technology that already exists. They’re working on generation four nuclear reactors that have an even higher energy return on energy investment. Nuclear energy return on energy investment is extremely high.   [00:47:48.240] Generation four reactors are looking to be even higher than what they are now. It’s a cheap source of energy. It has a lower carbon footprint than even solar. I mean, it really ticks all the boxes. And so the fact that you don’t have the highest level political policymakers taking this very, very seriously shows that these people just have no idea what they’re talking about.   [00:48:05.640] On top of that, though, is an area of the United States called the Green River Basin. That’s in Wyoming, Colorado, Utah. This is a very unique shale deposit that is a monster. The US Geological Survey estimates that there’s up to 6 trillion barrels of shale oil in there. That at least one 5 trillion that would be recoverable.   [00:48:27.870] And to put that in context, there’s been a total of about 1 trillion barrels of oil consumed in all of human history across the entire world. So we’re talking 50% more oil recoverable than has ever been consumed in all of human history just in this Green River Basin area in the United States. So that’s a lot of oil. The problem, of course, is that right now it’s a very unique, it’s very unique chemistry, it’s very unique geology. And so the technology right now doesn’t really exist to be able to extract that.   [00:48:58.630] Doing so would prove completely uneconomical. And at some point it’s going to be possible, but it’s just not possible to do that just yet. So that leaves us with an interesting situation. We talked about supply. We talked about demand.   [00:49:13.480] Demand is increasing, supply is constrained. We’ve got all the fanatics that are trying to tear down supply and make it more and more difficult and pushing people into these completely ridiculous solutions, these renewables that just don’t work, but saying, no, we don’t want nuclear. The solution that does work, we want to go with biofuels like corn ethanol that is completely stupid. And solar power in places where the sun doesn’t shine. It’s so ludicrous.   [00:49:36.190] These are the people with decades of experience and the decisions that they’re making. However, there are a couple of places on the list where there’s serious untapped potential, and the three in particular are Iraq, Iran, and Venezuela. And the reason for that is that those three countries are in the top five, and quite possibly even. The top three in terms of proven oil reserves in the world. We’re not talking about anything fancy.   [00:50:02.710] We’re not talking about generation four nuclear reactors or any green stuff. This is just hardcore old school oil and gas, conventional energy, the stuff that everybody hates. But you know what? If you want to avert an energy crisis, you can’t just go cold turkey and stop oil and gas right away. The way to do it, obviously, would be, well, let’s embrace nuclear.   [00:50:23.760] Let’s embrace a lot of these other things that actually make a lot of sense. Let’s not embrace corn ethanol and other biofuels. Let’s get out of this business where we’re incentivizing solar power, and especially in places where the sun doesn’t shine, etc, etc. It’s totally ridiculous. So there are technologies for this, but in the meantime, there’s a transition period there to be able to do that.   [00:50:42.630] You can’t just build a nuclear power plant by tomorrow morning. It takes a long time. In fact, with the generation four stuff, they’re not even going to have that out in commercial viability until at least 2030. So we’re way out from some of these things. The generation two and generation three stuff still exists, but there’s got to be at least a decade or two of actual oil and gas, old school oil and gas that’s being used if you want to afford a serious, massive economic crisis thrust upon us by the people with decades of experience.   [00:51:11.100] And the three place on the list, the top oil producers, the top oil reserves in the world, the number one in the world is Venezuela. It’s not Saudi Arabia. Saudi Arabia is supposed to be 258,000,000,000 barrels. Venezuela 303,000,000,000 barrels, according to the US. Energy information Agency.   [00:51:27.410] The Saudi Arabia numbers are you have to treat with extreme skepticism. Is that really 258,000,000,000 barrels? Potentially something that’s I’ve seen a lot of calculations that put it at a lot less than that. And again, the Saudis themselves are saying that they’re going to tap out at 13 million barrels per day. So it’s hard to have a lot of confidence that the Saudis have 258,000,000,000 barrels and reserves.   [00:51:47.410] If they’re saying we’re going to have limits on our capacity, it doesn’t really make any sense. But again, the big ones on the list here, iraq, Iran, and Venezuela. Venezuela is number 1303,000,000,000 barrels. There’s so much potential there, and I think especially for the US and North America, it’s extremely interesting. I did another podcast where I talked about I call it the Barbarian Kingdom Theory, where you’ve got instead of having one single superpower, you have a lot of powers, a lot of different regional powers, and sometimes people band together.   [00:52:17.190] And the concept of a North American union where the US and Canada and Mexico sort of get together as a single trade bloc, and I could actually see Venezuela being part of that. If I were to have a conspiracy theorist, I would consider the possibility of even an invasion of Venezuela at some point. Just given the examples in the past, most recently, obviously the invasion of Iraq in 2003, which in theory was based on the pretext of weapons of mass destruction and liberating the Iraqi people from Saddam Hussein. But it turned out to be very much about energy and oil with Venezuela. It’s entirely possible that a very desperate oil star of the United States goes after that 303,000,000,000 barrels with a similar pretext of we’re liberating the Venezuelan people from this evil dictator and so on and so forth.   [00:53:02.160] There was another precedent, though, set 100 years, almost 100 years before that, with the liberation of Panama when Colombia was first made independent from Spain, and one that’s independence from Spain, panama was part of Colombia. And a bunch of people went down to Colombia and tried to plead with them to say, let’s do a deal. Let’s build a canal, and so forth, and the Colombians weren’t having it. And so at a certain point, a bunch of US. Financiers, led by literally JP.   [00:53:27.730] Morgan, the man himself, staged a coup in Panama, financed a revolution, and helped engineer the independent republic of Panama, whose first order of business as a new government was signed a deal with a bunch of US. Banks to finance the Panama canal project. And over time, obviously, they built the US. Built a canal. The corps of engineers came in, the military came in, they built military bases, and this became the Panama canal zone, which remains sovereign US.   [00:53:52.930] Territory in Panama for decades and decades after that. It’s possible that energy prices, energy markets get so far out of balance that the US. Gets desperate and stages find some excuse to go into Venezuela and creates a kind of a Panama canal zone in Venezuela to take over a bunch of oil fields there and get a big piece of that 303,000,000,000 barrels of oil reserve. Maybe so, but either way, even without such imperialistic intentions, I think it’s entirely possible. I mean, Venezuela is a place that has reached rock bottom.   [00:54:26.140] They don’t have food. They don’t have medicine. They’ve got a massive refugee crisis, people fleeing Venezuela, going all over the world, actually. It’s heartbreaking to see. However, with that much oil, it’s impossible to ignore the potential of that place.   [00:54:42.000] And I think that if they’re able to get rid of this government that they have and get something that’s just not evil, something that’s just not horrible, it doesn’t have to be the most efficient government in the history of the world. It doesn’t have to be the most righteous and just government, history, world, just something that’s not so evil and terrible as they have. They can become extremely wealthy, frankly, in relatively short order. And the precedent for this, I mean, you just look at the growth of Dubai, for example, which in the early 1990s even, was nothing. And within 15 years, it was this hotshot place to be with all this wealth and glitz and glitter.   [00:55:19.540] I mean, Caracas again, this used to be a really, really welldeveloped place. Very wealthy and lots of opportunity. And I think it absolutely can be again. And I think there’s a case to be made that Venezuela could potentially be one of the most exciting places in the world, when he’s sitting on 300 plus billion barrels of oil in a time where the oil markets are really tight and the people in charge don’t have a clue what they’re doing. There’s a lot of potential there.   [00:55:41.790] Not yet, because they still have this huge problem. But there’s a catalyst there that once that government falls, and history would tell us that that’s most likely going to happen at some point, there’s a serious amount of potential in Venezuela. I think we’ll go ahead and stop there. I really appreciate your time and attention to listening today, and I will speak to you again soon.   Close Podcast Transcription

Lately we’ve been led astray over and over again by supposed ‘experts’ with decades of experience who can’t seem to stop making colossal mistakes. But I’m not just talking about individuals. I’m talking about institutions too. And one institution in particular that’s been an abject failure lately has been the central bank. That includes the Federal Reserve in the United States, the Bank of England in the UK, and more. The Federal Reserve, for example, despite its leaders’ decades of experience, completely failed to predict that their policies over the past few years would have any consequences. It’s extraordinary. These people honestly thought that they could print trillions of dollars, keep interest rates at 0%, and that there would never be any consequences until the end of time. And then, when inflation began to take hold last year, they failed to recognize it. They chastised people who pointed it out. Later, when they finally did acknowledge inflation, they insisted it was transitory. And then when they ‘retired’ the term transitory, they promised to do something about the growing inflation problem… eventually. Finally, in March 2022, they made a very ceremonial 0.25% interest rate increase. File that away under “too little, too late”. But now their tune has changed. Now their policies smack of panic and desperation, and they sound like they’re running around with their hair on fire with no clue what to do next. It hardly inspires confidence. Earlier this week we saw another example. The Bank of England made a stunning announcement that they would step in to prop up their rapidly-declining bond market. Investors around the world cheered the news, and global financial markets surged. The euphoria lasted about 24 hours. The next day, markets tanked again as investors realized, “Hang on… I don’t believe these people.” Central banks have enjoyed unparalleled respect and gravitas for the past 30 years; going back to Alan Greenspan in the 1990s, central bankers have been viewed as infallible superheroes who always know what to do. Now they just look like a bunch of amateurs. In today’s podcast, I walk through my analysis about what might happen next. Specifically, I argue why I think there’s NO WAY they’ll follow through on their interest rate increases. Simply put, continuing to do so will bankrupt their governments. Ultimately this means that inflation, at least some inflation, is here to stay. And I also discuss a couple of key asset classes, plus one surprising country, that can do well in this mess. Click here to listen. Open Podcast Transcription [00:00:00.850] Today we’re going to go back in time, october 19, 1469, to the city of Viadali in modern day Spain. Now, I say modern day Spain because at the time, spain was really just a series of independent kingdoms. You had Castile and Navarro and and Aragon and so many different kingdoms across the peninsula, counties and Duchies, and there was no unity to Spain at all. And there in the city of Adelaide, in the cathedral that day, standing at the altar, was a 17 year old kid from Aragon. His name is Ferdinand.   [00:00:31.570] He came from a noble house called the House of Tristomera. Ferdinand, by all accounts, was somewhat of a genius. He was considered to be a child prodigy. He was chess and checkers prodigy, even as a child, beating the pants off of everybody in the court. He was an athlete, he was a horseman, he was a great soldier.   [00:00:50.600] He was battle hardened in combat. He was known as a great military commander. And people even said they wrote about at the time, they even said he was good looking. So he pretty much had everything going for him that you could ask for as a 17 year old kid. And on top of that, he was in line for the throne of Aragon.   [00:01:04.920] Standing next to him at the altar was his cousin, which seems incomprehensible to us, but it was pretty normal back then. People married their cousins from time to time. And his cousin was an 18 year old. He was 17, she was 18. Her name is Isabella.   [00:01:16.850] She came from the neighboring kingdom of Castile. Now, again, at the time, there was no unity. There was no such thing as Spain. There were these independent kingdoms. And the marriage between Ferdinand and Isabella created the foundation for what would become Spain, the Kingdom of Spain, eventually even the Empire of Spain.   [00:01:33.800] And they had a very successful marriage. Ferdinand and Isabella financed Christopher Columbus. They expanded the dominion of Spain. And by the time Isabella died in 15, four, ferdinand died about a decade or more than a decade later in 1516. And by the time Ferdinand died, what they left behind was greatly was far, far greater than what they had started with, with these two independent kingdoms.   [00:01:55.430] Now they had a whole empire. And the guy that was left over sort of holding all the marbles from that was their grandson. His name was Charles. Charles was heir to essentially all the kingdoms in Spain. And on top of that, because they had very fertile, and Isabella had been very deliberate in selecting the marriages and betrothing their children they had married their kids, essentially Charles mother, into another very powerful house in Europe, the House of Habsburg.   [00:02:24.740] The Habsburgs had claimed to the Holy Roman Empire. In fact, at the time, the chief Habsburg of the house of Habsburg was the Holy Roman Empire. Holy Roman emperor. His name was Maximilian. And in 1516, Charles inherited all the kings in Spain.   [00:02:39.060] A couple of years later, his grandfather, the holy Roman emperor, died too. Charles became the holy roman emperor, as well as the emperor of Spain. So this is a guy that literally overnight, in 1519, became the most powerful person in Europe. He had all of basically central Europe. He had Austria, he had Hungary, he had Germany, he had the Netherlands, he had parts of Italy and Sicily and Spain.   [00:02:58.510] This guy was overnight just the most powerful person on the European continent. And by all accounts, he was a complete failure. You’d think that somebody with that much power would have been able to figure it out and do some good in the world and leave behind a great legacy. He didn’t do any of those things. Charles was a failure, made terrible decisions, terrible decision after terrible decision after terrible decision.   [00:03:20.430] He’s known to history as Charles V, although depending on where he was, if you’re talking about in the Netherlands, or for example, he was technically was Charles I was in Spain. He was Charles the fifth holy roman emperor, depending on where he was. He had different names and different titles. This is a guy that had so many titles, you could look them up on wikipedia. It’s about a paragraph long.   [00:03:38.420] Of all the different titles that he had. This guy had so much power, so many counties, so many duchies, so many kingdoms. It was absolutely insane. And yet he was a total failure. This is a guy who inherited this very powerful kingdom, and yet, through his just horrific economic mismanagement, he ran up massive debts, massive deficits.   [00:03:56.130] He constantly had to borrow money from Spanish nobles, forced loans. He had to borrow money from German bankers. It was just terrible. When it came to managing the economy and managing his own finances at the same time he inherited his crowns. Remember what happened in 1517?   [00:04:12.910] This is the start of the great reformation in Europe, where you had people that realize, you know what? I think I want to break away from the catholic church. And you had the origins of protestantism and Lutheranism, and this is a time of great social upheaval in Europe. And it was a time that a leader, somebody as powerful as Charles was, he could have been the guy to create strength and unity, to calm down the tension and say, you know what? We all have our differences, but we’re all the same, and let’s just bury the hatchet.   [00:04:40.950] Let’s all just get along and respect each other and be fine with our differences and be fine. But he didn’t do that. Now, instead of creating strength and unity in society, he fanned the flames of social upheaval. And with his own fanaticism, he persecuted people with different beliefs. He supported the inquisition, which was actually used as a weapon to stamp out intellectual dissent, as well as actually rob and pillage people of wealth.   [00:05:03.080] Anytime there was a person of wealth that was brought before the Inquisition. The first thing they did was take away all of their assets and basically he cheat all the person’s assets to the state. So Charles became actually quite wealthy by going after all these evil people of intellectual descent and stealing all their money. So again he could have been a person of unity but instead he became a person of division. There’s actually a story where the King of Spain, it’s unclear whether it was Charles or his son who was really cut from the same cloth.   [00:05:31.160] But in the late 1550s there’s actually an event where they burned a bunch of heretics I think also in the city of Vague. It was as attended by 2000 people. And at one point, according to legend, the king walks by one of the condemned, he was about to be burned at the stake and this guy is begging for mercy. And the king looks at him and says if my own son were as wretched as you, I would carry the wood myself to burn him. So that’s the kind of guy Charles is and the sort of cloth that he’s cut from and his family at the same time.   [00:06:02.620] You think about all the different terrible decisions and mismanagement. He inherited a burgeoning protocolist economy in the Netherlands. He left it on the brink of civil war. He inherited all these free and prosperous cities in Germany. He left them overtaxed and vanquished and moving really backwards instead of forwards.   [00:06:17.520] He had been moving back towards the feudal system instead of forwards into capitalism. He inherited the world’s dominant reserve currency, the Spanish dollar, the Real de Ocho. It was the silver currency that had become really the reserve currency around the world, in the Americas, across Europe, et cetera. And yet somehow this guy managed to engineer the worst inflation since the collapse of the Roman Empire in the 400s. He inherited a dominant military but he suffered some really embarrassing and completely unnecessary military defeats.   [00:06:44.190] All in all he was pretty much a failure. This is a guy again who was pretty much from birth brought up to become the Holy Roman Emperor, the Emperor of Spain, the King of Spain, lord of the Netherlands, all these things. This is a guy that was bred to rule. He had all this experience, decades and decades of experience. Latent to his reign, after literally decades on the throne, he provoked his sworn enemy, a guy named Suleiman the Magnificent from the Holy Roman Empire.   [00:07:10.110] He basically called Suleiman a butcher and practically dared the Ottomans to invade, which the Ottomans did. Wow, what a surprise. He boxed this guy into a corner, suleiman the Magnificent, into a corner. The guy actually had a real army and had the will to fight. And late into his reign he ended up losing charles ended up losing the Kingdom of Hungary, he lost the city of Budapest, which back then was just Buddha lost.   [00:07:32.130] The city of Budapest lost basically the entire Hungarian kingdom, plunging Europe into a major geopolitical crisis. Everybody in Europe, the French, the Austrians and Germans, everybody was completely terrified of what was going to happen. The Ottomans basically like it was like Russia and China rolled into one supervillain today. That’s what the Ottoman Empire represented. And here you have Charles V with decades of experience on the throne, essentially daring his sworn enemies, say, come on and invade me.   [00:07:59.440] I double dog dare you, and made this big speech about how he would fight to the death. It would be such an honor for him to die trying to kill this evil butcher, Suleiman the Magnificent. I mean, it was such a ridiculous thing. And of course, then he ended up losing Hungary. He lost the war and plunged Europe into a major geopolitical crisis, saying, oh, my God, we’re all going to end up being invaded by the Ottomans.   [00:08:23.330] He also on top of that, he continued to wage really idiotic and overly expensive wars that he couldn’t afford. And finally, when he was completely exhausted and had exhausted his finances, he signed a terrible treaty to end the war. It’s called the Peace of Augsburg, which is really one of the dumbest peace treaties ever signed that really just paved the way for future conflict. He completely destroyed the Calvinist, the Ana Baptist, and it ended up leading to the 30 Years War, which is even more expensive war, even worse war later on because he signed such an idiotic and stupid peace treaty. One of my favorite historians, who I love to read, named Will Durant, calls Charles V the most impressive failure of his era.   [00:09:02.530] And if you really read about Charles V, that’s probably a pretty good way to label him, if we think about that today. Let’s be honest, there are probably plenty of contenders for that title today. The most impressive failure of this era. There are a lot of contenders for that title, and I’m sure your brain is probably racing right now with examples. Too many names come to mind of the most impressive failure of this era.   [00:09:22.570] There are a lot of them. We’ve talked about many of them. It goes back to this concept of the experts, these allknowing, all powerful, unquestionable people that are supposed to just know everything and guide us to perfection forever and ever, until the end of time and never make a mistake. They’re infallible and they’re perfect and they’re going to just walk across the water and fix everything in our lives. These same people with decades of experience that are tough and respected by everybody around the world, and yet they’ve continued to lead us astray over and over and over again.   [00:09:52.220] To be fair, it’s not just people, it’s not just the individuals, and it’s the names that we’re all thinking right now. But I’m not saying them, lest I be canceled off the internet again. But we’re talking about institutions as well. And there’s actually one institution in particular that I want to talk about today, and that’s the institution of central banks. So we’re not really going to talk about even an individual.   [00:10:11.520] We’re going to talk about central banks. And this is really important because again, what I hope to sort of shed a little bit of light on is just this is one man’s opinion expressing his first amendment right to have an opinion and talk about at least where I think the pocket is going to be. And if we think about this with respect to central banks and this is a really critical trend, central bank, we got to talk a little bit of history here. Central bank goes back to the early 1006 hundreds. The first sort of protocol bank in Europe was the bank of Amsterdam, which was launched in 16.   [00:10:41.700] Nine had a whole lot of responsibilities ranging from currency, bills of exchange, discount, some elements of financial stability. A couple of decades later, in 1664, was the Swedish central bank, the Riksbanken. Then later on in 1694, at the end of the century, was the bank of England. And over time, the central banks were essentially had more and more and more power, more and more authority, more and more autonomy, specifically over the currency. And this is a really, really big deal, what central banks really do, and this goes really into modern day central banking.   [00:11:17.780] Central banks essentially control the money supply, controlling the money supply. Essentially they have all the control they need to set and influence interest rates. Now, this is a complicated process by which central bankers buy and sell bonds. They call it open market operations. They’re buying and selling bonds to increase and decrease the supply of money.   [00:11:37.440] That’s all very complicated and it doesn’t really matter. The bottom line is that central bankers have the power to control interest rates. This is really critical. It’s a really important thing to understand because interest rates are basically the price of money. If you think about it, when you go out and borrow money, interest is the price that you pay for the money that you borrowed.   [00:11:57.290] So interest is the price of money. It’s literally the price that you pay for money that you borrow or the amount that you receive for money that you lend. Interest is the price of money. So you’re talking about a group of people that has the ability to control the price of money. And when you control the price of money, you have the ability to control the price of pretty much everything.   [00:12:19.670] So we think about interest rates, right? What has to do with interest rates? Well, probably in our own lives, most people borrow money to buy a house. Most people don’t just plop down hundreds of thousands or millions of dollars in cash to buy a house. Most people borrow money from a bank.   [00:12:33.680] And so that makes real estate and real estate purchases and home buyer activity. Extremely sensitive to interest rates when interest rates are low and cheap when you can borrow money. Just a year and a half ago, people could borrow money in the United States at 2.5% for a mortgage. Now it’s six and a half going on 7% now. So obviously, when rates are low, people can afford to borrow more money, so that means they can afford to pay more for a house when rates are higher.   [00:13:00.820] Now it’s more expensive to borrow money, so they have to borrow less, which means they can afford to pay less for a house or real estate. Prices are extremely susceptible to changes in interest rates. It’s the same thing with really any consumer behavior. When you people borrow money to buy cars or to upgrade the kitchen cabinets in the bathroom, they borrow money at. Businesses borrow money because they have to invest in new equipment or new factories or whatever it is they’re doing.   [00:13:23.720] All these things are subject to when interest rates are low, interest rates are high. It changes behavior, business behavior, consumer behavior. And then it’s the same with asset prices. Interest rates have a huge impact on bond prices, which we’ll get into later. Extremely influential in stock prices.   [00:13:37.890] So overall interest rates, changes in interest rates have an extreme economic impact. And we know that now from experience because we’ve seen it interest rates across the world. Wherever you are in the world right now, chances are you’re living in a country you’re listening this in a place that has seen their interest rates go up. Their central bankers have been increasing interest rates. Very few countries have been cutting rates, most countries have been increasing interest rates.   [00:13:59.090] And we’re seeing now the effect that has on the economy. It’s wrecking havoc in financial markets.   [00:14:07.190] The experts don’t call it a recession, we’re not allowed to say recession. But I mean, a lot of places are in recession right now, and a lot of that is because of these changes, these increases in interest rates. So when you think about that, that’s an incredible amount of power for a single institution, a central bank that’s an incredible amount of power for a single institution to have, especially when you consider that nobody in that central bank, nobody on those committees is actually elected. In the United States. We have what’s called the Federal Reserve System.   [00:14:34.150] The central bank is called Federal Reserve banks. And the Federal Reserve system is actually comprised of twelve different Federal Reserve banks. These are all regional banks. For example, there’s one in New York and there’s one in Dallas, kansas City, San Francisco, all different places around the country. Minneapolis, Minnesota.   [00:14:49.870] All these twelve different Federal Reserve banks. Each one of those Federal Reserve banks is essentially directed by a board of directors. Well, guess who selects the board of directors? The majority of the seats on the board of directors of the central banks are actually selected by these big commercial Wall Street banks. So it’s these big Wall Street banks that select the people that make up the central bank.   [00:15:10.460] So we’re giving the power to control the money supply to the banks themselves, to the commercial banks, the big Wall Street banks, the investment banks. These are the guys that actually make the decisions about how to set interest rate policy and whether to increase or decrease the money supply or whether or not some factory work is going to lose his job because of what they do with interest rate policy. It turns out that the key decision makers that are actually making those decisions and pulling the strings and selecting the people that make those decisions are actually the big Wall Street banks. So it’s a rather perverse system when you think about it and just riddled with conflicts of interest. But these people are supposed to be the supreme experts when it comes to the economy.   [00:15:49.010] They’re infallible all knowing, all powerful, all seeing and yet somehow they’ve completely missed it. They totally failed to anticipate inflation. They totally failed to say oh gee, we’re going to keep interest rates at basically zero. We’re going to print trillions and trillions of dollars. Then along comes covet, we’re going to print trillions of dollars more.   [00:16:06.460] We’re going to slash interest rates to zero and we anticipate absolutely no problems with this whatsoever. So the experts upon experts here when it comes to the economy fail to anticipate inflation. They failed to anticipate the consequences of what they did. Then when inflation actually came around they completely failed to recognize it even when it was right there in front of them. Everybody else could see it but the central bankers said oh nothing to see here.   [00:16:28.180] So they started off early in 2021 when inflation was starting to rear its head and they just denied it. They rejected there’s no inflation. And then they started gaslighting people making you think that you’re crazy because you saw inflation and people think well wait a minute I see inflation. My costs are going up. I see food going up, fuel is getting a little bit more expensive and they could just say inflation?   [00:16:50.990] What do you mean that’s no inflation here? Then they finally roll this out and they said okay fine, it’s transitory. It’s transitory. And then the transitory became a bunch of false promises and they said okay by late in the year they said okay I swear to God we’re going to do something about it. We are absolutely going to do something about inflation.   [00:17:07.410] But later and they kept on with their money printing. They were dumping hundreds of billions of dollars into the housing market. They were dumping $65 billion a month into the housing market literally right up until March 2022. And finally they had a very symbolic ceremonial 25 basis point increase. When I say 25 basis points means zero point 25%.   [00:17:30.310] One quarter of 1% increase in interest rates in March. So inflation had been going on for more than a year and they finally increased interest rates by zero point 25%. So these people were totally asleep at the wheel. They totally missed it. They failed to anticipate any consequences.   [00:17:45.370] They failed to recognize the consequences. They failed to do anything about it. When they finally did something about it, it was basically nothing. Talk about too little too late, right? And now, six months later, now it says hair on fire.   [00:17:57.660] Oh my God. We have to do something about inflation. This is very desperate panicky. Whatever it takes at all costs, we’re going to keep raising rates forever and ever until the end of time. There’s nothing that we can do.   [00:18:08.980] That’s too much. We’re going to keep doing this no matter what the cost. This is now the sense of a complete and utter desperation on the parts of these central bankers. This does not inspire confidence. It’s very panicky.   [00:18:22.790] The policy, the comments, the speeches that they give, these are not the actions, not the words, not the speeches of people that have things under control. I would also point out I was talking to a friend of mine today and he pointed this out to me and I have to bring this up. It is actually very unfair what they’re trying to do now. So when you think about it, inflation has actually been around for a really long time. There are different types of inflation, right?   [00:18:48.450] We have asset price inflation and we have retail price inflation. Asset price inflation is when we see the prices of stocks and bonds and real estate and so forth increase in value when there’s no real kind of underlying driver behind that. And that’s what we’ve been seeing for a really long time. The stock market, for example, you had companies that were trading at 10 times 1200 times earnings. I mean, just outrageous price earnings ratios.   [00:19:14.420] Outrageous price revenue ratios. Outrageous cyclically adjusted price earnings ratios. I mean, the valuations were astronomical, really astronomical. We talked about this a lot in our writings. That valuations had only been that high couple two, three times ever in all US financial history.   [00:19:32.090] This is a prime example of an asset bubble or asset price inflation. But they were totally fine with that. No problem with asset price inflation because when asset price inflation is taking place, basically it means the people that own those assets, which are primarily very wealthy people, continue to get even wealthier. On the other hand, now we have retail price inflation, which actually the big thing that you hear them talking about is wage inflation. Wage inflation.   [00:19:54.970] Wage inflation is when workers make more money. So completely fine. When the price of whatever that pick your overpriced stock goes to the moon even though there’s no fundamentals behind it, that’s completely fine. But when some factory worker gets a 5% wage increase, we got to put that guy out of a job. We got to raise rates immediately so that that poor guy loses job immediately because we can’t have that.   [00:20:19.350] We can’t have any wage inflation. Oh my God. That’s the end of the world as we know it. And it’s extremely unfair actually when you think about it. It is actually kind of a bizarre form of almost like antisocialism in a way where they really take care of the markets and all the market participants in the professional class and all of that.   [00:20:39.500] But God help us if a factory worker gets a 5% wage increase. Now we gotta go and raise rates to the moon and cause a recession to prevent that from happening. So that’s what’s going on in the US. But this week and I’m recording this here now this is September 30 of 2022. It’s been a bizarre week and if we think about what’s happened this week in the bank in England, in the UK for a little while now, the British pound has actually been sliding horrifically.   [00:21:07.830] UK government bonds, which are called gilts, have also been falling too. A lot of this has been made worse because of various policies have been put in place by the new British government. So what they’re trying to do is basically they’re trying to cut taxes and deregulate the economy and really trying a new approach with inflation. They’re saying our economy is too regulated. We need to eliminate the constraints on supply.   [00:21:29.450] We need to liberate the economy and allow people to produce more easily and so forth. And that’s their approach. But you know what? The market doesn’t like it and so people are selling off the bonds and British government bonds are falling. So what’s happened?   [00:21:41.120] Well, the Central Bank had to step in and fix this and this is where things get really interesting. But we need to talk a little bit about bonds. Bonds are basically like stocks. Bonds are type of security. So when normal, when regular individuals need to borrow money, you go to a bank and you just get a loan.   [00:21:56.480] When governments or big corporations borrow money, they issue bonds, right? So bonds are basically fungible securities that can be traded so a corporation or government government can go. For example, just a couple of weeks ago the Treasury Department in the US issued about $50 billion worth of treasury bills. This is a type of bond that in this case matures in about six months. So these things you can buy treasury bonds and denominations as little, as small as $1,000 I think sometimes even $100 and they’re basically all the same.   [00:22:26.180] So everybody that buys this particular bond, everybody pays the same price, they’re all worth the same. It’s sort of like Apple stock. If I have one share of common stock of Apple and you have one share of common stock and Apple, they’re all worth exactly the same thing. They’re all the same. They all mean that one share equals one share equals one share.   [00:22:42.520] They’re all different now, different assets are not. That’s the concept of fungibility and finance. It’s called fungibility. Other assets are not fungible. If you think about a Ford Mustang if I have a Ford Mustang and you have a Ford Mustang, it’s not the same thing, right?   [00:22:56.120] My Mustang might be different than your Mustang. I don’t have a Mustang. I’m just using that as an example. But Apple stock, government bonds, the same issuances, they’re the same, they’re fungible. And because of that, very easily very liquid markets that can be bought and sold and so forth.   [00:23:10.580] So you have investors that are buying and selling bonds, just like investors buy and sell stock. And just like stock, bonds also have a price. So Apple stock has a price. US government bonds of a particular issuance like that has a price. You rarely hear people talk about bond prices because it’s a little bit of a complicated formula.   [00:23:27.170] Usually you hear people talking about yield, so they’ll say like, the yield on the ten year is 4% or something like that. So yield is essentially a proxy for bond prices. Bond yields and bond prices are related to each other and they’re actually inversely related. So bond yields go up and bond prices go down and vice versa. So the bottom line of all this is really that what you saw over the last week is UK government bond prices falling.   [00:23:53.890] Yields were rising, bond prices were falling because nobody wanted to own them. Everybody’s selling, everybody’s saying, I’m disgusted with the British government, I don’t want to have anything to do with this. I’m going to sell government bonds. So this is like what investors do. They throw a temper tantrum when they don’t like what a government does and they sell government bonds.   [00:24:09.440] And so bond prices really start falling. And this happened a lot this week. British government bonds, gilts, they’re called, really were falling and they’ve been falling for a while. So what happened is the Central bank stepped in and said, we’re going to save the day, we’re going to stabilize the market because that’s what we’re doing. And there’s actually a lot of reasons behind this.   [00:24:25.220] One of the reasons behind this is because there were a lot of pension funds. Pension funds tend to buy government bonds because they are considered to be safe investments. But now these pension funds were sitting on these bonds and the bond prices were collapsing. And so the pension funds are going, oh my God, we’re losing tons and tons of money here. Our entire portfolio is collapsing.   [00:24:44.540] And to make matters worse, a lot of these pension funds actually borrowed money to buy government bonds. So they were facing margin calls. It was just a pure meltdown scenario. And the government goes to the central bank, says, you’ve got to do something about this. So the central bank, the bank of England, steps in.   [00:24:58.580] Early this week and says we’re going to intervene in the bond market, we’re going to save the day, we’re going to prop up the bond market, we’re going to create stability again until this crisis passes. And essentially what that means is they’re going to go and they’re going to print a bunch of money. They’re going to print money so they can artificially prop up the bond market. They’re going to print money, buy bonds and artificially prop up the market. And they do this basically to try and save these pension funds.   [00:25:20.390] Now this is a huge reversal in their policy because up until this point the bank of England. The central bank. Like pretty much most central banks around the world is saying we’re going to raise rates. We’re not going to buy bonds. We’re not going to intervene in the marketplace.   [00:25:31.650] We’re going to raise rates. The market is going to do what it’s going to do and that’s it. So now all of a sudden overnight they reverse themselves and start buying bonds, reducing rates. And this announcement was met with just market Euphoria. Around the world stock markets went up, bond market surge.   [00:25:45.620] Everybody was happy again. They said oh central banks are on our side again and it’s going to be great. And that sentiment that Euphoria lasted about a day, like literally the next day the whole market broke loose. Everything started falling again because people realized I can’t trust these people. This is really the big trend that we’re talking about.   [00:26:05.740] For about the last 30 years central bankers have enjoyed unparalleled, really respect and dignity and grandeur and gravitas for the past several decades. It goes back to the 1990s when you had Alan Greenspan running the Federal Reserve in the United States. Everyone thought Greenspan was a god among men. It was just so wonderful and Greenspan engineered this incredible economy and then you had even the global financial crisis. People credited, this was in 2008, 2009, people credited the Federal Reserve was saving the world, saving the economy because they printed trillions of dollars to do this.   [00:26:40.730] Mario Draghi, who was the central bank president, the European Central Bank president, they said, oh Draghi saved the Eurozone and all these things. And everybody always treated the central bankers as like all these people, they really know what they’re doing and we can trust the central bankers because they know everything and they’re always calm and they are steady and they always have the answer, they always know what to do, they always have the solution. Well that’s not the case anymore. Now based on everything that we’re seeing, you look at this, just what happened this week in the UK. The central bank stepped in and said we’re going to save the day.   [00:27:11.550] And people said yeah and that lasted a day. And literally the next day people said I don’t believe these guys, they’re not going to be able to do it. They don’t have the ability. They don’t have the wherewithal, they don’t have the resources. It’s not going to happen.   [00:27:22.880] I’m selling, I’m out. And I dare you to bail me out, right? And that’s what happened in the UK this week and we’re seeing the same thing in the US. People just don’t have the confidence in the central bank that they used to. This is an institution that’s supposed to have the experts upon experts, the greatest experts in economics, the guys that are supposed to always have the solution, the steady hand, decades of experience that are supposed to be able to make sure that nothing bad ever happens.   [00:27:49.510] And people don’t have the confidence anymore in the central banks. They are not buying that the Federal Reserve is going to be able to tame inflation because now they realize all of a sudden they go, oh, we have this massive energy crisis. But it turns out the Fed can’t just print oil like they can print money. The Fed can’t print food like they can print money. They can’t create technology, they can’t do the things that the economy actually needs.   [00:28:11.180] They can’t create more labor like they can create more money. They can’t do any of these things, the things, the resources that the economy actually needs. The Fed is completely powerless to do anything about it. And they even acknowledge this. Chairman of the Fed gave an interview not too long ago where he was telling a member of the media and he said, oh, we finally understand how little we understand about inflation or when grilled by politicians.   [00:28:35.160] I think it was actually Elizabeth Warren who was grilling about this and she’s saying, so just so I’m clear, when you raise interest rates, is that going to bring down the price of food? And he said, no, not especially now. I said, Will it bring down the price of gas? No, it’s not going to do that either. Is this going to do anything at all?   [00:28:50.350] Is this going to impact inflation at all? And the answer is no. It’s not really going to do anything about inflation, but they’re doing it anyways because it’s that old expression when all you have is a hammer, everything looks like a nail. And so they just their single hammer is we’ve got to manipulate the money supply, we got to raise rates because that’s all they know how to do. Bear in mind, these are the experts with decades of experience, right?   [00:29:11.740] They’re supposed to be able to land the plane and get us out of this mess. And yet everything they do seems to just make it worse and worse. Now the goal, the miracle that these guys are trying to realize is they want to raise rates enough to bring inflation down, to tame inflation, get inflation back to 2%, but without causing widespread panic, widespread financial devastation, widespread economic devastation. So they want to be able to they call that a soft landing. This is a total fantasy.   [00:29:39.310] This is a complete and total fantasy. And simply put, inflation is not this just easy issue. It’s easy to understand but it’s not so easy to fix because they got hit by all sides. We talked about this before. Inflation has really been a function of both supply and demand, right?   [00:29:54.260] So all the really cheap ultra low interest rates that they have I mean this is the central bank. They created really, really low interest rates. And then the federal government came in and started dumping free money, just shoveling free money into the economy. I got to say not only did the central bank slash interest rates to zero but they also went and they gave speeches and they went to Congress and they wagged their finger and says the government needs to do more. There needs to be more fiscal stimulus.   [00:30:19.050] There needs to be more basically there needs to be more free money from the government. You got to look at this and go, wait a minute dude.   [00:30:27.210] You’re not an elected official. Who are you to go to the elected representatives of the people and tell them what they’re supposed to do? Honestly, it’s disgusting when you think about it. But here comes this guy who’s supposed to be the expert with decades of experience claiming to be the expert of experts, the king of kings with central banking going up to Capitol Hill, wagging his finger at Congress saying you need to do more. You need to give people more free money.   [00:30:50.280] Completely oblivious of all the consequences that would have really quite sickening. But these people did this. They made their low rates and the free money and they created artificially high excessive demand, right? But at the same time there were supply issues as well. So too much demand.   [00:31:05.430] And then they gave another one of these experts, another emperor whose name escapes me right now I can’t think of who it is but said, oh let’s lock everybody down. What could possibly go wrong? Let’s keep people terrified in their homes, locked in their basements watching fear porn on TV so that they don’t go out and work. Let’s keep people home. Let’s give them incentives to not work.   [00:31:26.360] And so we created all these supply issues through lockdowns, public health policy and then all these other things too. This anti fossil fuel fanaticism, god help us if we drill for another barrel of oil in the United States of America even though energy prices keep going up. Well that would be the worst thing in the world. So it’s this kind of anti fossil fuel financing combined with the public health policy and all the crazy things that they’ve done that have created supply issues, anti capitalist, anti productive policies, let’s raise taxes. Let’s do things to make it more difficult for people to do business, more difficult for people to go to work.   [00:31:58.990] Let’s create more licensing issues and more regulatory issues. This is the way these people function. So they created supply issues to make it more difficult to create supply. And they gave everybody a bunch of free money and stimulate demand. Duh, you’re going to get inflation from that, right?   [00:32:13.130] But it turns out the central bank can’t do anything about supply. They can’t fix supply, they can’t put people to work, they can’t change any public health policy. They can’t create more energy, they can’t create more food, they can’t produce anything except for policy statements and basically create money, print money. That’s all they can do. So really, in this case, because of all that, I think the best that the central bank can hope for is a combination of slightly lower inflation and higher unemployment.   [00:32:43.990] I think if they get to 5% inflation and 7% unemployment, why would they be taking a victory lap? They will be ecstatic. 4% inflation and 8% unemployment, they will be more than happy to deal with that. I think that’s really the best that the central bank is sort of hoping for. And I think that’s probably the best case scenario at this point because there’s not really anything they can do.   [00:33:05.780] The critical issue that you got to realize is that governments, there’s just too much debt in the system now. There’s way more debt than there ever has been literally in the history of the world. Way more debt than there was the last financial crisis back in 2008. And there’s more debt back then there was in the previous financial crisis in the 1990s. And so the debt issue is really important to remember.   [00:33:26.190] Today is the last day of the fiscal year in the United States, september 30, 2022. So it started October 1, 2021, and the fiscal year runs through September 3022. So last day, the fiscal year, the government national debt in the United States grew by $2.4 trillion this fiscal year 2022, which literally ends today. But it wasn’t just the $2.4 trillion. The total amount of new government debt that was issued this year was actually about more than $14 trillion.   [00:33:56.080] $14 trillion, right. The difference between the two, the two and a half to $2.4 trillion versus more than $14 trillion. The difference in that is because the government had a bunch of old debt that matured. So if you think about ten years ago in 2012, the US. Federal government issued like a ten year bond.   [00:34:15.760] This is technically ten years are known as notes. They issued a bunch of ten year notes. Well, guess what? Now, ten years later, those ten year notes matured. And so the federal government says, oh shit, I got to pay all that money back that I borrowed ten years ago.   [00:34:28.060] So what do they do? Well, they don’t actually pay the money back. They just go and borrow another whatever amount of money they need to pay off the old debt by borrowing new money. Right. So that doesn’t count as new debt because you’re basically just taking new money and paying off old money.   [00:34:43.040] So the net debt doesn’t actually increase, but they are issuing new debt. And the reason that’s important is because back in 2012, when they borrowed money, they were borrowing money at 1.5%. Today they’re borrowing money at 4%. So that’s a two and a half percent difference. And if you think about that, that two and a half percent difference.   [00:35:02.860] Over $14 trillion, right? Two and a half percent more interest that they had to pay on the $14 trillion worth of new bonds that they issued this year. That’s about $300 billion in extra interest that they’re going to have to pay every single year. Every single year. So essentially, the interest payments that the government has to make every year just went up by $300 billion.   [00:35:26.830] So you can start to see why this is such a big problem. So if the Fed keeps raising rates like they say, they say, we’re going to keep raising rates, whatever it takes. Okay. All right. Well, let’s see what happens.   [00:35:36.600] Let’s see what happens if you raise rates to seven and a half percent. Right. And they have to refinance. Let’s say. $10 trillion in debt over the next year.   [00:35:43.960] That’s going to be another hundreds of billions of dollars is going to be another five. Six. $700 billion in annual interest that they’re going to have to pay every single year. Plus the 300 billion from last year. We’re talking about almost an extra trillion dollars a year in annual interest expense.   [00:35:59.510] This is completely bankrupting to the government. The federal government will be completely bankrupt if they keep raising interest rates because they simply cannot afford it. There’s so much debt, if you think about this, $30 trillion, actually, now almost $31 trillion is the US. National debt. So if the national debt at $31 trillion and they raise rates to 7%, that’s over $2 trillion a year in interest, right?   [00:36:25.280] In interest.   [00:36:28.510] That’s half of total tax revenue, right? That’s before you pay Social Security. That’s before you pay for the military. That’s before you pay for the light bill at the White House. They’re shoveling $2 trillion out the door just to pay interest on the national debt.   [00:36:40.750] And on top of that, they go farther and farther into debt. Every year they went to debt another $2.4 trillion in fiscal year two two, and probably going to be another two $3 trillion next fiscal year. So you can see why this is completely and totally unsustainable. When you have a government like the United States that is so heavily in debt, tens of trillions of dollars in debt, you simply cannot have normal interest rates. You cannot have five, six, seven, 8% interest rates because the government’s going to go bankrupt.   [00:37:10.450] And that’s the bottom line, is that higher interest rates will bankrupt the government. And there is no central banker that wants to be tied to that. No central bank is going to have the courage to say, I’m going to tame inflation. I’m going to do whatever it takes, even if I bankrupt my own government. Nobody’s going to do that.   [00:37:25.420] And it’s not just the government. It’s not just the government. Again, in the UK, they went and did this. The central bank intervened because the pension funds are losing money. So basically anybody that owns bonds, pension funds, banks, insurance companies, they’re all going to suffer huge losses.   [00:37:38.300] They’re all going to require massive bailouts. And again, no central banker wants to do that. No central banker wants to create this massive financial crisis, this systemic, existential, game changing, earth shattering financial crisis that will bring down an entire nation. Nobody wants to be tied to that. So there’s a certain point right now you got to imagine they’re all talking, we’re going to do whatever it takes.   [00:37:58.240] They’re not going to do whatever it takes because that means bankrupting the government. So most likely, if the idea here is to try and figure out where’s the puck going to be, the puck is most likely heading to inflation because that’s the only other option. In order to not bankrupt the government, there is a limit on how high they can let interest rates get. And once they reach that limit, that’s as far as they’re going to go most likely to come back down. And ultimately that means that they will let inflation rein.   [00:38:25.730] They reach that limit, they go, okay, we think the government can afford 5%. Once we get to 5%, that’s it, we’re done. And if inflation is still 6%, you know what, we’re all going to have to live with 6% inflation. And that’s the deal. And that’s the consequence of having a government that is so heavily in debt.   [00:38:43.220] And it’s not just the United States. You’ve got Italy and you’ve got I mean, most of Europe is this way. I mean, the UK is this way. Spain, Germany, Japan. Oh my God, Japan is so heavily in debt.   [00:38:52.460] I mean, even China is sitting on a mountain of debt. Most of the world really is sitting on a mountain of debt, which is why they just cannot afford to have high interest rates. They can’t do it in Europe. You have all these governments that for years have been borrowing money at negative yields. So what are you going to do if you’re Italy and you’ve been borrowing money at 0% or -25 basis points and now you got to pay 4% forget it, you’re done, you’re done you can’t possibly do that, right?   [00:39:20.190] And so because the central bankers, they may be crazy, they may be panicky, they may be desperate, but they’re not stupid. These are not stupid people. So they know all this. And because of that, there’s no way, there’s no way that they can possibly, unless they’re going to say, you know what, I’m going to bankrupt the whole world. I’m going to bankrupt the government, I’m going to do whatever it takes, because frankly, I think they’re going to realize rationally, that a world in which all these countries are bankrupt and the financial system is bankrupt and the banks are literally bankrupt and the pension funds are bankrupt, that that’s worse than 6% inflation.   [00:39:53.080] And I think between the two, those two evils, they’ll definitely take the lesser of the two evils and the lesser the two evils is going to be 6%, even 7% inflation. And if they can get to four with 8% unemployment, oh my God, that’ll be a major victory. They will make monuments to themselves. They will be so excited about that. And I think that’s the situation that we’re looking at now, the financial implications of that are I think it makes sense for people to be prepared for.   [00:40:20.050] I think everybody recognizes now inflation is not transitory. It is not transitory, and most likely is not going away anytime soon. There are some things sort of in the short term, if all of a sudden Vladimir Putin keels over and the war in Ukraine ends, that’s definitely going to be a huge financial bonanza. You’ll see stocks go up and everybody’s going to be happy. It’ll just be a big happy boom all over again.   [00:40:44.750] The happy rally, oil prices will come down. Everybody’s going to be happy again. And because of that, inflation is probably going to go down a little bit just off of that, and they’re going to go, you see, we told you it was all Putin’s fault. But realistically, that’s not the case. Inflation, again, is a longer term issue that has a lot to do with not just Putin, although obviously the war in Ukraine has a major impact on that.   [00:41:08.730] But it’s fanaticism against energy markets. It’s all the craziness with the lockdowns, the public health policies, terrible anticapitalist legislation and regulations, the money printing, the free money that they gave out from the government, all those things really, that’s what impact. And you can’t just expect that’s all just going to go away in a couple of months. That was years and years and years in the making, and it’s going to take a while to work through. So preparing for a longer bout of inflation is something that actually makes a lot of sense.   [00:41:39.730] There’s a lot of history behind this. But one of the things, and this is not in any way me giving financial advice again, this is a guy expressing his First Amendment right to have an opinion on something. And when I look at history, I see that real assets do tend to make a lot of sense in an inflationary environment. These are talking about things that the world actually needs. Stuff energy, valuable minerals, valuable metals, food, and even, I would actually argue, productive technology.   [00:42:05.500] These are the types of things that we’re talking about. Energy is a no brainer. We’ve talked about this before. Energy is in really a massive crisis right now that I think is only going to get worse. We can see this in Europe where governments there are now scrambling, trying to figure out how do we make sure people don’t freeze to death in the wintertime?   [00:42:18.510] Because we’ve screwed this up so badly, we got to make sure that people now aren’t going to freeze to death in the wintertime. A lot of this is, yes, the war, but it’s so much more than that. It’s a lot of this environmental fanaticism. Look, don’t get me wrong. I’m very much in favor of taking care of the environment, and there are a lot of things that I personally do on my own.   [00:42:37.640] But this is not the way to do it. This kind of fanaticism where we say, oh, let’s go, we did a whole podcast about this. Let’s go down the road. Instead of oil and gas, let’s do wind and solar. It turns out in many respects that’s actually much worse and it’s dirty.   [00:42:52.510] The kinds of minerals and things you’ve got to pull out of the ground to do those sorts of things. The resources that are required, you’re not actually saving on your CO2 emissions. It’s a really expensive way. The energy return, on energy invested, on oil sorry, on oil, on wind and solar is actually really bad. It just doesn’t make any sense.   [00:43:08.700] We talked about this before. Nuclear is the answer. But you have all these greenies, all these energy fanatics in government that just continue to ignore the obvious solution. Every quarter, actually, the Federal Reserve Bank of Dallas, one of the regional Federal Reserve banks, conducts an oil survey, an energy survey of oil executives. And the last one just came out a couple of days ago on September 28.   [00:43:33.000] They’re hilarious. I’d actually encourage you to check it out. You can just sort of Google or whatever search engine you use. I actually use brave myself. It doesn’t sound right when you say I’m going to brave this, but yeah.   [00:43:43.260] So go to your favorite search engine and look for Dallas Federal Reserve oil survey and you can see the one from September 28. And actually they’re pretty hilarious because they’re bunch of oil executives really just complaining about how all this ESG environmental, social governance, all this sort of woke capitalism nonsense, has really gutted exploration. You can see this proven oil reserves, proven energy reserves in the United States are falling. There’s very little new discovery. The shale reserves are running out.   [00:44:11.460] The oil executives, don’t take it from me, these are the oil executives saying, hey, the shale reserves are running out. People think that all this shale oil in the US. Is going to power us and give us all this new energy reserve. No, it’s not. They’re running out.   [00:44:23.280] And we don’t have any new exploration because you can’t get financing, you can’t get government permits, all these things that are preventing us from new exploration and adding to our reserves. So this is a really big problem. And because of that, even though I think energy investments really have a lot of potential in some, I think like nuclear live a really, really long life ahead of them. There are a lot of things that make energy very, very contentious right now. I think, honestly, these green fanatics, they’re totally full of themselves.   [00:44:56.110] One of my partners today told me he’s in the UK. And he said he called me this morning. He said, I spoke to a coal producer in Africa, and he was telling me that his phone has been ringing off the hook for months for all these European governments, all these hardcore environmental fanatics in Germany that want to buy coal from them. And they were talking about buying the dirtiest coal imaginable. There’s different types of coal.   [00:45:18.710] This is really dirty coal mine from child labor in Zimbabwe so that these Europeans can heat their homes, basically taking a fuel source away from Zimbabwe and shipping it to Europe. And he said right now, they’ve got literally over 1300 trucks going from Zimbabwe to the port of Mozambique, and they can’t build the infrastructure fast enough so they can ship all this coal to Europe so that these people don’t freeze to death in the wintertime. But they refuse to endorse nuclear power, which would slash CO2 emissions and provide inexpensive power literally, for the entire continent, eliminate their dependence on Russian gas for decades and decades to come. But they don’t want to hear it, right? They don’t want to partake in the obvious solution that’s staring in the face.   [00:45:56.700] And so they say, oh, let’s go get the dirtiest coal imaginable from Zimbabwe and bring this up from there. But we love the environment. I mean, these people are so full of shit, and it’s impossible to take them seriously. On the mineral and mining side of things, again, these are also real assets. Mining is certainly less controversial than energy.   [00:46:15.280] You don’t have the same picket lines of people saying, we don’t want you’ve got so many people that are against energy, more oil expiration, I’ve got to help you. You can’t have anybody just looking for new barrels of oil. Mining is less controversial, certainly, than energy, but there is some controversy around it. It’s definitely not green friendly. And you don’t get the ESG marks.   [00:46:38.350] You don’t get the big private equity funds coming in that are concerned about their green report cards and so forth when you get into the mining business. This is why one of the reasons why I like agriculture so much, agriculture is a lot easier. It’s super relevant right now in many respects. There’s hardly anything more relevant in the world right now than being able to produce food. And there’s nobody forming a picket line saying, we don’t want any avocados here.   [00:47:02.570] It’s very safe. You get support from the government. It ticks all the boxes from the green stuff, the ESG funds, all those things. So this is one of the reasons why I like agriculture so much. The last one I want to leave you with though, is technology.   [00:47:15.170] And technology has long been tied to technology investments only good when interest rates are really low. That’s remarkably silly if you think about technology. And I think one of the ways that the world has gone wrong with its development of technology is if you think about the last 100 years or so, I mean, you can even go back thousands of years. The invention of the wheel, going back however many millions of years ago that was, and the ability to produce steel and all these things, some of which we’ve talked about in the past, this is productive technology. In the past 100 years, the automobile, the radio, the microprocessor, the invention and popularization of the Internet, all these things give us the ability to produce more and less time with fewer resources.   [00:47:58.440] This makes everybody better off. It makes everybody wealthier. A lot of that has changed in the last 15 years. There’s been a shift from when you think about the advent of the personal computer, it made everybody more productive. The advent of even the early days, the mobile phone was something you could be more productive and you could take work with you on the go and all these things, it made everybody more productive.   [00:48:20.480] Now, technology, I think really since not to knock it, but since 2007, since the iPhone came out, most technology, I think that was sort of the high watermark. And since then, the iPhone, since 2007 on most new technology has really been consumer technology, not productive technology. It’s consumptive technology. It’s technology that helps us consume better. When we think about, for years, among the top tech companies, amazon, Facebook, Apple, Netflix, considered a tech company.   [00:48:48.450] I mean, this is not a tech company. It’s a media company that just happens to deliver its media using technology. But this is considered a tech company. Amazon, basically, it’s tech that helps us spend more money, helps us shop. Facebook is a tech company that helps us swipe and scroll and scroll and swipe.   [00:49:03.920] Helps 14 year old girls feel shittier about themselves because there’s somebody out there that’s prettier and more popular. Apple, that creates the devices that help us swipe and scroll. Netflix, where we can just waste away hours and hours watching the tinder swindler or whatever. I mean, all these technology companies, it’s not really technology. It’s actually ways to make people waste time and actually be distracted from the work, from the productivity that they’re actually doing.   [00:49:32.420] Real technology will solve problems. Real technology creates ways to do things better, faster, cheaper, better, using fewer resources, using less energy, less electricity. That’s what real technology, productive technology does. And not just swiping and scrolling. And I think that productive technology is absolutely a real asset.   [00:49:50.660] Real assets are the things that the world, the stuff that the world really needs. I mean, it could even be an intellectual property. This is productive technology. This is a real asset. It’s not just swiping and scrolling.   [00:50:01.310] It’s things that actually move the needle to make people more productive so we can do more with less. Productive technology is absolutely a real asset. And one of those that I think makes a lot of sense from a macro perspective, I would say countries even, who can live within their means, who have fairly liberal economies, who produce real assets like AG mining, energy and technology, these are places that can actually do well. And ironically, the United States actually does have a lot of potential here. The US has a lot of minerals, a lot of resources, a lot of energy potential if they could just get out of their own way.   [00:50:35.160] Lots of agriculture, lots of farmland, lots of brainpower to create really truly productive, game changing, productive technology. All of these things the United States actually does have. Not the only country that has this, but there are not that many in the US is one of them. It has the potential to do this. The problem right now, obviously, is there are just way too many emperors obstructing the way we know who they are, too many people with decades of experience who just keep screwing it up.   [00:51:03.160] And I think the end of the story here is that if the United States is able to get rid of it, charles V and all the other little emperors out there, I think the US actually stands a reasonable chance in this environment that is going to be, I think, years and years, if not decades. We’re going to be dealing with inflation, we are going be dealing with energy issues and all these things. I think the US actually does stand a reasonable chance they can just get out of their own way. Thanks very much for listening. I hope you got something out of this and we’ll speak to you again soon.   Close Podcast Transcription

John Adams famous wrote to his wife Abigail in the year 1780: “I must study politics and war, that my sons may have the liberty to study mathematics and philosophy. . . in order to give their children a right to study painting, poetry, and music. . .” So that their children can major in gender studies and waste their lives on Tik Tok. OK so I added that last part myself. But I believe the quote most accurately sums up the natural decline of empire. When enough time passes, a dominant superpower begins to lose the cultural traits that made it great to begin with. Instead of being energetic, ambitious, and hungry, the population becomes complacent. Meanwhile, hard-working rivals become wealthier by the day… rising, ascending, and eventually eclipsing the declining superpower. History has been witness to this natural cycle over and over again, from the ancient Greek conflicts between Athens and Sparta, to the decline of France and rise of Great Britain in the 1700s. The United States is the modern superpower that is now in obvious decline; we write about this all the time at Sovereign Man, so this should hardly be a controversial statement. As former US Treasury Secretary Larry Summers once said, “There is surely something odd about the world’s greatest power being the world’s greatest debtor.” And he’s right. The economic and financial data are clear: the US has enormous debts, huge deficits, awful inflation, and insolvent pension funds (like Social Security). The social divisions are palpable. Trust levels in institutions, government, and corporations are at historic lows. It’s true that the US has been divided before. And the US has also seen its share of financial crises. But simply put, America has never been battered simultaneously by so many debilitating trends. This is truly new territory for the world’s dominant power. Now, it’s important to not get emotional about US decline. We’re talking about facts and doing our best to make a rational analysis. And one of my conclusions is that we may be experiencing the end of an era. For the past several decades, the US was the undisputed global superpower. And there was a great deal of peace and prosperity in the world. After all, so many countries– China, India, Russia, etc. were getting rich selling their products and resources to the United States. Who would possibly want to screw up that balance? We’ve seen this same cycle over and over again throughout history: peace and prosperity go hand and hand. But things are different now. Other countries are stronger than they used to be. The US is much weaker. The power dynamics have been disrupted… and the cycle of peace and prosperity is being displaced by chaos and conflict. This is our topic for today’s podcast. We start in ancient Rome and discuss how the unparalleled dominance of the Roman Empire in the early 1st Century brought an unprecedented period of stability, peace, and prosperity to the western world. Frankly it’s quite similar to what we enjoyed for the past 30 years. But the Pax Romana, as this period is known, did not last. Neither is the Pax Americana. We see chaos and conflict all over the world now… much of it due to the decline of the US, much of it due to bonehead incompetence from the supposed ‘experts’ who run the show. And this new era of chaos and conflict has some pretty serious implications. Don’t worry– it’s not the end of the world. In fact, there are some really interesting opportunities for anyone with the independence of mind to look at these facts and trends rationally. And we discuss some of these in today’s podcast, including things like real assets, and investing in neutrality. I explain, for example, what today would be the equivalent of having a Swiss passport in 1935. Or which specific asset classes are extremely relevant in a world where resource nationalism is a real possibility. And how cryptocurrency fits in to a cycle of chaos and conflict. These big picture trends are all very clear– it’s the obvious trajectory of the world right now. And it makes a lot of sense to align yourself with that trajectory of the world. You can listen in to the podcast here. Open Podcast Transcription [00:00:01.090] Today, we’re going to go back in time to the year 29 BC to the Forum, Romania of ancient Rome. Now, this is about a five acre stretch in the Roman city center. It still exists today. And 2000 years ago, this was the primary center of commerce and trade. Everything that happened in ancient Rome happened in the Roman Forum.   [00:00:22.620] This is where they gave public speeches, parades, criminals were put on trial. There would be punishments, fights, arguments. Everything would happen here in the Roman Forum. And seven centuries before, one of the last kings of Rome had built a temple in the middle of the Roman Forum. And that temple was to one of the gods.   [00:00:45.590] Remember, Rome was a polytheistic culture, and there was a god in ancient Rome named Janice. Janice was a two faced god. He represented duality yin and yang, light and dark, good and evil, war and peace. And again, this ancient king, this is now seven centuries before 29 BC, built a temple of genus there in the Forum of ancient Rome. And the temple itself was quite historic, and it was quite symbolic.   [00:01:14.470] And the entrance to the temple were gates, specialized gates, and the gates were there again, as Janice represented this duality, including war and peace. The gates to the temple represented war and peace. And there was always a symbolic gesture throughout the history of Rome that whenever Rome was at peace, some leader or general would go to the Temple of Janus and close the gates. Closing the gates of Janus signified that Rome was at peace. Now, the last time that Rome had actually been at peace and the gates of the Temple of Janus were closed, it’s been 200 years before this.   [00:01:49.080] Rome was at war for centuries, constantly. I mean, they had war with barbarian tribes. They war with Carthage, one of their greatest enemies, and had even been at war with itself for decades, really up to 29 BC. There was a civil war between Julius Caesar and Pompey the Great. It was a major civil war.   [00:02:10.640] Julius Caesar won that war, and then in 44 BC, was himself assassinated by various senators. That led to a second civil war and the second Triumvirate, including Antony and Cleopatra and Pompey the Great Sun. And it all ended, more or less with a battle of actium in 31 BC. September 2, 31 BC. Anthony and Cleopatra committed suicide the following year.   [00:02:34.660] And this was basically what Rome looked like in 29 BC. Two decades of civil war really taking its toll. Towns across Italy, towns near Rome, had been sacked. Commerce and trade halted. Crime went through the roof.   [00:02:48.200] There was no military, there was no security. Police forces don’t even exist. Bandits and murderers ran wild. It was kind of like San Francisco today. People were hiding their money, hiding their income.   [00:03:02.270] When armies would move through towns during the Civil War period, they would just plunder the countryside. They would raise farms. They would steal people’s wealth. People were literally burying their money, and hope was quite forlorn. People didn’t feel optimistic about the future.   [00:03:18.300] They weren’t having children. Birth rates were declining. Immigration rates were declining. In short, Rome was war weary. It was tired of conflict.   [00:03:26.490] It was coming apart at the seams, and people were desperate. They were sick of it. They were sick of the conflict. They were sick of the war. They were sick of the crime.   [00:03:34.750] They were sick of everything. They were just angry. They wanted to stop. And they’re at the point where they just didn’t care. They just didn’t care.   [00:03:41.800] They didn’t care about the Republic. They didn’t care about their freedoms. They didn’t care about the voting. They didn’t care about any of that stuff. They just said, please, can I get somebody to deliver me from this conflict, from this constant chaos?   [00:03:53.170] I don’t care what it takes. We’ll do whatever. Just stop with this and give us peace and stability. Well, that’s exactly what they got. And they got it in the form of a guy named Gaius Octavius.   [00:04:05.060] guyus Octavius was actually the grand nephew and adopted son of Julius Caesar. Now, you got to remember, in ancient Rome, adult adoption was actually a fairly common thing. Adopting was the way that people would signify, this is who my heir is. Gisele Tavis was the grand nephew. But at a certain point, Caesar, who did not have an error of his own, decided, I’m going to adopt Gaia’s Octavia.   [00:04:24.410] And that was the signal to everybody that this guy is my heir apparent. And after Julie Caesar’s assassination in 44 BC. Gaius Octavius had waged and won the next civil war. He defeated all comers, all enemies, and at the end of it, he was victorious, and it came at great cost, and he knew it. Rome was in turmoil.   [00:04:45.020] It was 29 BC. He knew he needed to do something quickly. He needed to bring stability. And that’s why in 29 BC, Gaias Octavius stood at the temple of Janus and the Roman form, and he closed the gates. Now, Gaias Octavius is obviously known to history now as Augustus or Caesar Augustus, but that was actually his real name, was Gaius Octavius.   [00:05:07.560] We know him as Augustus, and most people refer to him as Augustus. And Augustus was really the first emperor of Rome. This is when Rome transitioned from being republic to being an empire. And Augustus was absolutely a dictator. He had all the power.   [00:05:23.700] Nobody opposed him. He was quite cunning. He kept the Senate close, but they gave him all the power he wanted, and nobody questioned him, because, again, everybody was so tired of conflict, and they said, we don’t even care you’re a dictator. Just do what we need you to do, and you can have all the power you want. And after he closed the gates, augustus got to work with forming Rome, and he did a lot of things that really strengthened Rome.   [00:05:45.980] He improved the rule of law. He got rid of all the illegal expropriations and the asset seizures, what we would call today civil asset forfeiture. They had that in ancient Rome where they just went and stole property, private property from people. And he stopped that. He said, no, we’re not going to do that anymore.   [00:06:01.810] And people slowly became more confident. They realized, okay, I can actually have assets and it’s not going to get stolen by the government. And so this money came out of hiding. People actually dug up their money, they dug up their wealth. And private investment once again began to flourish because people felt like, I could actually do things now in this economy, and it’s not going to get stolen by the government.   [00:06:22.780] He strengthened private property rights. He stabilized the currency. He invested big time in security to the point that he actually created the first police force there was in Rome. Crime rates plummeted, piracy. He had a big navy and he kept it.   [00:06:36.420] And piracy on the seas disappeared. He actually used the navy instead of for war, to actually patrol the seas and make it safe for trade and commerce. Bandits went into hiding and crime rates really plummeted. He reformed the tax system. He eliminated this system of very unfair tax farming, which ended up rearing its head again later on in the empire.   [00:06:55.650] He simplified the tax code. He didn’t make taxes exceptionally low. They weren’t high, but they weren’t super, super low. But they are reasonable. More importantly, they were simple.   [00:07:04.460] They were easy to understand. It wasn’t hugely bureaucratic, and people felt like they got a lot of benefit for what they were paying. They got a lot for their money. And part of that was because Augustus went out of his way to stamp out corruption and eliminate all the graft and the theft that had been prevalent for really centuries before he took that savings. He invested heavily in infrastructure, roads, aqueducts, post, literally a postal service.   [00:07:30.920] In fact, the reason we call it post goes back to the ancient Rome where they had along the roads that the Romans built. Every so often they would have a post there. That post was literally a post whereby mail could be dropped off and picked up and so forth. There’s literally a post in the ground. You could hire fresh horses.   [00:07:47.530] Sometimes there is food and water or an in there. That’s actually today why we still call it the post, goes back to the ancient days of the Roman Empire when they actually had little posts along the side of the roads. And all these things, these infrastructure investments, they boosted employment. They had heavy, for example, irrigation investments in irrigation investments they did, especially in Egypt, which was the bread basket for the Roman Empire. The irrigation investments in Egypt just brought this bonanza of wealth and tax revenue.   [00:08:13.390] And there was so much money, so much tax revenue that came into Rome as a result of the infrastructure investments they made, the irrigation investment they’re making it literally. It was such a flood of revenue that came into Rome. This tidal wave of money coming from Egypt actually caused interest rates in the Roman Empire to drop from 12% to 4% is how much money came in. And as a result of all of this, borrowing was cheap. Real estate prices boomed.   [00:08:37.260] Frankly, there’s a lot of things that we see in some respects similar to over the last couple of years. Now, all this was taking place. It wasn’t just in Rome. Rome was in this period of peace and prosperity. But it wasn’t just in Rome.   [00:08:48.680] Rome had a huge economy, a huge population. There are 7 million people on the Italian peninsula alone, 40 million people across the entire empire. And they had a lot of spending power. They had wealth, and they weren’t afraid to spend it. Imports abounded from all over the world.   [00:09:03.450] There is an ancient philosopher who lived around this time named Elius Aristides who said, whoever wishes to see all the goods of the world must either journey throughout the world or stay in Rome. Because when you were in Rome, you saw everything there was to possibly see from all over the world. They had meats from Sicily, stones, gemstones from Africa, soap, pottery from Gaul, pearls from Britain, amber and FIR from Germany, figs and cheese from Persia, incense and ginger from Arabia, rare fruits from Lebanon, silks from China. All over the world. And all this brought a great deal of wealth to foreigners and foreign traders and manufacturers and foreign farmers.   [00:09:44.450] Everybody was getting rich trading with Rome, selling to Rome. Everybody was getting rich. And so this peace really brought prosperity to everybody all over the world. Now, it’s an interesting thing when you think about peace and prosperity, we often see these two words together peace and prosperity. They go hand in hand.   [00:10:00.300] This is not a cause and effect relationship. It’s not that one creates the other. Peace creates prosperity, or prosperity creates peace. It’s actually more like a chicken and egg issue. Which comes first?   [00:10:09.870] It’s kind of hard to say, but they really, both of them go hand in hand. That peace and prosperity. For example, we see that peace meant that peace is security. And so trade routes over the land and over the sea were safe. They didn’t have pirates.   [00:10:23.070] They didn’t have the same problem with bandits and highway robbers and so forth across the roads. And so this made trade a lot better. And that created a great deal of prosperity. But you have to have one without the other. It had to be peace and security in order to have the prosperity.   [00:10:39.200] But you had to have the prosperity in order to maintain the peace and security. So you have to have both at the same time. Again, it’s much more of a chicken and egg, as opposed to a cause and effect. And there are all these great stories back then, in the early days and the days of Augustus in particular, where merchants would come from all over the world. The story of merchants coming from Alexandria in Egypt, who literally came to worship Augustus because he provided the security that they needed to be able to trade.   [00:11:04.650] Their entire livelihood was based on the fact that they could trade. And the only reason they could trade was because August has provided them the ability to do so. Now, throughout all this time, life was pretty great, as you can imagine. Peace and prosperity, the stability. It was really extraordinary.   [00:11:21.660] And Romans lived a really great life. One of my, I think probably favorite, if you take a slice of life from Romans, like, what did Romans do? They got up in the morning, they went to work, and they do things like normal people do. But the way they actually entertain themselves is quite interesting. We hear all the stories about bread and circuses and the gladiator events and so forth, but actually, one of the things, especially in the days of Augustus, one of the things that was actually the most one of the kind of the centers of social life was actually the baths, the Roman baths.   [00:11:49.890] And many of these actually still exist today. The Romans were incredible engineers, and they figured out how to actually bring in hot water, underground water from natural hot springs and so forth, and pipe them into the city. And there were hundreds of them, hundreds of them, just in the city of Rome. These baths were actually at a subsidized entry cost. The cost was one quadrant, which works out to be an ancient unit of currency.   [00:12:15.440] That works out to be about $0.28 in today’s money. That’s based on a gold price of about $1,700. So we talk about twenty eight cents to be able to buy a day pass into a Roman death. Now, that might seem outrageously cheap, but it’s actually not. If you think about it, that daily rate works out to be about $100 a year, a little bit more than $100 a year.   [00:12:38.000] And that’s actually not that far off from what it takes to get an annual membership at the parks and recreation department in my hometown outside of Dallas, Texas. So it’s actually somewhat similar to these subsidizer. If you think about the Roman baths as sort of parks and recreation in the city, where you go to a local rec center in the gym and the swimming pool and all that, that’s what the Roman baths were, but they were a lot more interesting. Roman baths were open from sunrise six, seven a. M.   [00:13:03.760] To about 01:00 p.m.. For women, and then from 02:00 p.m.. Until evening time, maybe eight, nine PM. For men. And they have certain gym facilities, so you’re going there.   [00:13:13.050] And as an ancient Roman, they didn’t have, I don’t know, whatever spinning classes and that sort of thing. But instead you could throw javelins and discus and boxing and wrestling and all the old school kind of Greek Olympian sports. These are the sorts of things that you can do in the gym facilities. And then you would go into the Tepidarium. This is the warm air sauna and then the Calidarium, which was the hot sauna.   [00:13:37.190] Then they had the Frigidarium, which was a cold plunge bath. And then they had the Thermae, which were the hot baths and all these things you go around from place to place and the hot sauna, the hot baths and the steam rooms and the cold baths and go back and forth these places. And they had game rooms. They were you go and play dice. And they had this version of an early proto chest called Ludus Latin Collorum which was like a kind of military strategy game that was very popular in the Roman Empire.   [00:14:05.310] They had game rooms set up where you had guys that were playing these board games with each other. And they had libraries and reading rooms. And they had areas for socializing where people would sit around and eat fresh fruit and gossip and talk to each other about just learn whatever the rumor of the day was. And other rooms they could hear musicians perform and philosophers and scientists delivering lectures. And they had gourmet restaurants.   [00:14:30.560] All this inside of the Roman bath, you got it for basically you’re like parks and recreation. $100 a year price. What do you think about it? That’s a pretty ideal lifestyle. Now, Rome was the superpower at the time, right?   [00:14:45.580] This is a place they had no more enemies. Their last major enemy was Carthage. They had long since been laid to waste. Roman legions and the Roman Navy still inspired tremendous all around the world. They had the best technology.   [00:14:56.790] Rome had the best engineers, they had the best roads, the best aqueducts, they had great metallurgy, they had hydraulic mining technology. It was just out of this world stuff. When people come to Rome and go, oh, my God, I can’t believe people do these things. This is incredible. So Rome was exporting its technology.   [00:15:14.350] Everybody’s coming to Rome to learn and they were also exporting culture. Roman culture was dominant throughout the world. This was the age of Ovid and Horace and Virgil and Livy. Even Emperor Augustus himself was so enthralled that he would eagerly anticipate Virgil’s latest release like it was an Avengers film or something like this. When you look at all of that and you say, god, life was so good.   [00:15:39.860] Life was great. Life was great in Rome. Life was great outside of Rome. People were getting fabulously rich selling to the Romans. The Romans are getting fat and happy enjoying this wonderful life, this peace and prosperity.   [00:15:50.690] Businesses are making money. Property prices were going up. Everybody was doing great. And this is known to history as the PAX Romana, the Roman peace, where everybody was doing so well. Who would possibly want to mess that up?   [00:16:05.250] Who would want to throw a monkey wrench in that? Everybody’s doing so well. Nobody would want to mess that up. And that’s really why peace and prosperity do go hand in hand. Because you get to a certain point where you need some level of prosperity to be able to maintain the peace.   [00:16:18.920] But you need to have peace in order to have prosperity. They go hand in hand. It’s very cyclical. It’s a little bit of peace, a little bit of prosperity. It’s the self propagating, self aggregating, self fulfilling prophecy that as it continues, it gets bigger and bigger.   [00:16:32.970] It’s a lot of momentum in this towards more and more peace and prosperity. It just continues to build and build and build. And when you have it, it’s great. It’s great. And nobody wants to mess it up.   [00:16:45.590] This is what I think we’ve been experiencing for the past several decades. Starting in about early 1990s, we had a very similar thing. The US. Vanquished its last enemy. Instead of Carthage, it was the Soviet Union.   [00:16:58.270] Right. Just like Rome, the US has had and continues to have really this massive consumer economy that just like Rome, was importing everything from all over the world. The US was home to a very stable, respected reserve currency, accepted worldwide. The dollar was king. Everybody accepted it.   [00:17:17.530] Very powerful military dominant technology gave birth to the internet, Hollywood culture that was being exported around the world. Everybody wanted to be America, america number one. Everybody respected that. We’re talking about 1990s and again, everybody is making money. Who would want to mess that up?   [00:17:37.320] The Chinese are making money, the Vietnamese are making money. The Brazilians are making money. Mexico is making money. Everybody’s making money selling to the United States. Who possibly wants to mess that up?   [00:17:47.890] And this is the way the world was for decades. And we saw the rise of all these emerging markets, the bricks nations in India and Indonesia and so many places that we’re doing so extremely well. This is some people call this the PAX Americana, like the PAX Ramana. I call it the PAX argentari. Argentari is the Latin word for fights.   [00:18:08.370] It’s a financial piece, the money piece. Basically, it’s the piece that was brought by money, by wealth, because people were doing so extremely well. Who would possibly want to mess that up? But the thing is, it never lasts forever. There was kind of an obscure economist in the 20th century, mid 20th century.   [00:18:28.880] His name was Robert Trifon. And Robert Triffin had an economist theory, it’s called Triffin’s Dilemma that basically says that dominant superpowers simply cannot last. They cannot last because it’s like an autoimmune disorder. It just eventually attacks itself. Dominant superpowers by nature, because they’re the dominant superpower, they cannot produce everything in their own economy.   [00:18:50.610] It’s just too expensive. Being the dominant superpower means that you have this very expensive economy. You have expensive labor force and so you’re not going to be able to produce socks and underwear because it’s just too expensive. And so you got to start importing things from cheaper countries overseas and eventually that takes hold and you start importing more and more and more and more. As you start importing more, you grow this trade deficit, this current account deficit and essentially, you’re shipping wealth overseas in exchange for other people’s production.   [00:19:19.400] Your adversaries grow rich while you grow weaker because you’re importing so much. And this is just a very cyclical thing. Rich nations tend to and we have seen this over and over again throughout history rich nations grow lazy. They get fat and happy. They lose their edge.   [00:19:35.310] They lose the priorities of the things that made them great and powerful to begin with. They lose the eye of the tiger. Complacency sets in. Deficits become commonplace. Debts rise.   [00:19:46.410] The currency they start to debase the currency and they do so with a tremendous sense of arrogance where they say, we’re number one and everybody else is just going to suck it up. Everybody else has got to deal with it. We can do whatever we want because we’re number one. So we can debase our currency and we can go into debt and we can run these sky high deficits and we can do whatever we want. It’s that sense of arrogance because they lose the thing that makes them great.   [00:20:09.410] John Adams wrote to his wife Abigail on May 12, 1780. This was John Adams, the second president United States. This was years before he became president, but he was one of the Founding Fathers and had helped frame the constitution. In 1780 was the year he actually helped draft the Massachusetts Constitutions and the Commonwealth of Massachusetts. And he wrote to his wife in May 1780.   [00:20:31.790] He said, quote, I must study politics and war that my sons have the liberty to study mathematics and philosophy in order to give their children a right to study painting, poetry, and music so that their children can major in gender studies and waste their lives on TikTok. Now, of course, I added that last part myself but the whole idea here is that this is John Adams saying, like, I’ve got to do this tough work so that my sons can do this other stuff that’s still tough but different so that eventually, further on down the road, we have these younger generations, and they can do whatever they want. They can study art, and they can major in gender studies and they can do all these things that don’t really have the same value as studying politics and war or science and technology, etc. E. And this is essentially the way that empires go.   [00:21:18.560] You start off strong, and everybody is focused and there’s a common sense of understanding, and that commonality, that unity and eventually its discord. And all these things give way. And this is when empires go into decline and all of it can disappear rather quickly. In the case of Rome, augustus died in 14 Ad. Two emperors later, after Augustus was Tiberius, after Tiberius was very infamous, Caligula.   [00:21:44.600] Caligula ended his reign in 41 Ad. So from 14 Ad, at the time that Augustus died to 41 Ad, we’re talking basically three decades later, the treasure was bankrupt. All trust and confidence in the government’s, gone. This is by the end of the reign of Caligula, of course, Caligula just famously turned to I mean, they’re not just rumors, actually true stories about turning palaces into brothels and all this crazy stuff that was going on. And people looked at the government and said, oh, my God, what a joke.   [00:22:12.810] What a joke. All trust and confidence in the government was gone. The power, the fame, the grandeur, the gravitas was all gone. And the treasury was totally bankrupt. And it happened in three decades.   [00:22:24.030] It happened in about 30 years. Right? So that sense of decline, it works in the opposite way. When we talked about peace and prosperity as being this sort of self propagating, cyclical force that just continues to rise and rise and rise, and the more peace and more prosperity you have, the more peace you have, so the more prosperity you have. And it rises and rises and rises.   [00:22:47.150] But when the decline sets in, it has the opposite effect. You have this self propagating force of conflict and destruction and you have more conflict and you have more destruction. And this is really a common theme in history. Conflict really does. When you have decline that starts to set in, conflict often does take place when you have a declining power that collides with a rising power.   [00:23:07.610] This is known in geopolitics as the Thucydides Trap, and this is named after the ancient Greek historian who wrote the history of the Peloponnesian Wars between the rising and declining powers in Greece, Athens and Sparta. And this sort of conflict, conflict is always extremely expensive. Conflict creates economic devastation. We’re not just talking about war, but war in particular creates vast economic devastation. And that vast economic devastation often begets more conflict.   [00:23:34.250] Here’s a great example, world War One. Leading up to World War I have the UK in decline. The UK enjoyed a century as the peak superpower in the 1800s, but by the early 1009 hundreds, it was obvious the UK was in decline. Meanwhile, we have Germany as a rising dominant power. Austria Hungary is a declining power.   [00:23:54.140] The US is a rising power. The Ottoman Empire is a declining power. So we have all these powers rising, other powers declining, and they’re all colliding with each other. And basically there just needs to be some assets to be kicked. And that’s what World War One was all about.   [00:24:07.830] All these guys forming alliances and so forth. And at the end of day, they had to fight it out. But World War I, because they vastly, all the experts vastly underestimated what that war was going to be in World War I created a historic devastation the world had never seen before. That’s why they call it the Great War. They didn’t call it World War I, obviously called it the Great War.   [00:24:29.200] And the Great War dealt a historic amount of devastation, especially to the European continent. And that devastation, again, the conflict created devastation. And the devastation created, what a surprise, world War II. More conflict, right? Because he had the Weimar Republic, which made it possible for a guy like Adolf Hitler to rise and so forth.   [00:24:48.410] And you get more conflict out of that. Conflict creates economic devastation. Economic devastation creates more conflict. This is all very cyclical. It’s like the economic cycles where we have a period of boom and then bust.   [00:25:00.590] We have geopolitical cycles where we have peace and prosperity and then conflict and destruction. And then peace and prosperity and conflict and destruction. If we think about our world today, again, we go back to the US. It peaked in the early 1990s. Debt was being paid down.   [00:25:14.900] I mean, the deficits were actually falling. They’re running a budget surplus. Oh, my God, a budget surplus. Can you imagine a budget surplus in the United States of America? That’s what it was in the 1990s.   [00:25:24.260] And we had peace and prosperity. The worst thing that we had to worry about was Bill Clinton saying it depends on what the meaning of the word is, which, if you’re too young to remember that, that was actually a real thing that the President United States said. Depends on what the meaning of the word is, which in of itself is hilarious. It took 30 years, just like Rome, right from the time that Augustus died to the time that Caligula ended. His reign was about 30 years.   [00:25:51.320] And they went from being super powerful and prosperous and all these things to Treasury’s bankrupt. Nobody trusts the government. The whole thing is a joke. 30 years. Well, guess what?   [00:26:00.460] Early 1990s, 2022, 30 years, and we see the same thing. The US is an obvious decline. I’ve talked about this before, another podcast. When I talk about the four forces of decline, I’ll touch on these briefly. But we have the forces of energy.   [00:26:14.290] I did a whole podcast about the forces of energy, and I would really encourage you to listen to that and understand that trend about energy sources that are becoming more scarce, becoming more expensive. And this makes everybody worse off. You cannot have a healthy economy if you have expensive energy. It’s just not possible. There’s a very, very clear correlation between a robust and prosperous economy and cheap and expensive energy.   [00:26:38.700] Where you have an expensive bit of energy, you have a prosperous economy. Where you have expensive energy, you have an economy that’s worse off. And so the forces of energy are. Extremely powerful in this. We also have the forces of society, and these are the things, the anger and the trust issues and the social divisions and the constant conflict and the Twitter feuds, and just the antifa and the fist fights on the airplanes and all these things that we see, just society so deeply frayed and scarred and everybody just in each other’s throats.   [00:27:10.910] Those are forces of society that we’re also seeing. We have forces of economy, the debt and the inflation and Social Security looming insolvency and $2 trillion deficits, and politicians that hold up their index finger to their thumb and say it costs nothing when they’re talking about two and a half trillion dollars spending packages. These are the forces of economy. And the last of the four forces are the forces of history. These are the natural cycles of things.   [00:27:37.820] The rise and fall of empire, in this case, the rise of other nations. And we see this in this context of the idea of the cycle of peace and prosperity, the cycle of conflict and chaos and destruction. And we see this cycle. And just like Rome, when you think about in the 1990s and the US was at the center, it has the economic superpower and the military superpower, nobody could come close to the United States, and its last major enemy had been vanquished. And the US was exporting culture all over the world.   [00:28:07.400] It was all about Tom Cruise and Hollywood. And maybe in some respects, it’s still all about Tom Cruise. But if you look at the changes that we’ve seen, the US military, which I would still argue was the finest fighting force in the world, the military has been gutted from a financial perspective. It’s been gutted from a policy perspective. Now they stand down.   [00:28:30.150] The military, it’s all about all these sort of this woke ideology that they have injected into the military. Now. It’s not about national security anymore. They’ve done this in the intelligence agencies and the CIA and so forth. It is completely ridiculous.   [00:28:46.640] Not to mention the utter humiliation. The utter humiliation. The shameful withdrawal from Afghanistan with the helicopters and people dangling from the landing gears of the airplanes and having to pass babies over razor wire and so forth. I mean, just what an utter humiliation in front of the entire world. The kind of thing that makes the adversaries of America look and go, really?   [00:29:12.750] I’m supposed to be intimidated by these people? It’s just not a good look. You look at how from a cultural perspective, look at how these big US institutions just suck up to China from a cultural perspective. Disney is saying, thank you for letting us film our movie next to your Uighur concentration camp while we completely turn a blind eye to the genocide that you’re waging on your own people. The National Basketball association closing ranks, firing an executive because he dared say something that was pro Hong Kong.   [00:29:40.850] It wasn’t that long ago, John Cena, the Hollywood actor, was groveling in Mandarin on Chinese social media because he dared to call Taiwan a country. I mean, this is the sort of thing where you go, that was peak culture. Peak American culture was at least now 1015 years ago. Now it’s all about Hollywood studios. It’s like, it’s all about, we got to get the Chinese on board.   [00:30:03.220] We got to get our movie in the Chinese box office, otherwise we’re not going to make it. And all these big companies, they all turn a blind eye to all the human rights atrocities, everything that goes on in China, they completely turn the blind eye to it, and they completely just suck up to the CCP. It’s such a joke. We’re way past peak American culture again. The military has been gutted.   [00:30:26.330] From a financial perspective, this woke ideology, the humiliation, the loss of the defeats from that. And I would even say that if you look at American technology, which used to lead the way in the world, the US. Has really lost its edge in a lot of different ways. It’s really fallen behind. The US.   [00:30:42.810] Is great at producing vaccines. Boy, if you want a vaccine, the US. Is that’s USA number one. But in other things, I mean, the US. Has fallen far behind, for example, and things really of the future, like supercomputing technology, etc.   [00:30:54.590] For but the biggest thing that I would point out about US. Technology is that most us? Technology these days really seems to be more oriented towards consumer technology. It’s about helping people consume more. It’s not productive technology.   [00:31:09.090] It’s consumptive consumer technology. Instead of making us our lives better, our lives easier, doing things faster, doing things cheaper, how do we keep people scrolling and swiping and swiping and scrolling? That’s what it is. Like our big technology companies, it’s like Apple, which makes iPhones, and Facebook, which destroys the self esteem of 14 year old girls, and TikTok, which sells all of the 14 year old girls data to the CCP. And actually, it doesn’t even sell it.   [00:31:36.430] They just give it away for free because they’re all basically stateowned Chinese companies, and Spotify, which we just listen to music, whatever. This is a technology company.   [00:31:47.390] This is not the kind of technology that they used to put out decades ago. And it’s worth pointing out that let’s just say adversarial nations tend to focus more on productive technology and not consumer technology. You have a currency that’s not as widely respected as it used to be, not as powerful as it used to be, and geez, you’re looking at eight 9% annualized inflation. Central banks, central bankers in the US. Don’t seem to have the foggiest idea what they’re doing now that it’s running this haphazard monetary policy after being completely asleep at the wheel saying, inflation?   [00:32:23.470] What do you talk about? There’s no inflation. And they say, oh, it’s transitory. They said, okay, yeah, fine, we have inflation, we’ll do something about it eventually. And now all of a sudden it’s this emergency.   [00:32:32.360] Inflation has been around for more than a year, but now suddenly they’re taking it seriously and saying, from my cold, dead hens, we’re going to do no matter what the cost, we’re going to keep raising rates until whatever hell freezes over. It’s this very panicky approach to everything. And they’ve demonstrated that they are incompetent, that they totally missed it. They failed to predict it. They failed to see it even when it was so obvious to everybody else.   [00:32:57.900] This is not the kind of central bank policy and institution that inspires confidence in the rest of the world. And at the same time, the US. Sees many of his adversaries rising. And all these things happened again, like ancient Rome we’re really talking about over the last 30 years. We’re seeing geopolitical events that would have been unthinkable 25 years ago, and enemies, at least I want to say enemies, it sounds too generic.   [00:33:23.970] But really adversaries that are so emboldened in doing things that would have been completely unthinkable. And that’s what happens when you don’t have a stable hegemon. That peace and prosperity. The peace disappears quickly, and you can’t have the stable hegemon. When you’re running the largest current account deficit, you’re running the biggest national debt in the history of the world.   [00:33:44.270] It was Larry Summers, former treasury secretary. He’s in the news a lot, always running his mouth about inflation and where interest rates should be, blah, blah. But one of the better things that Larry Summers ever said was, how long can the world’s biggest debt or go on being the world’s greatest power? And he’s right. You can’t have $30 trillion in debt and expect to be the dominant superpower in the world and constantly go groveling to foreign nations, banks, please buy my treasury bonds.   [00:34:09.730] It’s just not a good look. It’s not something that powerful nations have to do. And so we have all these unthinkable geopolitical events, and we also have all these extra factors at play. We have consequences that are still playing out from the disastrous public health policies that took place during the Pandemic. We have the inflation, we have the energy crisis.   [00:34:28.650] And so all these things, the conflict, right? The conflict and destruction. The conflict is already upon us, and the conflict is destructive. Like we talked about in the examples, world War I creates economic destruction. The economic destruction from World War One created the conditions for World War II.   [00:34:44.960] Conflict creates destruction, destruction begins more conflict. And this is kind of the state of the world right now. It’s important to point out, and I’m not saying like, oh, this all means shooting wars. Conflict and destruction, that part of the cycle. Again, it’s this self perpetuating, self actualizing cycle where they reinforce each other.   [00:35:03.930] Conflict creates destruction, destruction creates conflict. That part of the cycle. Doesn’t necessarily I’m not talking about a shooting war. I’m not necessarily saying, although obviously we’re seeing that right now, but destruction basically means we’re talking about fewer resources. Conflict means having various forms of conflict over those resources, fewer resources.   [00:35:25.160] When you have conflict, conflict creates destruction. Destruction means fewer resources. Fewer resources means a scarcity mentality. It creates a sense of mercantilism. We talked about that in a previous podcast.   [00:35:35.250] The difference between mercantilism and capitalism. Mercantilism was an economic system before capitalism, before Adam Smith wrote The Wealth of nations in 1776, one of the most important things to happen that year. And before capitalism, there was this system called mercantilism. Mercantilism was all about government control. It’s a zero sum game.   [00:35:54.190] I get rich at your expense, you get rich at my expense. Therefore I have to block you. I have to block you from growing, because if I don’t block you, you’re going to grow at my expense. So I have to block you. I have to obstruct you.   [00:36:06.660] I have to stand in your way because it’s a zero sum game and I’m going to win. And I’m going to win because it’s at your expense. So we don’t do win win deals. Capitalism is all about winwin. Value creation is about winwin.   [00:36:20.700] And mercantilism, in this conflictridden, scarcity mentality, resources are scarce. And so I’ve got to be protective, protectionist, mercantilist mentality, it’s all about win lose. I got to win because you’re going to lose. And the only way I can win is if you lose. So the only deal I want to do is a win lose deal where I get all the chips and you get nothing, where I get most of the benefit and you get very little benefit because there’s a finite amount of benefit.   [00:36:46.790] And I’m going to take as much as I can for myself. And if I can’t do a win lose deal, then we’re going to do a lose lose deal. We’re all going to go down together. And that’s usually what ends up happening. And this is why conflict and destruction are self reinforcing, because it pushes people to do lose lose deals.   [00:37:02.960] And we’ve seen this, I mean, every day in the paper, we just see lose lose deals. The conflict, the war itself is just a lose lose deal. Everybody loses. Russia loses, ukraine loses, germany loses, the US. Loses.   [00:37:14.550] Everybody’s worse off. But they’re just going to keep doing it because they have this if I can’t win, then you’re going to lose, you can’t lose. So we all end up we’re just all going to lose. And that’s what ends up happening. We’re just all going to lose.   [00:37:25.350] And that’s this sort of destructive destruction, conflict cycle mentality. It’s mercantilist. It’s a scarcity mentality, it’s a lose lose mentality. And it’s all extremely anti productive. But again, it’s not all about a shooting war.   [00:37:39.860] It doesn’t mean a shooting war. There are so many different ways that conflict can play out. We’re talking about things like economic sanctions. G where have we seen those? Trade wars and tariffs g.   [00:37:49.890] Where have we seen that? Controls, right? Different types of controls, capital controls, exchange controls, price controls, competitive evaluation. We already see a lot of competitive evaluation, and I would remind you that in our modern world, in modern history, modern economic history, things like exchange controls and even capital controls were actually quite commonplace. Exchange controls have existed in modern economic history for far longer than they haven’t existed.   [00:38:17.970] Exchange controls are where people say, okay, well, here’s where our currency is going to be. Or we’re not going to allow currency to freely come in and out of the country. We’re going to create controls and restrictions around currency leaving the country or coming into the country and so forth. We’re going to control these things because we have to control our economy. We have to prevent adversaries from coming in and making investments or selling investments or profiting off of our economy.   [00:38:41.850] So this is why people create controls. And controls existed literally for decades and decades and decades. We’ve had the last couple of decades where we haven’t really had exchange controls, but that’s actually a relatively recent phenomenon, so it wouldn’t be a surprise to see return to some sort of exchange controls or capital controls. And again, some of us were already seeing some form of these things like competitive devaluation, the trade wars, the tariffs, the economic sanctions, these sorts of things. We’re already seeing again, it’s all of it.   [00:39:07.780] It’s all of it very anti productive. It’s win lose, or it’s lose lose. It’s definitely not win win. And this is why in this type of conflict, when we get into this part of the cycle where it’s about destruction and conflict and conflict and destruction, it’s really ultimately, again, we’re not talking about a shooting war, but all this type of conflict is really it’s like a war of attrition. It’s to say who can stand to lose the most resources for the longest period of time.   [00:39:33.820] That’s what a war of attrition is. It’s just you just lose and you lose and you lose, and basically you’re just trying to outlast the other guy. So who can lose the longest? Whoever can lose the longest wins the war of attrition. And that’s an extremely anti productive prospect.   [00:39:51.170] One of the things I think this leads to, and again, this is me trying to, in a way, connect the dots in advance and skate to where the puck is going to be. But this idea, the cycle of destruction and conflict and conflict and destruction, one of the things in the controls and the exchange controls and the capital controls leads to something that I think is we could call it resource nationalism. I know what I’m saying. Nationalism not nationalization. I’m not talking about expropriation or confiscation or governments coming and say we’re going to seize all these assets.   [00:40:22.830] We’re not talking about nationalization. We’re talking about nationalism. Nationalism. So this is basically export controls, right? If you think about whenever you export anything, when a company and wherever country produces something, they manufacture something and they ship it overseas.   [00:40:41.050] Essentially, they are exporting everything that went into producing that thing. If you’re producing widgets and digits and whatever else, you’re exporting everything that went into producing that. You’re exporting the raw materials, you’re exporting the labor, you’re exporting the energy, you’re exporting every single thing that went into producing that manufactured good, and you’re shipping that away. So in an environment, for example, where, let’s say, energy is scarce and it takes energy to manufacture something, it’s certainly plausible that a government is going to peer in it and say, do we really want all this energy that we had to use to produce this thing? Do we want all that energy being exported over to our adversary?   [00:41:18.540] And it’s certainly a case to be made that governments really start paying attention to how scarce resources being used and allocated. More importantly, where do they end up? Are we shipping things to our adversaries? Are we comfortable exporting energy to our adversaries? Are we comfortable exporting anything at all to our adversaries?   [00:41:36.930] And so they start looking at things and start identifying what they would consider critical national resources. And this can be a number of things. It could be certain minerals, very important, and critical minerals like lithium, for example. Absolutely certain things like energy. Even food.   [00:41:55.190] Even food, I think, is a possibility. We’re not talking about caviar and things like that. We’re talking about wheat, some of the really basic staples. And as an example of this, I would point out, in the state of California, for example, california is the largest almond producing region in the world. State of California produces 90 even.   [00:42:15.560] I’ve seen estimates of up to 99% of all the world’s almonds, right? Almonds is a type of nut, obviously. Now, almonds suck up a lot of water. They use a lot of water. And so the state of California, the almond farmers are estimated to consume, at least on the low side, 10% of the state of California’s water supply.   [00:42:35.570] So if you think about almond, farmers in California are using 10% of the state’s water supply to grow almonds, and then they take those almonds and they export them outside of California. Some of that ends up in different parts of the United States. Others might end up in China. And so, at a certain point, even the state government in California say, do we really want to be exporting 10% of our state’s water supply to China or any other country in the world? Does that really make sense?   [00:43:01.530] And so that sort of thing where they start looking at going, hey, we have scarce resources. We need to start paying more attention to this. And this is where they identify. This is a resource that’s in the national interest. A national resource.   [00:43:13.030] And I think this also includes certain types of technology, even data, personal consumer data, the types of things that, for example, I mentioned before that TikTok is collecting. Everybody that uses TikTok. I mean, everybody uses any of these apps. If you’re on Instagram or any of the sort of stuff. These guys are just collecting data, data and more data on you.   [00:43:33.660] And if you’re using TikTok, all that stuff is being shared immediately with the Chinese government. That’s not some wild conspiracy theory. This is the executives at TikTok at Bite Dance full blown admit this. They gave testimony in front of the United States House of Representatives and they full blown admitted this. So this is not any kind of conspiracy theory.   [00:43:52.810] This is coming straight out of the executive’s mouth. So this is the sort of thing, at a certain point, you can imagine politicians saying, we need to be a little bit more careful about what we allow to be exported. This is a type of export control. This is resource nationalism, where we start identifying we don’t want certain things to leave our borders, or not necessarily leave our borders, but we’ll give it up to Canada, we’ll give it up to Britain, but we don’t want it to go to the Chinese. And this is really not that far fetched.   [00:44:22.490] Remember, they did this with face masks. They did this with face masks in 2020. It was a national resource, right? People can’t buy it, we can’t export it, we can’t ship face masks overseas. So if they’re going to do it with face masks and they did it with face masks in 2020, why wouldn’t they do it with other things?   [00:44:37.440] Especially if there’s a real shortage or a real crisis in some particular resource. So this is something, I think, that’s totally within the realm of possibilities now. This is again, it’s not a guarantee or any kind of certain prediction. We can’t make certain predictions, and that’s not the business that we’re in. What we’re trying to do is make certain determinations about the path that the world is on.   [00:44:57.820] What is the trajectory that the world is on? And the trajectory right now seems fairly clearly that this is a mercantilist, scarcity minded, conflict and destruction sort of approach where there’s a whole lot of idiots in charge, and God help us, but there’s no way that Camel and AOC are going to lead us back to peace and prosperity. It’s just probably not going to happen. And I’m not saying that because this isn’t about doom and gloom or anything like that. This is not the end of the world.   [00:45:21.120] I do think, however, it’s important to consider that while not the end of the world, it may very well be the end of an era. An era where we had this PAX Argentarium, the PAX Americana, where it was just life was so good and everybody was making money. It was this again, self reinforcing, self propagating, peace and prosperity because more peace began, more prosperity and everybody is making so much money and everybody’s getting so wealthy and the Chinese are doing well and the Indians are doing well and the Russians are doing well and Europe is doing well and everybody’s doing well and who wants to mess it up? And then things happen. The decline starts to set in the natural end of empire.   [00:45:58.400] The decline of empire sets in and adversaries become more powerful and that balance of peace and prosperity starts to peak and offset and things happen and we see the four forces of decline set in. And then that leads to conflict. It leads to that thucydides trap. We have rising powers and declining powers colliding with each other over places like Taiwan or Ukraine or wherever else the case may be. That’s the world that we live in right now and I think it’s fair to at least argue the possibility of an end of an era, the end of a Pax Argentari on the end of a Pax Americana.   [00:46:32.370] And what does that really mean and where is the world going? I think it’s important to try and understand the trajectory of the world and to align oneself with the trajectory of the world. Instead of saying no, I’m just going to continue on as if we’re still living in the past, as if we’re still living in the 1990s and that’s still the world that we’re living in. Again, this is all about skating to where the puck is going to be. It’s not an exact science.   [00:46:53.220] We can’t really ever say for sure, but we’re not trying to pull out a crystal ball here and say here’s exactly what’s going to happen on this date at this time. That’s silly. We’re trying to connect some dots in advance and just understand big picture, the trajectory of the world and trying to align ourselves with the trajectory of the world. Now if we think about this from a financial perspective over the past several decades, central banks had all the power, right? Central banks, I mean we can think about if you’re old enough to remember Alan Greenspan in the 1990s, this is a guy, he was the big cheese back then.   [00:47:26.800] He’s one of the most powerful guys in the world. He was the chairman of the Federal Reserve back when you still used words like chairman. And this is a guy that went out and he commanded financial markets. He would notoriously speak in this Fed speak. He would just be very cryptic things and nobody could understand what he was saying.   [00:47:43.420] It was all this kind of code and everybody’s trying to read the tea leaves on what Alan Greenspan was going to do and what it was all about, whether he’s going to print money or he’s not going to print money. And based solely on what one person would say, markets would rise and fall. And we still see this realistically to this day. Jerome Powell, chairman of the firm. I think he’s chair or chairperson now.   [00:48:05.700] They don’t use ghastly words like chairman anymore, but Jerome Powell running the Fed. He goes out and says something and markets rise and fall, but these days are coming to an end. We’re already seeing this trust and confidence in central banks is falling rapidly. They have this basically one trick is to get to manipulate the money supply. They get to manipulate and by manipulating the money supply, they’re manipulating interest rates.   [00:48:28.670] That’s pretty much their one big trick. And people have seen again how asleep at the wheel they were. They look at the Fed with respect to inflation, say they were gaslighting people, they were denying it. Then they said it was transitory. Then they said, oh we’re going to do I swear to God we’re going to do something about it.   [00:48:45.960] And then six months passed before they did anything and they had these little tiny rate increases. And now they go, oh my God, now her hair is on fire. There’s five alarm fire. And they’re doing everything they can and they look like rank amateurs instead of these steady professionals who know what they’re doing. They look like complete amateurs who are totally asleep at the wheel, failed to predict it, failed to see anything coming, failed to do anything about it.   [00:49:08.060] And now they’re totally overreacting and blowing it all out of proportion. So this is not an organization that inspires confidence anymore. More importantly, I think people are realizing that the Fed’s bag of tricks doesn’t actually amount to very much. Yes, they can manipulate interest rates. Yes, they can increase and decrease the money supply.   [00:49:26.940] Big deal. They can’t produce food. They can’t produce energy. They can’t hit the button on their big printing press and make more oil come out of the ground or make more wheat come out of the ground. They can’t make more lithium come out of the mines.   [00:49:39.990] They can’t create any productive technology. They can’t do any of those things. And I think people are starting to realize that for the past several decades, during this whole PAX Argentarium, it was all about what is the Fed doing? And for the most part, the Fed was keeping monetary policy loose. For the past several decades, interest rates were generally falling and Fed balance sheets were rising.   [00:49:59.540] And so monetary conditions were easy and it was getting cheaper to borrow. And that was fueling this giant asset bubble. And that giant asset bubble fueled the rise in financial assets, paper assets, stocks and bonds and these sorts of things. And if we’re talking about the end of an era where an era that was dominated by Federal Reserve and central bank monetary policy that drove the value of paper assets higher and higher and higher, it might make sense to consider, well, what else is there? What are the alternatives to this idea of investing in paper?   [00:50:36.730] And frankly, the thing that might make a lot of sense right now is looking at real assets. Real assets is actually real stuff. Instead of just pieces of paper and so forth, it’s actually real things. I’m not talking about not investing in stocks and so forth. It’s not really what I’m saying.   [00:50:53.870] I’m talking about specific real assets. Energy, mining, minerals, agriculture, productive technology, which by the way, productive technology and consumer technology. And companies that actually invest in these things, companies that produce these things, could be on a stock exchange, could be a private business. But the point is, this is a big difference then. And the difference I would highlight is in the past, I think the best example of the financial asset boom was index investing, where in the past when all that mattered was are they printing or are they not printing?   [00:51:24.980] Are they keeping monetary conditions loose? Are they pumping liquidity into the system or not? And for most of the last several decades, they were pumping a lot of liquidity into the system. And essentially what that did is it drove up the value of paper assets, including big, broad index funds. Now, if you think about what an index fund is, a big broad index fund basically means that you own a little piece of everything regardless of price, regardless of quality.   [00:51:51.340] So if there are companies in some big stock index that are trading at all time highs and they are dog shit companies that just have no hope of ever making money and they have horrible balance sheets and they’re dead up to their eyeballs and they’re hemorrhaging cash and they’re never ever going to make money and the CEO’s a drunk or whatever, guess what? You buy an index fund, you’re buying shares of that company too. You’re buying shares of every terrible company in the index. And there’s a lot of terrible companies just because some companies on the stock market, a lot of terrible companies, a lot of great companies, a lot of things in between. But when you buy an index fund, you’re buying everything in the market.   [00:52:27.800] So even some horrible company that’s trading at an all time high, you are literally taking some of your money in that index fund and you’re buying shares of a horrible company and paying an all time record high price for it. And in a time where central banks dominated financial markets and it was all about are they printing or are they not printing? And as long as they’re printing money and as long as they’re expanding their balance sheets and keeping interest rates low, then you know what, paper assets are just going to boom. And that’s what happens. You didn’t have to do anything.   [00:52:55.530] You just tossed money into an index fund. You bought shares through the index, a terrible company, and paid a record high price for it. But you could still do okay because central banks were printing money. That’s the difference between real assets and. Paper assets, real assets and financial assets, real assets.   [00:53:11.640] We’re talking about investing in companies and businesses and even the real assets, the commodities themselves, etc. Are productive technology things that actually produce real things that actually matter in this world. Instead of just useless pieces of paper and not having any idea what we’re investing in, just throwing money at some random index or fund or piece of paper because the central bank is printing money, I think it’s probably worth considering that that era may in fact be over. And instead, I think what we’re left with is, in addition to investing in real assets, I want to leave you with an idea of investing in neutrality. And this is kind of an interesting concept.   [00:53:52.070] If we’re talking about being in an era where it’s dominated by conflict and destruction, and more conflict creates more destruction, which creates more conflict and so forth. I think there’s a couple of different ways to invest in neutrality, and one is looking in, let’s say, less aligned regions. I did a podcast previously where I talked about the barbarian kingdom thesis, where at the end of the fall of the Western Roman Empire, there are all these different barbarian kingdoms. There’s no longer a dominant superpower in the world. And I think that’s completely viable and plausible outcome, where instead of having a dominant superpower or even a bipolar world, it’s a multipolar world where you have China’s a strong power, and India is a strong power, and Europe is still relevant.   [00:54:34.990] North America, perhaps a union of North America is still very powerful, all these different sort of factions, some of which are aligned with others in certain ways and aligned with others in other ways. And if we’re talking about a world where there’s a lot of conflict, for example, between the US. And China, or Russia and the United States, et cetera, I think it might make sense to actually look at less aligned regions. And I think specifically, one of the regions that seems to be, at least for now, proving that it is not aligned and really had its fill with all this is Latin America. Latin America has a lot of Chinese influence.   [00:55:10.770] Latin America has a lot of us. Influence. Mexico is a great example. They’ve decided they want no part of this really hardcore side picking, where you’ve got to banish all Russians from your borders and you’ve got to engage in the two minutes hate every single day against all things Russia. And they said, we’re not going to do this.   [00:55:29.780] We’re going to continue to play nice with everybody. And in fact, Mexico even invited they said, hey, let’s have peace talks, and let’s invite Russians and Ukrainians here to Mexico and so forth. And Mexico is actually kind of gone out of its way to be neutral. And I think that’s interesting. And it’s the idea of looking at areas and parts of the world that are neutral is, I think an interesting concept, and not even necessarily in terms of financial investing, but we think it would even plan B sort of way of thinking about things.   [00:56:03.170] I look at Mexico as the way, if you could imagine having a Swiss passport in 1935, if you were in Europe, that would have been a very valuable resource for you and your family to have a Swiss passport in the mid 1930s before all hell broke loose in Europe. Because even when it happened, switzerland was still a neutral country. It was a safe haven. It was okay with everybody and didn’t take sides. And because of that, it was relatively unscathed even when all hell broke loose on the European continent.   [00:56:32.430] And I think to have something like that in Mexico is why having, for example, residency or citizenship, something like that in a place or at least a part of the world that is relatively neutral, I think that’s an interesting way to think about strategically even a plan B from a financial perspective as well. I think in terms of neutrality, I think also focusing on industries that aren’t really politically charged. This is one of the reasons why I like agriculture so much, because you could look at, I think, energy. There’s a lot of really great investments to be making in energy. We had a discussion before about nuclear.   [00:57:04.260] Energy is quite politically charged, though. I mean, everything to some degree is politically charged. There are people that are going to be professionally outraged about every single thing that you do or say. But in particular, energy, you’ve got a whole lobby of people, I mean, lots and lots and lots of people that never want to see another oil rig ever again. They never want to see another ounce, another barrel of oil ever drilled.   [00:57:24.230] They never want to see anything. They want to see any exploration. Same thing with mining, even though all these things, I mean, oil and gas and minerals, all these things are just so critical to the global economy. You don’t really see too many picket lines of people saying no more wheat, no more avocados. We want to round up all the avocado farmers and get rid of it.   [00:57:43.920] Nobody ever says that, right? Nobody has a problem with avocados. Nobody has a problem with these sorts of things. This is actually why I like agriculture, because it’s not politically charged. It’s neutral.   [00:57:53.890] It’s neutral. And I think neutral industries that don’t have these horrible forces, these ESG forces they’ve got oil has all the ESG forces against it. They’re forcing private equity funds and banks and so forth to not invest in oil and divest themselves from all their oil investments, try and chase these guys out of business and so forth. There are industries that don’t have that. Frankly.   [00:58:18.260] Certain industries within the technology sector are also not politically charged, right? Cybersecurity. Nobody screaming that cyber securitycurity firms need to go away and that they’re too politically charged or they’re rigging elections or anything like that. These are the sort of things I think that makes sense to really consider. So we talked about basically kind of less aligned regions.   [00:58:42.330] I don’t think there’s any such thing as a completely unaligned region, but less aligned regions, non politically charged industries. And I think as well, you can look the same thing with currency currencies are aligned. And I think if you’re holding a national currency in an environment that is very politically charged, geopolitically charged with a lot of conflict and so forth, what happens when they start sanctioning each other and the trade wars escalate and the competitive devaluation and the capital controls and exchange controls? What starts happening to the value of currency? They start playing, they get involved in currency disputes.   [00:59:14.480] Again, we’re not even talking about conflict. Doesn’t necessarily need to be a shooting war. It could just as easily be, hey, we’re going to dump your treasuries, we’re going to flood the market with treasuries. Your bonds are going to become worthless overnight. Your currency is going to go into freefall.   [00:59:28.890] All these things that adversarial nations could do. And so all these things are possible. And so to be able to hold things that are not actually aligned with any specific country or any specific block, and this is the thing that makes okay, sure, yeah, you could hold currency for other nations that are in line. But this is what I think why crypto is actually one of the many reasons why crypto is so extremely interesting is because it’s not aligned. Let them sanction each other.   [00:59:54.640] Let them engage in capital controls. Let them engage in all sorts of silly economic shenanigans with one another. It’s all good for crypto, and it’s a way to be able to hold wealth outside of a system that you can’t be sanctioned. It’s not subject to capital controls and all these sorts of things, and you can have it fully in the blockchain with a brain wallet and all sorts of things. This crypto is extremely interesting in this kind of environment.   [01:00:21.850] I think to a degree, gold and silver are as well. I would say it’s been just as an aside, It’s been interesting. I think a lot of people may be surprised that gold isn’t doing better in an environment where inflation is as high as it is and so forth. I think there are a number of reasons for that. But the one thing to keep in mind is that gold prices, where we start seeing major movements in gold prices over the long term, gold and has kept up very well with inflation.   [01:00:52.500] And the last stagflationary period in the 1970s, gold was one of the best performing investments. Gold, farmland, again, real assets like we were talking about did extremely well, extremely well. Gold, though, tends to move a lot when central banks buy and sell central banks, foreign sovereign governments, because these guys buy and they buy it by the time tons and tons and tons of gold. And that’s what really moves the price, because it’s not that much supply. And so when we see relatively limited supply, especially in an environment where people still deal with public health protocols and you’re dealing with supply chain issues and so forth, there’s supply issues in the gold market and then lots of demand coming from central banks, that’s what moves the price.   [01:01:37.830] And I think that’s something that and again. This isn’t necessarily a specific prediction. But I think in terms of the trajectory of the world. If people are looking at conflict and saying. I got too many dollars.   [01:01:49.530] Or I’m trying to screw over the United States because we’re trying to do a win lose or a lose lose. And so I’m going to dump some treasuries and so forth. Gold ends up being a beneficiary of this because they got to turn those dollars into something. They got to turn those euros into something. So what do they do?   [01:02:03.760] They buy gold. They buy gold because that’s traditionally what they can do. Gold is a big market. They can spend trillions and trillions of dollars in the gold market and buy a lot of metal. And it’s something that they know there’s always going to be some value for.   [01:02:16.620] They’re always going to be able to use that or trade that or sell it or whatever the case may be. And so I think we may be at some point here down the road in an environment where central banks and foreign governments are going to buy lots and lots of gold. And that’s something that could absolutely move the price. So all this is to say, I just wanted to give you some thoughts. This is by no means is this investment advice.   [01:02:38.720] This is one guy exercising my First Amendment right to express my personal views, presuming that the First Amendment right still exists at the time of this recording. I do absolutely fundamentally believe. In fact, I don’t even like saying the word believe. I believe. It’s like saying I believe in Santa Claus or the tooth fairy, something like that.   [01:02:57.630] I don’t believe. It’s just obvious the world is changing before our very eyes. My thesis, my theory, is that this is the end of an era, an era that was marked by dominance of central banks, the PAX Argentia, the PAX Americana, where life was so good, everybody’s making money, all these foreign countries, all these exporters traders, everybody emerging markets, everybody was doing well selling the United States, et cetera. But the natural forces of decline kicked in. Triffin’s dilemma.   [01:03:30.890] You cannot be the dominant superpower forever. Decline will eventually set in the rot, the complacency. You lose the eye of the tiger, you start to decline. And that decline creates conditions for conflict. And that conflict creates more loss.   [01:03:44.900] And that loss creates more conflict and so forth. We start seeing this with respect to trade wars and trade disputes and sanctions, and even shooting wars, and currency competitive, currency devaluation and all these sorts of things that creates more and more conflict, that creates more losses and destruction, which creates more conflict. And the scarcity mentality and mercantilist approach and win lose and lose lose deals. That’s basically what we’re seeing right now. That is my thesis here.   [01:04:13.560] And it, I think, combines with a lot of the things we’ve talked about in the past. The energy story, the barbarian kingdom thesis, all these things sort of together. This is just my attempt to try and piece together everything that I’ve studied for years and years about history with where I see the world is right now and where it looks like the trajectory of where the world is going. We can see the trajectory. And to me, I think it makes sense to align oneself with the trajectory of the world instead of trying to fight it, accept it and see where it’s going and try and really skate to where the puck is going to be, pick up on those big picture trends.   [01:04:50.630] It’s not an exact science. It’s not about crystal balls and trying to predict the future. It’s really about big picture trajectory and aligning ourselves with that trajectory. And the trajectory that we see right now is an end of an era. It’s not the end of the world, it’s the end of an era.   [01:05:06.000] And it’s not anything to be panicky about, it’s not anything to be overly concerned about. But it’s important to understand the gates of Janus are open. It is not the end of the world, but it does constitute a major shift. And as long as somebody has a little bit of courage and independence of mind to actually examine this openly with an open mind, it does create really a world of possibilities. I appreciate you listening and we’ll talk again soon.   Close Podcast Transcription

