Schiff Sovereign Podcast

By the third century AD, it was hard to imagine Rome being in worse condition. Historians literally refer to this period in Roman history as the Crisis of the Third Century. And it was brutal. Roman citizens couldn’t believe what they were experiencing… it was incomprehensible to them that their fatherland had become so weakened. Inflation was running rampant. The Empire was stuck in a quagmire of foreign wars and had suffered some humiliating defeats. Rome experienced multiple bad pandemics, coupled with even worse government response. Foreign invaders were flooding across their borders on a daily basis. Trade broke down, causing shortages in many vital goods. And terrible social strife dominated people’s daily lives. Ordinary Roman citizens were at each other’s throats, and it was a time of disunity and outrage. One contemporary writer of the era named Cyprian described the situation as follows: “The World itself… testifies to its own declines by giving manifold concrete evidence of the process of decay… There is a decrease and deficiency in the field, of sailors on the sea, of soldiers in the barracks, of honesty in the marketplace, of justice in court, of concord in friendship, of skill in technique…” Cyprian wasn’t just describing Rome’s obvious decline. Rather, his summary is an indictment of Rome’s inability to stop it’s decline. Everyone in the imperial government knew what was happening in Rome. They simply lacked the ability to do anything about it. Historian Arnold Toynbee called this the “Challenge and Response” effect… and it’s an interesting idea. The concept is that every society has to deal with certain challenges; if the challenges are too great, the society will not survive… i.e. the desert is too harsh, the tundra is too frozen, etc. But sometimes a society becomes so decadent, so prosperous, that it loses its ability to address challenges. It no longer has the social capital necessary— unity of purpose, the ability to compromise, the capacity to engage in rational debate. That is the position where Rome found itself in the 3rd century AD. And I believe the West is quickly heading in this direction. This is the subject of today’s podcast. We start out talking about Rome’s mortal enemy… and how, after more than a century, Rome emerged victorious as the lone superpower in the Mediterannean. Everything was great, and peace and prosperity reigned for more than 200 years. But over that time, the decadence set in. Wheras once Romans had valued hard work, freedom, and unity of purpose, their entire value system changed. People expected, then demanded, to be taken care of by the state. Corruption became commonplace.The bureaucracy multiplied. Social conflict soared. And eventually Rome lost the ability to meet its challenges. I make a lot of historical parallels to our modern world, including some specific examples of absurdities which occurred just in the last couple of days. But I also discuss why, in the end, these conditions actually create unique opportunity for creative, hard working, talented people. You can listen to the podcast here. Download Transcription as PDF Open Podcast Transcription [00:00:01.290] Today we're going to go back in time nearly 3000 years ago to the year 821 BC. To a city called Tyre, which is located in modern day Lebanon. Now, I want to give you an appreciation for just how old Tyre is, because if we go back to 821 BC, tire had already existed for nearly 2000 years prior to that. That's basically the the difference between us and Julius Caesar, right? So that's how old Tyre is.   [00:00:29.050] That even nearly 3000 years ago, it was already nearly 2000 years old. So that's an old, old city. And again, it still exists today. It's got a population of around 200,000 people. This is a real city today, located again on the Mediterranean and modern day Lebanon thousands of years ago.   [00:00:46.110] It was a city state, a major city state, probably the most dominant city stated part of a civilization back then known as the Phoenicians. A lot of people know the name Phoenicians. Some people don't know really all that much about them. The Phoenicians were a really important ancient culture. They predate the classical Greeks and a lot of the more famous ancient civilizations that people know about and have heard of, the Romans, et cetera.   [00:01:09.360] But the Phoenicians were a really important ancient culture. They were organized similarly really to how the Greeks would be organized later on. The Greeks hundreds and hundreds of years later would come around. They would organize themselves as city states, right? You had Athens and you had Sparta and all these different citystates across Greece.   [00:01:26.900] And there was no real imperial center, so to speak, around these independent city states with a common language and certain cultural traits. They were all Greek, they spoke the same language. And it was similar with the Phoenicians. There were different Phoenician city states, but there wasn't like an imperial government that lord it over all the rest. But certainly some that were more powerful than others entire was a really powerful city state.   [00:01:49.830] Among all these other Phoenician city states that were in and around the Mediterranean at the time. The Phoenicians were known to be incredible traders. In addition to being great traders, they were actually seafaring traders. They were great shipbuilders. They had a very powerful fleets and would go around and establish trading posts and even colonies all over the Mediterranean.   [00:02:11.300] And they were legendary for this. And there were ancient historians who wrote again later, again, just to give you context of how old the civilization is, there was an ancient Roman historian, his name is Straybo. And Straybo came a thousand years after the Phoenicians. And he wrote that the Phoenicians had established hundreds of colonies and trading posts. Now that was probably an exaggeration, but the point is that the Phoenicians, they were pretty big deal.   [00:02:35.140] They were among the first real seafaring explorers and they did put colonies and trading posts all over the place. And Tire was one of the most prominent city states of all the Phoenician city states. So much so, that for a while the Mediterranean was actually known as the Tyrann Sea, after the city state of Tyre in this Phoenician civilization. So they were a pretty big deal. And in the year 821 BC, the king of Tyra's name was Baton, the first baton I died.   [00:03:05.300] He had ruled for nine years and he died. He passed away. And before his death, he had named his two children. There was his son named Pygmalion, and his daughter, who was called Alisa. And Alisa and Pygmalion were determined to co rule together according to their father's wishes.   [00:03:22.220] And the king passed away. But of course, his son cheated his sister. Pygmalion cheated Alisa out of control. And basically Pygmalion, the brother, took control of the city state. He even killed her husband.   [00:03:34.920] And so here's now Alisa, who's left with no power, no husband, no inheritance, nothing, and her brother's, murderous thug, who's on the rampage. And so she flees, she leaves Phoenicia and she gets on a boat, takes some people with her and goes to this far flung trading outpost. And it takes her quite some time, but over a period of several years, she's sailing away to North Africa. Basically, she lands in modern day Tunisia eventually, where a few years later, in 814 BC, she founds one of the most famous cities that would become in the ancient world. They needed a name for their new city and so they literally called it New City, which you probably never heard of, like New City.   [00:04:20.610] I've never heard of that. Well, actually you have, because the words in their native Phoenician language were Cart for new and Hodge for city. So Cart hajj. Or as we call it, Carthage. So Carthage was founded in 814 BC by this Phoenician princess, basically, who had to flee her murderous brother.   [00:04:41.200] And there were so many legends about the founding, this according to Roman mythology, and again, this came around centuries and centuries later, that the Trojan hero Aneus, who fled Troy with some of the survivors, and he at some point arrives to Carthage. This is sort of like an odyssey type adventure, if you've never read Virgil's the Anea. He arrives to Carthage where he and Elisa fall in love. But then the Roman god, the messenger god Mercury, sends a message to Ana and he says, no, you have to leave. You can't stay here in Carthage.   [00:05:14.620] You have to leave, you've got to go and found Rome. This is your destiny. You can't stay here with this woman. And so he leaves and at least it becomes inconsolable. She's depressed and despondent.   [00:05:24.800] She lost her true love and so she kills herself, but not before threatening that her people, the Carthaginians and Anais's people who would become the Romans, would eventually go to war and have this big conflict, which of course ended up happening over time, Carthage really became a major power, an empire really in its own right? And by a couple hundred years later, really by the 500s BC, carthage was, was really one of the dominant powers in the in when I say the known world, I'm I'm talking about really the Mediterranean. There's a lot of civilization going on in, in India and China and Japan and all sorts of different places around the world. But we're talking really about European western civilization right now. They are really, really dominant power.   [00:06:05.240] And you had basically the 500, you had the Greeks that were in the eastern Mediterranean and you had the Carthaginians in the western Mediterranean. And this was actually at a time that Carthage had become a far greater power than its original Phoenicia, which is again sort of near modern day Lebanon Phoenicia. At that point it sort of encountered and subordinated itself to the growing Persian empire. Carthage was a pretty safe distance away. They said, well, we don't really have to worry about the Persians so we can continue to grow because we're way out here to the west and the Persians are way out to the east and so we're just going to keep doing our thing.   [00:06:40.110] And they had a lot of wealth, they had the ability to do that, they had significant agricultural wealth. We talked about that before in the ancient world, how agriculture was really everything. It was so important and it wasn't just they were growing food and sure, growing food was important. They figured out how to grow food and they grew so much food that they could use the surplus to trade with other tribes and kingdoms and civilizations. But agriculture wasn't just about food.   [00:07:05.420] It was also the ways that they grew industrial commodities. They could grow papyrus for paper, to write things, all these different commodities that they would use to actually make and produce things reeds, which were they make baskets to transport things, different tools and equipment, all these things they literally grew out of the ground. So agriculture was not just for food, but it was a major industrial part of their economy. And on top of that, in the area where Carthage is located, they also had significant mineral wealth as well, because mining was something that was very well known to the ancients. And at this time, the Bronze Age, the Iron Age was well upon them and people were experimenting with all sorts of metallurgy and different technologies and so the Carthaginians had all of that at their fingertips.   [00:07:51.680] So even to this day actually that still exists, that North Africa actually has really tremendous, and to be honest, largely untapped agricultural and mineral riches. Morocco, which is really in the same area right next to Tunisia, very near ancient Carthage, is home to the largest phosphate reserves in the world, which is actually one of the most important elements in agricultural fertilizer. There's incredible land and the weather and the water and so forth. So this is actually an area with quite a lot of potential as it was in the ancient world as well. Carthage continued to grow.   [00:08:23.570] It developed its own culture, developed its own language. They ended up calling it Punic. And this is kind of an interesting thing. I always find it fascinating, the development of languages and how languages really grow and take off on their own. It starts off everybody speaking their native Phoenician, but over time, because now, if you think about it, everybody sailed away from Phoenicia.   [00:08:43.900] Now you got a handful of people, and they're all basically, as far as they're concerned, they're on the other side of the planet from Phoenicia, because now they're in Tunisia versus modern day Tunisia versus modern day Lebanon. To them, that might as well have been another galaxy. And so they didn't have the same contact with the Phoenicians. And so when you have these people, now they're isolated together. They're isolated together.   [00:09:06.100] And so over time, people start speaking differently, their accent changes a little bit, and because they don't have the constant reinforcement of, oh, that's how the Phoenicians talk, right? Because now they're isolated, so they don't actually know. They don't have native Phoenicians coming, saying, no, this is how you pronounce this word, and that's how you pronounce that word. And this is the word that we use for that. Basically, a language sort of takes off and evolves on its own because it doesn't have the same native influence.   [00:09:30.490] And so it becomes different. On top of that, you have the influx of other cultures and other languages, because now the Carthaginians, they're way out in the eastern Mediterranean, they're in North Africa, they're trading with all these different African tribes. They're trading in Hispania, they're trading in Italy, they're trading in all these places. And they're picking up different parts of language, they're picking up different pronunciations, so forth. All those things fuse together and essentially create a new language.   [00:09:55.540] It's certainly at least a new dialect. This is something that's actually very, very common throughout history, even the English language. It's actually fascinating when you think about the development of the English language. It started with kind of a Germanic frizzian that meshed together with old Celtic and Norse and so forth, as the Angles and the Saxons moved into Britannia after Rome. And then the Vikings came in, and then the French came in in 1066 with Will and the Conquer.   [00:10:21.530] And so English. So you have Celtic and Frizzian and old Norse and French all sort of mixing together with different pronunciations, so forth. Then eventually you have English, you have this completely separate and distinct language. And it's fascinating. And this is actually what ended up happening in Carthage as well.   [00:10:38.270] They developed their own very strong, distinct culture and language and so forth. And that made a lot of sense given how much exposure they had to other cultures and peoples at the time. And again, they were very advanced. They had their own technology advances in agriculture, advances in shipbuilding. And the Carthaginians were an interesting bunch, like the Phoenicians, they were far more interested in trade than in warfare.   [00:11:02.280] And they were actually quite accomplished diplomats. They would go around and sign treaties with people. They say, Why do we want to go to war? War is expensive. Let's trade.   [00:11:09.340] That's a lot better deal for everybody. Let's just create value, and I'll give you what we have in surplus, you give us what you have in surplus, and we'll all become wealthier. And isn't that better than trying to kill each other? Yeah, it actually does seem like it's a pretty good idea. And they would actually go around and sign agreements and trade treaties and so forth.   [00:11:26.080] Again, this is thousands of years ago, in fact, in 509 BC. And it's incredible that we know a lot of these dates. In 509 BC. They actually signed one very particular commercial agreement with a fairly small kingdom on the Italian peninsula that had actually just overthrown its kings and had started an experiment with a new form of government called republicanism. And of course, this kingdom was called Rome.   [00:11:51.320] And they signed a treaty with Rome. They said, hey, okay, you guys will trade over there, we'll trade over here. We can do some things together from time to time, and we'll have a nice relationship with each other that goes back to 509 BC. Carthage and Rome actually kind of being a little bit friendly with each other. And this is the way of the world.   [00:12:10.250] At the time, you had in the, in the eastern Mediterranean, you had the Greeks, and they were fighting the Persians again. Decades later, we had the Battle of Thermopoly and the Greeks and Persians going to war with each other. But in the west, you've got the western Mediterranean, tunisia, Morocco, Hispania, Italy, you've got Carthage. In Rome, they just kept growing. They just kept growing.   [00:12:31.080] And of course, we know what happens here, that you've got two powers that are growing, that are wealthy, and eventually it's not going to take a rocket scientist to figure out that eventually these two are going to come into conflict with one another. And it happened. It happened. They called them the Punic Wars, and there were multiple conflicts. The first major conflict, the first Punic War, started in 264 BC.   [00:12:52.210] So this is now hundreds of years after the founding of Carthage, hundreds of years after the founding of Rome, after Rome becomes a republic, this is still in the republican era of Rome, when Rome is a republic, before the empire. And when the war started, like a lot of wars, especially wars between two great powers, it started for completely idiotic reasons. There were basically a couple of knuckleheads who went around stirring up trouble and both sides sort of got hought into it and say, oh, well, if we don't do something then the other guy is going to think we're weak. And then the other guys go, oh well, if we don't do something then they're going to think we're weak. And so they end up something that starts off as a nothing.   [00:13:30.800] And it just escalated and escalated and escalated until they finally said, all right, we're going to war. And again, they had no real reason to go to war. And they were trading and everything was fine, but it's just a couple of knuckleheads did some stupid stuff and it just cooler heads did not prevail. And these two major powers went to war, 264 BC. Probably at the time.   [00:13:51.500] Nobody thought, well, this is going to last a really long time, this is going to be a terrible war, this is going to be really costly. They thought, oh, we'll get in and out and it'll be quick, we'll bloody their nose and then we'll stop the war. But no, this lasted a long time. Lasted a really, really long time. The first Punic war lasted decades.   [00:14:06.870] Both sides suffered major losses. Ultimately the Romans won and that was one of the clear signs that Rome was an ascendance and can't be trifled with. But it was a very costly victory. It was a costly victory for both sides and they had a period of peace. But again, a few decades later, they went to war yet again.   [00:14:23.810] It was sort of like World War I and then there was some period of peace and then they had World War II, same Germany in the US and the UK. They all go to war again for the second time. Same thing. This is what happened with Rome and Carthage. And it was the Second Punic War that was the one that was really terrifying.   [00:14:39.920] That's the really famous Hannibal comes over the Alps with the elephants and he crushed the Romans. Hannibal was probably one of the greatest generals in all of human history. There is one battle in particular which I've written about before, the Battle of Cannae, which is one of the most stunning military victories in all of world military history. Just a stunning military victory for Hannibal. And at the time, the Romans were so vanquished they thought, this is it, we're done.   [00:15:10.130] It was that close to Rome, basically just becoming a client state of Carthage at that point. I mean, the Romans were danger close to losing it all. And you can imagine what would have happened, I mean, if, if the Romans hadn't finally been able to defeat the Carthaginians and defeat Hannibal. Most people probably at this point in time in history, would not have even ever heard of Rome. You know, Carthage would be the thing on everybody's minds.   [00:15:33.940] When we think about ancient history, we talk about the Carthaginian Empire and not the Roman Empire. So it came really, really close to that. But the Romans pulled out a victory in the Second Puny corps. Took them 17 years, but they finally pulled out a victory. But they all knew.   [00:15:47.310] The Senate got together and said, that was way too close, we almost lost it. We almost lost it. And at that point, nobody even remembered. Wait a minute, what was this stupid conflict over to begin with? Nobody even remembered.   [00:16:01.770] But it didn't matter because at that point, oh, did they hate the Carthaginians. Carthage was their mortal enemy and they wanted it destroyed. There was a famous senator or Roman statesman, his name was Cato the Elder, and this was a guy who used to go he would deliver these fiery speeches on the floor of the Senate in ancient Rome and used to end all of his speeches. It didn't really matter what he was saying, it was like this joke. And he would end everything he was saying, all of his speeches by saying, and Carthage must be destroyed.   [00:16:27.530] It became a known statement in Latin. And this was basically the sentiment of the politicians, of the people. Everybody said, Carthage is our moral enemy. Nobody even remembered why. But it didn't matter.   [00:16:40.240] We just have to destroy them because we came way too close to being destroyed ourselves. And so it finally happened. It took until 146 BC. Now that we have now we're in the third and final of the so called Punic Wars between Rome and Carthage. And again, it went in Rome's favor.   [00:16:57.510] But at that point, Rome wasn't messing around anymore. They said, you know what, we're going and we're just going to burn it to the ground. And Rome at that point was the clear power and the defeat over Carthage was total. So they completely destroyed the city, they burned everything. And again, in tradition of great empires, they rebuilt it from scratch, they burned it down and then they rebuilt it, which is sort of like how the US goes and bombs countries to smithereens and then spends a bunch of money rebuilding them.   [00:17:25.150] So the Romans basically did the same thing. That whole approach to international diplomacy and geopolitics is nothing new. The Romans did the same thing and they built actually a very nice prominent city on exactly the same site as ancient Carthage. So now we're in 146 BC. And just imagine, if you will imagine the joy, imagine the excitement on the streets of Rome.   [00:17:50.850] It must have been like you've seen those victory photos from World War II, like in Manhattan, they're in Times Square and people just women randomly kissing soldiers and sailors and all of that. Everybody's just so happy. Ticker tape parades everywhere, all this.   [00:18:09.050] If you're old enough to remember the fall of the Berlin Wall, pink Floyd shows up, they do a concert there. Roger Waters doing a concert on Where the Wall Fell. It's just excitement, people uncorking champagne and all this stuff. It's just happiness. It's happiness.   [00:18:26.090] Your mortal enemy has been defeated and everybody's just jumps on the peace train and is super happy and excited and life gets pretty good and life gets a lot easier, right? There's no more conflict, no more enemy, no more competition, no more antagonism, no more fear, no more any of these things that we can just live our lives and be happy and we don't have to worry about. I'm going to have to go to war, which obviously has a lot of personal implications for people. When you think about back then, some guy living on the farm who's tending to his farm, and he's got to go and fight for 17 years, I mean, that's going to have a lot of implications on you and your family and all of that, and you don't have to do that anymore, right? And so it's like a big party now.   [00:19:06.910] Everybody's happy. And so what happens? Well, the inevitable happens. This is where Rome sort of enters it's sort of fat and lazy stage, right? Everybody's happy, everybody's excited.   [00:19:19.020] And suddenly life just became really, really easy. Life became so much easier. Rome was the undisputed dominant superpower in the known world at this point. Again, Greece is finished. The Persians are finished.   [00:19:33.660] The carthaginians are finished. It is 100% Rome and nothing else.   [00:19:41.290] You could imagine probably a really great time to be part of the Roman Empire because things were really easy, but at the same time, their standards and morals and work ethic and everything started to shift because for really centuries prior to that, you've got a place that was founded on these ideals of republicanism. When everybody's contributing, there's this unity of purpose. We have a common enemy. We have this common threat that we've all got to chip in, and there's a sense of shared sacrifice, and everybody's working towards a common goal, and everybody's got to be everybody's got to be on their A game. Everybody's got to be contributing.   [00:20:17.980] Everybody's got to be giving the best in order for the society to thrive and the civilization to flourish. And suddenly all that's taken away, right? And so suddenly it's just a sense of wealth and decadence and do whatever you want, and it doesn't matter, and it's all fine, and we're rich and we're wealthy and we're Romans and everything's great. And this is really where the decline starts to set in. It takes a very long time, but this is where the decline really starts.   [00:20:45.320] And there were contemporary writers at the time who who did actually they wrote about this extensively. There was a Roman historian. His name was Titus Livius. He's known as as Livi. He lived about 100 years after the burning and the destruction of Carthage.   [00:21:00.860] He lived during the time he was he was a teenager when Julius Caesar was assassinated. He was an adult when Augustus became emperor, who's actually quite close with Augustus, with the emperor, the first emperor of Rome. And Livi wrote constantly about the degeneration of society, the loosening of social values and morals. He wrote about, quote, the gradual relaxation of discipline. He wrote about morals that, quote, sank lower and lower.   [00:21:26.650] He wrote about the downward plunge and complained about everything from excessive sexual license infidelity people turning away from their gods and all these things. Even that just changed fashion, hairstyles, excessive jewelry and makeup. There was a great deal of narcissism people dressing up, showing off wealth, wanting to make sure everybody else could see how great their life was. You could just imagine what it would have been like if the ancient Romans had had instagram. I mean, it would have basically been honestly very similar to a lot of things that we see today.   [00:22:01.800] This constant showiness which was honestly really different than the old traditional conservative values that the Republic of Rome had been founded on, where everybody's working hard. It's not about you. It's not about, oh, look at me, I'm so great. Look, it's about all of us. It's about the republic as a whole, and all of us benefiting all of us.   [00:22:24.530] And this is just a major, major shift in values. And there are a lot of people, including Livi, including even the emperor himself, that realized this. Augustus, actually, as emperor, tried to sort of decree his way back to Roman morality. He passed all these laws and said, well, women can't wear as much jewelry anymore, and all these sorts of sumptuary laws and so forth, but it didn't really matter. Social values continued to shift, and all these things continued, honestly, for hundreds of years.   [00:22:53.140] And we're sort of encapsulating centuries and center. We start off in the eight hundreds BC. Now we're talking about what is famously known in Roman history, is the crisis of the third century. This is the third century. Eighty s of the two hundreds.   [00:23:09.050] There was a writer who was one of the first real Christian writers. Now, Christianity is about 200 years old at this point, and there was a guy still wasn't the official religion of Rome. Christians had been persecuted in Rome, so it was kind of a dangerous time to be a Christian. There was a guy, his name was Saint Cyprian. He became a saint later on, and he was a bishop who actually was, ironically, from Carthage.   [00:23:31.690] And so maybe he had a little bit of an axe to grind and maybe didn't quite like Rome as much, but he was Carthaginian. He was actually a Berber descent, and he was a bishop. Writing in the third century Ad. In the third century. This is known as the crisis of the third century in Rome, where everything just went down.   [00:23:50.220] It was a terrible, terrible time. They had inflation and they had rebellions and civil war and famines and all sorts. It was a terrible, terrible time. I mean, if you compare it to that fat and happy period after the fall of Carthage excuse me. In the first century BC.   [00:24:07.230] And in the first century Ad. By the time you get to the third century Ad. Rome is a horrible place to be. It's a terrible, terrible place to be. And St.   [00:24:15.730] Cyprian, he writes, quote, there is a decrease in deficiency of farmers in the field, of sailors on the sea, of soldiers in the barracks, of honesty in the marketplace, of justice in the court of concord, in friendship, of skill, in technique, of strictness and morals. So he's basically summing up what he sees as here's what's going on. Right? And everything that he can see in Rome, whether it's people doing business with each other in the marketplace instead of honest people doing business with each other in good faith. Obviously, everybody's trying to make money but doing business with each other in good faith.   [00:24:51.840] Everybody's just ripping each other off. Everybody's lying and stealing and ripping each other off. Instead of actual justice in the court, there's no rule of law. It's bribery and corruption instead of skill and technique. People really giving it their all and working hard.   [00:25:04.660] There's no more work ethic. Nobody cares. People just they want to be lazy. They want to sit on the on the dole anymore. And this is actually something that happened very famously in Rome.   [00:25:15.100] I mean, so many things that happen, including people just coming in from the countryside, realizing that, well, hey, that you know, this is in the early first century. People realize, well, you know, there's so much money, and the and the government starts handing out free bread and circuses and all these things, but, well, who who wants to go and work hard in the fields when they're going to give me free money? They're going to give me free food if I move into the capital city? And so what happens? Well, jeez, what a surprise.   [00:25:40.030] Suddenly there's no more labor, you know, working in the you know, working in the fields, no more people working on the farms. So you have a decline in production, all these things. And this is essentially what St. Cyprian was summing up when he said, no more skill and technique, there's no more justice in the courts. There's no more honesty in the marketplace.   [00:25:55.880] And he basically sums up what's happening in Rome and how far they had fallen. Again, this is a common theme in history. We've seen over time, numerous societies that their civilization saw significant decline after they sort of reached this peak wealth stage. They got to their fat and happy stage. They have no more mortal enemy.   [00:26:14.830] Everything's great. They're the dominant superpower. They're the dominant economy. They're wealthy. They don't have to work too hard because basically, they're just cashing checks from all the work that the previous generations put into it.   [00:26:27.280] The previous generations came in and they built this civilization, and then you got newer generations to come in and just reap all the benefits, but without making the investments to keep it going. The analogy is sort of like Venezuelan oil fields, right? You've got one of the wealthiest I mean. Really, there's more oil reserves in Venezuela than anywhere else in the world, way more than Saudi Arabia. And you've got people that came in decades ago and did the hard work to make the investments and the exploration and so forth in that.   [00:26:56.950] And then what's happened? Over time, you've got these governments that have come in and just sucked all the oil wealth out. They've taken all that oil revenue and they just dumped it on socialist programs, basically, instead of reinvesting back into the infrastructure, back into the exploration, back into the equipment and everything to keep that wealth going. No, instead they just cashed in. They just took all that money and they spent it on stuff that would keep them in powers.   [00:27:22.630] This is a common theme in history. Life becomes too easy. The wealth makes life too easy. The lack of competition, generations that fail to pass on and instill the values to the new generations. There's no more unity of purpose.   [00:27:35.240] You've got social strife because now, because you don't have that mortal enemy, you don't have the problems, you don't have to worry about, how am I going to put food on the table? How are we going to feed this civilization? How are we going to deal with these? How are we going to get water from the desert? How are we going to all these things?   [00:27:49.750] You don't have to worry about that anymore. And so basically, people start creating new problems. They start whining and complaining about every the last little thing because they don't have the same problems that they used to have. Now I got to kind of pause and say that there's often in a study of history and anthropology, people talk about a decline in morals. And I mentioned this a little bit when I was talking about, for example, some things that Livi used to write about, and he was far from alone and we didn't even see this in more recent works.   [00:28:20.350] I'd say more recent compared to we're talking about thousands of years. But Edward Gibbon, who wrote quite famously, the decline in fall of the Roman Empire, this goes back to the late 17 hundreds, but obviously it's more recent than Livy, and he wrote extensively about Roman moral decay. In fact, Gibbon sort of points to Roman moral decay as one of the critical reasons for the decline of the Roman Empire. Now, it's easy to say that. It's easy to go, oh, the morals declined, et cetera.   [00:28:47.540] But if you really look at it from a position of intellectual honesty, it's hard to put too much stock into that because across a culture, ethical standards do change over time. And this is normal. And it's not to say that one's better or worse. It's easy for us to judge and say, oh, that shift in morals was bad or good or whatever it was. But let's be honest, I mean, there have been a lot of things in Western civilization that have changed over time.   [00:29:14.360] Things that used to be completely fine, culturally, ethically fine, and today are absolutely appalling. There was a time that there's an entire scientific field where experts got together, they called it phrenology. And they used to they used to take measurements of people's cranium and and and the distance of the the ratio of the width of their forehead to the width of their nose and make certain prognostications about somebody's value as a human being. This was an actual field of science. And from a moral perspective, yeah, that's totally fine.   [00:29:46.480] There was a time that children as young as nine, five, six were getting married. There's nothing for a couple of eleven and twelve year old kids to be married today. That would be again, absolutely appalling. And so all these things do tend to change over time. So I tend to look at more, aside from morality, the more objective indications about social decline.   [00:30:08.940] And we can see this obviously in Rome very easily. We can see for example, the decline in unity. They used to have unity of purpose. They had a common enemy, a mortal threat, an existential threat to their own civilization. I mean, Hannibal was danger close to wiping Rome off the map.   [00:30:27.050] I mean, if that doesn't unite people and it kept them united for a very long time until finally said, we're going to get rid of these people once and for all. And they destroyed Carthage, burned it to the ground and from there we saw a decline in unity before they sacked Carthage and burned it to the ground. Revolts and civil wars and all these things in Rome were almost nonexistent really. Almost nonexistent. And then afterwards it became commonplace.   [00:30:54.140] It happened all the time. People were always people constantly whining, complaining about stuff and sometimes that ended up as armed rebellion or riots or revolutions, civil wars along the way. There were always politicians who were ready to capitalize on that. They went and they tapped into that. People that were complaining about stuff, people that were angry about stuff.   [00:31:15.850] There's always some politician ready to stoke those flames of rage just basically to get elected and hold on to power. There was also a decline in a willingness to serve. And with Rome, obviously we can see that most easily with the legionnaires that originally were units of very high morale, highly trained citizens who it was considered an honor to serve, it was considered a very noble profession. And then later on, obviously the legionnaires, they had to be bribed into service, they had to be attracted by the power and the money and so forth, rather than the actual service itself. And of course, late in the empire you couldn't even find a Roman.   [00:31:55.290] All the legionnaires, they were paid mercenaries. They were just giving out citizenship to everybody because they just couldn't find anybody to do it. And again, I already mentioned the decline in the work ethic. They had after the fall of Carthage in the final defeat of the Carthaginians, they had so much red there. Rome was swimming in money.   [00:32:11.930] They had so much money. It led to the Dole, where they could just say, oh, here everybody, come have free bread, have free games, circuses, gladiator events, all these things. And it pushed more and more people to say, hey, that sounds great. I'm not going to work in the field. That's for suckers.   [00:32:27.400] I'm going to move to the city where I can get all this free stuff. And so it pushed people to move from the countryside into the city, and what a surprise. Again, it resulted in severe labor shortages because the government is just essentially, basically paying people to not work, right? So we're leading to severe labor shortages in critical industries, productions declining, all that, because who wouldn't want to who wouldn't want to get free bread and gladiator games and circuses and all that stuff rather than working out in the field? And so all this basically points to these are all just small examples of decay.   [00:32:58.380] I mean, there have been literally volumes and volumes and volumes of books written on the decline and fall of the Roman Empire. We're certainly not going to deal with it all right here, right now, today. We all know that there was a decline. It's hard to say really, exactly here's the date that it started, but we all know that there was decline. We all know.   [00:33:16.480] It's obvious. There is a clear social decay. We can see these issues about lack of unity, lack of work ethic, lack of service, all of these things. And it happened to also coincide with a very lengthy period of time where everything was great peace, prosperity, leading to the PAX Romana in the first century Ad. With Augustus.   [00:33:34.670] And again, it's not a one way street. There were plenty of things got better, things got worse, things got better, things got worse. Augustus came in, he tried to implement certain rules, certain changes, get their house in order, et cetera, but the trend was starting to go in a very, very clear direction, and that was social decay, and that led to a lot of problems. Now, there's a 20th century historian guy, you might have heard the name, his name was Arnold Toynbee. He wrote a book.   [00:34:05.550] Probably his biggest work was called the Study of History. It's it's quite an interesting word. It's controversial for some of the things that he, that he wrote, things that were acceptable to say in the 19, you know, early 19 hundreds that, you know, you just wouldn't say today. And a lot of things, obviously, that have been just totally debunked is silly. But one of the things that Toynbee wrote, there's actually a very interesting idea, is something that he called the Challenge and Response Effect, or challenge and response theory.   [00:34:32.000] And the idea behind the challenge and Response effect is that if a civilization experiences challenges that are simply too great, it's just not going to survive. A civilization in the harshest conditions. The desert is too barren, the tundra is too frozen, the challenge is simply too great. It's just not going to survive. And that makes sense, right?   [00:34:54.100] But similarly, and this is the interesting point is that if a civilization is too successful, if it goes unchallenged, a society often falls into this excessive decadence period. It reduces unity, reduces productivity, reduces efficiency, reduces service. And because of that, they essentially get to that fat and happy lazy stage where they suddenly lose the skills to be able to deal with challenges. There's a certain sweet spot in the middle where as a society, you still have the eye of the tiger. You still have a little bit of hunger to grow and produce and earn and become better.   [00:35:35.280] And because of that, you have the ability still to deal with challenges. But eventually you get so consumed with your own wealth, the decadence and so forth, that you lose the ability to actually meet challenges head on. You just sort of assume that, well, we're so great. We're going to be able to deal with whatever comes. It doesn't even matter.   [00:35:52.450] We're not even going to think about it. There's another anthropologist, a guy named Joseph Tainter, wrote a really wonderful book back in the late 80s called The Collapse of Complex Civilizations. Tainter is a very great thinker, and he borrowed a concept from economics known as diminishing returns. The idea behind diminishing returns in economics is that eventually, as you kind of say, you invest more and more and more into something. Well, eventually the return that you get from that, every new dollar that you invest, you're going to get less and less and less out of it.   [00:36:26.380] And if you think about that from a cultural, governance, social perspective, the idea is that as new challenges arise, a wealthy, decadent, successful society just says, we're, we're so rich, we're just going to keep throwing money at this problem. We're going to keep throwing more and more resources at this problem because we have so much money and we have so much, so many resources, we're just going to keep throwing money at this problem. But there's no efficiency left in it, right? Because nobody's paying attention. Nobody really cares.   [00:36:55.800] They lost the ability to focus. They lost the ability to intelligently and rationally solve problems. And so the more and more money they throw at it, they get less and less return on that money they're throwing at the problem. In order to solve problems, they balloon the size of government because they can afford to do so. But then making the government bigger, creating this vast bureaucracy, it doesn't actually solve the problem.   [00:37:17.290] So then they go and solve the other problem by say, oh, now we need to make government even bigger and bigger and bigger. And so this is the concept really, of diminishing returns is that the more they try and solve the problem, the more effort and resources they put into it, the less solution, really they get out of it. And in a way, it also represents diminishing returns when you reach that point. It also represents a fundamental shift away from the values on which the society was founded. And again, this is normal.   [00:37:48.240] We could see it everywhere. We can see it in, you know, even perhaps in our personal lives. We can see it in business. You know, there's a certain set of values, for example, for a startup, that once they become this huge multibillion dollar enterprise, they turn into this big, giant bureaucracy, right? And so these are the sorts of things that do happen, and it happens in societies and governance as well.   [00:38:08.500] But Rome obviously became its most successful era, became successful. All the stuff that it needed to be successful and be wealthy happened and was built during its Republican era, right? And then it was only after the Republican era, they invanquished Carthage, they built all this wealth, and then all of a sudden they say, oh, then they became an empire, and they built this huge bureaucracy. And it was the corruption and the decline of the rule of law and the decline in social cohesion and all these things. And obviously, at that point, they had reached a point of diminishing returns where now they go, oh, jeez, we got real problems now.   [00:38:42.730] We got to just keep throwing money at it. Let's keep expanding the size of government, let's keep expanding the bureaucracy. But they're not actually getting anything out of all of that. They're not actually solving any problems. They'd reached a point where they were simply incapable of rising to the challenge and fixing their problems.   [00:38:58.170] So I think it's you can probably tell where I'm going with this. I think it's pretty obvious that the west is becoming this way. And look, it's easy if we're talking about moral decay, again, I don't put a lot of stock on that. It's easy to use some of those words. It's easy to say moral decay or soft and weak and all these sorts of things.   [00:39:16.290] And to be honest, I think everybody probably has. We see stuff on a regular basis. You look just casual glance at the headlines, and you can just see stuff that goes, oh, my God. It just makes you scratch your head, shake your head, and go, just for real, just personally, I saw one just the other day I saw in the Wall Street Journal, we see, we already know. I mean, for example, just record high childhood obesity rates.   [00:39:44.090] The CDC's numbers say the average, you know, among children's, 20% of children are obese, and then another 20 some odd percent above that are overweight. And now the American Academy of Pediatrics is recommending quite an aggressive stance, an aggressive protocol to start medicating overweight children. So basically, if children are overweight, if children are obese, even on the way to being obese, they say, Give them a pill. Start giving this medication. And I'm thinking, well, that just doesn't sum up the US healthcare system.   [00:40:20.260] God forbid we say, well, let's actually just encourage healthy eating and go out and get some freaking exercise. No, instead, let's take a pill. Let's take a pill. Let's pump them full of drugs. And I mean all this like, well, what a surprise.   [00:40:33.600] Again, you have a whole generation of kids, we told, stay home, cower in fear. There's a virus on the loose. Don't go outside. Don't play with your friends. Don't do any of these things because there's a virus.   [00:40:43.560] Now you got a bunch of fat kids, and what's the solution? Give them drugs, give them a pill. This is a real thing. And you got to look at them and go, are you serious? Talk about a crazy departure of values.   [00:40:58.910] Would this have been the case decades ago? No way. Would this have been the case decades ago? But this is what it is now. And of course, it just doesn't end.   [00:41:08.870] I mean, everybody's got their own anecdotes. Again, the things that make you shake your head, but we've got to be intellectually honest and separate ourselves from that and say, all right, let's divorce ourselves, and saying it's weak and it's soft and all of that, because you always got to say, relative to what? If it's relative to our own past experiences. Again, this is always a funny one because it's almost like every new generation is considered weak and soft by the previous generations. I went to West Point, the military academy in the United States, and it was always kind of a joke is that every new class that comes in, when you're the freshman class, they call you plebes.   [00:41:45.720] It actually is derived from the Roman term plebian, which is what they call their peasant class in ancient Rome. And so this made its way to the military academy in the US. And so the freshman class comes in, they're called the pleebs because you're nothing. You're just nothing, and you're lower than ponds gum. And everybody always complains to go, oh, you have it so easy compared to how I had it.   [00:42:05.770] But again, when those guys were plebes, their upper class were complaining that you had it so easy. And basically every successive class is always thinking that they had it harder than everybody else, and the new guys coming in have it easier than everybody else, and it's all rather silly. And we can kind of point to certain things, go, oh, this generation is weak. But previous generations probably thought the same of our generation. And in fact, if we think about even the generation that's literally called the greatest generation was seen as soft and weak.   [00:42:35.080] The greatest generation. These are people that came of age during the Great Depression I mean, they had horrible economic circumstances. They had to go to war against the Nazis, then go back and rebuild the entire country. I mean, this is why they're called the Greatest generation. They were considered, as they were coming up as children in the 1930s, 1920s, 1930s.   [00:42:54.570] They were considered soft and weak, and everybody thought, oh my God, they're going to ruin the world. And they ended up doing pretty okay. So we have to divorce ourselves from the headlines and the anecdotes and the things that we see, and I think really focus on a little bit more objective data. But let's be honest, there's a lot of that as well. And I think some of the objective data that we can see if we think about through the lens of history and some of the things that I just explained about Rome and where they were at after the destruction of Carthage and the fat and happy and lazy stage where they were at.   [00:43:29.170] And we could see they had problems with recruiting, they had problems with labor shortages, they had problems with work ethic, they had problems with all these things. We go. Well, Jeez, today us. Military recruiting is invisible. It's horrible.   [00:43:39.260] It's basically as bad, if not worse than it was in the Vietnam post Vietnam era, where nobody wanted to be in the military, and people would go and spit on soldiers, said, you're a baby killer, and all these things. I mean, nobody wanted to be in the military. And this is basically where things are right now. And you got a huge percentage of the potential population of people who might be able to serve, not even fit for service, again, because they're obese. This childhood obesity is such a problem.   [00:44:06.100] It's actually taking people out of the potential to even serve the military, even if they want to. But of course, most people don't. And this is pretty alarming considering this is also the time that the Defense Department is pulling out all the stops. I mean, they are rolling out the red carpet. They're saying, we'll pay for college.   [00:44:23.510] They raised everybody's pay. So now you're talking about you could be a 19 year old spec four in the army making good money, good money, and have all of your college paid for and get like $40,000 in bonus money upfront to serve for a couple of years. And even then, they still can't get people to sign up because it's just obviously nobody wants to serve. And that's a problem that the Defense Department has really never actually been confronted with. They had pretty bad recruiting again, like in the early 80s, but they didn't have to bribe everybody with pull out all the stops to bribe everybody to do it.   [00:45:05.410] This is the point. They are bribing everybody and saying, please come and join the military. And they're going out on social media, they're developing video games and all this stuff, trying to go after these younger generations and they just can't get anybody to serve. We've also got similar to what we're talking about with Rome again through that lens, labor shortages in critical industries. Nobody wants to be a truck driver.   [00:45:27.170] Nobody wants to be a forklift operator. Nobody wants to be a farmer. People want to be twitch gamers. They want to post selfies of them sitting in a bikini by some body of water somewhere with some pithy idiotic one liner just showed that they're like philosophical or something like that. It's just so silly.   [00:45:47.250] And on top of that, you've got these terms now that are sort of made their way around corporate America and HR circles. These things like quiet quitting, for example. Quiet quitting, if you haven't heard that term, basically refers to somebody saying, I'm going to do the bare minimum that's just going to make sure I don't get fired. I'm not going to try, I'm not going to do anything above and beyond what's going to make sure that I don't get fired in my job. And I mean you talk about just a clear and distinct lack of motivation, lack of productivity, lack of efficiency, and this is this major movement that younger people are just saying, yeah, this is what we want to do.   [00:46:24.990] And I'll have something to say about that a little bit later because a lot of people go, I don't get paid to do this and say, well hold your horses, let's talk about that for a minute because I have a different perspective. But all this kind of takes me back to and I've quoted this a couple of times john Adams, the second president, the United States at what point in a letter to his wife Abigail. And I'm just paraphrasing here but he wrote, I must study politics and war so that my sons may study science and mathematics so that their sons have the liberty to study art and literature. And of course now we've taken that too so that their great great grandchildren can major in gender studies, rack up $100,000 in student debt only to have it forgiven by the federal government, live in your parent's basement and play video games on Twitch. That's pretty much where things have gone to and you sort of look back and go, well, there were a lot of sacrifices and investments and hard work that was made by previous generations that have come.   [00:47:19.890] And you're in a position where as the dominant superpower, you're not really reinvesting in that the dominant superpower, the society is really just sort of reaping the benefits of all that hard work and eventually that's a finite amount of value that you can extract from your tradition and eventually you just run out. We can see these as well in legislative and policy priorities. We see, oh, let's decriminalize shoplifting in California. Let's go into these catch and release, no bail. Let's take some violent criminal and just turn them right back out on the street because what could possibly go wrong?   [00:47:58.700] Let's cower in fear from a virus and shut down the economy and pay people to not work, and let's just turn a blind eye to a border where anybody can walk across and go live under a bridge in San Antonio. Meanwhile, unvaccinated foreigners cannot legally enter the United States because they're terrible people, but everybody else can come in illegally, and that's totally fine. Universal basic income is like a real thing, and it has a lot of legs where we just again, let's pay people to not work and just do whatever they want in life and just enjoy life and have free money. But even despite all of that, and that's just a tiny snapshot of real things that are indicative of trends that are unfolding, I think that the one that's the most concerning is the disunity. The lack of unity is so concerning.   [00:48:48.980] And we can see this again. Objective data trust is at such lows that even congress nobody's ever liked congress, and presidential approval ratings ebb and flow. But even in once esteemed and venerated institutions like the supreme court used to be, people said, oh, I hate congress, but I still have confidence in the supreme court. I still trust the department of justice. I still have confidence in the military.   [00:49:12.570] Even these once esteemed institutions have seen their trust levels plummet, and that's a big concern. Corporations, big tech, the government itself, the united nations, the media, et cetera. I mean, all this stuff. People just don't have trust and confidence in their institutions. This is a big deal.   [00:49:30.790] We can also see the social divisions that are just palpable. I mean, you can feel it, whether it's online, it's in the streets, it's the fistfights at the airport. I mean, people just something goes wrong and people become unglued. This snafu with the airline technology system, which, what a surprise, it's crappy technology. They're using outdated technology and these airlines and causing all these delays and cancellations, and people went nuts, went nuts.   [00:50:00.280] And we've just seen this. It's become commonplace. People just getting in brawls at an airport terminal, on an airplane itself. It's just these sorts of things. You go, this is not a cohesive society.   [00:50:12.510] And all along the way, you've got these politicians that stand ready to capitalize on the divisions rather than say, whoa, chill out, everybody, come on, this is silly. Let's not do this. Let's be grown ups. Let's talk about our differences. No, they stand ready to capitalize, continue to widen those lines, to widen those chasms.   [00:50:32.750] You notice when they talk, everything's always a fight. Everything's always a fight. We have to fight for this. We're going to fight for that. We're going to discuss this.   [00:50:41.470] We're going to compromise. We're going to respectfully listen to people's opinions, and we're going to come up with a sensible solution that we think works for everybody, that's in the best interest of the nation. It's never that. It's always, we're going to fight and we're going to capitalize on these divisions and so forth. And honestly, it is disgusting.   [00:50:57.670] It is so disgusting to see. But again, there is plenty of historical precedent for this. This is nothing new.   [00:51:09.030] Again, predictions are hard, especially about the future. But I think from what I see from a historical perspective, we may potentially be past the point where it's possible it can be healed. It's just a question over what period of time. I say that objectively. I'm not betting on it.   [00:51:28.270] I'm not certainly advocating for it. It's not what I prefer. I prefer a completely different scenario where people are happy and a lot more unified and people get along and can actually discuss things rationally. But COVID was a prime example. Maybe I'll start from the historical perspective.   [00:51:46.670] It got to the point in Rome where the disunity, again, was so palpable that when the barbarians invaded, they were greeted as liberated if people were happy, said, thank God the barbarians are here so they can deliver us from these idiots who are governing us. I'm not saying we're there yet, but I'm saying that historically, there's a lot of precedent for that. And I think COVID was a very interesting example because usually it's the time of crisis that does tend to unify, because now suddenly you have this common enemy and you have this thing that everybody's dealing with and suffering with, and everybody's got to chip in and share, and you set aside your differences in times like that. And COVID in theory should have been that, but it wasn't. And we won't even get into the ridiculousness of a lot of the decisions that were made and the policies, et cetera.   [00:52:33.880] But the point is that from a social perspective, there was an opportunity there to for unity to really form, and it wasn't. And maybe there's something else down the road that creates unity. But honestly, at that point, you're you're talking about a catastrophe that nobody would probably want. And so it's really a double edged sword. You have this disunity that needs a catalyst in order to heal.   [00:52:58.530] But the thing the catalyst that would heal it would probably be some major catastrophe that nobody actually wants. So it's not really a great outcome either way if you think about it from that perspective. If we go back to Toynbee and we think about all of this from, let's say we view it through the challenge and response lens, right? This all demonstrates this social dysfunction, the anger, the tirades, the politicians that are focused on, I got to tap into this chaos to get myself reelected. I got to tap into it and even strengthen, widen these social divisions because that's going to keep me in power, I'm going to get my agenda passed.   [00:53:37.250] We think about this from a challenge and response effect. It all just demonstrates a complete inability to. Be able to rise to the challenges and rationally solve problems because there is no rational problem solving. Not only is there no rational problem solving, there's no rational discussion. Somebody brings up says, I don't think we should be sending $50 billion to Ukraine without any oversight whatsoever.   [00:53:57.750] That person is shut down as a Putin lover. There are so many examples of this, you can't even have a discussion, let alone a solution. And it's funny because Toynbee wrote about this. Toybe wrote that it was a clear indication that a civilization has essentially broken down beyond all repair. And the sign is when it's the independent thinkers, the value creators, the problem solvers are silenced and marginalized by a dominant minority.   [00:54:28.320] And of course, we've seen this so many times. As one tiny example, this just happened. I bring this up because it happened a couple of days ago. There was a congressman who went on MSNBC. Obviously, MSNBC is incredibly left leaning, and he just was of the wrong ideology to go on MSNBC.   [00:54:48.690] And he said that Social Security is going to run out of money within the next decade, which is 100% true. Statement. How do we know it's true? Because the Treasury Secretary of the United States says so. The Secretary of Health and Human Services, the Secretary of labor, all these people sign their name to an annual report that says that Social Security is going to run out of money.   [00:55:09.650] The trust funds will be fully depleted basically within a decade. And it's a little bit of a moving target. Their projections change a little bit from year to year, but we're talking about pretty much a decade, maybe eight years, maybe eleven or twelve years. But somewhere in there, around a decade, Social Security is going to run out of money. And they're telling you you could pretty much circle this date on your calendar.   [00:55:30.230] And he just repeats this and says, Social Security is going to run on money. The trust funds are going to be fully depleted. The host of the show cuts him off and just this guy's trying to talk, and she just cuts him off and talks over. And so that's not true. That's not true.   [00:55:43.460] That's not true. That's not true. It is true. It is true. It's 100% true.   [00:55:49.380] It's just it's literally something that the Treasury Secretary of the United States signs her name to, puts in a written report that anybody can read. Anybody could read. This is not a conspiracy theory. It's 100% true. It's not even a political issue.   [00:56:04.500] It's an arithmetic problem. And they just put it out there for everybody to see. She said that's not true. That's not true. And so this is somebody that's just literally trying to raise a problem, trying to identify a problem for discussion, is being silenced, let alone talk about a solution, let alone actually implement a solution.   [00:56:21.250] You can't even talk about a problem without getting silenced. And again, we've seen that is one tiny example. We've seen censorship cancel culture, all this stuff. And again, it's just an indication of the inability to solve problems. We talked about these.   [00:56:41.020] I've kind of cast all of these something from a big picture I call The Forces of Decline and I say there's four forces of decline. This isn't in some anthropology book. This is just my own view on things. The way I categorize them. And I call one is the Forces of energy.   [00:56:58.950] I did a whole podcast about this where we talk about the energy return on energy invested is declining. Basically, we're not getting enough. We used to have where we would, whether drill for oil or gas or whatever, we would have to put in just a little bit of energy to get a whole lot of oil out of the ground. And that oil could provide so much energy for us. Now we've got to invest a lot of energy to get a little bit of energy out.   [00:57:21.740] And so that math, that calculus just totally upside down. It's the wrong trend. And that's actually a major force in future inflation and all sorts of things. Prosperity, you have human prosperity. Where you have cheap, inexpensive energy.   [00:57:36.070] Where you have expensive energy, you have problems. And our energy is getting more expensive. So forces of energy is a major force in decline. We also have forces of economy, debts, deficits, inflation, money printing, all these things. We talk about these things regularly.   [00:57:49.440] We also have forces of society. This is where a society eats itself from within the decay, the disunity, all these things that I've been talking about today, as well as forces of I just call them forces of history. These are the inevitable, the inevitable cyclicality, the rise, the peak, the declines of societies, of civilizations, of empires, of economies, financial markets. So many things are cyclical. We go through seasons, we go through cycles.   [00:58:17.730] And what we're really talking about today is mostly, again, forces of society, some forces of history. There's some cyclicality to this. But really talk about forces of society, again, leading to an inability to solve problems. This is not anything that anybody can really do about you. And I can't go out and suddenly get hundreds of millions of people to just chill out and say, dude, just relax.   [00:58:40.770] Let's have a rational conversation about things. And I could see some things your way and you could see some things my way. And we clearly have a problem. Let's identify we have a problem. Let's at least agree we have a problem.   [00:58:50.430] Let's talk about solutions, et cetera. But you can't really do that. Nobody can really do that. And honestly, it'll probably take decades, years at least, if not decades, to really repair and restore the trust and confidence and reinstall certain social values. Again, it's not even about morality.   [00:59:16.760] I'm not even talking about morality here. Again, I ignore that entirely. People do what they do. I don't care. It's really about some of these basic things about is there rule of law, is there the work ethic, all these things.   [00:59:28.140] You just go back to certain tradition and go, well, you don't have to be a genius to see like, well, what made the country, the society, the civilization wealthy and prosperous to begin with? Well, let's go back to that. Let's do that where people, you know, people worked hard and there wasn't a giant bloated government bureaucracy. Again, I know there's a lot of I mean, to be honest, most people probably do work really, really hard. Labor, however, is an economic resource and the more of it you have, the better off your economy is going to be.   [00:59:58.990] And when government policy is paying people to stay home and you've got a large movement of people that doesn't actually want to be in the workforce and so forth, that's going to create economic problems. Even though there are if 90% of everybody else is working their asses off and 10% of the people are being dragged along, that's going to create problems. And that's kind of where things are right now. But all of this does create really interesting and unique opportunity. This is really what I want to leave you with today.   [01:00:27.370] And I told you earlier and I talked about quiet quitting and I said I'm going to come back to this. And this is something I think that's worth mentioning. Again, the concept of quiet quitting is it's this growing movement where people say, I'm going to do the bare minimum because I don't want to do this and I'm going to do the bare minimum, make sure I don't get fired. People say things like, well, they want me to work more, they want me to work harder, but they don't pay me enough for that. They don't pay me to do this and that.   [01:00:52.370] And that may actually very well be a valid argument. Everybody's got individual circumstances and people might be in a job that they hate for a boss that they despise and get terrible pay and all these things. And sure, everybody's got to make a decision about that. But jobs are kind of interesting in that you do actually get paid in multiple ways. There's normal compensation, salary, benefits, et cetera.   [01:01:14.800] Maybe healthcare or not. You get the social benefits. You got people that you like at work and friendships that you develop and other relationships. But one of the most important things I think that's often discounted, especially among younger people, is you get paid in the learning and the knowledge and the experience. Because when you come out of school, especially even after university, you spent four years learning whatever, and then it's like you get on the job and you got to relearn everything from scratch.   [01:01:40.920] And this is really where some of the most valuable skills you learn really important things. You learn sales, you learn marketing, you learn finance, you learn whatever it is. You learn whatever a valuable skill. You learn welding, you learn how to be an electrician, you learn all these different things, really, really valuable skills. These are really valuable skills and you learn that stuff and it's interesting is because now you're getting paid to learn versus people go to people go to university and they'll go and spend they'll go and take on $100,000 in debt to end up learning almost nothing.   [01:02:12.200] And now you get a job where you're getting paid to learn something that's actually valuable. And so that dynamic, I think, is something that is really, really interesting. Now, some people might not be in a job where they're learning anything which is terrible, in which case you should absolutely consider your options and go find something where you can learn as much as you possibly can because that knowledge is so important. I've often said, and this is almost a cliche, the best investment you can ever make is the investment you make in yourself. And the way that you spend your time is so critical.   [01:02:46.600] And if you have a job, you're spending whatever 8 hours a day or more on whatever work you're doing, it should really be worth it. And you should be learning that's an investment in your time, you should be getting a significant, not diminishing returns. You should really be getting growing ample returns on that investment in your time. And if you're not, then sure, go find something else. Don't quiet quit.   [01:03:08.470] Just quit. Just quit. Don't beat around the bush, don't mess around. Just go quit and go find something that's actually going to do really well for your growth and your experience. We can learn the skills that are necessary to actually do better, to do more, or to go out and start your own damn company and do a better job than the other guys because you've learned how to do that now.   [01:03:27.720] And now your earning potential is so significant but because you actually made a conscious decision to go out and spend your time learning instead of this quiet quitting, what is that quiet quitting. You're basically making a conscious decision to go and take a third of your life and just set it on fire for an amount of pay that you even acknowledge isn't even that great. That's a horrible decision. That's a terrible, terrible, terrible decision. It pains me that this is actually becoming a popular thing among an entire generation to go, I don't quiet quitting.   [01:03:58.630] It's a terrible idea. If you're not happy with what you're doing, then stop. Life is too short. Don't mess around with it and go find something else where you can actually learn and become a better human being and use that as a springboard to set your life in the direction that you actually want to go. Instead of just being a passenger and going, well, this sucks, but I'm just going to keep doing it and spend 8 hours, a third of my life doing something that I don't like.   [01:04:20.840] It's terrible. And the larger thing behind all of this and all this is that all these things that we're talking about, you can't go and change any of these things, right? But certainly a strong work ethic is a personal choice. How we choose to spend our time, that's a personal choice. The way we invest our money, that's a personal choice in all of this because there are these problems, there are huge problems to solve.   [01:04:43.300] And again, we see labor shortages and supply chain dysfunction, all these things. It's clear and obvious, enormous problems that need to be solved. And because now there are shortages, it means that hardworking people, talented entrepreneurs, the investors who fund them have a ton of opportunity because there's very little competition. There's very little competition. If you think about, there's less competition now for hard work, for somebody that actually is willing to work hard, there's a whole lot less competition out there than there has been in decades.   [01:05:16.150] And that actually creates a lot of opportunity. It opens a lot of doors that weren't open before. If you want to start a business, there's a lot of doors that are open that weren't there before because there are so many problems and so many people go, I'm just not really going to do anything. I'm going to quiet quit instead of go out and start a business to tackle this problem. And, and it's, it's, this is, I think, a point to really look at because you can't, you cannot solve, you know, the nation's problems.   [01:05:42.240] Nobody's going to be able to go out and get hundreds of millions of people in the US. And look, these problems are similar in the UK and all places all over Europe. I mean, this is not something that is particular to any single country. These are things that are happening all over the world and nobody you can't go and just change the entire culture of your country and certainly not do it overnight, but you can absolutely make personal decisions and really just turn it upside down and realize this means that there are a lot of opportunities because there are fewer people that are willing to do the hard work. There are few people that are willing to go after these opportunities and solve these problems.   [01:06:16.810] And you know, it's, it means it's wide open. These opportunities are wide open. There is a ton of opportunity. Again, whether it's just somebody that's an employee that's just willing to work hard, there's a lot of opportunity for entrepreneurs that are willing to go and solve those problems. There are opportunities, again, investors who want to fund them, there's opportunities and I think that's really a better way to look at it.   [01:06:36.440] You can't solve these things. This train is long ago left the station. We can certainly hope for the best, but I think it's always, always, always critical to keep in mind the opportunities that are always in front of us. And there are a whole lot right now. Thanks very much for listening, and we'll speak to you again next week.   Close Podcast Transcription

By the turn of the 18th century, Great Britain was well on its way to becoming the dominant naval power of Europe. Brits had come to understand that a strong navy and merchant fleet were necessary to grow powerful and prosperous as a nation. And a mythology was already building around the Royal Navy. However all was not rainbows and buttercups. In 1796, the Royal Navy lost control of the Mediterranean. And in 1797, despite several victories, including repelling a French invasion of the British Isles, the navy also suffered two mutinies. And the threat of French invasion persisted. It was amid this backdrop that a young poet named Samuel Taylor Coleridge wrote The Rime of the Ancient Mariner. In it, a mariner is cursed to wander the earth telling his story about his grave error of killing an albatross which had led his ship out of icy, mist-shrouded seas. One of the most famous lines occurs as the ship is stuck in a silent and motionless sea, with stagnant air which refuses to fill the sails: “Water, water, every where, And all the boards did shrink; Water, water, every where, Nor any drop to drink.” The ship had drifted into what is known as the doldrums. This is the area between the distinct trade winds systems of the northern and southern hemispheres. Trade winds easily carry ships across the ocean; you can just sit back and let nature do the work. In the doldrums, conversely, the sea is silent and winds still. You can’t move forward, and you can’t go back. It’s not immediately dangerous, like a storm. But it is extremely dangerous to be stuck, with dwindling supplies, just waiting for a catalyst. (In Coleridge’s poem, the men were despondent, depressed, and constantly expecting disaster.) As we enter 2023, this is essentially the psychological condition of most of the world. In the US, for example, there’s no major cataclysm; the job market still seems to be fine, and inflation has ticked down ever so slightly. But everyone seems to be braced for something much worse to come; businesses have started to freeze hiring, and some are laying off workers. They are conserving cash, and not being very aggressive with innovation or investment. Economic activity has declined, as everyone holds their breath waiting for a recession. And these conditions can actually cause a recession, because it is expectation driven. This behavior is also driven by the endless chorus of “experts” predicting the future. Of course, no one can predict the future. And it is doubly absurd to take the word of “experts” who have been so extremely wrong about everything… For example, central banks and Treasury officials who failed to predict the dot-com bubble, sub-prime loan housing bust, 2008 Global Financial Crisis, sovereign debt crises, inflation, and supply chain problems… are among the leading voices making economic predictions for 2023. Does anyone actually still take these people seriously??? It’s more important than ever to decide for yourself how to react to the current conditions. This is the subject of today’s podcast— having the independence of mind to reject the experts and take back control, in light of the abundance of opportunity that truly exists today. You can listen to the podcast here. Download Transcription as PDF Open Podcast Transcription [00:00:01.370] Today we're going to go back in time to Sunday, March 30 in the year 1519. It was Easter Sunday, and on that day, a group of imperial emissaries from the Aztec empire arrived to what is today the modern day Mexico and the city of Veracruz on the Caribbean coast. And they arrived there. They traveled a great distance from their capital city of Tenochtan and arrived arrived to meet foreign visitors that had arrived. They'd heard that these foreigners were there and arrived to the shore.   [00:00:30.110] And of course, we know that the visitors were in fact Spanish invaders led by Ernan Cortez. Now the emissaries, the head emissary was a guy named tendel. He was relatively high ranking official in the Aztec imperial government. And the first approach to the emissaries was to greet the Spanish with kindness and generosity. They came bearing gifts.   [00:00:50.340] And according to the account, there was a Spanish soldier who was part of that mission. His name was Bernal Diaz de Castillo. And de Castillo's account that he wrote down later on was that the Aztecs arrived with fowl and mice cakes and plums, which happened to be in season at the time, baked fish, jewels. He said, quote, many articles of gold, beautifully and richly worked, ten loads of white cloth made of cotton and feathers. I mean, they really rolled out the red carpet for the Spaniards and they came with these lavish gifts.   [00:01:20.180] And the Spanish obviously took the gifts and were very grateful and thankful. And in exchange, Cortez gave them some beads. The Aztecs, you can imagine, got these beads. They just given them gold and jewels and food and all these fine cloths that they got some beads. And the Aztecs were probably these are diplomats, so they probably accept them gracefully and politely, but we're rather unimpressed.   [00:01:43.560] They said, jeez, we really roll out the red carpet for these guys. This is all they have to offer. Now, Ten Deal, again the head of the emissary, of the Aztec emissary, you also had with him scribes and painters and so forth. And their job was to catalog everything they saw. They obviously didn't have photographers at the time.   [00:02:01.210] They couldn't take pictures, but they had painters. And so the Aztec painters sat there and they set up their equipment and they drew, they painted images so that they could take back to the emperor and show the emperor, these are the people that are here. This is what they have. It wasn't art, it was military intelligence. And they were painting the ships and the armor and the weapons.   [00:02:24.840] And as Ten Deal was communicating back and forth with Cortez, you might be wondering, how do these people even communicate? It's not like Cortez would speak to navel or these people spoke Spanish. How they even communicate? It actually turned out to be a stroke of luck. The Spanish had been in the region for for quite some time.   [00:02:42.340] Obviously, we know Columbus sailed in 1492, the Spanish had set up a base in in the island of Hispaniola, which is part of basically comprises the Dominican Republic and Haiti today. They'd set up a base in Hispaniola back in 1493, big island in the Caribbean. And since then, so that had been 26 years prior. And over that period, they'd established bases of operations and outposts in the region. They'd establish outposts in Cuba and Panama, Puerto Rico, all sorts of places in the region.   [00:03:13.640] So by 1519, the Spanish definitely had a pretty good foothold in the region, and they were conducting trade missions and exploration missions all throughout basically the Caribbean coast and northern Latin America. And the Caribbean coast of Latin America. There was one expedition that had taken place years before, and there was a guy that basically was shipwreck, and most of the Spanish that were on board perished in the wreck, or they were taken as prisoners and sacrificed by the local Mayans. And there was a guy named Haranimo de Aguilar, and Aguilar had been shipwrecked with this group, but he was captured, and his life was spared. He escaped and was recaptured and escaped, recaptured.   [00:03:59.380] And anyways, he ended up spending eight years in captivity with the local Mayans. At the time, the Mayans were on the Caribbean coast of Mexico, and he spent eight years in captivity, and he learned the Mayan, the Yucatec language at the same time. But he was obviously he was a native Spanish speaker as well. So he was a Spanish guy that spoke the Yucatec language. Well, the Aztecs were a different group.   [00:04:22.710] Their native language wasn't the Yucatec language. They spoke something called Nawato, and Cortez just happened to have also in his vast entourage, he had been given a slave girl who was actually a native Nawato, native Aztec, basically, and her name was Maladzin, and Malanzin had been enslaved. She was Aztec. She spoke Nawatl, but she had been enslaved by the Mayan, so she also spoke Yuatec. So basically, the way that they would communicate is the Aztecs would speak Nawato to Malanzin, and Malanzin would speak Mayan, Yukate to Aguilar, and Aguilar would then translate that into Spanish to Cortez.   [00:05:02.260] So Cortez to Aguilar to Malin, zinn to the Aztecs, and then back through that chain, you can imagine, perhaps there was quite a bit that was lost in translation, but again, they were able to communicate enough. And Cortez, they received the gifts, gave the beads, all these things, and he told the envoys, he told the emissary, he said, Look, I want to meet the emperor. And the reason why is he said, look, he told one of the most ridiculous lies in history. He said, My men and I suffer from a disease. We have a disease, a very special particular disease of the heart, in fact.   [00:05:37.960] And we we need we need our cure. And the only thing that can cure us is gold. We have to have gold. Gold is our medicine, and if we get more gold and we'll be able to cure ourselves with this particular disease of the heart. And so he asked them, because they had already received as part of the gifts, they received this very nice gold.   [00:05:56.140] The Aztecs had a lot of gold. And in addition to that, they were excellent gold goldsmiths. They were gold workers. They could take the gold and turn in very fine jewelry and statuettes and so forth. And he basically said, look, is there more gold?   [00:06:07.240] We need this gold for our medical we have a medical condition, right? So we need more gold for our medical condition. And is there more gold? They said, yeah, there's more gold. And Cortez says, Great.   [00:06:15.830] I really want to see the emperor then. And they said, Hold your horses, hold your horses. To them, Cortez was coming from Spain. And at the time, the emperor, the king of Spain was Charles. At the time.   [00:06:29.970] This was Charles V of the Holy Roman Empire. Basically, this was probably the most powerful European ruler in history. Certainly ruled over more of Europe than any other quasi modern medieval Renaissance European rule. He came from the Habsburg family. He had holdings in Spain and Austria and the Netherlands, almost everything you could imagine in Western Europe, except for France.   [00:06:52.090] They had this big, gaping hole in France, and everything else was Charles V. So this guy was to Cortez, Charles the Fifth might as well have been his king, might as well have been emperor of the universe. But the Aztecs had never heard of him. Charles the fifth. Who is Charles the Fifth?   [00:07:07.360] For them, like, all they know is their emperor, and they thought that their emperor was basically a god. And so for Cortez to ask, I want to see the Aztec emperor. No, you can talk to us. You can talk to us. You're not going to see the emperor just yet.   [00:07:23.390] But we'll take your beads. Thanks very much for your beads. You enjoy all these gifts, all this food that we brought, all these 9th claws, all the gold, all that stuff, and we'll go and we'll take back your request about your heart condition, okay? And we're going to go back to the emperor and we'll see. And on the way out the door, cortez decided he really wanted to make an impression.   [00:07:43.980] So he put on a big show. He went to his guy and said, I want to load all the gunpowder we have. I want to fire all the cannons. I want to make a huge noise. I want to have the horses.   [00:07:54.860] They brought horses with them. And of course, the Aztecs never seen horses before. I want to bring the horses onto the beach. I want them galloping all over the place. They put little bells on the horses so they could see the thundering hooves of the horses and bells ringing and cannons firing and all these things to put on this big spectacle so that the painters would be painting all this furiously, and they'd all take it back to the Emperor and show the Emperor, look at what these people are.   [00:08:17.620] These people are serious. They've got technology that we've never seen. They look like people we've never seen. They've got armor, they've got swords that are made of this substance we've never seen. The Aztecs, they used wood for most things.   [00:08:30.210] They weren't really great with iron and steel and these sorts of things, but the Spanish had mastered all of that and Cortez knew it, and he wanted to put on this big show and so they did. And the Aztecs went back to the Emperor, all the way back to what is today to Narcticlon, which is today Mexico City, to see their emperor. And of course, this is the famous Makda Zuma, which Mactazuma, this is why it's usually pronounced that the Mexicans referred as Makda zuma in the US. And the English speaking world is often called Montezuma. Same person.   [00:09:05.820] Anyways, he was in his early fifty s at the time. He'd been on the throne for about two decades and was an interesting guy. He gets a bum rap in history. A lot of historians, especially over the last previously to now, and modern historians have given him a little bit of a kinder and gentler view. If you go back and look at what 19th century, 18th century historians had to say about Mactazuma, they said he was weak, he was a dope, he was indecisive, he was a total idiot.   [00:09:34.350] Modern historians have been a little bit kinder to his tenure, but even at that point, by 1519, mactazuma had been on the throne for quite some time, roughly nearly two decades. But he'd had a difficult rain. He'd had to deal with drought and famine and other kind of natural disasters. There was flooding, all sorts of things that had taken place. And he had also engaged in a lot of really unpopular policies.   [00:09:58.200] And to sort of cap it all off, he decided he wanted to build this vast palace, obviously funded by all the people, I mean, bigger than anybody he had ever seen. When you're already kind of unpopular, doing things that are unpopular, and you're going to go and spend everybody's money on this huge palace for yourself, it's not exactly going to ingratiate you to the people. And on top of that, he was waging war with his neighbors. And sure, the Aztec empire was expanding, but they were expanding to other tribes and other people who didn't even speak the same language. So these people were getting, you know, they were under the thumb of the Aztecs.   [00:10:33.300] They didn't particularly like the Aztecs. Some of them actually hated the Aztecs. And he had to suppress rebellions from all these different territories. So it was not this sort of Augustine PAX, Romana warm and fuzzy rain for Maktezuma. He had a pretty difficult time.   [00:10:49.940] It wasn't all bad, but it wasn't rainbows and buttercups. And by the time Cortez arrived in 1519, again, he'd been on the throne for, you know, 1520 years. And within the Aztec empire, there were deep seeds of of conflict, internal conflict, and the empire was kind of starting to come apart from within. In a way, it was kind of like the barbarians coming into Italy. And you talk about in the four hundreds of Rome, when Rome was such a disaster at that point that people, the peasants in the countryside were welcoming the barbarians, said, yes, please, just get rid of these idiots in Rome.   [00:11:27.780] Were we're so tired of. Even at that point, the the capital of the Roman empire wasn't even in the city of Rome anymore. That's how much Rome had disintegrated. It wasn't that bad in the Aztec empire, but there were a lot of internal seeds of conflict and people that were just honestly, there were people that looked at the Spaniards as saying, hey, these people can save us from these Aztecs who we hate so much. And there was actually cortez was able to find a great deal of cooperation with some of the enemies of the Aztec across Mexico as they march across the countryside.   [00:11:57.900] And so this was sort of the snapshot of what was going on in 1519 when Cortez arrived to get these emissaries that show up. They give you gold, they give you food, they give you all these nice things. You give them beads, you tell them this lie and say, oh, we're suffering, we have a disease, and we need gold in order to cure our disease. They say, okay, yeah, okay, fine, we'll go back, but you're not going to see the emperor. We'll go back, we'll have a talk, and we'll come back to you and we'll figure it out.   [00:12:23.280] And so, at a certain point now mockedazuma, he's not stupid. He knows his grip on power. He's had a fairly difficult time. He had to deal with all these issues over the past 1520 years. He knew his grip on power was somewhat tenuous, at least.   [00:12:39.380] And as a result, he had relied quite heavily on his advisors to steer his administration and make decisions for him and advise him on all these things. He just couldn't make a decision by himself. He had all these people to kind of tell him what to do. He had all these high ranking nobles. They were his official advisors.   [00:12:55.710] And, of course, the high priests, the seers, the diviners, the soothsayers that were there, and Aztec rituals. There were a lot of things, quite sadly, about the Aztec culture that were destroyed. The Spanish cortez himself ordered the wanton, devastating destruction of the entire Aztec culture and civilization. But there are some things, quite a lot of information that has been passed down to us. And we know a lot of the things they did, the different rituals that they had again the high priests and the soothsayerse that would do things like they would cast grains of corn into the air or cast them onto their holy almanacs and various books in order to foretell the future.   [00:13:38.050] They took mushroom. A lot of mushrooms grew around the region. They took mushrooms, which were psychotropic hallucinogenic substances, and they would have visions and tell the future. They would gaze into mirrors, different rock mirrors, often made of obsidian. They would do sometimes we would look and go, really?   [00:13:53.130] That's ridiculous. They would take a mirror. They would strap it to the head of a bird and have the bird fly around with this mirror on its head, and they would gaze into the mirror that strap to the head of a bird and then say, oh, this is what's going to happen in the future. They would interpret the movements of animals as a sign of things to come. Sometimes they would just literally roll some ice.   [00:14:10.830] And of course, there was always the ritual of blood sacrifice, and based on the way the blood fell and now it's splattered and so forth, they would say, this is going to happen, or that's going to happen. But with all these rituals, which for them was science, they totally failed, completely failed to predict the arrival of the Spanish. And Maktuzuma was furious. And according to later on, this was a Spanish priest who wrote all this down and kind of went and interviewed people and so forth. So according to this guy, later on, what everybody said, mactuzuma said he grabbed all these sous there's together and really just ripped them a new one in public, in front of the whole court.   [00:14:47.920] And he said, this is the quote. Now, this is the quote from the Spanish priest that published this a couple of decades later. So you got to take it with a grain of salt. But it's a great quote. It's a great quote.   [00:14:58.040] This is MACTA Zuma chewing out his south sares. He says, quote, It is your position to be deceivers tricksters, to pretend to be men of science, and to forecast that which will take place in the future. Deceiving everyone by saying that you know what will happen in the world, but everything is a lie. It is all pretense. He was furious.   [00:15:20.530] He was furious because he looked at this and he said, God, this could be. Look at these people. He's looking at these images of guns and cannons and horses with their little bells. You could just imagine horses with their little bells running on the beach with cannons going off. And they didn't predict any of this.   [00:15:38.060] And Maktazuma is furious, and he said, you're all full of it. You pretend to be men of science, and you pretend that you have this knowledge of the future, but it's all a lie. It's all a lie. And he called bullshit on his high priests and his experts, who are supposed to be able to predict the future. And of course, this is nothing that's unique to the Aztec culture and civilization.   [00:16:03.160] This has been the case throughout human history. We can go back thousands of years in human history. We can go back to the Babylonians and the Sumerians and the Judaeans and the Greeks oracles, and this has been a common, common thing throughout human history. The sears, the experts, the people that proclaim to have a special knowledge and the ability to foretell the future. And even obviously to this day, we have our Soothsayer classes, the expert class that claims in some degree to be able to predict the future.   [00:16:34.820] Now, of course, it's not blood sacrifice and psychotropic drugs. Instead, they're using complex mathematical models and they call them forecasts. But in both cases it is really quite an extraordinary hubris because even though they call them forecasts and it's all based on math and science and so forth, they claim they're right because they're the experts. They have the fancy degrees and all that. And by comparison, you're nothing.   [00:17:04.470] You're just an intellectual peasant by comparison.   [00:17:10.310] It was that same mentality back then, just again as mock to Zuma. He was chewing everybody out. He was saying, you pretend to be men of science that you know, and you deceive everyone, saying that you know what will happen, but it's all a lie. It's all pretense. Now, obviously, I'm not talking about Isaac Newton, Albert Einstein, and the real scientists.   [00:17:27.910] I'm talking about in people that are actually coming up with the laws and the theories and determining how the universe actually works. They're not making predictions about the future. Real science isn't necessarily about making predictions about the future. I'm talking about the quote unquote science, really pseudoscience that seems to claim to make predictions about the future and tongue, cheek examples, not science. But I mean, anybody watches Sports, you see these guys on the weekends of the pregame show and they all make their predictions about who's going to win the game and all of a sudden they're like hilariously wrong.   [00:17:58.090] These are the guys that are hall of Fame coaches and players that know the game better than everybody else, and they're all hilariously wrong. I mean, they just get it wrong over and over and over again. It's all in good fun. But they're experts, clearly. Experts that are trying to predict the future and they're hilariously wrong week after week after week.   [00:18:15.380] But in terms of again, that's all a joke. It's all in good fun. But there's real stuff out there and we know obvious examples. The science of climate change is a big example. And I always have to caveat this before anybody wants to jump down my throat.   [00:18:30.620] Feel free to jump down my throat anyways, but just to have the information. I'm very pro environment. I like clean air, I like clean water, I like taking care of the environment. I think these things make a lot of sense. Also, even from an economic and financial perspective, I think it makes sense, if you can, to use fewer resources.   [00:18:51.090] I think that makes a lot of sense just because it costs less money, keeps your costs down. Right as I'm recording this, I took my whole family down to South America, where right now I'm for the holidays. We've been here for the last couple of weeks and I'm on a nearly 100% sustainable farm down here with the solar panels and the well water, all these things. I mean the whole nine yards, the carbon footprint here, if anybody even cares, it's basically negative. And again, it's, it's a wise use of resources, all these things.   [00:19:22.680] And I also want to acknowledge there's plenty of very intelligent, dedicated, honest people working in climate science and it's an important thing to study. My point is that this has been the case for decades, that there have been apocalyptic doomsday models, one after another after another after another after another, that ended up being completely and totally worthless. But this is the stuff that drives political decisions. It drives investment decisions. In 1972, the top UN climate policy maker, the guy who's basically the head of the UN Climate Committee agency at the time, he said we have ten years.   [00:20:03.590] Ten years. It's like the world was going to explode in ten years by 1982 if we didn't do all these things on his little wish list. And even to this day, a couple of years ago. It was four years ago now. AOC Alexandria Casio Cortez, the congresswoman who will may certainly be president in the United States, scary as it is to say one of these days, four years ago, she said the world, you know, the world is going to, the world is, this is a quote.   [00:20:29.700] The world is going to end in twelve years. This is four years ago. And so this is the sort of constant hyperbole, the apocalyptic doomsday end the world predictions that come from the experts. And again, I like clean air, I like clean water. I like taking care of the environment.   [00:20:51.050] I would like that everybody takes probably better care of the environment, fewer resources. It makes sense. Across the board, even from a financial perspective, it makes sense. But these apocalyptic predictions, honestly, at this point, it's like just the bully who cried wolf over and over and over again. It's hard to take this seriously, especially when the policy makers, they look at the stuff, they get together and they ignore the completely obvious solutions.   [00:21:14.640] I did a whole podcast about nuclear power with the obvious solution. If you actually care about the environment, you actually care about CO2 emissions, you actually care about methane emissions, you actually care about these things, and you ignore nuclear power. I'm not willing to take anything you say seriously because at that point you're proving that you're a complete moron. And they do these things I mean, they have their I wrote about this, I don't know, probably about a month or two ago with the big UN climate conference, Cop 27, and I guess it was in Egypt. And they devote an entire day solving the climate crisis, and they devote an entire day to gender identity.   [00:21:50.600] Again, you look at these things and go, you make it so hard to take you seriously. You ignore the real solution, and then you spend a whole day talking about gender identity. You've got all these world leaders. You got the President of the United States, you got the European Commission, you got all these people that are there, everybody's in attendance, and you want to talk about gender identity instead of nuclear power. Sorry, I'm just not willing to take you seriously at that point.   [00:22:13.760] But these are the sorts of things we see apocalyptic predictions and forecasts, and they're right, and everybody else is just an intellectual peasant, and it's this kind of bullying and intimidation, and if you don't get on board, then you just get canceled. Speaking of getting canceled, we also saw this same sort of mentality during the COVID pandemic, these predictions. Remember the early predictions? They came out, and they said they terrified everybody. Very, very early predictions.   [00:22:40.620] They said, everybody's going to die if we've got to lock it up. We got to go home. We got to sit in our houses and cower in fear and watch the fear pouring on CNN and shut down the economy. And if we don't do that, then everybody's going to die. And they came out with these predictions that were just wrong, and they consistently over and over again with these predictions.   [00:22:59.020] And a lot of people may remember, March of 2021, the state of Texas, the governor of the state of Texas said, you know what? We're not going to do this. I'm outlawing. These mandates were done. And Tony Fauci blasted that decision.   [00:23:14.550] He said, oh, he was outraged. And he took to Twitter, because that's what the experts do. They go to Twitter. And he called outrage about the decision. He said, this is inexplicable, and you're inviting all the death and the predictions of the body counts in Texas.   [00:23:32.060] We're going to be piling up in the streets. And then it never happened. In fact, the COVID numbers went down, and then they asked Fauci about it later. So you just shrugged it not quite sure. And of course, shortly after that, this is when Fauci came out with this whole an attack on me is an attack on science.   [00:23:51.300] The quote is, attacks on me, quite frankly, are attacks on science. He anointed himself as science. And this is what we kept constantly hearing about science. Our science says this and the science says that. I'm going to come back to that in just a moment.   [00:24:06.110] Now, you've probably heard of Richard Feynman. If you haven't, richard Feynman was one of the most intelligent people one of the most decorated, successful scientists. He was a theoretical physicist to have ever lived by his own peers and contemporaries, modern day scientists, scientists who were peers and contemporaries of his time. People ranked him in the same breath as Isaac Newton and Albert Einstein. He was ranked in the top 100 physicists of all time, not in the top hundred.   [00:24:34.620] He was ranked, like, seven. I mean, this is a guy whose scientific achievements are virtually unparalleled. He was a Nobel Prize winner. He was participant in the Manhattan Project, who was manhattan Project was atomic research, and a lot of death and destruction came from that. But that was really the who's who.   [00:24:50.680] I mean, it was Oppenheimer and all these guys back then. He was part of that. He pioneered quantum computing, nanotechnology back in the 1950s, when vacuum tubes were still a thing. I mean, really, really smart guy. And probably the great thing about Feynman was he did not give a shit.   [00:25:08.330] He was one of the most intellectually independent people ever. And the the beautiful thing about it is that he lived until the late 1980s. And so there's actually quite a bit you can see interviews with Feynman. They're low quality video and not great quality audio, but you can see interviews with Feynman, and there's a lot of his work. We can't go back in time and see, like, YouTube videos of Isaac Newton.   [00:25:32.340] But Feynman you can. You absolutely can. And the things that he would say, it's really inspiring. And there were a lot of texts and transcripts of speeches, and he gave one speech in remarks to the National Academy of Sciences. This is a big deal.   [00:25:48.270] The National Academy of Sciences probably knows a pretty big deal in the United States in 1955. And he was talking about this, and he says he said, we found it of paramount importance that in order to progress, we must recognize our ignorance and leave room for doubt. He went on to say that scientific knowledge is a body of statements, some most unsure, some nearly sure, but none absolutely certain. Nothing is certain. This from one of the most decorated, one of the most knowledgeable, one of the most praised scientists to have ever lived in all of human history, basically saying nothing is certain.   [00:26:23.840] Later on, in another interview, this wonderful interview, I think this one's probably on YouTube, and he talks about this concept of how hard it is to know something. And in this interview, he's kind of blasting pseudosciences, and he said, I have the advantage of having found out how hard it is to get to really know to get to really know something, how careful you have to be about checking the experiment, how easy it is to make mistakes, to fool yourself. I know what it means to know something, and therefore I see how they get their information. He's talking about pseudoscience and soft sciences and people the expert class. Making all their predictions.   [00:27:08.450] He's saying, I know how they get there. I see how they get their information, and I can't believe that they know it. I have a great suspicion that they don't know and that this stuff is wrong and they're intimidating people. This is what Richard Feynman said, and the last one I'll share with you comes from a speech that he gave at the National Science Teachers Association. This is from 1966.   [00:27:30.780] And this is probably one of the most beautiful, I think, an inspiring speeches about academia and just that culture in general. And it's entitled what is science? And he gets really, really great remarks, and he says this is probably midway through the speech, and he says, when somebody says science teaches such and such, science teaches such and such, science says this science he says he's using the word incorrectly. Science doesn't teach anything. Science in quotes, science doesn't teach anything.   [00:28:02.220] If they say to you, science has shown such and such, you might ask, how does science show it? How does scientists find out? He goes on to say, he says, it should not be, quote, science has shown, but this experiment, this effect has shown, this research, this study, this specific experiment that has shown not science, but this specific research, this specific experiment is what he's saying. And he closes by saying, you have as much right as anyone else upon hearing about the experience or the research, whatever. Be patient.   [00:28:36.440] Listen, all the evidence. You have as much right as anyone else to judge whether a sensible conclusion has been arrived at. You have as much right as anyone else to judge whether a sensible conclusion has been arrived at. He would be canceled today for saying that because we're supposed to bow down to the soothsayers, bow down to the expert class. They've cast their they've cast their beans in the air.   [00:28:58.200] They've made their blood sacrifice, and they said, this is what the future is going to be. Billions of people. We're all going to die if we don't shut down the economy or all these things that they say. You're supposed to just take it all in and go, okay. Oh, I'm so sorry for trying to render an opinion.   [00:29:14.790] No, you're not allowed to have an opinion because they're the experts and you are not. And you pale in comparison to their awesome intellectual abilities, and you won't understand their mathematical models. You don't understand anything. And so you just have to listen. Feynman said no.   [00:29:30.300] No. You have as much right as anyone else to judge whether a sensible conclusion has been made that most of the stuff it's about nothing is absolutely certain. Absolutely nothing is absolutely certain. And I know how hard it is to actually really know something. It's all about ignorance and uncertainty.   [00:29:48.610] Nobody knows. Nobody really knows for sure. There is no certainty. And everybody, even people who are really informed or really smart, they're just not going to get it right all the time. And everybody, at least people who are informed, has an equally valid view.   [00:30:03.380] And this is especially true when it comes to making predictions about the future as we see time and time and time again. If you want to go back to ancient Greek oracles or mock de zuma's Sue Sears in 1519, sometimes the expert class just doesn't get it right now. I bring all this up because specifically right now, this is early January, January 6, 2023. I bring all this up because all the chatter and headlines about we see recession, recession, recession, we'll kind of talk about that later, but the debates about will there be a recession and will there be a soft landing and all these sorts of things and the constant commentary about recession. And honestly, I think a lot of that is a bit of a selffulfilling prophecy in a way that everybody keeps talking about there's a recession coming, there's a recession, there's a session.   [00:30:44.870] It affects business investment, affects consumer spending. People will invariably pull back. Businesses will invest less, they won't hire people, they'll even lay people off. All these things because it creates, in a way, potentially a self fulfilling prophecy. It creates the thing that you expect ends up happening.   [00:31:00.290] But my favorite in this whole group are the experts, the central bank, soothsayers, the economic forecasters. They look in their crystal balls and they say the economy is going to grow x percent this year and Y percent next year and Z percent the year after that. And this stuff, to me, this is hilarious. This is hilarious. And there have been some couple of conferences already just in the last several days that they roll out these central bankers and economic forecasters.   [00:31:35.000] They say, where's the economy going to be next year and where's inflation going to be and where is interest rates going to be and all these things. And these people just go, oh it's this, it's this. We're forecasting X percent growth, whatever it is. To me it's hilarious because you remember, these are the people who are consistently wrong. And again, non intended to point a finger at any single individual.   [00:31:56.000] But just as an institution, the central bank, they completely failed to predict the housing decline back in 2006 2007. They completely failed to predict the subprime meltdown. They completely failed to predict the global financial crisis. They failed to predict the supply chain challenges with COVID They totally failed to predict inflation. They pretty much missed every major economic event of the last several decades.   [00:32:18.430] How does anybody take these people seriously? Why would anybody even ask them a question unless it's part of some comedy routine going, we're going to ask these central bankers what they think. Ha ha. It's just part of a big joke. How does anybody take them seriously?   [00:32:33.910] Why would anybody even ask them a question? Because they've just been so wrong about everything and even when they're wrong, they double down and insist, no. You remember the whole inflation fiasco? They said inflation. There's no inflation.   [00:32:46.570] And then they say, oh, it's transitory. It's transitory. I mean they were wrong about inflation multiple times. Multiple times. And one of the most hilarious parts about that was I mentioned this before is Janet Yellen, who's the treasury secretary and she was part of the deficit spending the big bailout packages.   [00:33:08.770] Let's just borrow money from the Fed, prints money, the government will borrow money from the Fed and we'll sprinkle all this money around the economy. And there was a reporter who published an account and said janet Yellen, the treasury secretary, she was the one in the Biden administration who warned everybody about inflation. She was the one who knew that inflation was going to be a problem. She tried to warn everybody. And Yellen was so furious that somebody claimed that she knew what was going to happen, that she actually was the voice of reasons.   [00:33:40.410] She was so furious about that. She called a press conference on a Saturday to debunk and said, no, I had no idea. I had absolutely no idea. I didn't know anything about inflation. I failed to predict inflation.   [00:33:50.720] I think she was furious that somebody actually had the gall to suggest that she knew what she was talking about and had to call a press conference on a session. She couldn't even wait till Monday. On Saturday had to call a press conference just to debunk this horrible rumor that she was competent and knew that inflation was coming. And again, you got to look at this and go, how does anybody take these people seriously? Why would anybody ask them a question and then they go, oh, the economy is going to grow X percent and they just believe it.   [00:34:16.450] Why would anybody take them seriously? And again, I'm not trying to beat up on anybody. I'm sure they're all very nice people. I'm sure they're all very maybe very honest people, very hardworking people. They're only human.   [00:34:28.180] All of us. We're all of us just human. We've all been horribly wrong about so many things. But for most of us, aren't guiding global policy decisions about what's going to happen to the economy and interest rates and all these things? And of course, again, everybody's only human.   [00:34:46.810] The old quote, predictions are hard, especially about the future which is a quote that's often attributed to Mark Twain, just like a lot of great quotes are always attributed to Mark Twain. And yet you do the digging and find out that there's no evidence that Mark Twain ever said this. That the idea, the concept. Predictions are hard, especially about the future. This actually comes it's borrowed from an old Danish proverb, but it's absolutely true.   [00:35:08.200] Predictions are hard. Trying to tell the future is basically impossible and anybody that tries to do it is just going to end up wrong. And there's no sense in bothering to try and listen to all these expert classes to say, here's what's going to happen in the future. Because in many respects, this stuff is just hilariously wrong. Trying to predict the future is just impossible.   [00:35:29.830] And me, my approach has always been, rather than trying to predict the future, to really just understand the past, because the past is full of lessons. The past is full of knowledge and wisdom about trends that have repeated over and over and over and over again. And if you'll notice, it's why I always start these things. Let's go back in time. And when I write, if you're on our website and you read the things that I write, I'm constantly talking about history and looking at historical parallels because history does tend to repeat itself.   [00:35:59.880] Another one that's attributed to Mark Twain is that history doesn't repeat, but it certainly rhymes. I don't know that Twain said that either, but it certainly seems true that history does tend to have different shades of the same events over and over and over again. And we see, for example, that economies go through cycles and history has shown pretty much every possible economic scenario that's happened in the past. We've seen great inflationary episodes going back in the 1005 hundreds. We've seen inflationary episodes during the Roman Empire.   [00:36:30.710] We've seen what happens when people impose wage and price controls. Diocletian tried that in the early three hundreds in the Roman Empire. It didn't work. It didn't work. We've seen this over and over and over again.   [00:36:40.270] Hamarabi going back thousands of years in the Babylonians Hammer. Robbie tried wage and price controls. It didn't work. It never works. We could see this over and over and over again.   [00:36:49.220] We could see depression and stagflation. We've seen these things over and over again, literally in thousands of years of human history. We've seen pretty much every possible economic scenario. It's happened. We can see why it happened, what happened after what happened in the aftermath, how people tried to deal with it, the decisions that they made.   [00:37:08.890] We've seen financial panics and bank failures. We've seen what happens from currency manipulation and excess debt and wild speculation, government interference, central planning. We've seen all of this so many times. So many times. There's just ample historic evidence about these events and these economic cycles going through boom and bust cycles, et cetera.   [00:37:31.410] We've seen this all before. We've seen financial markets in the same way. We've seen bubbles, the Tulip mania, the South Sea bubble and all these things over and over and over again. There's so many instances of this. We've seen market history, markets get really hot, they get really cold and entire cycles and what happens?   [00:37:48.780] We can see people make a lot of money in the down part of the cycle. The people that have the courage to buy really great businesses, really great investments in the down part of the cycle. And then the cycles turn we can see these things over and over and over again. We can see that there are fly by night businesses that have a time in the sun. They soar like icarus and they go all the way up to the sun and they say, look at me, I'm so great.   [00:38:10.670] And then they crash and burn because it turns out there wasn't really anything there. And we can also see that businesses that are led by talented, honest, innovative people of integrity, that have healthy balance sheets, that are managed conservatively, these businesses that create real value, they create cost effective goods or services that are loved and adored by a growing market of consumers. And somebody can acquire these businesses available at a discount to intrinsic value. These are things that generally tend to work. And we see this over and over and over again throughout history.   [00:38:42.060] What you can't predict though, is the future. You can't say here's where the stock price is going to be in twelve months, right? Here's how much the, here's how much the financial rewards going to be, here's exactly what the yield is going to be, all this stuff. Because that's a prediction of the future. That's impossible, that's impossible.   [00:38:58.340] But we can look at trends and we can look at the countless stories of history go, well, this tends to do pretty well, this tends to not do, this tends to be a terrible idea. Wage of price controls, that tends to be a horrible idea. But great businesses, great management, solid balance sheets, conservative management, real value, all these things, that tends to be a pretty good formula. And we can see these things over and over again. But you can't say here's where the stock price is going to be in twelve months, here's where the tenure is going to be in 2025.   [00:39:26.050] All these things, that's impossible. And again, history is full of these examples. It's also full of big picture examples. And I write about this all the time we talk about in our podcast. Empires, nation, states, these go through cycles.   [00:39:39.860] They rise, they peak, they decline, they're overtaken by other empires that are going to rise and peak and decline. And we can see the same elements over and over again. You start off with a hungry, talented group of people that comes together, they're unified by singular purpose, and they grow and they expand. And eventually you end up with all these ridiculous things. Terrible leadership, reckless decisions, irresponsible spending, massive overextension of the debt, debasing the currency, social conflict, decadence laziness even where people just invent problems because their society has become so wealthy and so decadent.   [00:40:16.540] They got to create problems that aren't even real problems. They don't have to worry about how they're going to put food on the table anymore. And so they just come up with ridiculous issues. They go, this is a crisis. And they come up with silly things that aren't actually real national issues.   [00:40:31.530] And they make it like it's the number one social issue of the day. These are the sorts of things that we've seen this over and over and over and over again throughout human history. We see that a heavily indebted country led by a bunch of clowns that constantly shoots itself in the foot generally doesn't perform very well over the long term. History is very clear about this. You don't need to create a model, and you can't create a model, any complex mathematical model to predict some certain event or time frame the Romans.   [00:41:00.350] You can't go back in time to the Roman Empire and try and create some complex mathematical model and say, here's when the Roman Empire is going to fall. You can't create a complex mathematical model and say, here's when the French Bourbon monarchy, here's when Louis loses his head. You can't predict these things. You can't create a model and try and predict the future. And there's so many examples of this.   [00:41:22.170] Even as recently as the Soviet Union and the Berlin Wall fell in 1989, the end of 1989, even in the early mid 80s, very few people would have actually been able to predict that even a few years before it happened. Very suddenly, everybody knew the Soviet Union was on the way down. It was pretty obvious. Ronald Reagan used to tell all these hilarious jokes about the Soviet Union and worker productivity and all these things. And there was one of my favorite ones he used to tell, and he would say something along the lines of a guy from the Soviet Union, he goes to buy a car.   [00:41:58.130] He has to save all of his money, whatever, and he goes to buy the car, and he goes to buy the car, and the car dealer says, well, okay, we'll take your money now and we'll deliver the car in ten years. And and the guy says, okay, are you going to come in the morning or in the afternoon? I guess. What are you talking about? It's ten years from now.   [00:42:14.910] What does it matter if it's morning or afternoon? And the Russian guy says, well, the, the cable guy is coming in the morning. So these are types of things. And everybody knew that it was just this completely inefficient civilization, this is a completely inefficient union, and it was definitely heading down, but nobody would have said, oh, the Berlin Wall is going to come down in 1989. That was a very, very difficult prediction, even a few years before it happened.   [00:42:39.410] And it's this way of thinking that I want to just convey and suggest to you, this is the way I sort of think about solutions. Risk mitigation often write about this and call it the Plan B thing. I've been writing about this for years and years, this concept of the plan B, because ultimately nobody can predict anything. Nobody's ever going to be able to predict exactly what's going to happen. And when it's going to happen, all this sort of stuff.   [00:43:04.090] And so the idea about Mitigating risks, the plan B, it doesn't focus on, for example, the dollar plummeting in value by December 2023, or the Treasury Department defaulting on its debt in 2025, or China is going to invade Taiwan next year, any of these specific events, because it's impossible to predict, right? We cannot focus on a singular event. If you have that view, certainly you can take a speculative position. You can form a view and take a speculative position. You can say, well, I think the dollar is going to decline by 2023, and so great, you can short the dollar.   [00:43:37.480] You can short the dollar index. There's plenty that you think the Treasury Department is going to default on its debt in 2025. You can form that view, and you can take a speculative position. There are a lot of things that you're going to be able to do in that event. But it's generally a fairly dangerous idea to focus the entirety of your energy or your finances, your portfolio, your livelihood.   [00:44:01.710] It's just in general, like your life's, energy and dedication to this very narrow thesis. And there are a number of reasons why that's the case, of why it's a dangerous idea to focus so much of your energy and your motivation, et cetera, to a very, very narrow this thing is going to happen, therefore I need to do X-Y-Z. That's a dangerous way of doing things. And there are a couple of reasons. Number one is because timing on things is just so difficult to predict.   [00:44:32.300] Even when you're right, you can be wrong on the timing, and that could be devastating. There are a few examples of when people are successful at this, and finance, for example, he's a financial example. A lot of you might know the name Michael Berry from The Big Short. He's the guy that short of the housing market in the early two thousand s and made an enormous amount of money. He had a very specific thesis about large banks that own mortgage backed securities and collateralized debt obligations.   [00:44:57.290] And he did a ton of analysis and came to a very specific conclusion. And his conclusion was, right, the housing market was overvalued in the early two thousands, but he almost went broke because he made very specific bets based on this very specific thesis and really bet everything on this very narrowly tailored specific thesis. And the thing is that the housing bubble actually lasted way longer than he anticipated. So he was right about what would happen, but he was wrong on the timing because he was wrong on the timing. He almost went broke.   [00:45:28.790] You probably seen the movie, might have read the book. I mean, he had to suspend redemptions and his fund and people were threatening lawsuits and all these things, and he took a huge risk, huge risk, with other people's money and really bet the farm on his prediction of this singular event. And he turned out, again, being right on the event, wrong on timing, and just barely squeaked by when they were, they were running out of money. He was threatening with lawsuits and all these things. And then finally the housing market crashed.   [00:45:53.830] He almost lost everything, and then everything crashed. And because of that, he made an enormous amount of money, not only for himself, but for his investors. But it almost went down in flames. There are a lot of other people who didn't have such a happy story. There are people that really do bet the farm on one specific thesis.   [00:46:12.050] They get it wrong and they go down in flames. They lose everything. And that's why, again, it's really a dangerous idea because you can be right about the prediction, but wrong about the timing. And so if you think, oh, this is going to happen next year, and it happens, but it happens ten years from now, well, jeez, you've got nine years of sort of wasted opportunity, cost, that's a big deal. That's a big deal.   [00:46:36.380] Time is the most valuable asset we have and to sort of waste it, squander it, lose different things, because it's a really big deal. I would point out something else as well, another reason why I think it's a bad idea to sort of put all of your focus and energy and attention on trying to mitigate this one specific thing, to make a prediction and focus all of your energy on one specific thing. And I'll give you an example. Some people are worried, and there's been a lot of chatter about this too, about some kind of food scarcity and it's very apocalyptic predictions about the end of global food production, famine, starvation, et cetera. Again, this is a very specific risk that by the end of 2022, which has already come and gone, everybody's going to be starving and all these sorts of things.   [00:47:26.940] And again, that's a very specific risk and it's a scary one, and that compels a lot of people to sort of throw all of their energy into, I got to, I got to fix this issue, I got to mitigate this risk. I got to take all this action. And a lot of people, again, they just, they jump into this, throwing 100% of themselves into trying to solve this. And so they just have this bunker mentality and they move to the bunker and they spend their days working the land and kind of fencing off the rest of the world and cleaning their guns and basically living underground. Now, again, everything is about ignorance and uncertainty and pretty much everything is a possibility.   [00:48:04.880] There's nothing I mean, with the past couple of years, we should have learned that anything and everything absolutely can happen. There's nothing that's off the table. Anybody says, oh, that's impossible, it's never going to happen, has no idea what they're talking about. Everything absolutely could happen. And so the idea of, you know, something happening, global food production and all that sort of stuff, it's a non zero risk, you know, and it's certainly a high impact risk, but you know, somebody that actually really goes and studies land cultivation and agriculture and all these different things, it's a relatively low probability event.   [00:48:38.780] Now, if you focus all of your time and energy and saying I'm going to have this bunker mentality and fence off the world and work the land and all these things, if you're right, then you win. If you're right and global food production grinds to a halt and everybody else is starving to death, well you're doing great, you won. But again, that percentage is so low that chances are you just end up with this big opportunity cause you spent your entire life invested in mitigating a risk that ends up not happening. And the reason that's dangerous, again, there's that cost. In this case, it's sort of an opportunity cost and an opportunity cost of your time.   [00:49:16.080] But the second reason why that's so dangerous is because it really starts messing with your head, it starts messing with your psyche. When you get so wrapped up in this, one terrible thing might happen and you do, you put all of your energy into sort of mitigating that and fixing that. Honestly, it's like you start hoping that it's going to happen. You start hoping for the bad thing to happen because otherwise what else was the last couple of years of your life about? Since you spent the last five years trying to mitigate this one specific risk, you start hoping for that to happen just to justify the way that you spent your time.   [00:49:54.830] That's a terrible position to be in because there's so many other ways to deal with it. And rather than say I'm going to upend my entire life and pick up my family and pick up my kids and pick up everything that I'm doing, walk away from my career and do all of this so that I can mitigate this one risk and just put everything in my life 100% focused on this one specific thing that I'm predicting is going to happen in the next twelve months. There are other alternatives. And they say, well jeez, instead maybe let's start by having a garden around the house and stocking up on non perishables and maybe even having some land in a foreign country in a place that we really like, that's whatever that we can go to if we feel like we really need. There are other ways to do that.   [00:50:37.710] You can baby step your way in and do things that don't have such a high cost. They don't have the same mental emotional cost just on your own psyche. They don't have the same opportunity cost, they don't have the same financial cost. And so there's just better ways to deal with it. And that's the way I kind of want to get across to thinking about these things.   [00:50:58.290] This is ultimately the concept of a plan B is to find ways to mitigate these big picture trends. Don't try to pinpoint a specific event and time and so forth because it's just impossible to predict. But instead, like we talked about, focus on trends. They're much easier to see and understand. Is this country, is this society, is this government is going up or is it going down?   [00:51:21.850] Is this on the way up? Is it on the way down? This is a positive trajectory or a negative trajectory that's a lot easier to figure out than trying to determine where is the ten year treasury yield going to be in 2030? That's pretty much impossible, right? But we can we can kind of step back from a big picture perspective and go, is this good or is this not good?   [00:51:39.650] Are we going in the right direction or are we going in the wrong direction? Have we been going in the right or wrong direction for a number of years? And what does that kind of ultimately mean? That's a lot easier to figure out and from there to take sort of mitigating actions in ways that make sense regardless of what might or might not happen next. And we talk about these a lot.   [00:52:01.270] We write about these a lot. These are the sorts of things there's just limitless examples. When you really put your mind to it, you think of so many different examples. We write about these a lot. There's no downside.   [00:52:12.550] Again, we talk about doing things that make sense no matter what might happen or not happen next. It's like there's no downside. There's no downside in taking advantage of completely legal aspects of the tax code to reduce the amount that you owe the government every year. The tax code is thousands and thousands and thousands of lines and sections. I guarantee you there's at least one in there that you can take advantage of and reduce the amount that you owe.   [00:52:37.030] Out of all the thousands of lines in the tax code, there's probably one in there somewhere, at least that you can take advantage of to reduce the amount that you owe. There's no downside in doing that. There's no downside in becoming a welcomed resident or even a citizen of another country that gives you an additional place to call home, maybe in a place where your money goes a lot farther, possibly in a way that you can pass that benefit down to your children and grandchildren. There's really no downside in doing that. There's no downside in, for example, taking steps, again, completely legitimate steps to protect yourself from outrageously, ridiculously, frivolous lawsuits.   [00:53:13.640] And a lot of people might be in more litigious industries than others, and that's a real risk. And there's no downside in doing that. There's no downside in going and seeking out cheaper, high quality, inexpensive medical care in a. Different country abroad or diversifying certain business and investment interests so that you're not 100%, you don't have all your eggs in one basket. You're not totally exposed to a single country, especially if that country happens to be heavily in debt and on a downward trend.   [00:53:43.190] I mean, you know, we mentioned before, if you're thinking about food shortages, whatever, I mean, some people are very concerned about that. There's no downside. And maybe having a little bit of extra non perishables or having a garden in your home or planting a fruit tree in your yard that's probably going to make your home value increase. As a matter of fact, there's no downside in that. Or owning some land in a place that you enjoy visiting.   [00:54:02.980] All these things. This is a way that I encourage you to think about it big picture trends. This is going up as it's going down. What are the ways, the things that I think I can mitigate some of that in ways that make sense no matter what, as opposed to trying to predict the future, because trying to predict the future is pretty much impossible. We're always going to have experts in their expert opinions who try and tell us what the future is going to be.   [00:54:31.690] And frankly, it's very easy to be influenced and even manipulated by these expert opinions. And I think that's where we are right now almost as an entire species. I think if you look across the globe, sailors have this term, they learned a long time ago, sailors who went on the seas in the age of exploration, they learned that there are areas of the seas, they were propelled by wind and they learned the winds really well. And they eventually learned that there are parts of the sea, parts of the ocean where the winds converge and they could basically get stuck. You got the southeast and the northwest winds and they converge together.   [00:55:09.780] You can basically get stuck and end up not going anywhere. And meteorologists, they have a fancy term for this. They call this intertropical convergence zones, but more commonly these areas referred to as the doldrums'and. Doldrums. If you've read Sama Taylor Coldridge's Rhyme of the Ancient Mariner, this is the mariner, this is the albatross flying around.   [00:55:29.660] You've got these men that are going nowhere and they're stuck in the sun. They're running out of supplies. They have no motivation. The morale is almost nothing, and they're just having a terrible, terrible time. This is really what it is to be stuck in the doldrums.   [00:55:41.400] And it almost feels like as an entire species, that's kind of where we are right now. We're just not moving. We're not going forward. But at the same time, we're also not really going backward. 2022 was an okay gear.   [00:55:57.660] It was weird. All these terrible things happened in inflation and war and so forth, but for the most part, like, economies are still doing okay. It wasn't some insane financial catastrophe, so forth. Obviously, it depends on everybody's individual situation. If you're somebody that's had to flee Ukraine, 2022 was a terrible year.   [00:56:15.420] But if we kind of average that out across the globe, it's nothing comparison to 20 18, 20, 19, 20 22 was not a great year, but it wasn't a complete and total disaster. But at the same time, everybody sort of braced for this terrible catastrophe because we keep seeing this in the media, you know, this is going to happen. There's recession, recession, this and that, all these different things. And everybody's kind of braced for something we're not going forward because there's nothing, this thing, you know, you got the war, you got the inflation and all of this and all the morales just been sucked out, but at the same time, not really going backwards either. Everybody just sort of braced for this catastrophe, waiting for the shoe to drop.   [00:56:58.320] And it's exasperating. Honestly, it's exasperating. When you think about it, this is really stuck in the doldrums. When things are going well and you've got the wind in your sails and you're moving forward, it's great. It's easy.   [00:57:10.810] Everybody's happy. Positive people are making money. Everybody's got a job, wages are going up, companies are making money, markets are going up, governments are raking in tax revenue, all this stuff. Everything's great. That's easy.   [00:57:22.450] It's easy to have a positive outlook. And ironically, even sort of negative events are almost easier to deal with because at least you know what's happening, right? At least you know what you're dealing with. But if you think about human psychology, we crave certainty as human beings. It's uncertainty that kills us.   [00:57:40.230] It's like you go to the doctor for some kind of medical test cancer screening, and we're on pins and needles waiting for the results. It's the it's it's the uncertainty that's the most difficult part. You know, we that certainty is what we crave. And it's right now we feel, I think, a tremendous amount of uncertainty because, like, we're we're waiting for something that might happen. Everybody's telling us this might happen, that might happen.   [00:58:04.010] Frankly, we're talking about recession. Like recession might have already come. I mean, the economic soothsayers, they say, oh, no, we haven't had recession yet, because they're the experts and they know you don't get an opinion. You don't get to decide whether or not we've already been in recession. The recession is already here.   [00:58:21.500] Your opinion doesn't count. It's only the experts that get to make that decision at the National Bureau of Economic Research. So it's all rather silly, but this is kind of what everybody's in right now, this state of waiting for some catastrophe. We're not going forward, we're not really going back. But there's just not really a whole lot of motivation.   [00:58:37.520] There's not a lot of optimism, and the whole world just sort of stuck in the doldrums. And what a terrible reflection that is, frankly, on a lot of institutions on the media for just constantly chirping away the global leadership. They say so many countries are being run by completely idiotic clowns. And the media just goes, you have, again, these things that are being universally predicted by the experts. Now.   [00:59:00.030] The media goes and amplifies all of those things, and it does make an impact. It does cause people to change their decisions, change their behavior. It causes businesses to change their behavior. I talked about self fulfilling prophecies earlier. I was watching something, a Wall Street Journal, and they had an expert on they were talking to a guy that doesn't really matter who, but he's an expert.   [00:59:23.820] And they were doing these rapid fire questions and is stock market going to be higher or lower a year from now? And he said lower. Just one word answer.   [00:59:37.350] So let it be written. The expert has said the stock market is going lower. And so now if you're somebody that pays attention to that and you're thinking, oh, you're thinking, oh, jeez, I was thinking about investing in the stock market, but now the expert says it's going lower, so I guess I better not make the investment. It's crazy.   [00:59:54.830] If you want to invest in a great company, you found a wonderful business that's managed by, again, talented, innovative, honest people of integrity. It's got a great product and great prospects. Who cares what this guy says? Who cares what anybody says? Because at the end of the day, all these guys could be wrong.   [01:00:13.000] Everything could change tomorrow. And again, we learned that lesson over the past few years with COVID Everything changed practically in a day. Vladimir Putin could drop dead literally right now, and everything's going to change. There could be any number of things. A major oil discovery, major gas deposit, new technology invented.   [01:00:33.280] So many things that could happen in an instant. Peace in the Middle East. Venezuela decides to embrace representative democracy and all the idiots step down. There's so many things that could happen literally in an instant. And again, every single thing is a possibility.   [01:00:52.850] Everything is possible. And so it could turn out that everybody's wrong. There's certainly reasons why people have well reasoned arguments. I'm not saying like, oh, everybody's a moron. No, there's very smart people, and there are reasons why they may be right.   [01:01:03.840] There are reasons why may they be wrong. But just because they're smart people and experts in their field, nobody knows. Nobody can predict the future. And also, the reality is that right or wrong, there are still a lot of great things happening in the world. There's an abundance of really great opportunities, technological advances, all sorts of things that are happening in the world.   [01:01:23.770] And so somebody says a one word answer lower. Stock market is going higher. Lower. And that's going to dictate somebody else's decision making. No, that's ridiculous.   [01:01:35.310] Mock de Zuma found out the hard way sometimes the experts are completely and totally wrong. He paid dearly for it. I think a better approach is to remember Richard Feynman. Don't let the high priests, don't let the expert class intimidate you and control your thinking, control your mood. It's, I think, really important right now to have the mental toughness and the intellectual independence, to make your own decisions and realize that you're in control.   [01:02:01.170] You are 100% in charge of you. You are completely and totally in control. I want to thank you very much for listening. It's great to be back. I hope you had a really wonderful holidays and we'll speak again next week.   Close Podcast Transcription

On December 10, 1896, in the picturesque seaside town of San Remo, Italy, the famed Swedish chemist breathed his last breath after suffering a devastating stroke, and died. Nobel was an incredibly wealthy man at the time of his death, and most of his wealth had been placed in a trust. (In doing this, Nobel managed to sidestep Sweden’s gargantuan inheritance tax that had been in place since 1884, AND the Kingdom of Italy’s estate tax.) Nobel’s death is commemorated every year on December 10th, at the annual banquet which honors the newest recipients of the Nobel Prize. That’s tomorrow. And among the honorees at this year’s banquet is the former head of the US central bank, Mr. Ben Bernanke. I’m sure Bernanke is a wonderful human being who certainly tried his best. But, as you may recall, he was the “expert” who established the precedent of slashing interest rates to zero and conjuring trillions of dollars out of thin air. When Bernanke first became Fed Chairman in 2006, the central bank’s balance sheet was about $850 billion. And as the housing market began to decline, he continually insisted that there wouldn’t be a housing crash… nor a recession… nor certainly a major economic crisis. He was completely wrong on all three accounts. Within a couple of years, the entire global economy had nearly collapsed. Bernanke responded by printing so much money that the Fed’s balance sheet ballooned to $4.5 trillion (from $850 billion). And he cut rates to zero. Bernanke had this power because the nature of our financial system awards dictatorial control of the money supply to a tiny group of unelected central bankers. And Bernanke was the chief of that unelected committee. Bernanke faced some criticism for his actions, most vocally by then Congressman Ron Paul. But similar to the incorrect predictions he made about the economy and housing, Bernanke insisted that there would be no consequences… that the Federal Reserve could continue to keep rates low and print money, and nothing bad would happen. Once again, this view proved to be totally wrong. And we’re seeing the consequences now with record high inflation. It’s not Bernanke’s fault. He’s human. He made mistakes. All of us have. The real problem is having a system that gives supreme control to a tiny group of imperfect, mistake-prone human beings. The Fed has virtually zero oversight, zero accountability. They do whatever they want, and hundreds of millions of people have to suffer the consequences of their actions. More perversely, though, they’re held up as “experts”. And even though they’re just as human as the rest of us, these “experts” are somehow seen as infallible. We experienced the same thing during the pandemic; a tiny, unelected group of public health “experts” were given near totalitarian control over how hundreds of millions of people were allowed to live their lives. And we were expected to suspend all doubt and scrutiny, and to believe everything they say without question… because they were the experts. The most absurd part of all, though, is that even when they’re proven to be completely and totally wrong… these “experts” are awarded our society’s most esteemed prizes for achievement. Again, Bernanke may be a wonderful guy who tried his best. But his approach had devastating consequences. He created one of the biggest financial bubbles in human history. And tomorrow he’s won the Nobel Prize. This makes about as much sense as giving the Nobel Peace Prize to Henry Kissinger or Barack Obama. Or the special 2020 Emmy award to New York’s governor Andrew Cuomo. Or when Will Smith received a STANDING OVATION when he won the 2022 Academy Award for Best Actor, literally minutes after assaulting Chris Rock on stage. Or Vladimir Putin receiving the French Legion of Honor. Or Kamala Harris winning Time Magazine’s Person of the Year. Or the New York Times and Washington Post winning the 2018 Pulitzer Prize (for ‘excellence’ in journalism) for their “deeply sourced. . . coverage of Russian interference in the 2016 presidential election”, which turned out to be a complete hoax. Or Tony Fauci winning the US government’s “Employee of the Year” in 2020, after having already won the US Presidential Medal of Freedom. It’s hard to take any of this seriously when these organizations bestow their awards to “experts” who are so consistently wrong. This is the topic of our podcast today, which I call “Another win for the expert class”. It’s a bizarre cycle where ‘experts’, who sit on these award committees, bestow their prizes to other ‘experts’, thus inflating the credibility of the expert class far beyond where it should be. Again, we’re all human, and we all make mistakes. And that’s precisely the reason why no one… no matter how much of an expert he or she may be… should have unchecked power over hundreds of millions of people. Not to completely miss out on the fun, though, and given that this will be my last podcast until January, I also decided to resurrect an old favorite of mine– the annual Tommy Franks award. Tommy Franks is a retired four star general who was the first commander during the early days of the War on Terror after 9/11. Franks is a no-nonsense guy from Texas who didn’t pull any punches. And one day when a reporter asked Franks what he thought about a senior Pentagon bureaucrat, Franks didn’t miss a beat and quipped “he’s the dumbest fucking guy on the planet.” So, since the “experts” have been showered with so many awards already, I would be remiss if I didn’t add one more to the mix, and once again roll out the annual Tommy Franks “expert” award for 2022. Obviously the competition was pretty stiff. German Chancellor Olaf Shulz seems bent on freezing his people to death. Chinese President Xi has single-handedly been destroying his country’s social and economic prospects in the name of a virus. Teacher’s Union head Randi Weingarten is on the list for waging jihad against America’s children. Kamala Harris makes the list for her endless incompetence and word salads. Press Secretary Karin Jean-Pierre is also a nominee for maintaining an incredibly impressive level of general cluelessness. Pelosi makes the list for her keen grasp of arithmetic (“It costs nothing”) and for nearly causing World War III over Taiwan. The list goes on and on. But there is one who stands head and shoulders above all the rest. You can listen in to the podcast, and cheer on this year’s winner, by clicking here– “Another Win for the Expert Class”. Open Podcast Transcription [00:00:00.890] Today, we're going to go back in time to the 20 May in the year 325 Ad, to an ornate, luxurious palace of the Roman Empire, but located in an area that today would be considered part of northwestern Turkey. Now, the guy at the time who was the Roman Emperor's, name was Constantine the Great. He was present that day and his job was to essentially preside over over the opening ceremonies of what would be one of the most important conferences to have ever taken place in the history of the world. Seems like a weird concept, but it's absolutely true. This was a conference to which nearly 2000 people were invited. [00:00:39.140] It's not exactly known exactly how many of them showed up, but historians estimate that at least a few hundred made the very long journey. In ancient times, it was a big deal to have to travel, to go such a long way and made the long journey to Turkey to attend the event again. This was part of the Roman Empire, and Constantine, who was the Emperor, was there. Constantine was a Pragmatic guy. He didn't become known as Constantine the Great because he was stupid. [00:01:02.140] He was actually a very intelligent guy. He was a highly skilled politician, and he had spent really almost two decades trying to reunify Rome. And this is actually an important part of Roman history, because in around 293, the guy who was emperor at that time, in 293, his name was Diocletian. Diocletian may sound familiar to you, especially if you understand and know economic history relatively well. Diocletian is the guy that had this famous edict on wages and prices. [00:01:26.400] He tried to set price controls in the same way that price controls have been tried by many kings and emperors and rulers throughout history. They never work. They're always a terrible idea. They were a terrible idea when Diocletian tried them in the early fourth century. And so this is the same guy who also decided, you know what, I'm going to split up the empire. [00:01:44.510] That was another one of his brilliant ideas. In addition to wage and price controls, diocletian decided he was going to carve up the Roman Empire and then award the power and ruling of all these sort of smaller regional empires to a bunch of different people, all of whom had their own agendas. And as you can imagine, it didn't take long for these regional rulers and these mini Roman empires to go to war with each other. And so, essentially, by splitting up the Empire, all Diocletian did was he created four times the mess of the original empire. Terrible idea. [00:02:13.210] And eventually, Constantine was the guy that managed to reunite that empire. He did it in 324 Ad, after nearly two decades of really trying to unify this, defeating all the other rulers. And he did so because he had a great deal of help from Rome's Christian population prior to Constantine under Diocletian in particular. And before diocletian. To be fair, christians in Rome had been heavily persecuted. [00:02:39.180] Diocletian was particularly brutal to them. Christians had been deprived of their property. They were arrested, tortured, executed. They were thrown into the colosseum and eaten by exotic animals for everybody else's entertainment. Constantine was the guy that put an end to all of that. [00:02:52.310] He knew that Christians were committed, there was a lot of them, and that he would probably be better off in his political career and the campaigns that he was about to wage militarily if he had the Christians on his side. So he made it clear to the Christians, made certain promises that he would liberate them from their persecution, and this ended up being a very good gamble. Constantine was an educated guy. He was brought up to be able to easily socialize and had friends. They were pagans and Christians and could sort of mix in and out of all these different circles. [00:03:22.950] And he knew that promising religious freedom to the Christians would be enough to mobilize them towards his side in this war to sort of retake the Roman empire. And that's exactly what he did. Now, unlike most politicians, constantine actually made good on his commitments. And so in 313, this was before he had finalized reunifying the entire empire, but by 313, it was clear that he was the top dog. He was clearly the dominant leader of all the remaining rulers that were trying to control the empire. [00:03:48.130] It was obvious that Constantine was the dominant guy at that point. And so in 313, he announced full religious freedom, not just for the Christians, but for everybody in the empire. He said, you know what? You can believe whatever you want to believe. I don't really care. [00:03:59.930] You do you, and it's fine. And he ended up actually, later on, restoring property to the Christians, the property that had been confiscated from them by the Roman government. And so the Christians liked this guy a lot. In theory, Constantine himself actually converted to Christianity. He was baptized on his deathbed and all these things. [00:04:17.330] And so they liked him, they appreciated him, and they definitely supported him. And so it was after, in 324, he defeated the last competing ruler. And so Constantine became the emperor of the kind of reconstituted Roman empire. But at that point, he decided to move the capital to the east, because at that point, the east was the future of Rome. And he knew it. [00:04:38.390] A lot of people knew it. Rome, the city, rather. The Roman empire deteriorated, really, at that point, so much that the city of Rome, the legendary city of Rome, where it all started, rome wasn't even the imperial capital anymore. It wasn't even the provincial capital, the regional capital in the west, in fact, the western capital of the Roman empire. And the western Roman empire actually moved to what is today Milan in northern Italy. [00:04:59.370] So Rome, the city of Rome, wasn't even the capital anymore. And he said, you know what? We need to move on from this. Let's turn the page. We'll have a new start, new empire, just reconstituted. [00:05:08.140] We're going to have a brand new start. I'm making a new capital. And so he decided to make his capital in modern day Turkey. This was this was in the east, and that's where the future was. So they got to work on a city, the capital city that bore his name for 16 centuries. [00:05:23.120] It was known as Constantinople for 16 centuries. Today it's known as Istanbul, obviously in Turkey, but it takes a while to build capital. So in the meantime, he had a vast palace nearby in a city called Nica. And it was in Nica that he called this great conference the following year in 325 Ad. And the reason why he did that was because he was concerned. [00:05:44.680] Again, Constantine was a pragmatic guy, and Christianity was still relatively nascent. It was only three centuries after the death of Christ, and it took him two decades of winning the peace. He had fought war and battle after battle, and he just he didn't want conflict anymore. And he knew that there were internal divisions within Christianity. Again, it was still pretty nascent. [00:06:06.450] And these internal divisions could cause an all out civil war, at least serious social strife. And he said, you know what? After two decades of trying to win a peace and reconstitute the empire, I'm not interested in this. I don't want to have this anymore. And he was far too pragmatic to allow any kind of social conflict to take place. [00:06:22.410] So he convened this grand event, this big conferencing. He invited bishops and people of high religious standing from all over the empire to come and once and for all settle their religious disputes. And you might be thinking, well, what kind of religious disputes are we talking about? Because if you're somebody who's Christian today, it might seem like all that stuff is water under the bridge. But really, in the early days of Christianity, there were a lot of disputes. [00:06:47.710] There were a lot of unresolved questions. I mean, honestly, some things that we might think of today is really people really had a fit about that. Yeah, they did. Things like, did Jesus Christ own his own clothes? This is a guy that was going around healing the sick and taking care of the poor and so forth. [00:07:07.610] Did he actually own his clothes? Did he have any personal property to have any possessions at all? People really vigorously debated those things, and the questions, particularly in front of the Council of Nica, they had an agenda, and the agenda were things like, if Jesus was the Son of God, did that make Jesus lesser than God or more than God, or equal to God? And was he born or was he created? And all these different things. [00:07:30.590] And then some of these were administrative issues as opposed to purely philosophical and religious issues. How do you deal with there are a lot of Christians that were called lapsed Christians, people that literally, at the point of a sword, soldiers come in and basically shove a sword in their face and say, are you Christian or not? And if you are, I'm going to kill you. And some people renounce their faith on the spot and said, no, I'm not a Christian. And these were called lapsed Christians because basically they renounced their faith in order to