In the year 1566, at the end of the reign of the legendary Suleiman the Magnificent, his Ottoman Empire was the world’s dominant superpower. Ottoman territory extend across three continents over nearly 2.3 million square kilometers. Its military was powerful… and feared. The economy was strong and the treasury plentiful. But in time that changed. Subsequent Ottoman rulers became complacent. The government became bureaucratic. The military became softer. Society became decadent. As a whole, they lost the elements that made them strong and powerful to begin with, and the empire began to dwindle. Over time, France ascended as the dominant superpower; Paris became the global center of politics, commerce, and the arts. And no other European power could come close to France’s wealth or military capabilities. But eventually the French, too, lost their way, and were eventually displaced by the British Empire as the world’s leading superpower. To this day the British Empire is still the largest ever in the history of the world, totaling more than a quarter of the world’s land mass. They dominated global trade and oversaw a period of relative peace now called the Pax Britannica. Yet they too eventually declined, and the British Empire was ultimately displaced by the United States, which has now been the world’s leading superpower for decades. It goes without saying that the United States is also in decline; that’s not intended to be an emotional or controversial statement. From a rational academic perspective, it’s very difficult to not see obvious and familiar signs of an empire in decay. I group these into four fundamental forces of decline– The first are the Forces of Energy, both natural and political, which have created rising energy costs that are now bordering on an energy crisis. We discussed this at length in last week’s podcast, when I walked you through the dynamics of how it now requires much more energy to produce energy than ever before. In other words, oil producer are having to burn more oil now to fuel their equipment, for every barrel of oil that they pump from the ground. This is a critical trend to watch; the past few centuries have proven a very clear link between energy and prosperity, and more expensive energy is a nasty, long-term barrier to economic growth. The second major category of forces causing decline in the US are the Forces of Society. We can see this every day in the social and political divisiveness, censorship, media manipulation, the appalling decline in trust, rising crime rates, popularity of socialism, wokeness, etc. The third category are Forces of Economy. Here we can see evidence in the absurd level of money printing, inflation, the national debt, rising taxes, multi-trillion dollar spending packages that “cost nothing”, etc. And the fourth category are the Forces of History. This is the inevitable course of empire– rise, peak, and decline, and it includes all the geopolitical events we’ve witnessed, from the debacle in Afghanistan to the war in Ukraine and rise of China. Each of these groups of forces are contributing to an obvious US decline. It is by no means a one-way street. And there are many elements that could be improved. The widespread adoption of nuclear power, for example, could result in an economic bonanza in the US, which would keep the party going for quite some time. But for now, the trajectory of the US appears to be heading down. Again, that shouldn’t be a controversial statement, and I’d encourage anyone to look at the situation rationally and dispassionately, and not through the lens of patriotism or fear. For a long time I’ve asked myself– what comes next? Who will be the dominant superpower after the US decline? And I’ve often thought that China is the answer… simply because it is the only viable power large enough to displace the US. But China has always been an imperfect answer. China has a mountain of its own problems too. Some are fixable, like its giant debt bubble. Others (like its demographic crisis) are not. So my thinking has evolved… and I’m now considering a future world that looks more like Europe in the 600s. At the time, there was no superpower. The Byzantine Empire was still relevant. But Europe had been taken over by several barbarian kingdoms– the Ostrogoths, Visigoths, Burgundians, Frisians, Franks. Plus the Middle East and North Africa were rapidly falling to the new Islamic Caliphate. No single power dominated the rest. And I think that may be the world we’re headed for– where China, Russia, Europe, India, and North America are like the Barbarian Kingdoms of the 600s. This has huge implications, especially for the US dollar. The dollar has been the dominant reserve currency for so long, which is a privilege that the US government has been able to enjoy for decades. It means that the Treasury Department has been able to borrow a whopping $30 trillion worth of debt, and has never had a problem finding lenders. But in a world of Barbarian Kingdoms where no single superpower looms so large, there won’t be as much demand for US dollars. And that’s decline in demand for dollars is going to make it awfully difficult for the US government to keep spending. Or for the Federal Reserve to keep printing. This is the topic of today’s podcast. We do a deep dive on this ‘Barbarian Kingdom’ thesis, the Four Forces of decline, the implications for the US dollar, and ways to think about your Plan B. You can download and listen here. Open Podcast Transcription [00:00:00.790] Today we’re going to go back in time to September 4, 476 Ad, to the city of Ravenna in modern day Italy. And it was an important day, because that’s the day that historians regard as the end of the Western Roman Empire. Himself at that time was split into two. You had the Eastern Empire and the Western Empire. The Eastern Empire was really where all the power and all the wealth was.   [00:00:22.540] The Eastern Empire had its own emperor. A guy named Zino at the time was emperor in the east. Zeno had his own imperial court, he had his own succession, he had his own everything was totally different in the east. The west had its own emperor. And the emperor in the west was technically a guy named Julius Nepos.   [00:00:39.890] Julius Nepos, though, had recently been deposed. Julius Neppos had decided to elevate to his chief general. You could think of as like, his chairman of the joint chiefs, that the head of all the Roman military. Julius Nepos had elevated this guy named Orestes to become his chief general. Orestes was a famous guy.   [00:00:57.860] He had previously served atilda the Hun a couple of decades before, and Orestes then essentially became the head of all Roman military forces. Naturally, you can imagine what happens next. Oresty says, oh, wow, I have the entire Roman military, the Western Roman military behind me, so I’m going to go take over. So Resty goes and he marches into Ravena. Ravena, by the way, at the time was actually the capital city of Rome.   [00:01:21.770] The Western Roman Empire was so weak that the city of Rome wasn’t even the capital anymore. The city of Rome had been sacked decades prior, and all these barbarians had moved in. And so they actually had to move the capital to Ravana, which is on the opposite end of Italy. It’s in northeastern Italy again, on the Adriatic Sea. And so, arrested now with all the entire Roman militaries back, he goes into Ravana.   [00:01:43.200] He says, guess what, Julius nepos, you’re out. And Julius Nepos left without a fight. He fled to the Roman province of Dalmatia, which is in modern day Croatia. He tried to set up a fledgling government. He reached out to his colleague in the east, emperor Xeno and Constantinobi, please help me, send me forces.   [00:02:00.430] I need to take my crown back. And Zeno said, no, I don’t think so. I’m going to wait and see what happens here. So now we’ve got arrestes. Who was the head general.   [00:02:09.570] Now he’s taken over the Western Roman capital in Ravana. He’s chased out the emperor, Julius Nepos, and he decides he’s going to declare a new government. So he installs his son as emperor. His son is just a kid, a 1011 year old kid, and the kid’s name Romulus Augustus, which in theory is actually quite an auspicious name. Romulus was one of the founders of Rome.   [00:02:30.230] Augustus was its most revered emperor in the first century Ad. So you got this kid as Emperor Romulus Augustus. You got Orestes, who’s essentially the de facto Emperor, and then you’ve got Julius Neppos, who still claims to be Emperor, who’s sitting hundreds of miles away off the coast in Croatia. Now, the thing you’ve got to understand about especially the Western Roman Empire at the time, is that most of the military was made up of foreigners, foreign mercenaries, really, they were called Federati. Now, before going back hundreds of years, before Rome started cooperating with all these foreign barbarian tribes that were really at their borders, and they decided to create something they call this Federati.   [00:03:11.190] Federati is the same word, the same root of the word, the English word, Federation. And we can think of Federation as a league of independent countries, independent states. You can think of your Star Trek fan. Think about United Federation of Planets. You have all these independent planets that come together in a pact and agree to whatever they’re doing, fighting the Klingons and the Romulans, whatever.   [00:03:30.320] This is sort of the same thing in Rome. They said, okay, all these barbarian tribes are going to have this federation together where we agree to cooperate with each other. And we, as Rome, we will provide you certain things, and you, as you barbarian kings, you provide us certain things. And that certain thing provided by the barbarian kingdoms was usually military assistance. But by 476, this Federati was basically just foreign mercenaries and it made up a huge part of the Roman military.   [00:03:56.030] So there was another soldier at the time, his name was Odoacer, and Odo Acer. We don’t know much about him. We know he was not Romantic. Historians think he might have been Germanic or from one of these barbarian tribes. He might have been a Goth, we’re not really sure.   [00:04:08.840] But we know he was a soldier and he worked his way up in the Roman military. In the Legion. He became an officer and eventually head of the Federati. Now, the Federati had been promised the world by successive Roman Emperors for years and years and years, and they said, look, you come and you give us security and you give us peace, and we promise you the world, we’re going to give you lands, we’re going to give you farms, we’re going to give you all these things that you want. And of course, they never actually followed through on their promises.   [00:04:36.650] And so eventually, when arrested, chased away Julius Nepos and installed his son as Emperor, he got Romulus Augustus and the federal he came to arrestis and said, hey, we want all that stuff that we were promised. We want the land, we want the farms, we want the peace, we want all of that and arrest. You said, no, sorry, I can’t do it. All those other guys promised you that. You can’t expect these other guys to have made you promises, and then I’m going to follow through with it.   [00:05:00.370] Sorry, I can’t do it. So naturally, the Federati raced up. They were angry, and so they chose one of their own, this guy, Odoacer. Odoacer wasn’t a Roman. He was one of them.   [00:05:11.190] He was ready. The head of the federati. He was the natural choice to be leader in this rebellion in the Federatei marched into Ravana, which again was the capital of the time. Rome, the city of Rome wasn’t the capital, had already been sacked. They had to move the city, move the capital city to Ravena.   [00:05:26.180] And so Odawayser, at the head of the Federal, he marched into Ravana and he met arrestes in battle. And there was a battle. arrestes lost. The Western Romans lost arrest. He was slain in battle.   [00:05:37.430] And ODA racer walks up to Romulus Augustus and he looks at this kid and he says, I’m not going to murder this kid. But he throws the kid out. He said, look, you got to go. And Romulus Augustus went off and lived the rest of his life. But at that point, Odo acer essentially crowned himself king.   [00:05:55.250] Now, he’s actually fairly cunning about doing it. He didn’t say, I’m now the head of the Western Roman Empire. He just said, I’m King of Italy. We’re going to carve out this new state here. We’re going to call it Italy.   [00:06:06.450] I’m king of Italy now, and in fact, I’m just going to act like I’m subordinate to the Easter Emperor. So he writes to Zeno and he says, you know what? I’ve just taken over Italy, and I’m going to be your subordinate. I’m going to pay homage to you, I’m going to give you tax, et cetera, and you’re going to be my overlord. And for Xeno we thought, Great, that’s fantastic.   [00:06:27.150] Now there’s no more Western Roman Empire. The Western Roman Empire has essentially been dissolved because Odoacer, who just took over the throne, has decided he doesn’t even want to be emperor. He’s going to be my subordinate. And so essentially, that was it. That was the end of the Western Roman Empire.   [00:06:42.090] From that point forward, there’s only the Eastern Empire, which again ended up calling itself the Roman Empire. And that was basically it for the Western Roman Empire. Rome continued in the east and the Eastern Empire eventually became known as the Byzantine Empire, though they still refer to themselves as Romans. But that was it for the Western Roman Empire. The interesting thing about this, though, is that at the time, if you had been in revenue, or if you were still one of the handful of people left in Rome, it didn’t seem like it was that significant.   [00:07:13.930] Today, it’s literally the date, september 4, 476 to go. That was the day that Rome fell. But if you had been on the ground in Rome at the time, if you’ve been on the ground in ravine, if you’d been on the ground and Byzantium and you would have seen September 4, 76th, guess what? The next day wasn’t really that different. It wasn’t like everything changed all of a sudden overnight.   [00:07:35.750] In fact, for the most part, people viewed on the ground at the time, locals viewed this as just another passing event. It was just another embarrassing debacle. It was just another humiliating embarrassment for Rome. They go, Here we go again. Another guy marching in, taking over another battle, another emperor gets deposed, blah, blah, blah.   [00:07:55.070] We’ve seen this a million times before, and they had for the longest time, there had hardly been any peaceful succession, any peaceful transition between Roman emperors, especially in the west. There was all this political conniving and murder and intrigue, and it was just a normal part of life in Rome. And some people looked at this and said, Here we go again, just another thing. And it didn’t seem like it was any different. In fact, for days, weeks, months, even years after the fact, nobody really got the implication of what had just happened, that quite literally, the Western Empire ceased to exist, and that that was a huge watershed moment in history.   [00:08:33.050] Now, granted, it wasn’t like that was really the cause. We can’t go back and say with any kind of intellectual honesty that September 4, 476, that was the most important day in the fall of Rome. Or that was the fact that Odo. Acer came into revenue and went up to Romulus August and said, you’re out of here, kid. That was really what caused the decline.   [00:08:54.440] The decline of Rome, again, is a very long, very complicated story that involves so many different forces of military nature and economic nature and social nature and all these things that happened over very long periods of time. But that day, that was it. The Roman Empire in the west ceased to exist. And this is actually, in my opinion, a very important lesson from history, because it shows us that there are events that happen from time to time that are actually far more important than anyone realizes. And there are actually many examples of this throughout history we can think about.   [00:09:30.540] The assassination of Archduke Franz Ferdinand In. This clearly wasn’t like it was no big deal, but I don’t know that anybody would have necessarily looked at that and immediately thought, oh, my God, it’s going to be war. It’s going to be this huge war. It’s going to be the war to end all wars like nobody has ever seen before. That wasn’t really the immediate reaction, right?   [00:09:50.020] Certainly wasn’t something that people off in the United States would have thought, oh, my God, this guy got killed, and so we’re all going to end up at war, and it’s going to be so devastating and so costly. Nobody really thought that at the time, but that’s what happened because it was a trigger that created different escalations, and this whole war broke out as a result of it. Another great example, martin Luther Nailing, the 95 theses that he wrote up to the door of church in Wittenburg, Germany. And that was essentially the event that triggered the entire Reformation movement, that brought the Catholic Church to its knees and the Reformation, the counterreformation, all the movements and things that happen. It was one of the biggest moments in history.   [00:10:31.740] But at the time, it was just no big deals. Some guy goes as a monk, he puts something on the door, and that’s it, walks away. And at the time, nobody would have thought that that was this historical watershed moment, and yet it was. And this is the sort of thing that happens from time to time. It’s usually never about that single event.   [00:10:48.300] The event is really just a representation. It’s not like the assassination of Archduke Franz Ferdinand was the cause of World War I. The cause of World War I was the years, even decades prior to building of all the alliances. And suddenly, Germany literally creates itself out of nowhere in the forms itself out of a confederation of different kingdoms, independent kings that came together and decided, one day, we are now Germany. And they signed some papers, and poof.   [00:11:15.080] Now suddenly, one of the largest powers in Europe just exists overnight. And you’ve got Britain, and you’ve got France, and the United States have become the largest economy in the world, and you had all these forces competing with each other, making alliances with one another and so forth. And this is something that was literally years and years and years of conflict and tension in the making. And then all of a sudden, there was just this one event that triggered it, and it was this event, the trigger. At the time, nobody realized that’s it, that’s the trigger, and yet that’s what happened.   [00:11:43.210] The same thing with Martin Luther. There are all sorts of misgivings and conflict and turmoil and tension between the church and other groups. Martin Luther was just the trigger. Nobody thought it was at the time, but that’s what happened. And we could see this over and over and over again throughout history.   [00:11:58.020] So many different instances of some event that seems maybe relatively innocuous or, okay, maybe it’s a big deal, but nobody necessarily expected, wow, this is going to lead to so much change, so much turmoil, so much disruption. And it wasn’t about the single event. It was about the years and decades. In the case of Rome, even centuries of buildup, of trends building. In 2005, you may have probably seen this on YouTube or something.   [00:12:25.330] Steve Jobs gave a very famous commencement address to Stanford University. He talked about life, and he talked about going back in time and connecting the dots. And he would say, you know, he would talk about his own life. He’d say, I did this, and then I did this, and then I did this, and all these sort of weird things. I dropped out of school, and I kept showing up to classes, even though I technically dropped out, and all these things that impacted my life and that’s resulted in the way where I am today, and all these products that we’ve created at Apple and so forth, of all these bizarre, seemingly random events that happened in my life.   [00:12:55.900] But in retrospect, when I connect the dots, I can see how it all led to this point. And Steve Jobs at the point also kind of famously said, you can never connect the dots going forward, only backward. But that’s not entirely true. With all deference to Steve Jobs, it’s not entirely true if you think about life really itself, and many of us have had that same experience. We look back, I know I can.   [00:13:18.450] I’m sure many of you can as well. You look back and connect the dots on things that seemingly random events, totally accidental. You meet somebody that something happens and this door opens and it creates this opportunity and something else happens and whatever, you meet your spouse, whatever, almost accidental events, and you look back on it in life and connect the dots and say, wow, these sort of things that weren’t delivered. And that’s how I ended up where I am today. And that is true to a degree.   [00:13:45.850] But there are also other things that are seemingly extremely deliberate. Extremely deliberate because in life, while there are some things that are accidental, there are some things that are deliberate. There are some things that we plan on. And I can’t believe I’m going to use this as an example. I’m kind of vomiting in my mouth right now.   [00:14:01.380] But if you think of Hillary Clinton, it is no accident that she ended up where she did. I mean, that was a grand plan for a very long period of time to become this political insider and work her way up. And eventually she wanted to be present. She didn’t make it. But it is no accident that her career and her life has had the trajectory that it did.   [00:14:20.310] And she is a great example of somebody that really connected the dots going forward. So I look at all this in context. If I think about the historical element of it and so many things that are going on today, and I’m going to actually rely on this cliche right now. This is one of the most overused quotes, especially in business and finance people think about Wayne Gretzky, this famous Wayne Gretzky quote where he talks about skating to where the puck is going to be, not where it’s been. It’s actually miscredited to Wayne Gretzky.   [00:14:49.410] He would actually himself credit his father. Walter Gretzky is the guy that said that. But the point is that it’s this concept of connecting the dots going forward and trying to look at big picture trends and think about what’s happening. We’re not talking about thinking about looking into appearing into a crystal ball and thinking about this is exactly what’s going to happen on this date, at this time. That’s ludicrous.   [00:15:10.890] There are obviously always people that think that they know exactly what’s going to happen, and that’s totally ludicrous. Pompous. It’s petty, it’s narcissistic. But we’re talking about major trends. You don’t have to be a rocket scientist.   [00:15:23.190] You don’t have to have a PhD in history or economics or any of these things to see major trends, to connect the dots, especially if you have a little bit of humility. And if you think about the fall of Rome, the fall of Rome was so obvious. It was so obvious. Everybody knew it. Everybody could see it.   [00:15:38.470] This is why Rome lost so much of its population during the 400s, during the 300s as well. People said, screw it, I’m out of here. This place is going the way of the dodo bird. And they were right. They were right because the fall of Rome was so obvious.   [00:15:51.060] They were losing military power. They lost all their economic power. They’re losing territory. They were getting invaded by barbarian tribes. People were happy.   [00:15:58.580] They were getting invaded by barbarian tribes. People in the countryside are saying, please deliver us from these high taxes. Thank you, barbarian tribes, for invading us so we don’t have to pay these ridiculous taxes anymore. We had price controls and wage controls under penalty of death. It was so obvious that they were in decline and that they were eventually going to fall into the dustbin of history.   [00:16:18.780] It was so obvious. World War I was also so obvious, right? If you look at the power dynamics in Europe, it was obvious there needed to be a war. Somebody had to get their ass kicked to prove who was the big cheese in Europe. Now it had to happen, right?   [00:16:34.800] So if we look back in history, the Reformation was obvious. It was just one of these things. The trends, the tensions, the conflicts were building for so long. So while we can’t necessarily connect the dots and say, this exactly is going to happen, we can look at these major trends and things that are so obvious and still have a little bit of humility and say, I could be wrong. However, there are some really obvious things happening to try and connect the dots going forward.   [00:16:59.870] Obviously, we’re talking about this because I think it is pretty clear that the United States is in decline. We’ve been writing about this sovereign man for a really long time, and a lot of the things that we’ve been writing about have continued to accelerate and get bigger and bigger and bigger and bigger. A lot of the things that we thought in terms of the direction of the US. It’s happening. It’s happening in front of our very eyes.   [00:17:21.270] And I would say, just to summarize, the US. Is subject to what I consider four forces of decline. And I think those forces aren’t, by the way, just in the United States. I think we can see this in a lot of different places, but one of those is the forces of energy. Now, I talked about this actually in a podcast last week.   [00:17:39.700] We explained all about what’s happening in energy and energy markets and energy commodities in general. And I would really actually encourage you to go back and listen to that because it’s really important to understand the forces of energy. And energy as a decline. Force is so powerful. It is so powerful, it’s transnational, it’s global.   [00:17:59.540] It’s something that really makes everybody poor and there are solutions to it. We talked about nuclear. We talked about I made an analogy to the collapse of Bronze Age civilizations and ushering in the Iron Age when people discovered steel. We have fission, we have fusion technology, we have our steel. It’s coming, right?   [00:18:17.430] We have things that we can do to actually improve that. But the bottom line is that it is taking a lot more energy to produce energy. And that makes everybody poor. There is a very clear, very clear trend between cheap energy and when I say cheap energy, I mean essentially, it doesn’t take very much energy to produce energy. It doesn’t take very much you don’t have to burn a whole lot of oil to produce barrels of oil, right?   [00:18:43.390] So that’s cheap energy. And when you have cheap energy, you have prosperity. Where you have expensive energy, you have a lack of prosperity. And so what we’re seeing right now, this increase in energy prices, and I don’t just mean in dollar terms, I’m talking about in energy terms. And if you don’t know what I’m talking about, I would really encourage you to go back and listen to that.   [00:19:01.840] But energy is getting more expensive, makes everybody poorer. That is definitely a force of decline in the US. But the US. Is also subject to forces of in addition to forces of energy, forces of society, where we see the rise of socialism and wokeness and this horrible division that exists where two people just can’t even have a conversation and people get in fist fights on airplanes because they’re just so tightly wound. And we see all of this leads to things, terrible, terrible national priorities where we say, oh, we got all these problems going on.   [00:19:31.960] You know what? Let’s forgive student debt. Let’s take a trillion dollars that we don’t have and just make it go away because people need to study underwater basket weaving and all these kind of ridiculous things. And you know what, just to be fair, there are a lot of people, and I think especially more conservative pundits, that have said, oh, this is something that it sticks the cost onto people. Blue collar workers that didn’t go to college, the working class, so that people who study whatever gender studies and things like that can get their degrees for free.   [00:20:05.610] And that’s not entirely true. Obviously, there are a lot of people who go to medical school they study computer engineering, whatever. But if you really look at the statistics in terms of the degrees, degrees of study courses study that most people take, a lot of it’s not exactly hard science. Most of the stuff that people study is not hard science is not technology. It’s things that don’t actually move the needle economically for the United States.   [00:20:29.970] So if you think of it in terms of return on investment, let’s be honest, we’re probably going to get a higher return on investment. If we even think this is a good idea at all to say let’s forgive education, you’re probably going to get a higher return on investment, incentivizing engineering and math and science and all the Stem fields. But that’s not really what they’re doing. So they’re saying, oh come on, come all, we’re just going to forgive all this student debt, which is extremely inflationary, but this is a terrible priority, or another terrible priority. As an example, they got so insane over their vaccine mandates and he had the federal government going and literally firing people because they wouldn’t get a COVID-19 vaccine.   [00:21:05.810] And there are people that were high up in national security positions, people with literally decades of black ops experience going and doing clandestine missions overseas, but we’re going to fire them because they can’t get a vaccine. They don’t want to get totally fine that they go and risk their lives with terrorist cells, but not okay that they don’t get a covet shot, so we’re going to fire them, right? That’s an insane priority that we’re going to prioritize. Subordination over public health policy is a higher priority than national security. That is a horrible priority.   [00:21:35.520] But this is an example of the forces of society that the US is gripping with, that is an indication of its decline. Another one of these four forces. In addition to the forces of energy. The forces of society. We have our forces of economy.   [00:21:47.310] The overspending. The constant insane deficit spending. The inflation. The money printing. The national debt.   [00:21:53.210] The fact that Social Security is about to go bankrupt and is going to require a bailout to the tune of literally tens of trillions of dollars and I say about to go bankrupt. I mean in the context and the timeline of retirement where the Social Security Board of Trustees itself is saying. Look guys. Basically within the next ten years these trust funds are going to run out of money and that’s going to cause a serious problem. We’re going to have to cut back on the promises we made.   [00:22:17.500] We’re going to have to cut back on the benefits that we pay every month. We might have to do all sorts of other things in order to keep this program going. And I don’t even think they scratched the surface of that realization. Are they doing anything about it? No, of course not.   [00:22:29.910] They’re going to keep kicking the cannon on the road and saying nothing to see here, people don’t worry about it. And in ten years, this is going to be a massive problem, I guarantee you. The last force that we’re dealing with in terms of US decline is the forces of history. The forces of history involve the natural cycle of things, the rise and fall of empires, the rise and fall of reserve currencies, the rise and fall of military power, all these things that we’ve seen over and over and over again. And this idea of cyclicality is really important.   [00:23:00.980] We spent a whole podcast last week talking about the forces of energy. We write all the time about the forces of society and the forces of economy. I want to talk a little bit about the forces of history today, this idea of the natural cycle, where there’s always been a dominant superpower, there’s always been a dominant reserve currency, there’s always been a dominant economic system, and these things change over time. And I’ve talked about this and I’ve written about this really since I started Soccer Man 13 years ago. But I will admit again, you have to have humility with this.   [00:23:30.970] I’ve been wrong. I’ve been wrong a lot. One of the areas I’ve been wrong is I’ve thought there’s always been and there’s always going to be a dominant superpower. And we can think about this throughout history. The United States the dominant superpower.   [00:23:42.860] Now, before the US, the US displaced Great Britain, which used to be the dominant superpower. Britain displaced France, which in the 17 hundreds, the 1617 hundreds, was the dominant superpower. France displaced Spain, spain displaced the Ottoman Empire, et cetera. So you can go back and sort of walk that dog throughout history and see one empire declining, another empire rising, that empire declining, another one taking its place. And I’ve applied this thinking to trying to determine what’s going to be the next dominant superpower, and I just sort of assumed by default, it’s got to be China.   [00:24:15.930] It has to be. It’s the only possible option. But I’ve always had some misgivings about that, because China has its own problems, right? China has I mean, if you think about the US. The US has a massive amount of debt.   [00:24:26.150] It’s got all these bizarro financial crises, looming retirement crisis, currency issues, etc. And guess what? China has that too. China has massive amount of debt, has its own really weird financial crises brewing. It’s got its shadow financial system and all these things with just huge debt bubbles.   [00:24:42.800] China has its own retirement crisis, unfunded pensions, etc. It’s got serious currency issues in terms of lack of convertibility, and nobody really trusts it. But more importantly, it’s got all these continued economic tumultuous, economic issues from its COVID response that to this day, now going on almost three years since it was first discovered in China, in Wuhan, that they’re still shutting down the economy, they’re still locking people in their homes, they’re still doing all these crazy draconian. Things and you could just keep looking at this, etc and etc. There are so many issues in China now, I would look at all of these and say, well, that’s fixable, because while China has a lot of debt, it has a lot of problems with its pensions and problems with its currencies, et cetera.   [00:25:26.730] All that stuff is actually fixable because China does have a lot of assets. It’s got a lot of financial reserves, it’s got huge foreign reserves, lots and lots of savings, lots of production. So a lot of these financial and economic issues are fixable. But there are some things in China that are not fixable. And the biggest one of those really is its demographic issues.   [00:25:48.070] Decades of this one child policy, which is one of the dumbest ideas since the feudal system, have really vanquished future Chinese prosperity. What you want in any nation, in any healthy nation, for any healthy economy, you have to have a demographic period, demographic pyramid, basically, it’s got a lot of young people at the bottom and not as many old people at the top. You don’t want it to be really steep. But you want it to be enough. Where you’ve got younger people that are eventually going to go into the workforce and there are going to be more people in the workforce and they are retired.   [00:26:22.990] And that the people in the workforce can pay for the people that are retired. And it’s not going to be a huge burden and so forth. And you’ve got this kind of constantly, steadily growing, not by a whole lot, but a steadily growing population that keeps a very steady, safe demographic pyramid, where you constantly have this new flow of young people. And they just destroyed that in China. They said, okay, we’re only going to have one child.   [00:26:44.660] Well, guess what? If you have two parents and one child, that means by the time those children come of age, now you’ve got one person taking care of two older people. It just doesn’t work. It just does not compute arithmetically. It doesn’t work.   [00:26:57.210] And you can’t just fix that, right? Because now they finally realized, oh, my God, that was stupid. So they’re getting away. They’ve gotten away from their one child policy. But you can’t just fix that overnight because it takes literally decades and decades to fix that.   [00:27:10.540] You can’t just conjure out of thin air 30 year old people, right, who are in the workforce and they’re contributing and they’re paying taxes and they’re paying into pension funds and paying into Social Security programs. You can’t just conjure that out of thin air. The only way you can is with immigration, right? If you have immigration, say, okay, we’re going to open our borders. Everybody that’s 30 years old, between 30 and 45, we want you coming into our country, paying taxes and working and so forth, because we have all these older people and we don’t have enough young people in theory, you could fix that problem with immigration.   [00:27:40.640] Now, you get too much of that all at one time, you create a whole other set of problems. But it doesn’t even matter because this immigration wave in China is extremely unlikely. It’s extremely unlikely because who wants to deal with that? Who wants to deal with the environmental crisis? Who wants to deal with all this COVID nonsense?   [00:27:55.230] Who wants to deal with the lack of freedom? Most people can’t even speak Chinese. It’s a tonal language, and there’s not that many tonal languages in the world. And it’s very unlikely that China is going to be able to just fix this all of a sudden with immigration. It’s possible, but it’s unlikely.   [00:28:08.970] And on top of that, they have their debt problems, retirement crises and currency issues and all these things that I need to fix. So again, in theory it’s fixable, but it’s highly unlikely that they’re going to be able to fix all of this. And this is essentially what leads to the conclusion that China isn’t necessarily bound to become the world’s dominant superpower. And I’ve had to unlearn this. Now, I said earlier, one of the key lesson from history that we talked about earlier is that sometimes things happen, events happen in history that are far more important than anybody realizes at the time.   [00:28:40.680] Again, like the fall of Rome on September 4, 476 Ad. Like Martin Luther in 1517. Like the assassination of Archduke Franz Ferdinand. That’s lesson one that we can learn about from history today. Lesson two is that the world doesn’t necessarily need to have a dominant superpower.   [00:28:58.070] We’ve had this unipolar superpower world that’s very US centric, and that’s certainly on the way out, as the US is clearly in decline for years before that, decades, it was kind of a bipolar world, but the US. Was clearly the more dominant one when it was the US and the Soviet Union, which you had in the had these two superpowers together. But there was obvious that the Soviet Union was in decline and it wasn’t going to last, and eventually they went away. But there is a case to be made that the world doesn’t need to have a dominant superpower at all, doesn’t need to have a single superpower or dual competing superpowers. It’s possible the world has no superpower at all.   [00:29:38.510] And to this I would actually point to this period of time after the fall of the Western Roman Empire. So we go back to 476. And now initially you’ve got Emperor Zeno says, hey, now I’m the big cheese, I’m the sole guy. I get to be emperor now of all of Rome, and it’s all that’s going to take place from Constantinople. But over time, the Eastern Roman Empire, which was just known as the Roman Empire, again became known as the Byzantine Empire, started to fall into decline after you have the Justinian era, et cetera.   [00:30:10.170] By the 600s, Byzantium was still relevant, but it was no longer the dominant superpower. And you had all these different barbarian kingdoms. If you look at a map of Europe and the have all these different kingdoms, the Visigoths, the Franks, the Phryzians, the Jews, the Saxons, the Slavs, the Avar Kingdom, then he had the Arabs. This was after Muhammad and the Muslim caliphates were rising. They were conquering all over in the Middle East and parts of Africa.   [00:30:36.390] The Vikings were going to emerge soon, right? So you had all these different barbarian kings and all of them, each of them was powerful in its own way. Not one of them was so much more powerful than the others. There wasn’t one of them that could just command the rest to heal and say, okay, here’s what we’re going to do, like the US has been able to do for so long, right? The Byzantine Empire was no longer powerful enough that it could do that.   [00:30:58.870] It couldn’t tell the Saxon, hey, here’s what you’re going to do. Saxons, here’s what you’re going to do. Franks, here’s what you’re going to do. Goths, they couldn’t do that anymore, right? And so it wasn’t a unipolar world or a bipolar world.   [00:31:12.170] It was just a no superpower world. And the world just sort of existed that way. And my thinking has evolved in this way now, where I start, instead of thinking about, OK, China is going to be the next dominant superpower. Now, I think of it as this barbarian kingdoms theory and thinking, what are the barbarian kingdoms of tomorrow? And clearly China is going to be one of them.   [00:31:37.320] China is going to be one of these kingdoms. Just say, okay, it has all these problems. Yeah, great big deal. Still a billion people, a huge economy. Huge economy, right.   [00:31:45.680] Probably will be continued to be the large it might even be today already the largest economy in the world. Will probably continue to be the largest economy in the world for quite some time. But that doesn’t necessarily make it the dominant superpower that gets to command everything that happens in the world. Europe, the EU, Eurozone, whatever that ends up looking like in the future. And I think that’s clearly going to change.   [00:32:06.890] That’s still relevant. It’s still there, right? It’s a lot weaker. Europe is having so many issues. It’s energy issues, it’s refugee issues, all sorts of things.   [00:32:15.980] That debt issues. It wasn’t that long ago they had the Pigs crisis. Portugal, Portugal, Italy, Greece, Spain. Europe is still going to be relevant. That we can’t say that Europe is just going to fall off the face of the Earth is a very advanced civilization with hundreds of millions of people.   [00:32:32.970] This is still going to be a very relevant place that has power, greater Russia, whatever context that means, whether it’s just Russia or a smaller Russia or even larger Russia than it is today. If they win this war in Ukraine and they annex Ukraine, and the annex, other places and they start sort of piecing together almost a Soviet Union. Again, I think there’s a very strong case to be made that Russia becomes and remains really quite a powerful place. India I think is fairly obvious as well, just by sheer size. And look.   [00:33:05.800] The US. Is not going anywhere. Anything is possible, but most likely the US. Continues to exist and I think it remains still powerful. I think it’s likely that the US.   [00:33:16.280] Tries to sort of ally itself in some kind of North American union. Canada’s got a lot of oil reserves, mexico’s got a lot of commodities and there becomes sort of a North American union I would say, and we’ll talk about this in a minute, that the future of this is actually very commodity oriented, commodity versus today it’s all about money is power. Well I think in the future, and we’re getting there very quickly, is that wealth, real wealth is in commodities, it’s in stuff, it’s in real things as opposed to money in dollars and paper assets. And so if you combine North America is incredibly wealthy in stuff, in resources and commodities, especially if you include Mexico and Canada together in some North American union, that could be an extremely powerful alliance, a federation if you will. There are other players that I think are also going to be very relevant.   [00:34:07.050] I think you’ve got the United Kingdom is always going to be I think, relevant. Venezuela, which now by many official statistics has the largest oil reserves in the world. If I’m honest. I think there’s a case to be made that there’s an invasion of Venezuela at some point just to sort of take over their oil reserves and pull Venezuela into some sort of federation, some North American union or American union. I think even the UK maybe joins that.   [00:34:32.670] You have the US. The UK, canada, Mexico, Venezuela, possibly a couple of places together in some union to try and compete against China which makes its own union with Southeast Asia. So you’ve got all this sort of manufacturing capacity and economic power against North America, but you’ve got Russia and you’ve got Europe and different places in the world and I think there’s a case to be made and again there’s no crystal ball here. So I in no way could say this is exactly what it looks like. But if we try and connect the dots and use the Gretzky cliche and try and figure out where is the pot going to be, it seems pretty obvious that the US.   [00:35:09.800] Is in decline for all these forces that we talked about, the forces of history and the forces of economy, the forces of society, the forces of energy that are pushing the US. And decline. It’s not inevitable. Some of these things can change. They can certainly change the trajectory of these forces of energy.   [00:35:25.160] They could turn the forces of energy into growth instead of decline if they would just get their shit together and realize, oh wow, nuclear is so powerful and we can get on board this, and this is really going to solve a lot of our problems. And by getting on board and stemming the decline in terms of the forces of energy that can really turn around a lot of other things and create a lot of prosperity, which helps unleash a lot of to reverse the decline in terms of the economic issues in the US. Etc. And so there are a lot of things that can happen here. But if we look at the trajectory right now and the forces and trends that are in front of us, this is certainly a plausible scenario that doesn’t necessarily look exactly like I’ve been outlining here.   [00:36:04.170] But there are a lot of different this barbarian kingdom theory where there is no single dominant superpower. And the reason that’s worth thinking about is because whether it’s China that rises or multiple this sort of multiple barbarian kingdom theory, it has a significant effect on the US dollar. And that’s going to have implications for just about every single person alive, because what it ultimately means is a different global financial system. The world right now, the financial system in the world is this we go back in time a little bit. Now we go back in time to July 1944.   [00:36:41.190] It’s at the tail end of World War II. The invasion of Normandy was successful in the US. Knows now the writing is on the wall. Most of the world knows the writing is on the wall, at least in Europe, that the war is going to come to an end fairly soon. And they got together in a hotel in the United States in Bretton Woods, which is a city in New Hampshire.   [00:37:00.570] And they said, okay, we’re going to create a new financial system. Over the month of July 1944, they created a whole new financial system, decided the US. Is going to be the center of this new financial universe. The US dollar is going to be pegged to gold, and every other currency is going to be pegged to the US. Dollar.   [00:37:14.930] And it was basically the system of fixed exchange rates, which existed for a very long time. In August of 1970, 115 August to be exact, richard Nixon terminated gold convertibility once and for all. There was some kind of movements before that and et cetera, but in August 1971, Nixon terminated gold convertibility. So in terms of the Bretton Woods system that existed, where they said the US dollar is pegged to gold and everything else is pegged to the US. Dollar.   [00:37:41.940] Well, Nixon terminated that. So now we have the system of free floating exchange rates where the dollar goes up or down against the pound, and the pound goes up and down against the German mark and so forth. And this kind of colloquially became known as Bretton Woods Two. So the original one was Bretton Woods one. Now we have Bretton Woods two.   [00:37:57.720] And during that time, the US. Remained still the dominant superpower. It wasn’t long after that the Soviet Union was an obvious decline, then collapsed entirely. And for the last 30 years, it’s been a unipolar world, and the US. Has been the dominant superpower.   [00:38:11.810] And why is that? Right? Why is the US. They took the dollar off of gold and they’ve kind of done whatever, they printed a bunch of money and all these things. Why does this continue to be the case?   [00:38:20.780] Well, one, because obviously there is no alternative. The US. Has been the dominant power for so long. The dollar has been the dominant currency for so long. That’s just the way it’s been.   [00:38:30.140] And since there’s no obvious alternative at the moment, the world just sort of remained that way. But also specifically because the US. Has very mature financial infrastructure. You’ve got very free flowing markets. There’s no formal capital controls in the US.   [00:38:45.030] You can move money in, move money out. It’s got a very robust banking system. It’s got financial markets. These financial markets are very deep and relatively transparent. You can throw literally, if you have to, you could put trillions of dollars to work in the United States, whether you talk about stocks or bonds or whatever else, real estate, even.   [00:39:04.230] They’re very deep financial markets in the United States where you could put money to work. And so that’s a major factor in why you couldn’t do that. For example, this is why I hate to pick on Costa Rica. It’s a wonderful country, but Costa Rica Cologne is just never going to be the reserve currency in the world because it’s just not a big enough economy. The financial markets in Costa Rica really aren’t even any financial markets in Costa Rica.   [00:39:27.360] You couldn’t do anything. You couldn’t put that money to work. So anybody that’s holding Costa Rica Cologne, what are you going to do with that money, right? You can’t invest, you can’t put it to work anywhere. You can’t buy assets with it, so it just doesn’t work.   [00:39:38.490] The US. Has a really huge economy with very deep and liquid financial markets, so it makes it very easy and very convenient to put money to work. The other thing that really has kind of maintained the US financial lead in the world has kept the dollar being in the position that it is, is for the longest time, the US. Has had unmatched military power. And believe it or not, that actually is a very big deal.   [00:40:01.650] And the reason why is because the US military is what supports this concept of the I call it the petrodollar loop. The concept of petrodollar is very common. People know about this. This terminology basically refers to the fact that oil and oil contracts around the world are priced in dollars, whether it’s the Saudis selling to Europeans or different oil producing people in Indonesia, selling to Australia. Those oil contracts are priced and quoted and settled in US dollars.   [00:40:33.070] And that’s a really big deal. And the reason that’s such a big deal is because it creates this loop. It creates this essentially artificially engineered demand for US dollars. Means every country has got to buy oil. So if you want to buy oil, you’ve got to be able to have US dollars because that’s how you pay.   [00:40:51.320] You pay for oil in US dollars, right? And so you pay for oil in US dollars, which means that you need US dollars. So you have to hold US dollars. So if you’re holding US dollars, you have to hold those dollar somewhere. And this essentially what do I do?   [00:41:05.050] If you’re a country, you got $100 billion in US dollar reserves. What am I going to do with this money? I got to put it to work somewhere. So I have to put it in US financial markets. And most of the time that means US bond markets and most of the time that specifically means US government debt.   [00:41:19.580] Treasuries, right? US. Government debt. So people, essentially the fact that oil and by extension coffee and copper and all these major commodities are priced in US dollars creates demand for US dollars.   [00:41:34.570] And I talked about the military. The military actually has a lot to do with that because it goes back to this agreement made with OPEC nations and Saudi Arabia and basically saying, look, we’ll give you military aid, we’ll protect you, we’ll give you military technology, we’ll give you weapons, et cetera, as long as you price and quote and sell your oil in US dollars. And if Saudi Arabia is going to do it, pretty much everybody else is going to go along with that. They set the standard. And so this is the concept of the petrodollar.   [00:42:02.190] And the fact that the US military is so powerful means that a lot of these other countries, they’re just not going to mess with that. They’re not going to disrupt that, and they’re going to price and sell and quote oil contracts and so many other commodities contracts in US dollars. It creates demand for dollars, which creates just out of the blue creates this artificial demand for US government debt. It means there’s all these foreigners out there in the world that are buying US Treasury debt. Every time the government wants to go into debt, it’s got all these foreigners there that are more than happy to buy.   [00:42:30.770] Now let’s go back to the concept of decline. Again, if we go back to Rome in the 400, the 300s, it was so obvious that Rome was in decline. If you look at the United States today, it also seems pretty obvious the US is in decline. They do the things that take place in the United States. I mean, my God, look at what happened in Afghanistan last year.   [00:42:54.450] It was so humiliating to see.   [00:43:00.350] Honestly, it’s probably the one thing that still gets me really emotional to see that maybe it’s the fact that I served in the military and just to see that just so humiliating. But it wasn’t even just that. I mean, the things we had politicians stand up and say, talking about multi trillion dollar spending packages go on live television with a straight face and say it’s going to cost nothing. Or Pelosi running off to Taiwan and literally trying to set off World War Three. Or the fact that supposedly all these people with decades and decades of foreign policy experience couldn’t stop the invasion of Ukraine.   [00:43:34.390] It’s just one thing after another after another after another. It’s the division and the horrible wokeness. And the fact that they go and they pass a law to say, oh, let’s go and give $80 billion to the Internal Revenue Service, because that’s what a healthy economy, that’s what a wealthy nation does as we go and we invest tons of money into our tax authorities to go around and harass private citizens. That makes a lot of sense. All these things are such obvious indications of decline.   [00:44:02.150] And I don’t mean that in an emotional sense. I’m not trying to say all the US. Is finished and it’s all going away or trying to scare anybody. I think it’s important, however, that people look at these things rationally and just ask yourself, is this something that a dominant superpower does? Is this the way that a wealthy, prosperous nation acts?   [00:44:20.480] Are these the things that we would see from a country that’s on its way up or on its way down? And I think if you look at it rationally, you look at the events, you look at the conflict again, the forces of society, the forces of economy, the forces of history, a lot of these things that we’re seeing are really signs of a downward trajectory. That doesn’t mean it’s going to happen tomorrow. But boy, if we think back to five years ago, ten years ago, it’s like a totally different world now. It’s a totally different country.   [00:44:45.840] It’s really hard to not see the fact that things have been accelerating and deteriorating very rapidly. It doesn’t mean that it’s a one way street down. Things could reverse, things could improve, et cetera. But it seems pretty clear, if you look at events rationally, that the US. Is in decline.   [00:45:03.170] And it’s entirely possible, if we go back to this concept of lesson number one, that sometimes there’s an event that happens. And that event is something that at the time, people just think it’s just again, it’s some passing thing that happened. Just like when Odoacer marches into Ravana and goes up to Romulus August and said, you’re no longer the emperor kid. Get out of here. And people go up and they shrug their shoulders.   [00:45:25.100] Here we go again. It’s another guy, another emperor. Somebody else got deposed. Big whoop. We’ve seen this a million times before.   [00:45:31.700] And they never really connected the dots and said, oh, my God, this is it. As a political entity, we’re actually done, right? Maybe there’s already been that ODA oasis event in the United States. Maybe it was Afghanistan. Maybe it was years ago.   [00:45:46.540] Maybe it was something that’s still to happen. We don’t know yet, because, again, this lesson from history, sometimes something happens that’s so powerful, marluther goes and nails his 95 feces on the door of the church in Wittenburg, Germany, and nobody even realized at the time what a watershed moment that was. Maybe it’s happened already, and we don’t even know. But in theory, if we think about decline in the United States, in theory, there should be some event, and maybe it’s already happened that becomes the thing that triggers the decline of the Petrodollar, right? And some of this, by the way, it is happening, some of this has been engineered just out of plain stupidity.   [00:46:21.670] I mean, the fact that they engineered so many stupid things, even in Russia, the Russians used to take US. Dollars as payments, and then they said, oh, no, you can’t take US. Dollars anymore on the road. Said. Okay.   [00:46:32.530] I guess we’ll take Rubles. And now they’re dealing with the Chinese and Renminbi, and they’re demanding rubles from the Europeans. Well, guess what? That’s a clear case of Petrodollar decline. We’ve seen this across the Middle East with countries now that are saying, you know what?   [00:46:45.220] We’ll go ahead and take other currencies. We’ll take renminbi, we’ll deal with Russia, et cetera. Because a lot of this comes from just engineered stupidity, from a bunch of rank amateurs masquerading as experts in diplomacy. Oh, I have 50 years of experience, but somehow I’m a complete idiot when it comes to diplomacy and engineering. All these things that ultimately result in this decline of the Petrodollar, right?   [00:47:08.970] Because now, all of a sudden, when you have different countries and now trading with each other in oil and gas and different commodities, and they’re not invoicing each other and they’re not settling and closing those trades and transactions in US. Dollars, guess what it means? That’s a decline in the petroleum. It means there’s less demand for US. Dollars.   [00:47:24.720] And that’s a really big deal. It’s a really big deal. The other part of that, if you go back to this idea of these sort of competing barbarian kingdoms where you have several powerful entities, powerful blocs, powerful countries, but they’re competing with each other, and there’s no single dominant superpower. If you have no single dominant superpower, you don’t necessarily have a single dominant reserve currency. So if we imagine a future where the US.   [00:47:49.460] Continues on this trajectory, the US. Continues to decline, and again, we’re just trying to connect dots, and we see the US. Is obviously in decline. If that trajectory continues, we can see a world where China has got its problems, but it’s very powerful. The US.   [00:48:01.900] Is very powerful, but has so many problems. Europe is still powerful. Russia’s powerful, right? We have a lot of different competing powers. And because of that, there’s no single dominant reserve currency because hey, countries are invoicing and trading no longer petrodollars.   [00:48:17.010] Now they’re trading in euros and they’re trading in renminbi. And people are like, you know what, we’ll start taking other currencies now and it’s fine. And that’s a really big deal because it decreases demand for US dollars, right? So we have all the stuff that they’ve engineered so far out of their own stupidity. We’ve got the rise of competition.   [00:48:33.540] We also have the fact that the US is rapidly becoming no longer, I still think to this day, an unmatched military power, but not anywhere near the same way it used to be. I would still contend that the US marine Corps is the baddest and boldest military force in the world, probably in the entire history of the world. But if we’re honest, the Chinese military is becoming more powerful every day, every year, for sure. And their weapons and technology, especially missile technology, all these things, they really are running circles around the US in a lot of different elements of military technology. So you can’t ignore that.   [00:49:09.380] That’s one of these forces of history. If we think about the US decline and that has an impact on things like the petrodollar, petrodollar has a huge impact on the future of US debt and the US economy. A lot of this is because if we think about for the last several decades I talked about this a minute ago, but wealth has been really paper has been wealth. Wealth has been paper. We think about financial assets, we think about bonds, we think about stocks, we think about pieces of paper.   [00:49:36.380] We think about the representations of paper in our bank accounts. Bank accounts, just a number printed on the screen. It’s an entry in the database that says you have this much money. And that database is an abstraction of some piece of paper that isn’t backed by anything, right? It’s all of it’s just sort of this make believe abstraction of wealth.   [00:49:53.970] That’s what money is today. That’s what wealth is today. In a highly inflationary environment, in an uncertain environment, in an environment where you’ve got multiple powers and multiple competition, and it’s no longer clearly this one piece of paper that’s better than all the other pieces of paper, this idea of paper wealth starts to take a backseat to real wealth. Real wealth meaning stuff, commodities, actually productive assets, businesses and minerals and of course oil and energy and all these things. Real assets, as opposed to paper assets, real assets really becomes the most powerful thing, really the most powerful form of wealth.   [00:50:31.990] This is actually what I would view if we think about, again, trying to connect the dots and we look at all these different things, what’s happening in energy markets, what’s happening in the US economy, and geopolitics. Et cetera, and just looking at the things that seem really obvious. Well, we’ve been on this Bretton Woods. There was a Bretton Woods One. There was Bretton Woods too.   [00:50:49.620] But now a lot of the fundamental things that have made Breton Woods Two possible, like unmatched military power, unmatched US. Economic power, all these things that used to underpin Britain Woods Two are no longer still the case. Right. So this takes us into a future. What does it look like?   [00:51:06.250] Let’s call it Bretton Woods 3.0. What does that look like? What does Bretton Woods 3.0 look like? Well, I think it probably looks like competing reserve currencies, especially this sort of barbarian kingdom thesis hold. Or it means the US.   [00:51:18.810] Isn’t the dominant reserve currency. Maybe the renminbi becomes the dominant reserve currency. Maybe the international community gets together and says strategic SDRs that are issued by the International Monetary Fund. This becomes a dominant reserve currency. Or the World Bank creates some new reserve currency.   [00:51:32.840] Or maybe it’s gold. Right. But there are a lot of different possibilities. But each of these different possibilities, unless the answer is no. Nothing to see here.   [00:51:43.470] The US. Dollar continues to be the only dominant reserve currency in the world. Right? Okay, there’s a small chance that that’s the case, but there’s a lot of different scenarios here that there’s competing reserve currency, or it’s gold, or it’s some formal IMF World Bank reserve currency. Right.   [00:51:59.200] So all of those different options essentially mean that there’s reduced demand for US dollars. There’s reduced demand for us. Dollars because the Chinese are no longer paying for oil in dollars. They’re paying in renminbi, or maybe they’re paying in rubles. The Saudis aren’t necessarily demanding US dollars for payment anymore.   [00:52:15.530] The Venezuelans are not demanding payment for US dollars anymore. This is actually why I think it may be possible, certainly not outside the realm of possibilities, that there’s an invasion. There’s some excuse for there to be an invasion, a US. Invasion of Venezuela. And Venezuela essentially becomes a client state of the US.   [00:52:31.880] Just to make damn sure that Venezuela continues invoicing and closing trades for oil in US dollars. That’s certainly a possibility. There’s precedent. That the US. Will use its military to defend the petrodollar because they know it is so important.   [00:52:47.750] Now, why is it important? Petrodoll is so important. This idea about foreigners and having demand for US dolls is so important because you have to think about the national debt. Now, so far this year, this is again September 9, 2022. Bear in mind the US fiscal year starts on October 1.   [00:53:04.890] From October 1, 2021 to September 9, 2022. That’s almost the entire fiscal year. Right? The fiscal year is going to end on September 30, so just three weeks from today. But so far this fiscal year, the US.   [00:53:15.140] National debt has increased by almost two and a half trillion dollars. Technically, the actual numbers $2,468,000,969,678 as of yesterday afternoon. That’s the amount, $2.46 trillion in additional debt so far this fiscal year. Now this is really important. 246 trillion dollars.   [00:53:39.740] That’s new debt, right? That’s basically the difference between how much they spent this year and how much they earned in tax revenue was about $2.46 trillion. But the actual amount of debt, the actual amount of debt that was issued this year was about $16.5 trillion. Now let that sink in. The actual amount of debt issued was 16 and a half trillion dollars, basically since October 1.   [00:54:08.190] 16 and a half trillion dollars. It’s like one $4 trillion a month. It’s an insane amount of money, 16 and a half trillion dollars. Now, what’s the difference? Let’s say the debt went up by two and a half, right?   [00:54:22.340] But we issued 16 and a half trillion debt. What’s the difference? That’s $14 trillion difference. How do you get $14 trillion difference? Well, I’ll explain to you.   [00:54:28.920] 14 and a half trillion dollars is debt that’s already matured. So let’s talk about very briefly, let’s do Bonds 101, how bonds really work. The US. Government borrows money almost every day, right? Government is constantly borrowing money.   [00:54:42.130] You can go to the treasury website, they have an auction schedule, literally, at least every week, they’re issuing 28 day T bills. The idea is that the government borrows money, but it does it in specific increments of time. So you can buy a bond that’s literally the shortest bond is 28 days. So you give the government $1,000 and 28 days to give you back $1,000, plus a tiny bit of interest. Actually, it works.   [00:55:03.440] Technically, they discount it, but that’s a different story. So the shortest term bond is basically 28 days. This is called 28 day bills, and it goes all the way up to 30 years, right? So there’s people that loan the government money in the early 1990s that haven’t been paid back yet. They’ll get repaid sometime over the next several months.   [00:55:24.170] Literally today, somebody that loaned the government money in 2012 and bought a ten year note is going to get paid back today. Somebody that loan the government money on September 9, 2012, their bond is going to be called when the bond matures. So a ten year bond that was issued on September 9, 2012, would literally mature today. And the government has to pay them back, right? So we have these bonds again, that are issued anywhere from 28 days to 30 years.   [00:55:52.880] And the common ones, you got one year, two year, ten year, et cetera. And so these bonds, again, whether it’s 28 days or one year bonds, two year bonds, five year bonds, ten year bonds, technically, anything between one and ten years is called a note. But let’s not get bogged down on the nomenclature. But when these bonds mature, they need to be repaid. So the government borrows money.   [00:56:13.790] It issues a ten year note today. Well, in 2032, September 9, ten years from today, they’re going to need to pay that money back just like anybody else, right? When the bonds mature, they need to be repaid. So most people, when they have debt that needs to be repaid, they reach into their pocket and they pay the money. But that’s not how the government works because the government doesn’t have that money, right?   [00:56:35.710] The government doesn’t have the money to actually repay bondholders whenever those bonds mature. So what do they do? They just borrow more. It’s like they basically refinanced the debt. So what happened this fiscal year, $14 trillion of bonds matured and rather than pay that money back, the government just borrowed another $14 trillion to pay back the $14 trillion.   [00:56:57.060] So what happened? They borrowed 14 trillion and they used that 14 trillion to pay back the other $14 trillion. So the actual amount of debt, the net debt didn’t increase. Right? They went into debt by additional 14 trillion, but then they paid back 14 trillion.   [00:57:10.550] So we had plus 14 -14 so the net debt. Is actually zero, but the important thing is they had to go out and actually still borrow the $14 trillion to pay back the $14 trillion, right? So we have two and a half trillion dollars basically in new debt because they spend more than they earn. But on top of that, they still had to go out and borrow $14 trillion to pay back the other 14 trillion. That’s a total of almost 16 and a half trillion dollars worth of bonds that they had to sell this year.   [00:57:38.290] That is an enormous amount of money. That’s an enormous amount of money. And it’s not like this year wasn’t an anomaly. Next year there’s going to be a whole bunch of there’s going to be trillions and trillions of dollars of the US national debt that matures. And guess what?   [00:57:52.180] The government is going to have to go and borrow money just to pay back that debt. And then on top of that, they’re going to have to borrow more money because they’re going to have to finance the deficit. They’re going to have to pay, OK, we spent more money than we earned in tax revenue, so we got to go out and we got to borrow more money. This is every year now. It’s not just the two and a half trillion dollars in additional spending, it’s the $14 trillion in debt that they had to basically refinance, right?   [00:58:18.780] But that’s still debt that they have to sell. So they have to go out to the whole world. They have to go to banks, they have to go to hedge funds, they have to go to foreign governments, they have to go to foreign central banks, they have to go to just foreigners in general and say, please, please buy our debt, buy our Treasuries, please buy this 1416 and a half trillion dollars. So obviously it’s worth asking the question, how can they possibly continue borrowing $16 trillion per year? Even if it’s a lot less than that.   [00:58:46.140] Hell, even it’s only ten it’s only $10 trillion. It’s only $8 trillion. That’s an enormous amount of money. That $8 trillion in debt is, like, larger than almost every economy on the planet. And they got to borrow that in debt every single year.   [00:59:02.690] That’s an enormous amount of money, right, in a Breton Woods Three environment. That is virtually impossible in an environment where you’ve got competing reserve currencies, where you don’t have the Petrodollar dominance that you used to have, right? Remember, under the Petra dollar, every government, every bank, every big company, overseas, everybody held dollars. Everybody had to hold dollars. Well, guess what?   [00:59:26.820] In an environment where there’s a different reserve, there’s some World Bank reserve or there’s multiple competing reserve currency. You’ve got euros and you’ve got renminbi and you’ve got different currencies. Well, guess what? Now there’s less demand for dollars, which means that people that used to buy those charges, that used to be in that group that said, okay, sure, we’ll buy some of that $16 trillion, they used to be in that group, now they go, actually, I don’t need US dollar assets anymore. Now I need renminbi assets.   [00:59:54.750] I need Rouble assets. I need Euro assets. I need maybe pound assets. I need gold. I need something else.   [01:00:01.320] I don’t need dollars anymore. So that’s less demand for dollars. So if you don’t have these foreigners buying mopping up $16 trillion a year, $16 trillion in Treasuries in US debt every year, who’s going to do it? Right? Who’s going to do it?   [01:00:19.200] And more importantly, why would anybody want to? Because interest rates. If you buy these treasures, what are you going to get today? 3%? Three and a half percent.   [01:00:27.710] What’s the rate of inflation? 8%. So if you’re buying Treasuries, you’re loaning money to the federal government, you’re losing money when adjusted for inflation, you’re losing money every single year. You’re losing money after adjusting for inflation year after year after year. So why the hell would anybody want to do that?   [01:00:45.060] You’re not making any money. You’re losing money right? Now. You have all these other options to say, I can go and buy money.   [01:00:54.270] Oil from I could buy commodities from India. I could buy commodities from Australia. I could buy commodities from anywhere in the world. I could buy commodities from people in South America, Africa. I don’t need to own US dollars anymore because there are so many different options.   [01:01:10.230] So why would anybody do this, right? Why would anybody mop up $16 trillion a year when you’re losing money when adjusted for inflation? So the only way they could make it more attractive and say, please buy our bonds, please buy our national debt, the way they make it more attractive is they have to raise interest rates. And this is actually what happened in the 1980s. They raised interest rates so high, you could get 18% on a US government bond that was actually a lot higher than the rate of inflation.   [01:01:40.690] There were people that were buying 30 year bonds, paying 1516, 17%, 20% US. Government bonds for 30 years that were basically getting paid for 30 years, getting 30% a year, not getting paid 15%, 18% per year by the US. Federal government. That was a hell of a deal. That was an amazing deal, right?   [01:02:00.490] So they would have to raise interest rates. But if you raise interest rates now, you bankrupt the federal government, because now, can you imagine the federal government paying 15% interest on $10 trillion? That’s $1.5 trillion a year, just an interest, right? You get to the point now where almost all of your tax revenue is going to pay interest on the debt, and now you’re talking at night. So if you raise interest rates to a level that would actually be really attractive for foreign governments to go and buy US.   [01:02:30.730] Debt, now you bankrupt the federal government, you bankrupt the US. Government. And, oh, by the way, that doesn’t even take into consideration this is another one of these. Again, when we’re trying to connect the dots going forward, we got to look at obvious things. What’s obvious?   [01:02:42.640] Social Security is going bankrupt, right? That’s not some alarm bells, oh, my God, this guy is falling. This is guy I talk about this a couple of times a year. You read the Social Security annual report of the trustees? The trustees of Social Security program which includes the Treasury, Secretary of the United States, the Secretary of Health and Human Services, the Secretary of Labor These are some of the most senior government officials in the United States government.   [01:03:08.800] And they say flat out in the report of trustees, the annual trustee report. You can Google it, look it up yourself, and see. You can read it. They’ll say, you know what, the trust funds of Social Security will run out of money in the very early 2030s. So this is basically ten years from now, which in the context of retirement is kind of right around the corner.   [01:03:29.550] We’re supposed to think about retirement over a period of like 40, 50 years. Ten years is right around the corner. So they’re telling us the Treasury Secretary of the United States of America is telling us that Social Security is going to run out of money. It’s trust funds are going to run out of money in ten years. And as a result of that, they’re going to have to make serious, serious changes to the program or there’s going to have to be a massive bailout and a massive bailout of Social Security.   [01:03:53.880] We’re talking $10 trillion at least. The actual number that the US. Government puts on its balance sheet is over 50. $60 trillion is what’s actually needed for Social Security. So even if they do a fraction of that and they say, okay, let’s do $10 trillion, that’s on top of like 510 trillion dollars a year in maturing debt on top of a couple of trillion dollars a year in deficit spending.   [01:04:15.690] How is this even possible, right? Who’s going to do that? And you’re talking about doing this in a world where foreign governments have there’s competing reserve currencies. So people don’t need US dollars anymore. They don’t need to hold US government debt anymore because they have to hold US dollars.   [01:04:30.970] They can hold renminbi. They could hold euros. They could hold all sorts of different currencies because we’re talking about a world where there’s competing reserve currencies. This is massively destructive to the US economy, to the US government particularly, because if they don’t have all these people out there in the world saying, okay sure, yeah, we’ll buy $16 trillion a year in debt, if they don’t have it anymore, then what happens? Well, either the Federal Reserve, the US.   [01:04:54.560] Central bank, the Fed has got to print all that money. The Fed prints the money and say, okay, here you go, here’s your $16 trillion. So now the Fed basically goes on this absurd money printing bonanza and prints trillions and trillions and trillions of dollars every single year, which of course is going to result in huge inflation, or there’s going to be a major default. And default could mean one of two things. Either they default on their financial obligations, they default US government defaults on its bonds, which again that’s going to create another huge financial crisis, means that people aren’t going to want to buy US debt at all, which is going to make that problem even worse.   [01:05:34.200] Or this is probably more likely they default on their obligations to citizens. They don’t have enough money to pay for this premier world dominating military anymore. They can’t have a 700 billion dollar defense budget anymore because there’s so much of the money’s got to go to pay interest on the national debt. They can’t afford Social Security anymore, right? So they cut the program.   [01:05:53.860] Or they keep moving the needle and say, sorry, you’re not going to retire at 65. Now we’re going to move it to 75. You can’t get Social Security until you’re 75, or something like that. So these are the things, the promises that they’ve made people for years. We’re going to provide for your security.   [01:06:08.400] We’re going to provide for your retirement. We’re going to provide these things. Guess what? They’re just not going to have the money to do that. So they default on the promises they made to their citizens.   [01:06:16.540] So these are the ways if we look at things that are totally obvious, it’s so obvious that Social Security is running out of money. That’s not a conspiracy theory. That is literally a quote from the Treasury Secretary of the United States. They tell you in black and white that these trust funds are going to run out of money in ten years time.   [01:06:37.570] That one is so obvious we don’t have to bother thinking about what could happen in the future. They’re telling us, they’re telling us right? We can see the decline in the US. We can see all these other competing factors and we connect the dots going forward and try and think about the things just big picture trends that are obvious. We can think, well geez, we’re already kind of moving into a Bretton Woods three scenario.   [01:06:56.450] We’re moving into an environment where because of all these different factors that may be competing, currencies debt level is going up. Even if somehow over the next ten years the US is able to escape a Bretton Woods Three scenario and for the next ten years the US dollar remains the world’s dominant reserve currency. Even if that’s true, they’re still going to have to contend with Social Security. So either they’re going to have to go into debt and say, okay, well we need another $10 trillion to bail out Social Security, which is going to be really hard, or they’re going to default. Either way, these are things that I think people need to prepare for.   [01:07:30.360] And the implications are, number one, your taxes are probably going up. They’re going to have to raise taxes right, because they’re going to have to try and live within their means. They’re going to have to pay for all this debt. They’re going to have to pay the interest, they’re going to have to pay the higher interest rates. So that means they’re going to have to get the money from somewhere.   [01:07:46.070] So taxes are probably going up. It probably also means that retirement is uncertain, is a little bit in danger, Social Security is certainly in danger and it means that typical retirement planning that people base for decades thinking okay, I can do a little bit of this and then I’ll get my Social Security and everything will be fine. Well I don’t think you can necessarily think that way, especially if your retirement is farther out. If your retirement is more than ten to 15 years out in the future, you’re really going to have to think differently about retirement and figure out different ways that I can save more for retirement or just assume that you’re going to have to continue working for a lot longer than you were expecting. Because if you look at the annual trustee report for Social Security again they’re telling us in black and white that those trust funds are going to run out of money and when the trust funds run out of money they are going to have to cut benefits.   [01:08:37.790] It’s as simple as that. So this is really what plan B thinking is all about. It’s trying to connect the dots a little bit, looking at things that are obvious, again with humility because we could be wrong and we have to acknowledge we’re not Anthony Fauche. We don’t have all the answers. Like nobody has all the answers except for Faucey, who knows everything that’s ever going to happen again in the history and the future of the world, but everybody else is just a mere mortal.   [01:09:03.630] We don’t know exactly what’s going to happen. So we try and look at things that are completely obvious and recognize that we could be wrong, right? But that’s why the idea is to look at these obvious trends and try and think about from a big picture perspective, is that a good thing or is that a bad thing? Is that good for my retirement or is it bad for my retirement? Is the fact that the Treasury Secretary is telling me that Social Security is going to run out of money, is that good for my retirement or is that bad for my retirement?   [01:09:27.930] These are very simple elementary questions, and this is really what Plan B thinking is all about. It’s not rocket science. We keep it very simple. And if so, if it’s like, okay, jeez, it’s probably bad. So there’s something that I can do about it, in which case there’s no downside if I happen to be wrong.   [01:09:45.670] And so let’s think about taxes. Taxes are probably going up. We could be wrong, but there’s a very strong case to be made that taxes are going up. There’s a lot of politicians right now screaming and moaning and whining and complaining about taxes are too low, we need to raise them. So we don’t have to get into the details right now.   [01:10:04.140] But there are a lot of legal, perfectly legal and legitimate things that you can do to reduce your taxes. And if we’re wrong and it turns out that taxes don’t go up, in fact, taxes go down, well, there’s no downside, right? There’s no downside in taking completely legal and legitimate steps to reduce the amount that you owe. There’s no downside in doing that. If taxes don’t go up or they go down, even when you took certain steps now to reduce your taxes, guess what?   [01:10:32.020] You’re still fine. Who cares? There’s no downside in that whatsoever. As long as you keep it simple, you don’t go out of your way and get involved in some really crazy, ultra complex, very expensive tax plan to reduce something. You’re spending so much money and maintaining some structure every single year, tens of thousands of dollars and something like that, unless it’s really worth it to you, right?   [01:10:58.190] But doing very simple things that make sense, there’s no downside in that. You’re not going to wake up and go, oh, I’m so angry, I save money on my taxes this year. Nobody’s ever going to say that. Nobody’s ever going to say that, right? And the same thing about retirement.   [01:11:12.370] If it turns out that benevolent space aliens show up and save Social Security, just pour a bunch of free money into Social Security and save retirement for everybody. And you went out and actually you set up a more robust retirement structure and you put some extra money away into your retirement plan. You made some better investments and you set up a structure where you could make more lucrative investments instead of just sort of generic, Wall Street managed generic, lackluster funds, and did things that were a little bit more interesting and more lucrative, and you have more money set aside for retirement. There’s no downside in that, right? You’re not going to be upset about that.   [01:11:49.800] And that’s what Plan B thinking is all about. Look at the big picture trends. Look at the things that are obvious, try and determine, is this good for me or bad for me in the future? And what are the things that I can do now that are simple and cost effective and makes sense? No matter what happens next, if I’m totally wrong, if we’re totally wrong about how we’re thinking about X, Y, and Z, I’m still okay.   [01:12:10.040] That’s what Plan B thinking is all about. As a final point in this, I would say a third lesson here. Number one, being there are often events in history, huge events that take place that people don’t even realize the significance at the time, but they end up being watershed moments. And I think in the United States, it’s possible that we’ve already had that. We’ve already had our Odo acer shows up to Romulus Augustus.   [01:12:34.430] It’s possible we had that moment already. We might have had our Martin Luther moment already, or possible we didn’t. We don’t know. We’re not going to know for quite some time. Lesson two is that doesn’t always necessarily have to be a dominant superpower.   [01:12:46.360] We walk through a scenario in which there are multiple superpowers and what that might mean and what that means specifically to the petro dollar and the difficulty of the US. Being able to have to sell potentially $10 trillion a year or more of debt. That’s a really tough thing to do. And the implications of that being able to potentially even bankrupt the US. Government and the potential inflation or the defaults that would take place, that’s a big deal.   [01:13:12.130] Number three. Another lesson here is there’s always a brighter place. And we talked about this barbarian kingdom period in history. This is actually what most people kind of commonly call the Dark Ages. And historians actually have tried to shift that to something else to say, well, let’s not call the Dark Ages anymore because there’s only the Dark Ages in Europe.   [01:13:31.850] And that’s actually true, is that while it was the Dark Ages in Europe, you think about 600, 700 Ad. 800 Ad. It was the Dark Ages in Europe. But in China, it wasn’t the Dark Ages. It was the golden age.   [01:13:42.930] That is the Tang dynasty, the golden age of Chinese civilization or the Gupta empire in India. Even the Golden Age are nearing the Golden Age in Japan, or the Empire of Ghana or different places around the world that were booming, right, booming economically, booming socially. They had peace, they had prosperity. It was a wonderful place to be. And that’s always the case.   [01:14:05.930] It’s always been the case that even though there’s some place that might be really bad and struggling, there are other places, are doing really good. Dark Ages in one place might be Golden Ages in another place, and it doesn’t mean that, okay, you should get up and move and go somewhere. For a lot of people I know that’s really radical, but at least think about it. The world is a big place, and anybody who ever said, oh, it’s a small world, never flew across the ocean to Australia before, the world is absolutely freaking enormous. And there are a lot of different opportunities in the world depending on what your priorities are.   [01:14:37.830] And different countries in different cities and different places have different things. Different opportunities for people. Depending on what your priorities if you’re a priority is retirement. Or you want to raise your family in a quiet and peaceful place where you’re not going to have people constantly screaming at you or telling you how to raise your children. Or business opportunities.   [01:14:53.890] Or you’re young and single and you’re looking for different lifestyle opportunities. Whatever the case may be. The world is a huge place and there are different opportunities for everybody where you can have your golden age. No matter what’s happening in the world. Again, it doesn’t necessarily mean you have to move, you have to pick up and go and take your family somewhere, but it’s at least worth looking at options and knowing that if there is one of these events and we do find, oh, well, that was the Oto Acre event, that was Romulus Augustus in September 476 Ad.   [01:15:25.710] And it just happened, and I feel like I need to get out of here. You want to have that option available and that’s again, also the idea behind a plan B is you want to have this stuff lined up in advance so that if plan B ever becomes plan A, you’re not thinking about it while you’re packing your bags. It’s important to think about this stuff in advance and having a little bit of the interest and the courage and the presence of mine and the independence of mine to try and connect the dots again with humility. That’s really what it is. That’s what it’s all about.   [01:15:57.950] Having a plan B. And plan B thinking. It’s the whole idea. It’s the idea is to look at big picture trends that are really obvious and things that we can look at again with a little bit of humility because we know we could be wrong and that’s why we want to do things that make sense no matter what happens or doesn’t happen. Next.   [01:16:13.930] Thank you very much for listening. I hope you enjoyed it and I’ll speak to you again soon.   Close Podcast Transcription

The year 1776 is legendary for precisely one thing: the Declaration of Independence. But 1776 was actually a REALLY big year. Because in addition to the formation of the United States (which undoubtedly had an extraordinary impact on the course of the world), 1776 also saw two other historic trends take shape. The first was the birth of capitalism. 1776 was the year that Scottish economist Adam Smith published his famous work An Inquiry into the Nature and Causes of the Wealth of Nations, which was the first book ever to outline the case for free markets and laissez-faire governments. Not to take anything away from impact that US independence had on the world, but you could easily make an argument that the idea of capitalism has been just as profound to human history. Capitalism is responsible for more wealth creation and more prosperity in the past 246 years than every economic system combined over the previous 5,000. That’s a pretty significant impact. But we’re not even finished yet with the big events from 1776. Because that year saw something else take place that was truly profound… again, potentially outweighing the impact of both US independence AND capitalism. It was the invention of the steam engine… which at the time may have been the most disruptive technology in human history up to that point. For thousands of years prior, nearly all work done on the planet was powered by muscle, i.e. human beings and animals toiling away in fields and factories. Just about everything required physical labor. The steam engine changed all of that. For the first time on a mass scale, an inanimate fuel source (like coal or wood) could power machinery, which could do the work of dozens, even hundreds of people. It was the steam engine that really kicked off the Industrial Revolution and brought about an extraordinary period of growth to the world, where wealth and standards of living increased like never before. Over time, human being figured out better, faster, cheaper ways to produce energy to fuel their machines. And there is an inextricable link between prosperity… and cheap energy. When energy is cheap and abundant, societies are able to invest heavily in growth; they have more resources (i.e. more energy) available to grow, to produce goods and services, to invest in the future. When energy is expensive and scarce, the opposite happens. A society has to spend most of its energy just to sustain itself, and there is limited surplus left over for growth and investment. After generations of enjoying cheap energy and declining costs that fueled unparalleled prosperity, we are now facing steeply rising energy costs. And I don’t even mean in dollar terms. Sure, the cost of a barrel of oil has more than doubled in the last year. Gasoline prices and electricity prices are high too. But what I’m really talking about is the cost, in energy, of producing energy. Oil wells, for example, require electricity or diesel fuel to power their pumpjacks. So oil wells essentially consume oil in order to pump oil. In the past, this ratio of oil produced vs. oil used was quite attractive. For every barrel of oil it burned in fuel, an oil well would produce 30-40 barrels of output. And that was a great cost/benefit ratio. But this ratio is falling rapidly, making energy a lot more expensive. And that’s a terrible trend. Again, cheap and abundant energy is a critical factor in driving prosperity. More expensive energy has the opposite effect. Europe is already in a full-blown energy crisis, and many developing countries aren’t able to get their hands on enough energy to sustain themselves agriculturally. So this is already becoming a major issue, and it could potentially become much worse. Obviously the war doesn’t help. But there has also been a deliberate political agenda to drive investment and enthusiasm away from fossil fuels towards more expensive, inefficient forms of energy production… like installing solar panels across cloudy Germany. Again, I cannot overstate how important cheap energy is to human prosperity. So these incompetent, spinless politicians and climate fanatics are dragging the world down a terrible path. Fortunately there is a real solution to this problem that already exists: nuclear. It’s controversial (even though it shouldn’t be). But momentum is really starting to build for a new energy renaissance driven by nuclear power. And this is a major trend you ought to be aware of, because it could drive human prosperity for generations to come. (Plus there are a LOT of ways to invest in it now.) I invite you to explore this topic with me today in today’s podcast, in which we discuss: – the intriguing history of energy, and why there was very little growth for 5,000 years – how everything changed in 1776 – basic energy terminology you should know, like EROEI, specific energy, and more – why cheap energy is so important to prosperity – why energy is becoming more expensive… in energy terms – why nuclear is the obvious answer, and how it can drive future growth Open Podcast Transcription [00:00:00.910] Today we’re going to go back in time to the year 1776. Now, most people think of exactly one thing when they think of the year 1776, and of course, that’s the signing of the Declaration of Independence and the birth of the United States as a nation. It but 1776 was actually a really big year for a couple of other things that we’re going to talk about. The first, though, was a book. And it was a book that was written by a Scottish economist named was Adam Smith.   [00:00:29.030] And the book was called An Inquiry into the Nature and Causes of the wealth of nations. It’s often just referred to as the wealth of nations. And this is generally known as sort of the Bible for capitalism. Adam Smith is known as the father of capitalism. So you kind of argue that 1776, just like it was the birth of the United States, was also the birth of capitalism.   [00:00:48.350] Capitalism, just like the United States, has had a profound impact on the world. And I think you could make an argument that it’s possibly just as important, certainly at least in the same conversation in terms of the impact that capitalism has had on the world prior to capitalism. Hundreds and hundreds of years before capitalism, we had the feudal system, which is one of the dumbest ideas ever. Such a stupid idea. You had the king at the top, who was in his position solely by accident of birth, a bunch of noblemen, same position.   [00:01:16.760] And then all these medieval serfs who were tied to the land and couldn’t go anywhere. It had no freedom. Terrible system. Terrible, terrible system. But between capitalism and the feudal system, there was a period of time where the general prevailing economic system was known as mercantilism mechanicals.   [00:01:30.840] And it was a very authoritative system. The government was in charge. And primarily it was based on an ethos in which everybody believed that the world and wealth was finite. It was a zero sum game. The only way I can be wealthy is by taking from you.   [00:01:52.270] I have to take your wealth. And that’s the way I, as a nation, become wealthier. And that was the cause of imperialism and so many wars over territory and resources. It was all about, I have to expand my territory. I have to expand the availability of my resources, and that’s the only way I can become wealthy.   [00:02:10.930] And Adam Smith said, no, that’s crazy. That’s stupid. Adam Smith believed, and he wrote about this in The Wealth of nations, is that wealth is not finite. Prosperity is not finite. And the way to actually create literally infinite wealth and prosperity is through value creation, by doing things that actually create value through competitive advantage.   [00:02:30.900] He gives us great example in the book where he talks about silk, and he’s saying, in England, we do a lot of textiles really great, but we don’t do silk. The French do silk really well. So you know what? The French should do what they do well, which is produce silk, and the English should do what they do well, which is wool and other things like that, and then we can trade with each other. That way, we’re doing what we do most efficiently.   [00:02:54.750] You’re doing what you do most efficiently. And we trade because we do things that we do most efficiently. We have this extra surplus, and we can trade our surplus with each other, and that way we’re all be better off. We’ll all be better off. And it was not a zero sum game.   [00:03:08.780] It was infinite prosperity. Everybody can win. It’s a win win. That’s what capitalism is all about. Win win, as opposed to winlose zero sum game.   [00:03:18.180] Mercantilism. And again, mercantilism is what gave way to all the imperialism and war and everything was all about taxes and tariffs and all these things. I would say, actually, we’re kind of sliding quickly towards mercantilism again today. When you hear these progressives talk about I think it was AOC said, you don’t make a billion dollars, you take a billion dollars. That’s a zero sum mentality.   [00:03:42.720] That’s based on this idea that wealth is finite, prosperity is finite, and the only way somebody becomes wealthy is by taking it from somebody else. That’s a very 18th century, 17th century mentality. It’s incredibly antiquated. It’s naive, it’s unsophisticated. Capitalism means value creation.   [00:04:01.060] Wealth is infinite. And Adam Smith was the first guy to really write this down and say, this is what the world can be. That was a really big deal. But there was something else even bigger that happened. And the other thing that happened that year was another Scotsman big year for Scotland, another Scotsman named James Watt, who had relocated to the city of Birmingham in England.   [00:04:23.850] James Watt was 40 years old in 1776, and he was an inventor, he was an engineer. And he put the finishing touches in 1776 on one of the most profound inventions, certainly up to the that point in history. It’s called steam engine. Now, like all great scientists, james Watt stood on the shoulders of giants, like Isaac Newton before him and all great scientists before him. And one of the giants upon whose shoulders James Watt stood was a guy named Thomas Newcomen, who decades before had created something he called an atmospheric engine, which was something like a steam engine.   [00:04:56.530] But the basic idea behind the steam engine was you produce heat in some capacity, you burn something, that heat is produced, it heats up water, the water produces steam. And that steam, the rising of the steam creates a force, and that force does something. It turns a crank, it drives a piston, etc. It turns a wheel, something happens. It creates some mechanical motion.   [00:05:18.810] And that mechanical motion powers a machine that does something that weaves textiles or even powers a steam ship. It wasn’t long that steam was soon powering everything. This idea of steam power, that you could take this inanimate fuel source like wood, burn it, and power something to create machinery. Soon everything transportation and trade and commerce and industry, cities, everything was being powered by steam. It’s interesting that James Watts company was called Watt and Co.   [00:05:50.820] At the time. This actually companies still exist, believe it or not. It’s a subsidiary of a large conglomerate, publicly traded company called Illinois Tool Workshops that has probably hundreds of subsidiaries. And one of those is actually the original Watt and Co. It’s changed names since then, but that original company still exists, which is kind of interesting.   [00:06:08.980] Now, the reason this is such a big deal, the reason why steam power was such a big deal is you have to now we have to go even further back in time. You have to think about the way that human civilization was for, honestly, millions of years. Now, the first fossil fuel some years ago wasn’t that long ago. Archeologists found fossils in a cave in central Bulgaria that they dated back to 46,000 years. And the fossils, through some DNA studies, that they did realize that these were certainly Homo sapiens.   [00:06:45.790] Our exact species of human beings have been lots of different species of human beings over time. But these were the first recorded Homo sapiens. And if you think about these people that would have existed in central Bulgaria 46,000 years ago. Or people that would have existed during the agricultural or called the Neolithic Revolution 10,000 years ago. Or even people in ancient Mesopotamia three.   [00:07:10.750] 4000 years ago. Their lifestyles wouldn’t have really been that different because most of the things that they did. Whether it was 460 years ago or 10,000 years ago. Planting the fields. Et cetera.   [00:07:23.030] Everything that human beings did was done primarily by human beings. Not by machines, not by robots, not by AI. Most of what they were doing was being done by human beings or animals, right? They were raising mules and horses and ox and so forth to do certain things. But it was really just muscle power.   [00:07:45.750] And so if you think about that, somebody, for example, 10,000 years ago who was working a wheat field, went out in the field, planted the seeds, took care of the crops, pulled some weeds, irrigated, maybe even dug some irrigation trenches, et cetera, harvested, separated the wheat from the chaff, processed. All that was basically done by hand, by human beings, literally human muscle power. And really up until the Industrial Revolution, until the invention of the steam engine, that’s the way it always was. So if you think about a farmer in the 16 hundreds, even in the early one, seven hundred s, the way that farming was done wasn’t really much different than the way it was done in ancient Mesopotamia, thousands of years before. It was still a human being.   [00:08:34.120] Maybe a couple of draw animals that were out in the fields using muscle power in order to plant their fields and tender their crops. Sure, by the 1500, they had better yields, they had better farming techniques, fertilizer, maybe better irrigation techniques, and possibly even the occasional, maybe water power to grind grain. They figured out water mills, and maybe even some early crude windmills, but it was still primarily muscle power. Steam changed all of that. And it was one of the most profound discoveries, one of the most profound inventions, literally in all of human history, because it gave way to this idea that suddenly we have this inanimate fuel source.   [00:09:12.210] So instead of muscle power, now we can go and take you, we can chop down a tree, and we can burn this wood, and this wood is going to create steam, and the steam is going to power stuff. And again, we had transportation industries, homes, entire cities were being powered by steam. Now, the interesting thing about this is that initially, the people were burning wood, because that’s what people burned for a really long time. And then a couple of different things happen. One, as they chopped down a whole lot of trees, and they realized they had to go a lot farther afield to get new trees to chop down the wood.   [00:09:42.630] But they also realized, wow, there’s a better source of fuel here. And it was called coal. And the reason that coal was a better source is because it actually contains more energy per weight per kilogram. And so if we think about energy, this is something that in science is referred to as specific energy or energy density. So if you think about, and we’ll get to this in a minute, but the amount of energy which you could measure in a number of different units of measurements, so in this case, we’ll say joules per kilogram for wood is about 18 joules per kilogram of energy that you get.   [00:10:16.180] So there’s an amount of energy that’s contained in wood. You can burn that wood, and that energy then is converted from what’s stored in this chemical energy of the wood into heat energy. Same thing with coal. You’ve got this chemical energy that’s contained in coal, you burn it, and that energy is converted into heat energy. Well, it turns out there’s about twice as much energy, twice as much chemical energy stored in coal for every kilogram of coal than there is for every kilogram of wood.   [00:10:44.040] And I realized, oh, wow, this is great. So we get twice as much energy out of coal than we do for wood. So then coal became all the rage. Coal became super popular, and it was great. It was one of the things that actually ended up powering transatlantic steamships and so forth, because they could put more fuel on the boat, because you could get twice as much energy out of every kilo.   [00:11:02.310] And then they figured out how they could kind of doctor the coal a little bit and put certain additives. And so forth, it became much more powerful, much, much more reliable source of energy. Lighter, better, faster, sweeter. Everything was better about coal. But the other thing about coal is that it wasn’t just the specific energy.   [00:11:21.300] It was also about how easily you could get it. How easily could that form of energy be obtained. So let’s think about a basic energy calculus. Let’s think about a lot of people probably like to garden, okay? So if you have a garden, you may be pleasantly surprised to know that gardening is actually pretty good exercise.   [00:11:39.820] And people burn 250 to 350 calories per hour when they’re gardening. That’s energy that we’re using, right? Because that’s human muscle. Just like thousands of years ago in ancient Mesopotamia or 10,000 years ago, we’re using human muscle in our gardens with our tools and our shovels and all these things that we have to do. So you’re burning about 300 calories an hour.   [00:12:01.820] That’s energy, right? So if you think about it takes 100 hours of work to maintain, to seed your garden, to maintain it, go out and pull the weeds, harvest it, process everything that you get out of that. If you think 100 hours times 300 calories an hour, that’s 30,000 calories, 30,000 calories that you’re burning that’s energy, right? So literally, just in order to break even on that energy consumption, if you’re spending 30,000 calories to take your garden from nothing to where you’ve got food in your hand, you’re spending 30,000 calories of energy, then in theory, your garden should generate at least 30,000 calories in order for you to break even on it. Otherwise you’re going to be spending more energy than you’re producing in the food, right?   [00:12:46.790] So that’s roughly, if you think about it, if you have a tomato garden, that’s like somewhere between 80 to 100 tomato plants that you would need. So your garden needs to have at least 80 to 100 tomato plants just for you to break even on that 100 hours of work. So if you think about this, and I’m sure that’s a pretty easy concept to understand, if you think about this in the context of energy in general, it’s the same, really, with any form of energy. We could think about that with oil. We could think about that with coal.   [00:13:14.280] If you think about it with something like, for example, early steam engine, when people were burning wood, somebody had to go and chop down the wood. Then they had to transport the wood. They had to have carriages with horses, the horses need to be fed and all these sorts of things.   [00:13:30.850] This is true of any form of energy. There’s no such thing as truly free energy. Every form of energy has to be harnessed in some capacity. We have to drill for oil, we have to mine coal, we have to chop down trees to burn for heat energy, all these sorts of things. This is known in energy analysis as energy return on energy invested.   [00:13:51.670] And there’s a lot of different ways people look at it. Sometimes they look at it as net energy. There’s a lot of different terminology for this. But you can think of energy return on energy invested as I have to put energy in, in order to produce this energy, and I get a certain amount of energy out. So you can think about it again as wood, I have to put a certain amount of energy into chopping down the tree, transporting the wood, maybe even processing the logs, et cetera.   [00:14:16.840] And then I burn it. It goes into my steam engine. And that steam engine produces a certain amount of energy. So we certainly better hope that that steam engine produces more energy than it required to chop down the tree and transport it to the steam engine, all that. So we better hope that generates more energy than that.   [00:14:34.890] So this energy return on energy invested is generally considered a ratio, right? So we say for every one unit of energy I put into it and chopping down the tree and transporting the wood and all these sorts of things, for every one unit of energy I put in, I get three units out. Five units out, 100 units out, right? So the general level that most people, it’s certainly an advanced developed economies. The threshold that they look at is they say, okay, this is what makes a reasonable energy source and economically viable.   [00:15:05.800] Energy source would be a ratio of about seven. So if you have seven to one, for every one unit of energy you put in, you get seven units of energy out. That’s considered economically viable. Now, there is no standard calculation, right, because it really depends on how far do you take this. What do you actually sort of circle in the energy input?   [00:15:24.050] We know the energy out. That’s usually pretty easy to figure out, right? How much energy does this steam engine produce? For us, that’s pretty easy to figure out. Same thing with a power plant.   [00:15:33.410] We know exactly how much energy this power plant can produce. But what’s a lot more difficult is to figure out, okay, how do we calculate exactly the amount of energy required that goes into it? If you think about the wood and the steam engine example, do you also include the energy used, for example, to manufacture the axe that was used to chop down the tree? Do you amortize the cost of that axe over thousands of trees? Do you include the cost to make the wheel that goes on the carriage to transport the wood, et cetera?   [00:16:03.230] So there’s no standardized calculation for this. And this is why you’ll see a lot of estimates. If you look up energy return on energy invest, you’ll see a lot of different calculations for a lot of different fuel sources. But it’s a very interesting way to think about energy. I want to go into a little bit more about energy terminology.   [00:16:21.860] If we think about really anything height, weight, area, length, et cetera, let’s think about length. We have different units of measurement for length, right? We could say miles, we could say kilometers, we could say millimeters. We could use nautical miles, light years, right? So these are all different ways to talk about length, and they all have different uses.   [00:16:44.270] So if you’re in aviation or shipping, if you have a boat, whatever, you’re probably accustomed to using nautical miles. When you talk about distances, if you’re just driving around the road in the United States, you’re using regular, what they call statute miles. Or if you’re in pretty much everywhere else in the world, you’re using kilometers. If you talk about really short distances, using millimeters or centimeters or inches, if you’re in astrophysics, you use light years to talk about really far distances between stars and galaxies, or maybe parsecs or kiloparsecs, right? These are all different units of measurement, but ultimately, they all measure the same thing.   [00:17:23.230] They all measure length, right? And we convert from one of these to the other. We can say, okay, I’m whatever, 6ft zero inches, which is the same as 182 CM. You can also, if you wanted to, you could calculate your height in miles. You could calculate your height in light years.   [00:17:41.020] If you wanted to, you could calculate your height in nautical miles, or you could calculate the height of Mount Everest in meters, or you could calculate it in feet. And so there’s a conversion between these 1 mile is equal to 1609 meters. We convert back and forth. Energy is the same way. There’s different units of measurement, just in the same way that we can convert from miles to kilometers and kilometers to nautical miles and light years, et cetera.   [00:18:06.890] We can do the same thing with energy. So different units of measurement for energy, if you’re talking about, for example, your electricity bill, which is a form of energy, you’re accustomed to seeing something like kilowatt hours. If you’re in science and technology, a lot of times people use joules. If you’re in particle physics, they use a unit of measurement called electron volts, which is a really tiny unit of measurement. If you’re in the automotive business, you use footpounds.   [00:18:33.130] If heating people use British thermal units. BTUs, food is a form of energy. Food is literally just stored potential energy. And with food, obviously, the unit of measurement we use with food is calories. Again.   [00:18:48.830] We have BTUs, British thermal units quads. Quad is literally 1 quadrillion. That’s ten to the 15th British Thermal units, or barrel of oil equivalent BoE. So there’s all these different units of measurement when we think about energy. So let’s go back to food for a minute and think about something really standard that probably everybody’s at least seen if not eating at some point in their life, like a Snickers bar.   [00:19:11.120] A Snickers bar is 250 calories. That calorie. Again, that’s a unit of measurement for energy. It’s literally the sort of amount of stored energy inside of all that mess that chocolate and nutty, not going anywhere for a while, 250 calories of energy. And so, if you consume a Snickers bar, that energy now is going from the Snickers bar and through your body’s metabolic process, is converting that into some form of energy, which you can then use to go for a run, power your muscles, type on a keyboard or do absolutely nothing, in which case your body goes AHA.   [00:19:45.440] And it stores that in your gut, or your butt, or wherever you happen to store your fat, because fat is really just stored energy. So we take this stored energy from the Sniggers bar, put it through our body’s metabolic process, and then it ends up being stored somewhere else in our body in a rather unsightly manner. But you can again convert because calories is just a unit of energy. So the 250 calories in a Snickers bar is the same as saying, well, 250 calories is the same as 1,046,000 joules, which is the same as 991 British thermal units, which is the same as zero point 29 kilowatt hours. These are all different units of measurement for energy.   [00:20:23.850] It’s like saying that 100 km is the same as 54 nautical miles, which is the same as 328,000ft. This is all the same thing. We’re just using different units of measurements. So 250 calories is roughly 1000 British thermal units and so forth. Now, with all that kind of in mind, we talked about energy return on energy investment, we talked about specific energy, we talked about basic energy calculus.   [00:20:48.390] Here, if we go back to this idea, we had the steam engine and we had people burning wood and they were burning coal. Well, eventually they figured out, oh my God, we could do this with oil. And now oil had been around for a really long time. In fact, I’ve read about shipwrecks in the ancient world going back thousands of years, where they found at the bottom of the ocean, they found oil lamps on these old shipwrecks, right? So even in the ancient world, people realized that they could burn oil as a fuel, mostly for lamps.   [00:21:17.550] And even in the early days in the United States, when they discovered oil, they were originally saying, oh, this is great for lamps. And everything was basically about lighting that they could put basically becomes kerosene, and they could burn it and have these oil lamps. But eventually they realized we could burn this because oil has a much higher specific energy than coal. It’s got a very high energy return on energy investment, by the way, natural gas even higher. And they realize that we could burn this.   [00:21:44.840] This becomes a source of electricity, becomes a fuel not just for lighting lamps, but literally for powering entire cities, for eventually internal combustion engine, et cetera. So oil, especially in those early days had an incredibly high energy return on energy investment, had a very high specific energy. So it was a much more efficient fuel source than coal, certainly than wood. And this was, again, a huge discovery, not even just for any single country, but literally for our entire species. The important thing to really understand about energy is that you got to think about energy as the ability to do things, the ability to create value.   [00:22:23.440] If we go back to the idea of Adam Smith and Adam Smith’s concept of capitalism was value creation, you do what you do best, we’ll do what we do best. We specialize in certain things, and we create value. And the amount of value that we can create is infinite. But in order to create value, we need energy. And initially it was human beings with muscle power and animal power doing things to create value.   [00:22:46.960] And then all of a sudden, we had machines doing that. And so the machines made us much more productive, much more efficient. Instead of having 100 people doing this one activity, you could have one person and a machine doing this activity and meant that everybody else is freed up to do other things, and we could produce more. So energy, the ability to have abundant energy and the machines that were powered by that abundant energy was an incredible boost in human wealth creation. And that’s the important thing about energy.   [00:23:16.420] It gives us the ability to do things. Now, if we think about energy in that context, right? So let’s look at the United States, for example. So total energy production, now we’re going to go back to those units of measurement, right? So we have barrel of oil equivalents or kilowatt hours, whatever.   [00:23:33.810] So the ones that they use a lot of times in national accounting like this is quads one quad is 1 quadrillion British thermal units. So 1 quadrillion, by the way, is ten to the 15th power. That’s one followed by 15 zeros. That’s a big number. Total energy production in the United States is about 100 quadrillion British thermal units.   [00:23:55.630] Okay? So British thermal unit is specifically what is a BTU? I’m trying to remember it’s like to increase I think it’s increased a certain amount of water by one degree Fahrenheit, something like that. I can’t remember exactly what it is, but each one of these has a very specific measurement to it. So total us.   [00:24:15.350] Energy production, 100 quadrillion British thermal units. And we could convert, again, that British thermal unit. We can convert that to kilowatt hours, we can convert that to whatever we want in the same way that we could convert a nautical mile into inches and feet if we wanted to. So 100 quadrillion BTUs, we say, okay, it’s 365 days in a year. There are 350,000,000 people in the United States consuming this 100 quadrillion BTUs of energy production.   [00:24:44.360] So what that works out to be, if you divide that 100 quadrillion BTUs by 350,000,000 people divided by 365 days out of the year. And convert that into another unit of measurement, one that we all understand. Food calories, right? Let’s convert it into Snickers bars. 100 quadrillion BTUs is the equivalent of about 200,000 food calories per person per day, literally for every man, woman, and child in the United States every single day.   [00:25:10.500] That’s the amount of energy. That’s about 800 Snickers bars worth of energy per person per day in the United States. That’s how much energy is being produced. So if you can imagine, every single day, 800 sneakers bars just fall out of the sky, right? That’s how much energy is essentially being produced in the United States.   [00:25:27.910] So that’s based on daily caloric consumption, anywhere between, let’s say, 1802,600 calories, that gives you roughly the daily food needs of about 80 people, okay? So that’s essentially what it works out to be. If we’re talking about 200,000 food calories per person per day. So 200 Snickers bars, that’s about 80 people in terms of daily food needs. Let’s have a little thought experiment for a minute.   [00:25:53.590] So let’s imagine that we have 80 people all working in some beautiful garden in some commune where no money exists, and it’s just people just working, right? Sounds like a communist paradise, but just go with me for a minute here. So we have 80 people kind of working in some gardens. And initially, they don’t know anything about gardening, they don’t know anything about food production. And so it takes all 80 people working in the garden just to produce enough food in order for them to survive, right?   [00:26:22.880] So the 80 people, they consume x number of calories working the garden, and the garden produces exactly that many calories. And so they eat, they have that food, and so they’re able to survive to another season to work in the garden and keep consuming and producing, and they never have basically any surplus. But then one day there’s a technology breakthrough and they realize, oh, wow, we could fertilize or we could increase our crop yields and all these different things. And the crop yields skyrocket. The crop yields just go through the roof and all of a sudden now they could free up a whole bunch of other people.   [00:26:56.560] Now, instead of all 80 people working in the gardens to produce enough food to support exactly 80 people. Now it only takes ten people working in the garden, and those ten people can produce enough food to support 200 people, right? So that’s a huge breakthrough, because what it means is those other 70 people and their little communist hippie commune now can go out and do stuff. Those 70 people can engage in trade and develop technology and security and build buildings and so forth, and essentially create civilization. And everybody benefits because of that, of those 70 people.   [00:27:31.720] And now, all of a sudden, instead of producing enough food barely for 80. People. Now we’re producing food for a couple of hundred people. And some of those 70, they say, oh, you know what, I’m going to go to the next commune over and I’m going to trade the surplus of food we have for other things that they might have. And so I’m going to bring those other things back and everybody’s going to be better off because of these advances.   [00:27:52.950] So the basic idea here is that when you have the ability to produce energy more efficiently, more inexpensively, it’s better for everybody. It drives prosperity. And that’s a very key point that you have to understand, is that prosperity really abounds when energy is cheap. Poor countries have expensive energy, and it’s actually quite a vicious cycle because they have to spend more energy to get energy. And instead of spending that energy, instead of having an abundance of surplus excess energy that they can spend on other things, they have to keep reinvesting all the energy they get out of their system right back into it to try and produce more energy.   [00:28:30.780] So they don’t ever have any excess energy left over for value creation. Just like what Adam Smith said. Actually, to combine these two capitalism where we have this concept of value creation, and it’s not a zero sum game, wealth is abundant, prosperity is abundant. Plus cheap energy, you get crazy amounts of prosperity. And what a surprise.   [00:28:51.650] The United States had both of these for a long time and became the wealthiest country in all of human history. Prosperity abounds when energy is cheap, if you think about it in financial terms, right? Because we’re talking about energy return on energy invested. It sounds like a financial term. Let’s think about a basic financial investment, something as simple as a certificate of deposit.   [00:29:14.430] If you go back to the early 1980s when interest rates are actually really high, in early 1982, you could go to your bank and put money into a three month CD certificate deposit and they would pay you an annualized rate of 15 and a half percent. 15 and a half percent. Now, inflation was pretty high back then, but it’s basically about the level that it is now. Inflation was about 9% and your three month CD was 15 and a half percent. This is kind of in a way of looking at energy return on energy invested, right?   [00:29:44.340] So it’s like your inflation is kind of your cost and your three month CD yield is your return. And so if you subtract the two and you say, okay, my return is 15 and a half percent, but my cost of getting that 15 and a half percent is I have to pay this 9% inflation. But hey, I’m still six and a half percent ahead. 15 and a half percent return minus the 9% inflation means I’m still six and a half percent ahead. Even after adjusting for inflation, that’s extra surplus and that extra surplus of six and a half percent.   [00:30:18.750] You know what? I could reinvest that again and get another six and a half percent on that. Or I could invest in other things. I could pay down my mortgage. I could invest in the business.   [00:30:26.500] I could do so many other things because that six and a half percent, that’s surplus, and I can get ahead with that. Now, think about what we’ve been dealing with over the last several years, right? Inflation was I’m not talking about now. I’m talking about let’s go back to 2017, 2018, when inflation, the official inflation rate was like 1% 0.7%. Now you could go out and actually get a certificate of deposit.   [00:30:50.770] If you are really lucky, you might be able to get a 0.7% 1% certificate of deposit. There are a couple of banks that are actually offering that was considered a really high certificate deposit rate. So now we got 1% inflation. That’s sort of our cost in order to produce a 1% rate on certificate deposit. Now we’re just breaking even.   [00:31:12.400] We’re barely breaking even here. We got 1% in one person out. We’re not actually we don’t have any surplus. There is no wealth. There’s no prosperity being generated here, right?   [00:31:21.320] And Metro respects is actually even worse because if you put your money in a savings account, you’re getting 0%, and yet you’re still paying 1% inflation. So now you’re actually worse off year after year after year. Now it’s negative prosperity instead of positive prosperity. So this is a really important concept to understand, is that cheap energy? And when I’m talking about cheap energy, we’re talking about energy return on energy investment.   [00:31:45.790] We’re talking about the amount of energy required to produce energy. Because the cheaper energy is in energy terms, the more energy we have left over is surplus. And that surplus energy powers things. It powers value creation. And value creation was what creates prosperity, especially when you combine it with capitalism.   [00:32:05.950] Now, the issue that we’re facing, of course, is that energy is becoming more expensive. We think about the price of oil. Right now, the price of oil is like $90, $100 a barrel. Depends on if you’re looking at WTI or Brent or whatever it is that you’re looking at. But as of the day I’m recording this, september 2, 2022, that’s the price of oil.   [00:32:23.870] If you listen to this, at some point in the future, you might think, oh, my God, $100 oil sounds so cheap. I hope we don’t get there. But it’s certainly a possibility. But try to divorce yourself for a moment from the idea of the price of oil denominated in dollars or euros or any other currency. Try to divorce yourself from looking at gasoline prices in your local currency and instead think about the price of oil, the price of energy in general, and the price of oil in oil, right?   [00:32:52.670] What is the price of oil in oil? How many barrels of oil do we have to burn in order to get one barrel of oil or really better, how much oil do we get out of the ground for every barrel of oil that we burn in producing it? Right? So this is the basic energy in, energy out, energy return on energy invested. Well, guess what?   [00:33:13.260] We don’t have to guess because a lot of oil companies actually produces and there are extensive studies and you can even look at government sources. The Energy Information Agency for example, the United States, they have lots and lots of data on this and even the oil companies themselves often report this. And in the 90s, for example, in the early ninety s, it was pretty common that oil companies would report a 30 to one ratio. So for every barrel of oil or barrel of oil equivalent amount of energy that they were burning, that they were consuming in trying to drill for oil, they were getting 30 barrels out. That’s quite a good ratio.   [00:33:44.930] Remember, the sort of economic threshold is about seven to one. So they’re getting 30 to one. Well by the early 2000s, by 20 05, 20 06 that had fallen to about 18 to one. And now in a lot of places it’s less than ten to one. So it’s been falling, it’s been falling pretty rapidly.   [00:34:01.750] Now, bear in mind, in the early days in the United States in particular, we’re talking about 1000 to one energy return on energy investment. This is in the early 1009 hundreds when the oil was just bubbling up out of the ground and they just had to go and just scoop it up in jars. It was so abundant. You’re getting 1000 to one really energy return on energy invested. Now again, this is something that it varies widely.   [00:34:24.020] This is not something I’m not trying to say, oh, we’re running out of oil tomorrow, or any of these sorts of things. It’s not what it is. And it’s very specific. Literally every oil well is going to have its own calculation in terms of energy return on energy investment. Every field, every region, it’s all different.   [00:34:41.680] But it’s pretty clear that the abundance that they had so long ago and it was so much easier to get it out of the ground because it was in many respects not even underground. It was bubbling up above ground. Those days are gone when it was so easy to get. So now they have to spend more energy to get it. Fortunately, a lot of the technology has gotten a lot better and that makes things more productive and means you consume a little bit less energy in getting it.   [00:35:06.960] But it can be deeper, it can be harder to get to and you’ve got to go through a lot of things, especially with shale oil etc. Or to really unlock all of that. And so that’s why in many respects that energy return on energy invested is declining. We’re getting less and less oil for every barrel of oil that we spend or in many respects we’re having to spend more energy to produce the energy. That’s the opposite trend that we want.   [00:35:31.470] Again, if we think about this in a financial context, now we’re saying that if we go back to that certificate of deposit example, now we’re saying, okay, well imagine now we have that certificate deposit. Now we’ve got really negative rates. So now it’s like in the European Union or Japan or Switzerland. Now we go to certificate deposit. Now we have to pay minus.   [00:35:51.910] And on top of that we’ve got four, five, 6% inflation, right? So that’s not a great situation to be in. There are of course a lot of reasons for this. We have climate fanaticism that has truly just demonize the oil and gas sector for sure. They say oil bad, solar good.   [00:36:09.890] That’s the only thing that anybody is allowed to say. And that’s led to quite a bit of wokeness in business, banking, lending, investment markets, capital has really dried up. They call this the official kind of nice sounding, high sounding terminology for it is ESG, which stands for Environmental Social Governance. And so you have all these banks and private equity funds and hedge funds that have adopted these ESG principles. And so if you got an ESG fund you’re literally just not allowed to invest in oil and gas companies because they are evil.   [00:36:42.680] And so you can’t invest in these companies. And so what that means is there’s less capital going into these sectors. If you want to see this for yourself, the Federal Reserve Bank of Dallas publishes every quarter. The next one is coming out in a couple of weeks. The last one was from June, the one before that was from March.   [00:37:00.140] And they publish a quarterly oil survey and they go and survey a bunch of oil companies. And so granted this is all anecdotal some of this is more objective data but some of this just listening to some of these oil companies just complained. A lot of it is hilarious. There’s one I think from June, I’m going to read this and this is an oil company executive and they post these comments and they say when our government leaders are regularly demonizing the business, the oil and gas sector, we shouldn’t be surprised that investors are not interested in supporting exploration for new supplies. Basically.   [00:37:32.020] Meaning you’ve got all these politicians that are saying oil is bad, oil is bad, oil is evil. And so of course the banks and the private equity funds and all these guys are just they are divesting. They’re not investing in oil in many respects. They’re actually getting out of the oil business. They’re selling their oil positions that they have and making it.   [00:37:51.660] Another one says the current administration in Washington has declared war on fossil fuels. They did this before going into office and they have continued that war to this day. Another one says the real energy crisis isn’t even here yet. Shale will likely tip in a terminal decline. That’s shale is the type of oil that’s contained in rocks and it was sort of all the rage some years ago.   [00:38:12.100] But they’re saying shale will likely tip into terminal decline in about five years as the main shale plays run out of locations. Unfortunately, by then most of the individuals with incumbent knowledge will have retired. The brain draining industry will create a real and much larger crisis in the mid to late 2020s. So this is another sort of point to the idea about energy return on energy invested, having the resources and tools to do this. So this is if you really want to hear the comments of people that are in the business, they’re right here in the Dallas Fed actually puts this stuff out.   [00:38:40.700] There’s actually one guy who’s saying it’s really frustrating, but this push for the elimination of fossil fuels. Now would I like to see the use of fossil fuels reduced? Of course I would. If not for my sake, then for the sake of my kids and my grandkids and generations to come. But they’re saying, look, it’s got to be gradual and not let’s get this done yesterday because obviously let’s get this done yesterday attitude.   [00:39:01.690] We’ve got to get ourselves off of these fossil fuels. Now that’s having a significant impact and it also means that there’s not as much investment, there’s not as much exploration. And when there’s not as much exploration out there, that’s a big problem, right? Because it means that now we’ve got to spend more energy to produce the energy that we have instead of having this abundance of energy. That’s a really big deal.   [00:39:24.130] Now the issue is actually a bit worse than that. It’s actually quite a bit worse than that. And we’ve got to talk a little bit about physics here. There’s a principle in physics called conservation of energy. And thermodynamics this is the first law of thermodynamics and it basically says that you might have heard of this, you probably have that energy is neither created nor destroyed.   [00:39:42.130] It is conserved and conserved basically meaning that energy essentially just changes form. We never really just eliminate energy never just disappears from the earth. It’s just converted from one form to another. So an example of this is photosynthesis, right? So we have sunlight.   [00:40:01.030] Sunlight shines all over the world and plants absorb this sunlight and they’ve got special chemicals and so forth inside of their plants and chloroform and all these things. And plant biology is really interesting. What is that really interesting and the things that plants are able to do to power themselves is a really high talk about really high energy return on energy invested is what’s inside of the plants and the stomas and everything. It’s really powerful biology. Now that solar energy through the photosynthesis process is converted into stored energy inside of the plants.   [00:40:31.160] So basically, photosynthesis converts solar energy into stored energy inside of plants. And then what happens? Human beings, the head of lettuce, whatever we go and we eat the lettuce and the stored energy inside of the plants goes through another process, our human metabolic process, and we convert that stored energy inside the plants into muscle energy that we can use to do things again. Go, run, go work out at the gym. Whatever it is that we do, play with our kids, right, that requires muscle energy that we get from the stored energy in plants.   [00:41:04.090] And so we’re just converting one form of energy to another. In the same way that early steam engines were converting, there was a certain amount of potential heat energy inside of wood, and they would burn the wood, then produce steam, and that steam would essentially power again, some kind of turban or crank or shaft or something that would produce mechanical energy. So we’re just converting this potential thermal energy or this chemical energy inside of the coal into heat energy, which is converted into mechanical energy. So this is essentially what conservation of energy is all about. Unfortunately, that process can be messy and not very efficient.   [00:41:42.250] And the reason for that is that there’s a lot of loss along the process. So if you think about a coal power plant that burns coal to produce electricity, today in our modern world, not in 1776, today in our modern world, roughly 68% of the potential chemical energy stored inside the coal that is burned to produce electricity, 68% of that is lost just due to heat, because the coal gets really hot. And that heat, instead of being contained inside of the system, is just sort of if you think about sort of like a fireplace or if you ever have like a Franklin oven or something like that, these things, they can get really, really hot. But a lot of that heat is really lost. And it’s the same thing in, for example, an automobile engine.   [00:42:25.720] We put gasoline in our cars, and the gasoline in our cars, there’s an internal combustion inside of the engine block. But a lot of that chemical energy inside the gasoline is actually lost to the heat, which is why your engine block is really hot. Once your engine is going for a while, your engine block gets really hot. And the reason your engine block gets so hot is because of so much heat in that chemical reaction where you’re converting the potential energy, the chemical energy inside the gasoline, into the mechanical energy of your car. Well, again, that process is very inefficient.   [00:42:59.560] And so there’s a lot of heat loss in that, right? So we’re losing literally two thirds of the energy in the conversion process, transferring from one form of energy to another. So that’s a pretty big deal. Then they also have another thing called the capacity factor. This is with power plants.   [00:43:17.670] Power plants have capacity factors. And these are losses that are often due to certain operational inefficiencies and things like that. And these can be quite significant as well. You could lose easily 2030, 40% of your energy just due to this capacity factor, the operational inefficiencies. And then you also have other issues.   [00:43:34.460] For example, like what’s plugged into the other end of that. If you think about an old incandescent light bulb, those old glass bulbs or the tiny little filament in the middle, those were popular when I was a kid in the where I was told you’re not allowed to shake the bulbs because the filament might fall out and then the bulb is pretty much dead. But those bulbs, you’d have like 100 watt light bulb. 95% of that electricity that went into that bulb was wasted to heat. Only 5% of it actually went into light.   [00:44:00.490] So now the light bulb converts electrical energy into light and heat energy. But only 5% of the electricity went into light and 95% was wasted as heat. So if you think about it again, coal fired power plant, we’re losing 68% of the coal energy into heat loss. We’re losing a lot more due to capacity factor than losing 95% wasted to heat with an incandescent light bulb. So at the end of the day, if you think about going from the coal, the lump of coal to the light at the other end of that, it’s a really, really low ratio, right?   [00:44:34.030] So if you consider that through the lens of energy return on energy investment, right, you think about something like oil. Oil has a declining energy return on energy investment. Again, we had 1000 to 101 and 35 to one and 20 to 115 to one. Now in some respects, even less than ten to one. So we have this declining energy return on energy investment.   [00:44:55.330] Then we think about, okay, we drill for oil using vehicles and generators and all these things and all that requires, guess what, gasoline, which is made from oil, right? So we have oil that is powering the way that we drill for oil. So right off the bat now, all those things, the generators and the vehicles and so forth that we’re using, the big trucks and tractors and generators, all require oil. But the engines and motors and those things are wasting two thirds of it in heat loss, right? So we’re using oil in order to drill for oil, but two thirds of the oil that we use is being wasted.   [00:45:29.270] And then the oil that we get out of the other end, the oil that we’re actually drilling, that we’re producing as a declining energy return on energy investment. So that’s a really bad scenario, that declining energy return on energy investment. We’re wasting most of what we get out. We have to put it right back in to try and produce more oil, wasting most of that because of the heat losses, etc. For so if we go back to that financial example again.   [00:45:50.190] This is like a certificate of deposit. It’s paying zero 1% interest like they do today at a time when inflation is 9%. And then on top of that, you’ve got to pay 30% tax, 40% tax. If you live in the state of California, God help you, you got to pay 45% combined state, local, federal tax on that 0.1% interest that you get from your CD. So you get 0.1% interest, you pay 40 50% tax, then you got 9% inflation.   [00:46:19.370] So you’re getting killed, especially after adjusting for taxes and adjusting for inflation. And then you go, you got this tiny little bit of money that’s really, when adjusted for inflation, less than what you started with and you got to reinvest that back into your CD. That’s not a way to become prosperous. That’s the way to become poor and poor and poorer every single year. Now, a lot of people obviously jump to renewables and say, oh, renewable is the answer.   [00:46:44.290] Wind and solar and blah, blah. And it’s just not. It’s just not. The first thing you’ve got to understand about renewables is that renewables is like it’s like the term rainforest. They used to call it a jungle and then a couple of decades ago they start saying, no, it’s not jungle, it’s rainforest.   [00:46:58.410] And somehow it’s some kind of catchy marketing idea that just makes it the kinder, gentler jungle is now called the rainforest. Renewable energy is not renewable because it takes stuff in order to create the renewals. Photovoltaic cells don’t fall out of the sky, they have to be created. And all the things that go into producing photovoltaic cells and wind turbines, et cetera, are all based on finite resources. It takes metals and minerals and all these sorts of things to produce those things.   [00:47:24.760] And some of those, by the way, like lithium and cobalt are really nasty. You’re talking about child labor in the Congo overseen by guys with AK 47s holding their guns to the heads of little kids out in cobalt mines, which are dangerous and nasty. And yet it goes into these batteries and it goes into photovoltaic systems and all the progressives and all the environments. People go, yeah, this is so great. It really is.   [00:47:51.460] This just child labor. There’s a horrible environmental consequences to a lot of this, but everybody just sort of ignores that. And so this is why I would say it’s not renewable because it does depend on many of these finite resources and many of these are really nasty resources that we have to pull out of the ground. And then on top of that, you’re dealing with heat losses, transit losses, capacity factor, especially with something like solar. Guess what?   [00:48:14.270] We have this concept called nighttime when the sun doesn’t shine, right? So you are all automatically starting off with this capacity factor of 50% at best. And that’s assuming that for the other 12 hours of the day, every single day the sun is shining, which of course it doesn’t. So if you’re being relatively realistic, even in your calculations, the energy return on energy invested is quite low. Same with wind.   [00:48:40.100] Guess what? The wind doesn’t blow all the time. And so you have to have all sorts of redundancy built in if you expect to get electricity. And that really vastly increased. I mean, double, triple, quadruple.   [00:48:50.360] If you have to have four different turbines, six different turbines, it’s six x’s your input costs, right? So your energy return on energy investment ends up being quite a bit lower than that. Now, I’ve been hearing a lot of people started to talk about this. If you think about the summary of all of this, we’re talking about, look, energy is critical. Energy is prosperity.   [00:49:14.410] The cheaper energy is, the more prosperous we can be. And yet energy is becoming more expensive, not only in dollar terms or local currency terms, but it’s becoming more expensive in energy terms. And that’s really bad. That’s a bad trend because if energy becomes more expensive, that puts a limit on the amount of prosperity that we can have. And a lot of this is self inflicted, right?   [00:49:34.720] They go off and they engineer a war and they engineer all this wokeness and drive exploration and discovery out of the business. By the way, every year the US Energy Information Agency puts out a report and they say, here’s what US proven energy reserves are, proven energy reserves in the United States. And last year, for example, the last report they put out, that number declined by almost 20%. And the reason why is because there was almost no exploration, no new discoveries. That’s a really big deal.   [00:50:04.650] And it’s not because there’s not more discoveries to be made. It’s because they just can’t get the money, they can’t get the political will, they can’t get the support, the entire industry can’t get the support they need. So a lot of this is really just a self inflicted wound. But there are a lot of people now that are starting to look at this and study this and these energy trends. I mean, Michael Moore made a documentary about this in many respects, is all you need to know.   [00:50:26.700] You can probably guess where that goes. And the moral of the Michael Moore story there is we just all need to consume less. We all need to figure out how to get by with less. We all need to just own up to the fact that we’re going to be less prosperous and our entire civilization is going to be less prosperous and so forth. And then a lot of people are even talking economic growth is dead and a lot of people are making the link between fossil fuels and food and saying, oh, because energy is going to be more expensive than food’s, not going to be done, fertilizers aren’t going to be made.   [00:50:56.770] And that’s going to lead to starvation and famine and all these things. I got to tell you, I have a completely different view I have a completely different view of this. And for this, we’ll have to go even further back in time. You’ve probably heard of ancient historians use what they call the Three Age system. We have, for example, the Stone Age.   [00:51:22.330] The Stone Age lasted millions of years, right? Fred Flintstone and Barney Rubble and the whole cartoon and the dinosaurs and all that. But the whole point of the Stone Age was human beings using learning how to use fire and develop very crude tools that were made of stone, because that’s what they had available. They took stone, they shaped the stones, and they made little shovels and very crude weapons and things like that. They had access to metals.   [00:51:50.950] In fact, there’s a lot of archeological evidence of many Stone Age tribes I’m not going to say civilizations, but Stone Age tribes that had gold and silver and copper. Most of it was just used as decoration and adornments. I’m sure the big chief, whatever, was wearing gold and silver, maybe they made little just had it stacked around as ingots and things like that. But everything that they did, they didn’t have any metallurgical capabilities, so everything they did was based on stone tools. Well, eventually they developed the ability to work with metal, and the new technology that came of age to them was bronze.   [00:52:31.550] And this goes back now several thousand years. Bronze was absolutely game changing for our species. Bronze is basically the combination of copper with tin. Copper in and of itself wasn’t useful enough for them. They couldn’t turn it into a tool.   [00:52:51.840] They had to combine it with something. And the thing that they combined it with was ten. And the reason why is because tin had a very low melting temperature. Ten’s melting temperatures about 250 degrees centigrade. You could get that on your kitchen stove at 250 degrees Centigrade.   [00:53:06.650] It’s like 450 Fahrenheit. That’s about where you would bake a loaf of bread in your oven. So today you could just melt ten in your oven if you wanted to. But you combine ten, the ratio is about ten to 110 parts copper, one part ten. You combine the two, you’ve got bronze, which is a metal that you could forge, that you could shape into tools and weapons and all sorts of things, wheels, even if you wanted to, all sorts of things.   [00:53:30.050] And this was a major game changer because now they had a really great metal that they could use to actually go out and help grow and build civilization. And so tin was as critical to the world thousands of years ago as oil is today. Tin was the aside from food and water, was the most important commodity in the world. This is why it was so important that the historians literally call it the Bronze Age, because the tin was. The key element going into the bronze medal that they were making.   [00:53:56.910] And the bronze was an absolute game changer for human civilization. There was a substantial bronze trade in the Mediterranean, substantial tin trade in the Mediterranean. The tin itself, copper mines, lots of copper mines all over. Some of the biggest copper mines in the ancient world were actually in the island of Cyprus. Tin, on the other hand, was quite scarce.   [00:54:13.930] They had to come from a long way. You had to go all the way to Afghanistan in the mountains of Afghanistan, go and find ten and haul it all the way across, basically Iran and all over the Middle East and up into Turkey and so forth. And there are all these trade routes, and the trade routes for ten were very expensive, extensive. The ten trade was very expensive most of the time. There were fleets of ships going all sailing all around the Mediterranean, because that’s where most of the civilization was at the time.   [00:54:42.500] And they were trading in tin among a lot of other things, including, like I mentioned, oil lamps and copper and gold and silver and all sorts of things. And then eventually the tin supplies started to run out. And I’m sure there are people in the ancient world who were running around saying, peak ten, the ten is drying up, but we can’t get any more tiny people saying, oh, you’re crazy. There’s no such thing as peak ten. Don’t believe anybody says peak ten, that’s nuts.   [00:55:10.270] And yet, sure enough, the ten dried up and the trade ended. And you could imagine the same thing. What if all the oil just runs out all of a sudden? You could imagine the chaos, the war, the violence that would ensue in the world. Or if all of a sudden all the oil dried up in the United States, I have to imagine they would probably be looking pretty hard at invading Venezuela literally tomorrow morning.   [00:55:33.810] Right. So the tin trade in the ten supplies and the ten reserves drying up was a major factor. Extremely disruptive. There is some evidence, it’s possible that the Trojan War, in fact, may have been fought over ten and over the years, obviously, as they told the story and retold the story, at some point along the way, somebody decided, you know what, let’s forget about the tin trade and just insert something else. It’s a lot sexier story.   [00:55:57.450] If we say, oh, is this hot babe Helen of Troy? Everybody went to war over this woman as opposed to the tin trade, that’s not really as sexy. It’s not going to stand the test of time. So they knew their audience pretty well and they changed the story. But it’s possible that the tin trade may have actually been the cause of the Trojan War, at least one of the causes of the Trojan War, because Troy actually would have been a very wealthy city set smack dab right on these trade routes of where the tin would have crossed paths from Afghanistan going into the ancient Mycenaean civilization and ancient Greece and the Hittites, et cetera.   [00:56:29.450] These are sort of the dominant kingdoms at the time, the Hittites, the Mycelian civilization.   [00:56:37.590] Then there was a tin shortage, and the tin just sort of went away. And this was certainly a tumultuous time in human history. And there are a whole lot of other things, by the way, going on. There were wars, there were invasions, they had a volcanic eruption, they had climate change. They had all sorts of things that happened.   [00:56:54.030] But one of the key lessons that we learned from history is that you never bet against human ingenuity, that human beings have been down before plenty of times, have faced an incredible amount of adversity, and yet, time after time after time, human beings adapt and overcome. And we always figure out a way. And it’s because we have brains, we have our ingenuity, we have courage, we have all these things that enable us to go out and say, all right, we’re going to figure something out. Regardless of the stupidity of our leaders that want to drive wars and cause all sorts of inefficiencies, we’re just going to get it done. And the beauty of this is that essentially heralded the end of the Bronze Age.   [00:57:34.210] Not even the end of the Bronze Age. It was a fullblown collapse of the Bronze Age. The Bronze Age went out in terrible fashion because the entire thing that made the Bronze Age possible just went away. Now, they had this other technology at the time that they were aware of. They already knew for a long time.   [00:57:50.390] They always knew about iron. Iron was so much more abundant. I mean, tin was rare and had to go all the way to Afghanistan to get it. Iron was man, look at those rocks over there. It’s all iron.   [00:58:01.740] Everything is all iron. There was iron everywhere. It was like oil in the early days of the US. It was just bubbling up out of the ground. There were iron rocks and rocks and rocks everywhere.   [00:58:09.790] It was so easy to get. The problem is that iron has a very much higher melting point, talking 1500 degrees centigrade as opposed to 200. You can do tin in your oven iron. You need very special equipment. And when the tin went away, instead of cowering in fear and saying, oh shit, we’re all done for.   [00:58:27.480] Everybody’s going to die. We’re all going to starve, all these terrible things are going to happen. They said, all right, we’re going to figure this out. And they doubled down and had a tremendous growth curve, not necessarily in their economic growth or any of these other things, but in the growth of human knowledge, the body of knowledge of human beings. And they learned very quickly, how can we work with iron?   [00:58:47.310] And they developed much more advanced technology. They say, okay, if we build it like this, and we take these bricks and we take this grass, and we use these special equipment that we developed in order to create more combustion and retain the heat, et cetera, you know what? We could actually get a fire much hotter that’s going to be able to we can actually work with iron. And they figured that out. They figured it out pretty quick.   [00:59:10.110] And then they figured something else out because once they were working with iron, then they really started experimenting. I said, okay, what happens if we add a little bit of this? And what happens if we add a little bit of that? And suddenly one day they went, oh my God, look at what happens when we add a little bit of carbon to this, because now we go from iron to steel. And steel was an absolute game changer.   [00:59:33.890] Steel was better, faster, cheaper, stronger, much more abundant. Steel was absolutely revolutionary. It was so much stronger than bronze, so much stronger than iron. It was the best thing that had ever been invented in the entire world up to that point in human civilization. And with steel now, they had really powerful tools and really powerful weapons, and they had really powerful weight.   [00:59:58.770] They could build things with steel. They could build really great structures that could last a really long time. There were so many things that they could do with steel, and it made all the difference in the world. And the world propelled itself forward. They were at the depths of this crisis.   [01:00:13.150] They had resource shortages and everything. And they said, you know, we’re going to find a better way. And that better way was steel. So I believe that the world is in a similar point right now where we have these issues where our energy return on energy, investors getting lower, our energy is becoming more expensive, not only in dollar or euro terms, but in energy terms. That’s really bad for prosperity, because prosperity requires cheap energy.   [01:00:39.690] But we already have this, right? In the same way that during the Bronze Age, they knew about iron. In fact, there are some civilizations that already started to kind of crudely work with iron. And they figured out, okay, we can kind of get to 1500 degrees Celsius. We can kind of start working with us a little bit.   [01:00:55.900] So there are some basic, some tribes and some kingdoms had very, very basic crew knowledge of working with iron. But it didn’t really go anywhere because iron in and of itself, it was okay. But they were so accustomed to working with bronze, they were really doubling down on tin. I think we’re in a similar position today. And the iron essentially that we have available to us, because this is a technology that already exists, just like for a lot of ancient Bronze Era civilizations already knew about iron, we already know about nuclear.   [01:01:25.410] Now I remember that concept of specific energy we were talking about that energy density, the amount of energy you have, and Joules, or really megajoules per kilogram, I want to go back to that with nuclear. So remember, with wood, the specific energy, that energy density in wood is about 18 megajoules. Remember, Joule is a unit of measurement for energy. So 18 megajoules for every kilogram of wood. With coal, it’s twice as much.   [01:01:51.800] It’s about 36 megajoules per kilogram. With uranium, it’s 80 million. 80 million megajoules per kilogram. Okay, 18 megajoules per kilogram with wood, 36. With coal, 80 million with uranium.   [01:02:11.110] So what you’re talking about with a little hunk of rock with uranium, 80 million megajoules per kilogram. It’s off the charts in terms of its specific energy, the amount of energy that’s contained in a kilogram of uranium. If you compare that to, for example, photovoltaics, if you compare that to solar power, the panels, if you generously, I think assume 2000, 2500 hours a year for 30 years of a lifespan for solar panels, you’re going to get about 40 to 50,000 megajoules. With solar panels, it’s not really about weight so much as energy, right? You think about solar panels is like per square meter or per square foot of solar panel.   [01:02:50.020] So we convert this into volume or area instead. So you’re talking about 40 to 50,000 megajoules for every, let’s say, square meter or liter of solar panels versus 1.5 billion for uranium. The difference is just extraordinary. And if you look at the numbers, for example, energy return on, energy invested. Look, this is something that’s subject to a lot of debate.   [01:03:16.430] And it’s a bizarre thing with nuclear. There are so many people that hate, really hate nuclear. They think nuclear is the worst thing in the world. All they can think about is, whatever, three Mile Island and Chernobyl and all these sorts of things. They say nuclear is the worst thing ever.   [01:03:33.750] Okay, fine. I’m not here to say nuclear is perfect form of nothing’s perfect. Everything has upside, everything has downside. The problem that we’ve had for so long. And by the way, excuse me, I would take this back to Covet.   [01:03:50.990] I would take this back to a lot of things related to C. There was never any rational debate that was even allowed, let alone took place about upside versus downside, looking at actual, real data. Instead, it became very emotional. It became very contrived, heavily censored, and this is the only thing that you’re allowed to think, et cetera, honestly, with the subject. I think nuclear is the next Covet with respect to the debate and the emotional frenzy and everything going along with because they’re environmentalists right now in Germany, you have environmentalists.   [01:04:22.900] That because they’re losing so much Russian gas. And the Russians have just recently announced, hey, by the way, we’re going to dial back the amount of gas that we’re sending to you for the wintertime. Good luck with that. Dealing with the harsh winter in Germany without our Russian gas. Good luck with that.   [01:04:38.810] So, of course, the Germans know they got to keep the power on, and yet what do they decide to do? They’re firing up all these coal fired power plants. And the Green Party, right, the hardcore environmentalists are saying, yeah, let’s do it. Coal fired power plants, that’s great, let’s do it. Because they’re so antonuclear.   [01:04:55.190] And you have these people, the Greta Thunbergs of the world. How is this person even relevant in a conversation? You’ve got a bunch of kids that are out in the streets protesting no to nuclear, don’t know the first thing about nuclear energy, nuclear power, the risk associated with it. Come to find out, oh, well, actually, they say, oh, it’s radioactive, and so forth. A lot of things there’s just crazy misconceptions about it.   [01:05:19.330] Again, I’m not here to say there’s no issues and there’s no risk and so forth, but I think that as somebody that I pride myself on being as objective as possible, I have looked at this so much, and I’ve come to the conclusion, looking at so much data, including there’s people that are extremely pro nuclear, by the way, that completely dismissed. Oh, there’s no risk of that. And there’s no risk of that. Of course there is. There might be a meltdown.   [01:05:43.510] There might be there’s certain risks that might happen. There’s also, by the way, a lot of risks of coal. In fact, often there’s more radioactivity coming out of a coal fired power plant than there is in any nuclear plant. You’d be surprised, actually, at a lot of this. And for anybody that really does, I think, rational, objective research, the conclusion to me, I think it’s an inescapable conclusion that this is absolutely the way forward.   [01:06:07.820] Nuclear is absolutely the way forward. There are a lot of really great, I think, objective, comprehensive studies that really, when you talk about energy return on energy investment, they go all the way through and say, okay, let’s talk about even what does it take to build a nuclear plant? What does it take to mine uranium? What does it take to produce the energy? Once we have the uranium, we have the plant built.   [01:06:27.490] For example, you can see things like it takes 75 concrete and 36 tons of steel for every megawatt and power that a nuclear energy plant produces, right? So it’s a very comprehensive study, and you can see a lot of these studies. For example, wind, by the way, produces requires 460 tons of steel per megawatt versus 36 tons of steel for a nuclear power plant. So you end up, again, if you look at all this and say, what does it take to mine what does it take to build what does it take to produce all this? You end up with an energy return on energy investment of between 60 and 70 X.   [01:07:03.040] That’s really high. That’s really high. And that’s really your all in cost with everything, even including the steel and the concrete and the mining and all these things. And by the way, for people that are so inclined for this, the CO2 emissions on nuclear are basically nothing all the way through the chain. Even with the mining of the uranium, even with the concrete and the steel and all that, you’re talking about a CO2 emissions that is almost nothing.   [01:07:27.790] You can’t say that about solar. If you’re honest about it and you’re honest about the cobalt and the lithium and the battery production, all these things, you just can’t say that about solar, but you can about nuclear. That is completely undisputable. And there’s a lot of really good data. I’m not here to convince you about nuclear or whatever, but I want to point out that this idea of nuclear, especially right now, nuclear fission is technology that already exists.   [01:07:52.920] It’s better, it’s cheaper, it’s everything. And I would really say for the people that are detractors the stuff that’s out there, there’s so much media, so much hysteria. Nuclear is terrible. They say, oh, it’s too expensive. No, it’s not.   [01:08:08.420] It’s really not. And there’s actually a lot of data for this. In fact, in the state of California, which still has at least one nuclear power plant that’s run by PG and E, Pacific Gas and Electric, the average power production cost for PG and E is ten cents per kilowatt hour. For their nuclear plant that they have, it’s 6.5 cents, right? It’s not even a study.   [01:08:30.170] It’s not even some hypothetical, let’s try and figure this out. It’s the data that they have. They know this. This is what it costs us per kilowatt hour. And again, lower CO2 emissions, all these things that all these people supposedly care about.   [01:08:41.980] And instead they go, no, we don’t want nuclear because they’re still living in the think a lot of people haven’t really bothered to try and objectively educate themselves. Yeah, of course there’s risk. There’s risks of tailings. And you’ve got a story that a lot of people talk about nuclear waste. It’s funny.   [01:08:58.290] In the United States, under Jimmy Carter, jimmy Carter actually outlawed the recycling of nuclear waste to go back into nuclear power plant, said, no, we’re going to go and store this. And in the there were some issues with that in the technology has obviously gotten so much better. And by the way, why wouldn’t you want to recycle a nuclear waste if you can get more energy out of it? That just increases the energy return on energy invested even more. So there’s been a lot of political ill will against nuclear for a long time.   [01:09:25.960] And I view this as this is actually the good thing about global competition. And it’s like anything else when you’ve got some countries that say we’re going to raise taxes and we’re going to make things more difficult for business, et cetera, well, guess what? You can have other countries say, well, guess what? We’re going to lower taxes and we’re going to roll out the red carpet for productive individuals and profitable businesses because we want you to come to our country. And so this is how places like Singapore are actually really able to thrive and become incredibly successful, because they were very competitive in building the right kind of environment that was attractive to businesses and productive people in the UAE, they said, hey, we’re going to cut our taxes.   [01:10:02.050] Come to the UAE. You’re not going to pay any taxes. We’re going to build this whole this whole thing here for you. A lot of these countries, they became competitive because they knew all these other countries, these Western developed countries, were going in the wrong direction. They said, we’re going to compete.   [01:10:15.880] And they were able to attract a lot of business. It’s going to be the same thing with energy. There’s going to be a lot of countries, they’re going to say, we don’t want nuclear energy. We’re running away from nuclear energy. And there’s going to be other countries that say, we like nuclear.   [01:10:25.980] Sure, if you want to do nuclear, come to us. We’re going to support it. We might even subsidize it. We’re going to embrace it with open arms. It’s like every other technology.   [01:10:33.570] There are places that say, sure, you want to do driverless vehicles, come to us. We’re going to pave the way for you. We’re going to pass special legislation making driverless vehicle autonomous driving technology possible in our state or in our country. There are countries that outlawed online gambling, and there are other countries that said, we like online gambling. And if you want to be in the online gambling industry, come to our country, right?   [01:10:57.910] So this happens in everything, and it’s going to happen with energy as well. There are going to be a lot of countries that say, you know what, you want to do nuclear? Come here. We like nuclear. We want to go nuclear.   [01:11:09.240] If you want to do nuclear, come here. We want the most advanced technology ever. And this is going to happen. It’s already happening. And it’s even happening in surprise places.   [01:11:17.400] It wasn’t that long ago, I think it was back in July, that the European Union, they published this thing called the Green Finance Taxonomy for Sustainable Activities. This is basically their thing that says, all right, this is what we now consider as our big EU government. This is what we consider now environmentally sustainable activities. They’ve now included nuclear on that list. There are a number of caveats, but they’ve included nuclear on that list.   [01:11:42.080] What that means is that a lot of funds and a lot of investment can go and be allocated now into nuclear energy, nuclear power, RND, research, development for nuclear energy, etc. And in a way that never was before. And they get all sorts of different incentives and tax benefits, et cetera, for this. Now it’s pretty pathetic that they had to be dragged into this kicking and screaming. You had certain places, the Green Party in Germany, this one guy, one freaking guy who’s like, I’ve been fighting against nuclear energy for 50 years, and I’m not going to allow that success to be snatched away from me after all that time.   [01:12:17.810] It’s like, dude, what kind of ego? What kind of ego do you have to have to say, I am going to personally retard the progress of all of human civilization because of my own ego, because I’m not going to because otherwise, what was my life for anyway? I’m sorry. Your life in the last 50 years was completely meaningless. And I would say that’s probably the same for a lot of other politicians that have spent 50 years in government.   [01:12:41.620] I can’t think of anybody right now. We’ll see. But for these people, their entire life was completely meaningless. Everything they did was wrong. Well, guess what?   [01:12:49.450] Tough shit, get on board the train right now. Because this is what the world needs, and this is where the world is going. And so this one guy is trying to block this, unsuccessfully, by the way. Then you had the entire government of Austria that threatened to sue the European Union over this. I mean, so ridiculous.   [01:13:04.170] Then of course, quite predictably, greta Thunberg is barfing all over this and making her contrived scowling faces and giving these silly videos and speeches and stuff that for some reason some people actually listen to. But it’s still happening.   [01:13:21.450] This is happening. There’s a lot of momentum. There’s a lot of progress. More importantly, there’s been literally tens of billions of dollars in investment capital, even primarily earmarked for R and D going into nuclear. And not just the technology that exists.   [01:13:33.420] We have nuclear fission, which is where we split apart an atom’s nucleus. This is really powerful. Inside of an atom’s nucleus, you’ve got a lot of similarly charged particles, a lot of protons, and you’ve got different subatomic particles even within really tiny particles, within protons themselves, you’ve got a lot of similarly charged particles that in theory, based on what we know about electromagnetism, they should be flying apart from each other, right? When you take two magnets that are similarly a North Pole and a North Pole, or you take two similarly charged electrical particles and you put them together, then the electromagnetic force is going to cause them to go flying apart from one another. They’re going to repel each other.   [01:14:12.540] And yet you have all these similarly charged particles that are sitting inside of an atom’s nucleus, which means there’s something really powerful as a very powerful force inside of a nucleus. In fact, scientists refer to there’s a weak force and a strong force inside of a nucleus. And so what happens in fission is we’re breaking apart that atom’s nucleus and we’re unleashing that energy that’s holding together all these suddenly charged particles. That’s where a lot of this comes from. So the force and the energy inside of that through splitting apart an atom’s nucleus, that’s the fission process.   [01:14:43.970] That’s what powers nuclear energy. It’s why there’s so much energy inside of uranium, because that’s what they’re using for this, is uranium. There are other elements that can be used in nuclear power and a lot of research and development for that. But on top of that, and I would actually say that fission is like our iron. So we’re the end of the Bronze Age right now, and we’re looking around saying, hey, we have this iron, right?   [01:15:05.760] Look, it’s everywhere. It’s all these rocks everywhere. We have all this iron already. And we can say the same thing. We already have fission, we already have nuclear.   [01:15:11.890] And you know what? It’s pretty good. And it’s a lot better than the alternative, which is running out of the tin that we have using fission. It’s not perfect, but it’s pretty good. And that’s basically the same situation that Bronze Age civilizations were faced, the ancient Egyptians under Ramsey III were faced with at the end of the Bronze Age.   [01:15:33.030] But we also have our steel. And our steel, which is not here yet, but it’s coming, is nuclear fusion. Fusion is where we instead of splitting apart at atoms nucleus, where we’re combining two or more nuclei together, it releases an incredible amount of energy. The specific energy in fusion is so high. Remember I was talking 80 million, it’s like half a billion with nuclear fusion.   [01:15:54.750] It’s even higher with nuclear fusion. Nuclear fusion, if you go back a couple of decades, you might be thinking nuclear fusion. It’s not even possible. Well, in many respects, they’ve already done it. There’s been so much R and D into this.   [01:16:07.100] The advances are happening very rapidly and there’s a ton of capital going into this. This is our steel. This is like steel in the Bronze Age. This is something, we know it’s there, we know it’s coming. We already have a really good alternative in fusion, but fusion has the potential to be even better.   [01:16:23.470] And this is why I would say ultimately why this is not this bad news story. This is not famine and widespread economic devastation and all these sorts of things because we already have it. We have it. We have something that is inexpensive in dollar terms. Again, you think back to Pacific Gas and Electric, six and a half cents per kilowatt hour versus $0.10 for the rest of their energy.   [01:16:45.890] Lower CO2 emissions. It’s very high energy. Return on energy investment, absurdly high specific energy, all this stuff combined, and we already have it. We don’t have to figure out, oh gee, how do we do nuclear fission? We already have it.   [01:16:59.050] It’s already there right in front of us. And all we have to do is just somehow muster the political will and the will and the media don’t hold your breath for that. But it’s going to happen because there’s so much competition in the world among nations. There are countries that are in a quite serious energy situation right now, and they’re going to be the first ones to go, you know what? We’re going nuclear.   [01:17:21.890] I don’t give a shit what the media says. We’re going nuclear because we need it, because we have no alternative and we’re going to do it. And all of a sudden, everybody’s going to look around and say, oh my God, look at how they solved their problem. They have so much energy right now and it’s so cheap and their economy is booming. We want that too.   [01:17:36.410] And all the people that were against it, they’re going to look really stupid. All the politicians that were against it, they’re going to look really stupid. People have been making little baby steps in this. Again, we can see what’s happened with the European Union. We can even see, believe it or not, even now, the State of California, they had this one nuclear power plant and now they’re looking at saying, hey, let’s continue the lease on this.   [01:17:55.280] Let’s keep going with it. I’ll be the first guy to say that Gavin Newsom is a moron, but he’s actually been one of the guys leading the charge, notwithstanding other side issues, including the fact that he’s getting billions of dollars from the federal government to do this. So it’s free money and very little risk on his part. But again, you’ve got people that are just they’re coming up with the most, the craziest things. You got people that are saying, oh, but the nuclear power plant is on lands that once belonged to Native Americans and all these sort of things.   [01:18:20.840] You go, how is it even relevant right now? It’s really insane, the sort of obstacles and the roadblocks and the excuses that people come up with. But in time, and I think relatively short order, there’s going to be a period because there are countries that are going full steam ahead, no pun intended, with nuclear power, and everybody else is going to say, wow, look at that. They’re better, they’re faster, they’re growing like crazy. They don’t have any of these obstacles.   [01:18:44.260] They’ve completely divorced themselves for any dependence on Russian oil and gas. They’re totally energy independent and their economy is booming as a result. We want that too. And that’s really what’s going to lead to this kind of adoption. On top of that, all the investment capital that’s going into it, that makes it even better, even safer, and developing nuclear fusion technology, this is what’s absolutely going to drive prosperity for the future.   [01:19:11.940] Because, again, that rule from history, you never bet against human ingenuity. We’re going to have political competition that’s going to cause a lot of countries to increase adoption. And our human ingenuity, the investment capital, is going into this. This is going to power prosperity for decades and decades to come. It’s not.   [01:19:28.660] Going to solve a lot of the other major political challenges. It’s not to say that Social Security is still going broke. The US government still has $30 trillion in debt. They still love their Marxism. They still love all their Woke bullshit, all that kind of stuff.   [01:19:41.050] But we don’t have to worry about living in some kind of Mad Max world where we’ve got this handful of scarce resources and everybody’s out killing each other over it. It’s going to be bumpy and it’s going to take time. It’s still going to be all sorts of issues. You’re going to have to put up with everybody’s nonsense and campaigning against this. But eventually, nuclear is going to be powering decades, even generations of prosperity to come.   [01:20:04.470] And I believe that’s going to make it the biggest thing that’s happened since Bye.   Close Podcast Transcription

Years ago when I was in the military, I had the privilege of serving with some of the finest people I will ever know in my entire life. It’s not a cliché. Many of my brothers in arms were incredibly honest, hard working, dedicated, loyal, intelligent, creative, courageous, and more. And yet, if I’m being brutally honest, I also have to acknowledge that I also served alongside quite a few scumbags. I remember one enlisted soldier in my unit who was arrested by Secret Service agents one day because he had been counterfeiting $100 bills on a Laserjet printer. (He should have been a central banker instead.) Others routinely beat their wives and children. Others were petty criminals and kleptomaniacs. It was a small number, for sure. But there were certainly plenty of bad apples in the military. And there are always going to be bad apples in any large organization– whether it’s the Army, or the entire federal government. This is important. Because we live in a time when apparently the solution to EVERYTHING is MORE GOVERNMENT. Bigger government. And more expensive government. This week, just like that… poof. The government became much bigger. Politicians are cheering this legislative ‘victory’ as the dubiously-named ‘Inflation Reduction Act’ was passed and signed into law on Tuesday. As I’ve said before, the bill will probably make inflation worse. But even more, the bill aims to expand the size and scope of the federal government… as if it weren’t big enough and powerful enough already. And this takes me back to bad apples. There are already millions of people who work for the federal government. Even if just the bottom 10% are bad apples– people who abuse their positions and power for personal gain, or because of their ideological fanaticism, then a lot of terrible things can happen. The IRS is going to potentially hire tens of thousands of people. If even 10% of those are bad apples, the damage they’ll cause is incalculable. Exhibit A: Just take a look at the CDC. This week they admitted, rather sheepishly, that nearly everything they did during the COVID pandemic was wrong. The CDC acknowledged being plagued by a horrific culture of selfishness, bureaucracy, fear, careerism, and ineptitude, and that they need a “reset”. “It’s not lost on me that we fell short in many ways,” said CDC Director Rochelle Walensky, in an honest assessment of her agency’s response to COVID. Of course there are some smart, good-natured, intelligent people who work for the CDC. But with such a toxic culture, the entire organization became a Bad Apple within the government. And the consequences that resulted will be felt for years to come. Thanks in part to the CDC’s response to COVID, the US economy ground to a halt. The supply chain broke down. Mental health, substance abuse, and domestic violence problems skyrocketed. Censorship and cancel culture reigned. And trust in major institutions, including the medical industry, plummeted. Constantly expanding the size and authority of government only increases this risk of terrible consequences. Yet it seems to be the only solution that politicians can ever come up with. This is the topic of our podcast today: bad apples… and why having a Plan B is really so important. Open Podcast Transcription [00:00:03.670] – Holly So the government got bigger this week. Are we celebrating?   [00:00:08.750] – Simon Ha ha, well, some people are.   [00:00:10.180] – Holly Some people are.   [00:00:11.470] – Simon That’s okay. The government did get a lot bigger this week because they just found another way to spend an absurd amount of money. And it’s interesting thing because this is their solution to everything. The solution to everything is we need, whatever the problem is, the solution is more government. And whatever the previous problem was that we solved with more government. Well now the problem is we need even more government. The government’s never big enough so we need even more government. And of course now we need a bigger IRS to be able to pay for this bigger government. You and I have discussed this a lot, that the trust in pretty much every institution and that includes the government is really bordering an all time low. We see this now: nobody trusts the media, nobody trusts the banks, nobody trusts the big tech companies, nobody trusts any of these things. And it’s especially the government. Congressional approval ratings are at astonishing lows. The office of the presidency, the Supreme Court, all these various departments and agencies, individual offices within the government. Interestingly enough, even the military now is taking a hit. The military was always one of the things that sort of stood above and beyond in its reputation and the numbers, the approval ratings and the trust level and military was always quite high.   [00:01:36.700] – Simon Even that’s really starting to come down a lot. So trust levels are really at a low and let’s be honest, there’s a lot of good reason for that. We see all sorts of things that are now where you can say historic overreaches and shenanigans and all these things, so many just weird, weird things and you think what are they possibly going to do to top this? And then they do it again. There’s just something else that people just can’t believe. How could you possibly do these sorts of things? What I would say is I think in fairness and again I always try and look at things very objectively, very rationally and I want to I guess briefly mention this in the context of good apples and bad apples. When you think about how big societies are in any country that you go to, even small countries, people listen to this from all over the world, but especially big countries. I mean you get all sorts of people, you have really good people and you have really bad people and a whole lot of people in between and there’s no different in the government. I would actually go back to my time when I was in the military and some of the people that I served with, I would say to this day rank as some of the finest people I will ever know in my life.   [00:02:54.220] – Simon Some of the most noble, some of the most honorable, some of the most selfless people I have ever met and will ever meet in my entire life. At the same time, there are also some of the worst scumbags I’ve ever seen. There were guys that were beating their wives. There were guys that were harder drug dealers. Yeah, there were guys getting arrested. The military police would go around these guys up in their quarters, on post on the base, because the guy was beating his wife, beating his kids. Again. There were guys that had really severe substance abuse problems, or guys that had a major drug ring, prostitution ring. There were guys… I had a guy in my unit who was actually arrested. I remember the secret service showed up one day to our headquarters. And I was the executive officer. And they came in and sat down. And they took a meeting and explained that we actually had a soldier in our in our unit who was counterfeiting $100 bills. Like. Really cheap, bad, terrible $100 bills. Like, off of a laser jet printer and going around town trying to buy stuff. Whatever. These fake $100 bills. And it’s actually one of the jobs of the secret service. They protect the president, and they also go after counterfeiters. And so they came and they arrested this guy. They put them in handcuffs. They hauled him away. It was like in the middle of a training session whenever the secret service came in and cuffed this guy and hauled him away. And I’m sure he did prison time or whatever. You get all kinds. You get some of the best people, like I said, I will ever meet in my life, and some really bad scumbags. And that’s the way it is. I think, in anything. You can’t have an organization as large as the military, the federal government, the IRS, the IRS, the FBI. The FBI is an interesting one because they’ve taken so much heat. They’ve taken so much heat. And let’s be honest, there’s a lot of reason for that. I mean, over the last several years, it’s been one scandal after another after another. We just kind of look at bonehead.   [00:05:00.930] – Simon How could they do that? It looks bad. There are a lot of things that look really bad. I would also say again, in fairness, I personally know a lot of FBI agents, and I’m just speaking from personal experience, the ones that I know are really great people, really great people. The kind of people that you go, well, I’m glad that person is in the FBI. Really professional, really intelligent, sophisticated, and all they want to do is just catch bad guys. They want to catch really rotten criminals and put them behind bars. That’s what they want to do. Having said that, there are also a lot of bad apples. And the FBI, in fact, just the other day, there is yet another scandal. It wasn’t something really reflected on the bureau itself, but something that highlighted that, yes, there are some bad apples, and it was actually this big scandal in Puerto Rico. Wow, what a surprise. Is it Tuesday? There must be another scandal in Puerto Rico. And they arrested in Puerto Rico the former governor of this lady, Wanda Vasquez, on basically bribery and corruption. And again, lockdown Wanda. Right, lockdown Wanda. So this is the one that was never elected.   [00:06:08.570] – Simon She was the Gerald Ford of Puerto Rico.   [00:06:13.250] – Holly Ha ha ha.   [00:06:13.250] – Simon But at least Gerald Ford won his primary. Just barely won his primary against Ronald Reagan, but at least Gerald Ford won his primary. Wanda Vasquez didn’t even actually win the primary in her own party. So that’s how widely despised she was. But everybody knew she was corrupt. And it turned out, oh, well, okay, so this is whole thing and it was bribery scandal. And there was an FBI agent, actually, technically a former FBI agent who was in the middle of all this, and he was kind of brokering the bribes and everything like that. And again, it’s not a good look. He got a guy who was an ex agent. So again, technically, he was no longer in the bureau. But it’s not like he suddenly became corrupt. The second he retired. He became this corrupt criminal. Give me a break. So this guy was arrested too. And it’s these sorts of things to go, that’s a bad apple. And there are bad apples like that in any organization.   [00:07:04.150] – Holly Oh, I have one for you. For two years, I was threatened, right? We were all threatened by the CDC, who’s controlling us and like, a toxic relationship. And now they finally apologized. But I still have trust issues because this apology was a total non apology this week where what was it they said? Mistakes were made, right? Total passive voice when they’re saying this. And it doesn’t really engender a lot of faith from people who honestly felt like there was a breach of power there.   [00:07:43.790] – Simon Yeah, it’s funny. We’re having this discussion yesterday with some friends, and I don’t personally agree with it because I’m a rational adult and I can do my own research throughout all this, looking at studies, et cetera. But I at least understand the desire for people to want to have some objective authority, give them objective advice about some emerging medical threat. And I understand why people would look to the government to fill that role, to say, look, there’s some brand new thing, and I don’t know what to think about it. Can you tell me, is this a risk or not? What do I need to do? Should I be freaking out about this? What’s the deal? And is there some independent sort of objective medical authority that can tell me whether or not it should be concerned and give me the right kind of advice? And I understand why people would look to the government for that. Personally, I don’t, but I understand why people do. I don’t want to be completely…   [00:08:44.250] – Holly Traditionally, it had at least the veneer of being trustworthy. I’m not just talking about the CDC. I’m talking about all institutions. We thought Walter Cronkite was delivering us an objective, objective unbiased news. It expanded across it was generational, and now that’s completely changed.   [00:09:06.110] – Simon Yeah, it’s totally changed from an institutional perspective. But we can come back to that because I think, for example, in the media, I think a lot of people, while we don’t trust the media and we don’t trust legacy media, people don’t trust CNN, they don’t trust MSNBC, they don’t trust all this stuff. But there are individual voices in media that people do trust. Everybody’s got places they go to where they feel like, okay, I’m getting the unvarnished truth here from this organization or this person. So I think that’s a good thing. I think that the idea of the trust in the institutions is falling. I don’t necessarily see that as a bad thing because people are finding we do have so many options in terms of places that we can find the right information and people that we can trust. But I think you’re right. The CDC. Such an embarrassment. And this week they issued they said, oh, we conducted a study, we conducted self assessment, which is interesting, that they would have gone and done that again. It was very light touch. Mistakes were made, and they came back and said, we need a culture of what do they say?   [00:10:17.280] – Simon We need a culture of action and we need a culture of equity. I’m not sure what equity to bring sort of identity politics into this. I’m not sure really how that impacted the outcome and the embarrassment of their covid 19 response. I’m not really sure how diversity and inclusion factor into that, but that was something that they cited and they said, oh, we need a culture of action. Actually, no, you don’t need a culture of action, because that sort of was the problem. That was all the actions that you were taking and all the things that you were doing. It just happened to be all the wrong actions. And if anything, there’s a culture of a complete lack of accountability. And this is sort of the thing is that this is government in general. Congress passes laws and agencies go into all these things. They issue their guidance, but there’s never any accountability when they’re dead, flat wrong, hilariously, embarrassingly wrong. There’s never any accountability. Nobody ever gets fired. The amazing thing is about it that a lot of these people that are in charge, fauji is still running around saying, this guy is following, I mean, this is a guy who hasn’t been fired.   [00:11:26.210] – Simon He’s been so wrong, proven wrong, over and over and over and over and over again. And it turns out in the CDC sort of very vaguely hints about, okay, yeah, we weren’t really putting all the information out. We’re sitting on a lot of information. I mean, they waited so long, so long to actually tell the truth and say, well, the people are actually really high risk of this, are people that are obese people who haven’t taken care of themselves. And maybe, just maybe, we were wrong for saying that people should sit at home, coward, fear in their homes while everybody was ordering in Big Macs and drinking mass quantities of alcohol, deal with all the mental health pain, and not going to the gym because we told people you can’t go to the gym, we closed all these things. So all these really unhealthy habits, maybe that was totally wrong decision. It’s not even this little very brief document where they acknowledge mistakes were made. They owe a huge apology to everybody. So do the tech companies. All this stuff all along the way where they say if you had an independent opinion and you were canceled and they slapped all these warning labels on your dangerous misinformation and so forth, it turns out, oh, it actually wasn’t misinformation at all.   [00:12:42.700] – Simon The misinformation was the bullshit that was coming out of the CDC. That was the misinformation. So it was perfectly fine to spread misinformation as long as it was the official misinformation that was coming out of the CDC and not the actual truth that was coming out of the independent research and so forth that people were conducting. They owe a massive apology to so many people. And again, this is a case of bad apples. And I think within the CDC, there are a lot of really smart, intelligent people, intelligent, even well meaning people within the CDC. I think one of the big issues inside the CDC wasn’t even necessarily all these terrible people. The culture itself was the bad apple.   [00:13:26.660] – Holly Well, bad apples rot other apples.   [00:13:30.650] – Simon The Michael Lewis book on this, I don’t know if you’ve seen them, it’s a really great expose into how absolutely rotten and hilariously incompetent the CDC was. And it’s not because they don’t have very intelligent people. The CDC, the prioritization, the incentive structure, et cetera, just creates these horrible, horrible, horrible outcomes. It’s literally the entire organizational structure and the culture itself that is the bad apple.   [00:13:57.190] – Simon And so we can see this idea of bad apples across government. We can see in a lot of these organizations, not to say that everybody in such and so agency or such and so whatever is bad or the agency itself is bad, I’ll even say something that’s going to surprise a lot of people. This almost sounds sacrilegious, but there are a lot of really even within the IRS, there are a lot of really great IRS agents. I would actually tell you that some of the most competent, sophisticated investigators in the world, especially when it comes to anything financial, are IRS agents, specifically on the criminal side, the criminal investigative agents, these are some of the most sophisticated financial investigators in the world. They really understand banking, international commerce, and transaction. They really get this stuff. These are very complex topics. They’re very sophisticated people. And a lot of these guys, all they want to do is catch people that are hardcore frauds and cheats and stealing from the government, whatever. And again, there are some very good people involved in some of these organizations. Having said that, again, they’re also bad apples. There are bad apples.   [00:15:06.910] – Simon Sometimes it’s the entire organization or the structure or the incentive structure within the organization that’s the bad apple. But there are always bad apples inside. You get people like Lois Lerner, who was the lady infamously inside of the IRS years ago that just coincidentally happened to be targeting these sort of conservative charities and that was a quite famous case. But there are always bad apples inside of these organizations and sometimes it’s just a handful of bad apples that can really wreck a lot of havoc and destruction.   [00:15:37.910] – Holly Well, that’s the thing. I try to say this earlier and I was having technical problems, so I don’t know if it recorded or not, but in a box, if you have a bad apple, a rotten apple, it will corrupt the other ones. It spreads. And so I think at this point there are a lot of people who are skeptical about things like this inflation reduction act that was just passed and signed this week because they are starting to think that the bad apples have taken over. And if certain parts of the government are expanding, those parts of the government will be I’ve seen the word “weaponized” against them. The trust has eroded to the point where they think that these criminal investigators are going to be just investigating people who disagree with them on political, social and other topics. What do you think about that?   [00:16:29.330] – Simon It is a trust problem, and we talked about this before. If you think about it, the analogy being in a terrible relationship and you’re in a really terrible toxic relationship with somebody, whether it’s a loved one, spouse, boyfriend, girlfriend, whatever, you have serious trust issues. Everything that person does you view with serious suspicion. You start extrapolating well because of this and this is going to happen. They’re going to do this and this and they must be sleeping with a neighbor or whatever. You start inventing things that aren’t real. You start scrutinizing these tiny little things and making a huge deal out of it. And if you look at it rationally, we know, okay, that’s not really true. And this is the relationship, again, that I think that a lot of people have with their government, right?   [00:17:22.080] – Holly Especially when they gaslight you. There is no inflation or what you were just talking about with the virus.   [00:17:30.320] – Simon Right. You find out that you’re in a manipulative codependent relationship with a really terrible person that has taken every advantage to sort of steal and plunder and create all sorts of mistrusts and so forth. So yeah, of course you have every reason to be skeptical. But then you see some little action that they take and we start saying, oh, this is going to happen. Now we sort of create outcomes. We invent outcomes that haven’t happened yet. Now, it certainly makes sense to think about various scenarios and so forth, but we talked about this before. A lot of people said, oh, they’re going to pass this thing with the IRS. $80 billion is going to be 87,000 gun toading agents storming down people’s doors. Whatever, okay, let’s tone it down a little bit. That’s not going to happen, that’s not going to happen. And if you just sort of dive into the numbers and the actual text, the legislation and so forth, a lot of this stuff isn’t really true. But this is always the case after the Dobbs Jackson Supreme Court decision that overturned Roe v. Wade. There are a lot of people that were freaking out about all this is going to happen, that’s going to happen.   [00:18:42.640] – Simon Again, people were inventing outcomes that didn’t exist. And then Kansas fairly conservative state went and passed in a statewide vote to preserve abortion rights in the Constitution. And so a lot of times the things that people think this is going to happen is going to be this terrible outcome. Again, I think we need to step back and try and look at it as rationally as possible, try and keep a level head about ourselves and look at the actual facts of the matter. I think in the case of the IRS, there actually is quite a bit of it that is earmarked specifically for enforcement, which does mean there’s going to be more field agents. There’s most likely going to be in terms of the gun toting special agents on the criminal side, now we’re talking like 1000 people. A lot of that is going to be field auditors, people that actually go out. But those numbers, I would be surprised if it was really even 25,000 at that. Not to say that that’s a good number or bad number or anything. Again, it’s not the 87,000 gun toting door kicking agents that’s been circulating around the media.   [00:19:53.950] – Holly However, that’s a lot of people to investigate. Only people who make more than $400,000.   [00:20:02.790] – Holly Which is impossible. Impossible, right. Whatever the number is, it’s going to be a lot of people. It’s going to be a lot of people. I’d say even if it’s 25,000, which is probably a mid range estimate, it could be more, it could be less. If you’re talking about 25,000 field auditors, that’s a lot of people. If you think about bad apples, it’s even 10% bad apple. Now you’ve got thousands of people who are bad apples who are going out for whatever personal advancement, some kind of political fanaticism, ideological agenda, whatever the case may be, going out and causing all kinds of havoc and destruction. If you think about that in the context of the entire federal government as an institution, that vast apparatus that’s got literally even a couple of million people that are working directly in or with the federal government, if even 10% of those are bad apples, you’re talking about hundreds of thousands of people, hundreds of thousands of bad apples. That’s a lot of destruction. That’s a lot of destruction. And if you think about the top 10% of those by virtue of their rank and position and authority, that’s tens of thousands of people that have significant power and authority to again, these are kind of faceless innocuous bureaucrats like Lois Lerner at the IRS who years ago just decided, well I’m going to coincidentally target all these conservative charities.   [00:21:34.710] – Simon You get people like that. Imagine tens of thousands of people like that. Just the numbers are what they are. It’s a big number. And so when your entire solution based to everything, the extent of your creativity is “We have a problem. What’s the solution? Let’s expand the size of government”. Right? And again, if even just 10% of those people are the bottom 10% people are the really bad apples which frankly I think that may be fairly generous. The actual number may be much higher than that. But let’s call it 10%. 10%. That’s a lot of destruction that can be caused. So if you’re talking about you’re hiring 250 people or even if 2,500 them are really nasty, that’s a lot of destruction out there across middle America because this isn’t just people that wealthy people or multimultimillionaires, et cetera. It’s ludicrous. They say, oh, this won’t affect anybody who makes less than $400,000.   [00:22:35.250] – Holly Biden said it right before he signed it.   [00:22:37.360] – Simon Lot of them said it, they all said it. The Treasury Secretary said it. The congressman said it, senator said it. But they had the opportunity to actually codify it into the law and actually write it down and make it part of the legislation. “Say thou shalt not audit anybody who makes less than $400,000.” It was brought up and they said, “No, we’re not going to actually write, we’re not going to write it down. We’ll just say it” because politicians always do what they say, right? So we’re back to the trust issue and nobody trusts them and rightfully so. As an institution, why should anybody trust these people when all they do is lie and lie and lie?   [00:23:10.500] – Holly Well that brings up what happened earlier this month with the non raid. They keep talking about classified documents and we’re supposed to trust all of this but there’s a lot of things like a lot of smoke around it. So you know a thing or two about the classification system. Can you kind of go through that a little bit so we can at least have an understanding of what they might have been looking for or maybe not even in this case what they’re looking for?   [00:23:39.780] – Simon Yeah, sure. I mean I was an intelligence officer so obviously have a lot of first hand experience with this. There’s a lot of mystique behind the idea of classification. It’s an old joke that I can’t tell you got to kill you. It’s such bullshit. It’s so silly. What I would say is when I was an intelligence officer and I’m sitting here and I’m looking at all these classified documents, a lot of people don’t really understand how it works. You get a security clearance. There used to be something called a Defense Investigative Agency, whatever. They’ve kind of rolled all this stuff into various agencies. But you go through a background check depending on the scrutiny, level increases or decreases based on the level of classification. If you’re trying to get a top secret clearance as opposed to secret clearances, more scrutiny. They’ll go and they’ll interview people and they’ll definitely look at your financial records and different things like that. There are certain disqualifiers, but they’ll go through and look at your finances. For example, if you’ve got a ton of debt, that’s not a good thing because then they’re going to think that okay, you’re susceptible to bribery and selling secrets and things like that.   [00:24:45.560] – Simon So they go through, they do fairly extensive background check. But your clearance basically makes you eligible to obtain certain classified documents. It’s not that you can just go and just willynilly start getting access to whatever you want. All classification, all classified documents are on what’s called a need to know basis. That’s a real term. And you have to be working in a specific job and a specific agency that requires you to have access to certain information. There are certain things that are just sort of out there that the need to know is pretty broad, really broad. And they have entire systems. So there’s one that’s used widely in government called SIPRNet, which is basically like the internet. There are web browsers and websites and everything like that. But there’s a certain level of encryption and you have to be on a special device, a special machine that has certain encryption on it to be able to access. It’s a secret version of the internet.   [00:25:44.310] – Simon And it was hacked last year, right?   [00:25:46.950] – Simon That’s a whole different thing. Different, yes, exactly right. So all these secrets, they make a big deal about this stuff. And to be fair, there’s a lot of deal made about Hillary Clinton’s emails as well. And I think the same rules apply. But there wasn’t really so much a big deal made about the fact that this was with the solar winds hack. Nobody made a big deal about that. And the fact that the Chinese and the Russians got to plunder all this treasure trove of US government secrets. So I made a big deal about that. That’s totally fine. Nothing to talk about there. When was the last time you heard anybody in the media talking about that? They didn’t really talk about it. Even when it came up. But now it’s just this classification issue. But yeah, you could browse SIPRNet and go to any agency, any intelligence agency, and they have a separate website with these secure servers that are connected to SIPRNet. And then there’s another one that’s actually top secret. It’s called JWICS. Joint Worldwide Intelligence Communications System. JWICS is the top secret version of the Internet.   [00:26:50.190] – Simon So these agencies then have yet another set of secure servers that they connect to an even more secure network that’s got a different set of really, really high level encryption that you have to access with special machines, et cetera. And you could go around and you could look at all this stuff and the things that I always saw when I was in the intelligence business, I was actually surprised at how much completely useless, petty information was classified. I would say literally at least 90% of stuff that’s classified probably shouldn’t be classified.   [00:27:27.810] – Holly Wow.   [00:27:29.550] – Simon Government overclassifies things. Really overclassifies things. Things are, again, silly, petty, oftentimes common knowledge. It’s just so stupid. And you can just stroll through and read. They classify embassy cables, right? And a lot of the stuff you can see for yourself, don’t take my word for it, you can go to WikiLeaks and see a lot of this stuff, a lot of these things that were classified documents that were leaked and posted on WikiLeaks, and most of the stuff is so mundane, it’s so trivial, it’s so petty. And you go, really? This is secret, this is top secret. You actually classify this garbage.   [00:28:06.270] – Simon It’s hard to lend any credibility because as soon as somebody says, oh, it’s classified documents, people think you’re talking about nuclear launch codes. And the reality is a lot of this stuff is really just tame, lame, mundane stuff. Really petty, really silly. And it’s as if sometimes you would think that they took a copy of the National Enquirer, then put a classification label on it. Sometimes that’s how petty and silly some of the stuff is. And I use the National Enquirer literally because sometimes you even get analyst reports and people come out with these crazy ideas about this imminent space alien attack. Some analyst in some office somewhere in the Space Force,  “we’re protecting against what we think is an imminent alien attack”. And then they go and they put a classification document. That’s the same thing you would see in the National Enquirer.   [00:28:59.490] – Holly Which might be the only institution people still trust.   [00:29:02.740] – Simon Ha ha, maybe so, but there’s a lot of just really ludicrous stuff and they slap classification labels on it. And then a lot of the things that people say is “well you classify stuff because you’re trying to protect the source”. They go, well that’s not really true either, because most of these sources are so well known or have already been compromised. It’s satellite imagery, for example. Give me a break. What big tech company? You tell me. Google doesn’t have access to it’s all on Google Earth anyways. There’s so many things like, to say that there’s some unique source and people don’t know where it’s coming from is actually quite silly. Or even some of the human sources, like a lot of these diplomatic cables saying we have to classify it so we protect the source. I will tell you, anybody with half a brain who walks into an embassy meeting, they know exactly there’s always employees of the CIA pretty much at every embassy, and everybody knows exactly who the spooks are because they have the weirdest, strangest titles you’ve ever seen. You meet a guy in an embassy, he’s wearing a kind of nice looking suit, gives you a card.   [00:30:08.260] – Simon You look at the card, and the title on the card is one of the most incomprehensible… You’re like, what is that? That’s a spook. That’s exactly who the spooks are. They’re in what’s called official cover, as opposed to non official cover. So the official cover guys are people who have these bizarre job titles, who work in an embassy, claim to be working for the State Department, but they’re actually spooks. And so these are the guys that are providing a lot of information going, these embassy cables, but everybody knows who they are, and so you’re not protecting the source because everybody knows who these guys are, and so they end up with this trivial, mundane, silly stuff that ends up being classified. Yes, mishandling classified information is against the law. I would actually tell you it happens so regularly, in many cases, inadvertently, people just it’s not to say everybody does it every day of their lives, but it actually does happen fairly regularly, even though a lot of the stuff is supposed to be maintained in buildings with no windows, guarded by MPs and et cetera. But it still happens, and you don’t really hear a whole lot about it.   [00:31:13.040] – Simon A lot of times people get admonished, and it could be a fairly big deal, but certainly not to the extent that we’ve seen here over the past week or so. That’s a personal take on what’s been happening and kind of a nonsecret of what we’ve been discussing, but a little bit of a personal take on classified documents. I’m not condoning any way mishandling classified information, but what I would just say when people hear classified information, they kind of assume we’re dealing with nuclear launch codes. And for the most part, that’s just not the case.   [00:31:45.750] – Holly Now that you told me, you’ll have to kill me.   [00:31:47.900] – Simon Ha ha.   [00:31:47.900] – Holly Although we won’t go into the whole controversy right now over whether a president has the right and the ability to declassify things, we’ll let them settle that.   [00:32:01.050] – Simon That’s up to the legal scholars and the courts.   [00:32:04.530] – Holly The point of all of this is that there’s nothing that’s happening right now that I see that is healing the wounds. Right. That’s making people trust their institutions more, it sounds like, although you’re saying hey, it’s probably not going to be 87,000 IRS agents like we were talking about last week. The idea that there are bad apples everywhere and that certain people do take license with the power that they have does give people pause. And it’s one of those things that makes you wonder kind of the reality of what could be coming. Now, you said something to me earlier, this isn’t going to happen tomorrow. It’s not like the IRS is going to unleash all of these new field agents and by the next tax, say half of the middle class is going to be audited. Right? This is a process and there could be amendments made.   [00:32:58.050] – Simon Yes. So a couple of things to bear in mind. Number one is there’s been a law passed, there’s been funding, in theory allocated. First things first, they actually have to come up with the money. So you always have to remember that with the United States when you’re running multi trillion dollar deficits, just because they allocate money for something doesn’t mean, especially when you’re talking about over five to ten year period, doesn’t mean when you think about five years from now, are they actually going to be able to come up with that money? Will there be a source of capital that’s going to go and continue buying, funding US. Deficits year after year after year? Can they really say that with a straight face that six years from now we’ll still be able to run these huge deficits? And yes, sure, the Chinese will continue buying our debt, so it’s not going to be a problem. We’ll be able to fund this. You might actually not have that luxury. You might not actually be able to come up with the money, and you might actually have to live within your means because you can’t keep running these massive deficits.   [00:33:58.030] – Simon So even that’s not a given. It’s also not a given that they won’t make changes to the law. It’s entirely possible that there’s a radical political adjustment and people come in and go, “you know what, we don’t like this and we’re going to pull the funding”. And they could just as easily do that as well. So again, don’t overreact and assume that there is a law that was passed and then sort of read into the law things that aren’t actually there and just assume that all these things are going to happen. It does make sense to understand certain implications. And the implications are, yeah, sure, there’s a lot of this that has been earmarked specifically for enforcement. That does mean more field auditors. I’m actually much more concerned about something else we can talk about in a second with respect to enforcement. But even with the field auditors, let’s say it’s 25,000, and I think that’s a reasonable estimate. It could be more, it could be less, but it’s not like you can just go and grab those guys and they’re out tomorrow morning in the field. It’s going to take a long time to recruit.   [00:35:00.450] – Simon The job market is tight, very tight. And these people that are going to be hired by the IRS, they have to be educated. They have to have certain credentials. It’s tough to find those people and to go and get a whole bunch of them, that’s tough. And it sucks as well for the private sector because now the IRS is taking a very scarce resource out of the labor market, right? So it’s already scarce. And now you’re going to make it even more scarce so you can have them doing instead of something productive, you can have them doing things that are anti productive. So I think it’s actually a terrible move. But then you’re going to have to train these people, right? They don’t just show up on day one and send them out in the field. It’s going to take a couple of years, really to work all that through. So that’s one thing to bear in mind, is it’s not like this is all going to get ramped up immediately, tomorrow morning. The big priority is, first of all, they can have to recruit these people, but they also gonna have to they’re going to have to fix their broken as customer service because they have no I mean, there’s nobody even going to answer the phone right now.   [00:35:59.440] – Simon So they got to fix that. There’s so many things they need to fix. But the part that I was going to say that’s actually even more concerning for me is the technology end of it. And the IRS has been trying to invest in technology. They haven’t had the budget for it. They haven’t had the funding for it. Now they do. And so you can be fairly certain that they’re going to really expand. They already have a system in place that tries to flag certain things, whatever. And I think one thing that’s highly likely is, and again, I’m not really extrapolating or trying to invent things that aren’t there. This is based on a lot of comments from the service itself, from the commissioner, et cetera. They really want to invest in AI. And that to me is actually very scary because the government does not have a good track record at all when it comes to technology. Brought to you by the people that spent $2 billion on the Obamacare website, right, because Michelle Obama’s college buddy, whatever, owned the company. I mean, it was so ridiculous. These people can’t do anything right when it comes to technology.   [00:37:10.030] – Simon It’s so terrible. They’re so behind the times. In the US Air Force that deals with floppy disks, with missile launches, I mean, really important stuff. They deal with old school floppy disks. It’s completely ridiculous. And so for the IRS to have this AI system that goes in and looks through zillions of tax returns, through this AI and machine learning because there’s a lot of data there. This is how machine learning works. You just give it lots and lots and lots of data and then it comes up with its own analytics, et cetera, and then figures out how do we audit better, how do we catch tax cheats, et cetera. Which is great, except for the fact that they’re probably going to do it really poorly because the government does have a dismal track record when it comes to technological implementation. So what concerns me is that they go and take some of this money and they go and spend a lot of money, billions of dollars are going to go and waste on some AI machine learning system that fails miserably at its job. And all of a sudden now you got all these sort of regular people that get flagged by some incompetent, broken AI tax system.   [00:38:28.600] – Simon Now everybody’s getting flagged by the IRS because of some things they develop. It doesn’t even touch the human beings. If a human being looked at, they go, there’s nothing to see here. This is a completely normal, honest, taxpaying, law abiding citizen, but for whatever reason, machine flagged it and so now everybody’s lives are turned upside down. That’s the part that actually bothers me.   [00:38:50.040] – Holly It reminds me of that Tom Cruise movie years ago. The Thought crime?   [00:38:55.290] – Simon Oh, the Minority Report.   [00:38:56.890] – Holly Minority Report, yeah.   [00:38:59.130] – Simon Well, I don’t know that it would really be a pre-crime issue, but I think it’s a no-crime issue. That’s the thing about it. People that done nothing wrong and they get flagged by some system because whoever wrote the software didn’t know what they were doing and the IRS didn’t really the implementation of it. The people in charge of developing that technology and implementing it just did such a pitiful job. And this is the tracker we see with the federal government.   [00:39:26.250] – Holly The issue too is that the tax code is so complicated that there are probably a lot of people who are making mistakes without even realizing it. I know there was a book that came out a while back about how you’re constantly committing felonies from the moment you wake up in the morning because some law somewhere, this goes beyond the tax code. This is just the legal system and antiquated laws that are still on the books around the US. But that’s probably going to erode trust even more because then agents who are looking for money could possibly take advantage of people who are not experts and haven’t gone to get their master’s degree in accounting or their CPAs. So we’ll see how that comes out.   [00:40:14.570] – Simon But again, then you’ve got the bad apple angle of it as well.   [00:40:20.570] – Holly And to be true, there are bad apples in the public too. There are people who are deliberately trying to…   [00:40:28.130] – Simon There are people that are cheating and committing fraud and they’re criminals of all stripes everywhere.   [00:40:34.920] – Holly And those people probably need to fess up.   [00:40:38.630] – Simon Yeah, that’s the thing I would say, with taxes it’s very interesting. It’s always better to sort of come clean and say, “well, I really didn’t know”. If people that are doing things that are really on the aggressive side. This is definitely, I think, an opportunity to reflect and say it’s probably better to come clean for a lot of reasons. Number one, because interest rates are rising, but the IRS only raises those on a quarterly basis. And so if you got to pay essentially interest on the money that you should have paid three years ago, it’s a lot better to do that now rather than let the interest continue to accrue because that interest is actually rising. And usually the IRS, according to a lot of the tax lawyers I deal with, they tend to be a lot more lenient when people sort of step forward and say, “you know what, I did some things, I was a little bit aggressive, I got some bad advice and I shouldn’t have done this. And I kind of realized that now, jeez, I’m really sorry, I didn’t know what I was doing”, and file an amended return. There are some people that say “never file an amended return because that’s going to automatically trigger an audit”.   [00:41:46.340] – Simon But in a situation where there’s going to be a whole lot more field agents out there auditing, if the chances of people getting audited are higher anyways, you may certainly want to consider filing amended returns and paying some potential back taxes that should have been paid for anybody who is doing things that were extra aggressive. At the end of the day, I think most people, vast majority of people who haven’t done anything wrong, it is a cause for concern to think that now there’s going to be all this extra scrutiny for people that haven’t done anything wrong. Honestly, it’s irritating. It’s really disheartening to think that to have some looking over your system that might flag you or honestly. Or some guy with an axe to grind because you donated to the wrong political action committee or whatever. And then that stuff is public record and they see this and some guy with an axe to grind is just going to go “I’m going to go down this list and just start grabbing everybody who donated to this particular charity” or something like that. That is a risk. I’m not saying it’s a guaranteed outcome, but statistically speaking, if you just look at bad apples across the government, there’s going to be some percentage of people, whether it’s 2% or 20% or whatever that number is, it’s going to be some percentage of people that use and abuse their position and power and status in ways that cause tremendous amounts of destruction.   [00:43:15.110] – Holly On that happy note. Ha ha.   [00:43:19.530] – Simon I mean, not to leave it there, but I mean, this is a couple of points to make again. Number one is this particular issue. It’s not certain, it’s not final. It’s been passed in the law, yes, but it’s something that’s supposed to roll out over literally years and years and years, which means that a lot of things could change, a lot of things could change, and the entire direction of the country could shift. We’ve seen this again, really throughout human history. I mean, we go back to ancient Rome and we see a series of horrible, terrible emperors, and the empire was in decline. And then suddenly you had a handful of good emperors in a row, and everything changed. They stopped the decline. They arrested the decline. They started moving in a better direction, reconquered some lost territory, changed the laws, reestablished a sound currency, made a lot of strides, and bring down inflation and bringing down their debt levels and getting their budgets under control and so forth. These things do happen. It doesn’t stop the ultimate trajectory. To me, it’s like health so many other things where if you’re constantly making bad decisions for your entire life, if you’re never getting any exercise and you’re drinking excessively and you’re taking in a lot of sugar and you’re just eating Big Macs every day, eventually, you’re going to be on a really terrible health trajectory.   [00:44:50.790] – Simon You can get away with doing that in your teens and 20s, but if you’re still doing that in your 60s, you’re going to have pretty serious problems.   [00:44:57.950] – Holly So even if you start going to the gym, these are cumulative and it’s not going to make a huge dent.   [00:45:05.370] – Simon Well, you can always start taking steps, but in the same way, it’s sort of like somebody that’s now in there, I don’t know, around 75 or so, that decides, “now I’m going to start getting serious about my health. Finally, I’m going to put down the Big Macs and I’m going to start going to the gym”. Okay, that’s great. And it’s going to help. It’s going to arrest some of the decline and may even kind of move the needle in the opposite direction and maybe actually start improving things a little bit. But starting to take your health seriously when you’re in your mid 70s is different than taking your health seriously when you’re in your 30s, right? Because you have so much more maneuverability and time on your side. And when things are already when the accumulation of bad decisions has been made and that sort of total aggregate bad decision, the outcome of that is so great. It is a lot harder to steer that ship in a different direction. So in a way, if you look back to Rome again, it doesn’t really stop the inevitable outcome of “here’s what’s going to happen”, but it does actually make things better for a significant amount of time.   [00:46:12.160] – Simon And I think that is something that I think a lot of people could probably anticipate. Nothing goes up or down in a straight line, and I think for a lot of people, things across really all of Western civilization over the last several years have been feeling down. Everybody literally in the entire planet felt this during Covid and there was so many things even before and since, but nothing goes up or down in a straight line. And so I think that, for one, it certainly makes sense to assume that there is going to be a break from that. That would be a good period as well. At the same time, though, this is the whole thinking behind this concept of having a plan B. Because when you can see these sorts of things I wrote about this fairly extensively, this inflation reduction act, I mean, it’s so hilarious in so many different ways. You don’t legislate your way out of inflation. The fact that they think they can do that is so ludicrous, is so pompous, is so narcissistic. We have all the government has all the power to do all this stuff. It’s so ludicrous.   [00:47:23.330] – Simon You do not legislate your way out of inflation and prosperous, healthy nations don’t resort to cannibalizing the wealth and plundering their innocent, hardworking, productive people because again, and I say that very deliberately, because they had the opportunity to write it into the law and say “You know what? We’re going to ignore people that are making less than $400,000 a year”. They could have really you know, they could have had a hardcore they could put a probable cause or at least reasonable suspicion provision in there to say you can only out of people who are making $400,000 a year if you have very clear evidence of wrongdoing and fraud and so forth, not just even a little bit of suspicion, nothing random. They could have written all that into the law, but they didn’t. They didn’t. They claim that they care about middle America. They care, they care about working class people, but they don’t give a shit because they had the opportunity to write in the law and they didn’t. So this is not how a wealthy, prosperous nation acts. This is not the kind of legislation they pass. They don’t resort to these sorts of things.   [00:48:27.060] – Simon But it is the hallmark of nations and empires and dynasties and decline going back to ancient China. We can see examples of this in Rome. Byzantine Empire. The French Bourbon monarchy, the Ottoman Empire. This is a hallmark of empires in decline saying “We got to go after our people, we got to seize their wealth” because in many respects they feel like this is their primary source of revenue. They got to go take that money. So it’s unhealthy. And I think it is a major indicator of decline. It’s not to say that decline is a one way street because it can in fact be arrested and it can in fact reverse course. So nothing is completely inevitable. But you are in a position where, for example, I like to bring up Social Security. I mean, the Social Security Board of Trustees is saying, hey guys, we got like a decade basically, until these trust funds run out of money. That’s going to be a big deal. That’s going to be a big deal. So if you plan on being retired at any point past the early 2030s, well, guess what? You’re going to have a serious problem.   [00:49:32.690] – Simon They’re going to have to drastically cut back on all the promises they made. It’s going to be a big deal, right? And so it’s hard to even if there’s some radical political transformation and all this stuff over the next couple of years, I mean, Social Security is still going to run out of money. So there’s only so much that even in a radical political transformation, there’s only so much sort of good. Even if they reverse course, there’s still going to be consequences and still going to be bad things that happen. And that’s why, again, it just makes sense to have a plan B when you look at a lot of these things in that direction. I don’t think it’s cause for panic. I don’t think it’s caused for just try and stay above it. Try and not be outraged all the time or be depressed and despondent and panicked and worked up and stressed out. Just understand it for what it is. Number one, I think you can have at least a little bit of hope that things are probably going to change because these things are cyclical. But two, there are things that you can do about it.   [00:50:31.190] – Simon You are, again, a lot more powerful in your own life than they would want you to believe. You do have a lot of options and tools at your disposal and taking advantage of those is completely rational thing to do.   [00:50:42.810] – Holly Alright, thank you. Till next week.   Close Podcast Transcription