avoid persecution, to avoid torture, to avoid execution. [00:08:00.080] And so would those people be welcomed back into the Church? And how easily could they be welcomed back in the Church? And so these are sort of administrative issues that need to be sorted out. One of the actually almost silly administrative issues was when exactly Easter, the Easter holiday, would be celebrated. And this was this shockingly caused tremendous controversy in the early days of Christianity, because it was a time when the holiday was a lunar calendar, Jewish calendar, the Hebrew calendar and the Roman calendar, the Julian calendar, all these different things. [00:08:27.800] And it was really difficult to determine when exactly the Christian holiday would be celebrated, when Easter would be celebrated. And again, these disputes might seem quite petty to a lot of people today, but this back then, it was really enough to cause extreme social turmoil. And you had factions developed, and you had people that say, this is what we believe, and if nobody else believes us, when we're going to fight each other, all these things. And it was a lot of internal strife within the community of Christians. And so Constantine, always the diplomat, always the Pragmatist, convened this conference. [00:09:00.400] It's now known to history as the Council of Nicaea. And to his credit, even though he was the emperor of the Roman Empire, had a lot of power, he pretty much stayed out of it. And he let all these hundreds of people argue with each other and sorted out among themselves the bishops and the clergy that were in attendance and had people from all these different factions. He basically let them battle it out. And in the end, the Council made its final resolutions, and they literally defined what was the belief system that still actually exists today for most denominations of Christianity. [00:09:33.280] They defined essentially, this is the truth. This is the truth. And they defined every last detail about what the followers were supposed to believe. And they came up, even with a formal statement, this is called the Nicene Creed to summarize the key points of this truth, they said, this is the truth. This is what we've decided is the truth. [00:09:51.700] And anybody that doesn't accept this will be excommunicated from our system. And after they decided that all these are the religious authorities. Now, Constantine as the civil authority, the Emperor of Rome, who was in charge of the government, he didn't get really involved in the religious issues and the religious decision making. But as the head of the government, he played along and he said, okay, the religious people have decided, and the government now is going to support you. So you're saying you're going to threaten people with religious punishment and excommunication if they don't believe your truth? [00:10:21.610] Well, I'll go along with that. And I'll essentially impose civil and criminal penalties, including exile on the people who the council majority had decided to excommunicate. And there were people at the Council of Nica that stormed out of the council angry and bitter because their faction didn't win the philosophical battle and they were excommunicated. And some people went off stuttered their own church and so forth. But Constantine actually ended up exiling these people because it was what the religious majority decided that they wanted. [00:10:51.220] The powerful bishops that defined the truth, this is what they wanted, and he went along with it. Now, I'm not saying all this to dump on any religion or anybody's beliefs, but I do, as you can imagine, believe in freedom. I believe absolutely in all sorts of freedom, including the freedom of religion, which is really, in my opinion, a form of intellectual freedom. I think that people should be free to believe in whatever they want to believe and not have it dictated to them by a council of, frankly, people that are generally proven to be self interested bureaucrats. We've seen this ourselves many, many times. [00:11:26.000] Obviously, one very recent example of this was COVID, the Pandemic Debacle. We all remember it. Not only is it very recent, but it will forever be burned into our memories. The virus came along. It's been three years ago now, recording this, December 9, 2022. [00:11:40.290] It's been basically almost three years exactly at the end of 2019. By March 2020, it had taken over the world. And also having taken over the world, were the public health dictators. Now, let's be fair. Like a lot of us may remember things a little bit differently, but most people were really shit scared at first because based on the available information at the time, the stuff we heard in the media, the stuff we heard on social media and all this stuff was that it was like this flesh eating virus that if you got it, your brain would explode and you would die instantly. [00:12:14.980] And that's sort of the thing that everybody thought. We saw the videos of people getting welded into their homes in mainland China and all these sorts of things. You think, well, jeez, that's probably not good. That sounds like a really nasty virus. We had images of a lot of people that are a bit older probably remember the Ebola outbreak in the 1990s and the hot zones and all that stuff. [00:12:36.710] That just I mean, that was really terrifying stuff because it was like you were just bleeding from all these orifices in your body and just have this horrible, convulsive death. And I think that's what a lot of people thought, you know, COVID-19 was at first. And if I'm really fair, I have a very difficult time faulting anybody for their initial reactions to COVID-19, including politicians and policymakers and the public health people. But you're supposed to be leaders, are leaders for a reason. And after several months of this highly reactionary, super emotional response, several months of that, there was more than enough time and more than enough data, more than enough information for these leaders. [00:13:15.210] I'm doing air quotes, of course, to summon their courage and to analyze the information and to look at the data and weigh the costs and benefits to make pragmatic and rational decisions. But that didn't happen. Instead, basically, we got a new council of Nica where you had a handful of bureaucrats, self interested bureaucrats, defined the truth that everybody else was told to believe, and anybody that didn't believe it, anybody that had different opinion, anybody that had different data, anybody that had different analysis was punished. They were censored, discredited, and basically exiled. Now, we know the stories. [00:13:51.210] This is nothing new. We've talked about this. I've written about this a lot. These are very familiar stories. You might remember the Great Barrington Declaration early on in the pandemic. [00:14:00.670] This is a bunch of eminent scientists who got together and said the cost of the lockdown is not worth it. The lockdowns will cause far more harm than good. And you have these people at the top of the pyramid. Francis Collins, Tony Fauci sought to use their influence and all their connections in the media and big tech to discredit these people who wrote the Great Barrington Declaration, who had a different opinion and thought that the lockdowns weren't worth it and they should try a different approach, and tried to discredit them as fringe scientists. And of course, the quote from the email, a very famous email, was, we need a quote, quick and devastating takedown of its premises. [00:14:37.120] So these are fringe scientists and this wacko idea that we shouldn't lock down the whole world, this was considered controversial and these people had to be censored and discredited. And it's crazy when you think about the extent to which this happened, because that one example only scratches the surface of the censorship that took place during all the peak pandemic insanity. And I don't want to spend this episode today rehashing all of that because we all remember it so well. But a few of these examples that you'll recall I mean, remember when the vaccines first came out and anyone who said at the time that a vaccinated person can still get COVID. Oh, if you said that, you were erased off the Internet in an instant, and it was these key members in the government that ensured that the censorship would take place. [00:15:29.450] And of course, now we know that that's obviously true, that of course, if you're vaccinated, you're triple vaccinated and quintupley boosted that you can still get that people still get COVID. They absolutely get COVID. But if you had said that back when the vaccines first came out in 2021, late 20, early 21, you would have been erased off the internet for your misinformation. And again, anybody that suggested that COVID was leaked from the wuhan institute of virology, you were canceled, you were raced off the internet, you were decried, you were discredited and said, oh, this denounced. Everything about this person is evil, terrible misinformation. [00:16:04.990] Now, of course, this is a mainstream, widely accepted idea, and there's a lot of evidence to support it, and certainly a lot of evidence to show that all these official investigations discrediting that theory were highly biased. And we didn't even get into that whole rabbit hole. And yet again, the entire time, I'll just call it church and state, because by church, I mean the holy warriors and the COVID fanatics who teamed up in public health to define truth, jam it down everybody's throat, shut down intellectual descent, do a devastating takedown of any intellectual descent, and excommunicate all the non believers. These were the holy COVID fanatics that had serious positions of power. This is what they were doing over and over and over again. [00:16:52.340] And of course, now it turns out that many of their key policies, these major ideas, the entire concept of lockdown, lockdown, lockdown, let's just shut everything down and just sit and wait for a virus to just disappear. It turns out that there's a mountain of data showing that many of these ideas and concepts may in fact have been horrifically wrong, that the lockdowns were totally destructive. And we've seen a lot of data behind this. I've written about this and reprinted a lot of reports about this showing in the United States. For example, a recent report showing that just really the devastating impact on young people their educational, developmental, and social progress. [00:17:33.390] A lot of this stuff actually comes from the government itself, from the education department that shows how far behind young people have fallen. We can see all the data on suicides, drug abuse, spousal abuse, child abuse. It's absolutely disgusting. And then the mountains of data on things like mask mandates, and we could see this country versus country, state versus state. If you remember when the state of Texas said in 2021, they said, you know what, we're done with mass mandates. [00:17:58.300] We're not going to do mask mandates anymore. And of course, fauci came in and predicted this giant wave of death in the state of Texas. There's going to be bodies piled up in the streets because Texas is saying, no more mass mandates. And it didn't happen. It didn't happen. [00:18:11.690] And when you compare, you know, the death rates and the infectious rates and so forth in these states that had looser mandates versus stricter mandates and so forth, there was no clear consensus. And in fact, in many respects the looser states, the easier going states fared better off. If you look at especially on an age adjusted, population adjusted basis, you compare places like Florida and California, it was pretty clear that there was an advantage to places that had looser restrictions, that didn't have the same mandates. And yet all the bishops and the high priests and the media just let them get away with it. When they said, hey, what happened with Texas? [00:18:47.200] You said it was going to be bodies stacked up in the streets. You just shrugged it up and said, oh, I don't know, and they just let him get away with it. So everything that this guy said, the media just repeated and said this is the gospel. He went to Zuckerberg and all the social media guys and they said anything that Fauci says is true and anybody that disagrees with it is not true. And even when he was totally wrong, they never really came out and said, okay, well, sorry, we were wrong about that, we were wrong about this and we were wrong about that, and we're changing our policies and so forth, they just gave him a pass. [00:19:17.300] Every time he was proven to be completely wrong, they gave him a pass. When he was caught telling a bold faced lie, they gave him a pass. They completely ignored. He never apologized, never admitted he was wrong, never admitted he might possibly be wrong. And his ego was so massive that even aligned himself to the very concept of science itself as if he is the second coming of Isaac Newton and Stephen Hawking and all these things completely ridiculous and even to this day still seems to be a believer in these policies. [00:19:46.070] In the lockdowns you might have seen, there was a recent interview did with CBS News and you have to use some of these words very loosely. Interview you have to do very loosely the journalist you have to put in error quotes because to describe it as a softball interview would be a horrific insult to the sport of softball. The quote unquote journalist was basically asking and answering the questions for Fauci, so he didn't even really have to say very much because she was just putting the words in his mouth and essentially asking whether or not he agreed. It was so ridiculous. And then when asked about there's COVID outbreaks, so there's RSV, there's all these things do we need to close the schools again? [00:20:25.930] And of course, Fuchsi pipes up and demonstrates that he's completely open to the idea of closing schools again, even though the science very clearly proves that to be wrong, that the consequences just are not worth it. The benefits are marginal, the consequences on the lives and the development of young people have been enormous. And he's just still stuck in this mode of, well, we've got to consider that and maybe we should close the schools and again, living in the past. He's telling the reporter, oh, we've got a long way to go and we're not there yet. And he's still insisting on the wet market theory that, oh, it must have been a bad must have been, et cetera, can't bring himself to acknowledge the idea of a lab leak. [00:21:09.070] And probably the most hilarious part is that when asked if China is covering up the truth about COVID's origins, he he actually said this in reference to the term covering it up. If it's a cover up, he said, quote, I don't know what that means. Literally, direct quote, I don't know what that means. I don't know what a cover up means. His delicate babe virgin ears can't possibly comprehend what a cover up is. [00:21:35.070] This is from a guy who is the highest paid federal employee who's been in his position for decades. Been in his position since 1984. Was put in his position when Ronald Reagan was president. Put in his position by Ronald Reagan, whose net worth just happened to soar during the pandemic, thanks to his vast stock portfolio, which is almost 100% invested in the pharmaceuticals companies he was promoting and in funds who were invested in these pharmaceuticals companies. This is not some wild conspiracy theory. [00:22:00.860] This is all publicly available information because as a government employee, anthony Vouches had to file public disclosures about his financial status. And so to see the benefit couldn't happen to a nicer guy. I mean, it is really a financial success story. Good for him. So let's put a bookmark in this for now, and we come back in a little bit to our friend Dr. [00:22:22.420] Fauci because I want to move on to another expert. And this is another expert that's actually in Sweden right now as we have this conversation as record this again. This is December 9, 2022, because he's about to be honored at the Nobel Prize banquet tomorrow, every year on December 10, to coincide with the death of Alfred Nobel, which took place on December 10, there's this Nobel Prize banquet. And one of the guys who's receiving Nobel Prizes here, there's the Nobel Prize in economics is Ben Bernacki. Ben Bernacki used to be the chairman of the US. [00:23:01.850] Federal Reserve, the central bank of the United States, from 2006 to 2014. So he was the head of the largest central bank in the world, which meant that he had an incredible amount of influence and authority in setting US. Monetary policy. Now, that might sound relatively boring unless you actually really understand what US. Monetary policy is, what monetary policy is in general. [00:23:22.110] And to give you a little bit of a snapshot, Bernanke Bernanke once bragged in a televised interview I think it was on 60 Minutes, this was some years ago and he claimed, quote, that he could raise interest rates in 15 minutes because people would say oh, well, you're printing a lot of money and you're expanding the money supply. And isn't this going to cause inflation? You said inflation. You don't have to worry about inflation. I could raise interest rates in 15 minutes. [00:23:44.310] And he kind of bragged about it, because when you think about it, that's an incredible amount of power for a single human being to have, or even a small group of human beings. Because what he's saying is he has the ability to change interest rates on a dime at the drop of a hat, to create infinite quantities of money at the drop of a hat, and do so without any congressional approval, without any presidential approval, without really any oversight whatsoever. Him and a couple of other people on this committee, they go, let's create trillions of dollars out of thin air. Let's slash interest rates. And they could do all these things without, again, any approval mechanism. [00:24:18.830] And the impact of these actions is incredibly profound. Raising and lowering interest rates, printing money, they have really profound impacts on the economy. The easiest way to think about this is that interest rates are essentially the price of money, right? Interest rates are the price of money. When you think about it, it makes sense. [00:24:35.030] When you're borrowing money, you pay interest. So that's the price you pay for money. When you're saving money, you're essentially loaning it to your bank. When you're saving money, that's the price of money. The interest is the price you get paid or that you pay for money that you might borrow or lend or anything else. [00:24:50.330] And so when you have the ability to set interest rates, you're essentially setting the price of money. And when you have the ability, the price of money is the most important price in the entire economy, followed probably fairly closely by the price of energy. But when you have the ability to set the price of money, it really gives you the power to control the price of just about anything. Real estate, stocks, sovereign debt, literally just about everything is derived from the price of money. And this isn't really hard to understand. [00:25:22.070] Let's think about real estate, for example. If interest rates right now drop to 0.1%, the 30 year mortgage is 0.1%. Just imagine how much money you could borrow if the interest rate is 0.1%. I mean, with $1,000, you could borrow $12 million. If interest rates are 0.1%, it would be utterly ridiculous. [00:25:46.180] And because of this, home prices would probably rise, right? If it's that cheap to borrow, that means the average home buyer could afford to borrow more money. And if the average home buyer could borrow more money, that means they could bid more money for a home. So all home prices end up rising because interest rates are so low. But if interest rates rise to 99.9%, right, home prices are going to plumb, it because it's so much more expensive to borrow money, right? [00:26:09.670] It's because you're paying so much more interest, buyers won't be able to afford to. Borrow or pay as much for a home. And so home prices are going to fall. So because interest rates rise and fall, that affects the price, the value of homes. It's the same thing with stocks. [00:26:24.340] It's the same thing with business equipment, the same thing with all this stuff. And you think about over the last several years, businesses, big corporations, they have borrowed so much money because it's been so cheap. They've been able to go to the bond market and borrow money at 3-2-1 percent. I mean, nothing, right? And they use that money. [00:26:42.050] They borrow 1%, and they use it to buy back their stock. So their stock ends up going up 10%. They borrow money at 1%, they use it to buy back their stock so the stock price goes up. And these are the sorts of things that happen when interest rates are low. And so by cutting rates, it creates this extra stimulus, this big monetary stimulus. [00:27:01.900] All this money sloshing around the system, and it affects the prices of all these assets, which impact the price of everything, means that it's easier to do big projects, which has impacts on the prices of oil and gas and gold and everything else. And it all comes down to this handful of people, this unelected committee that has the supreme power to change interest rates in their sole discretion whenever they want to. Again, like Bernacki said, I could raise interest rates in 15 minutes. No human being should have that kind of power because it gives them extraordinary control over virtually everything in the economy. Now, Bernacki, when he was a Fed chairman, he was the first guy really, in modern history to use that power unabashedly to slash interest rates down to zero. [00:27:50.570] Nobody had really ever seen that before. They kept using the word unprecedented. Unprecedented. But he made unprecedented normal. He made unprecedented kind of commonplace because Bernacki was if you remember, during this time, Bernacki was the Fed chairman right before he came in, right before the last financial crisis, the big financial crisis in 2008. [00:28:09.370] A lot of you probably remember that. You know, I mean, this was this was where everything, the banks crashed, housing crashed, the entire economy, the entire old global economy almost went off the rails. You had entire countries that went bust overnight. Iceland famously went bust literally overnight because they had so much economic exposure to all these different things. It was a really, really terrible financial crisis. [00:28:33.260] So Bernacki dealt with it by slashing interest rates to zero and printing trillions of dollars. [00:28:40.230] Right before this happened, he was completely unaware that there was anything wrong, that there are any problems. And there was a certain point he went and testified before Congress. This was prior to when the crisis really kicked off in 2008. I don't remember exactly when it was, but it wasn't that long before. And he insisted that there would not be a nationwide decline in home prices. [00:29:01.440] And even if it did happen, that even if there was a nationwide decline in home prices would not cause any broader economic problems. He kind of kept saying this over and over again, everything's going to be fine. Everything's going to be fine. And of course, he was proven hilariously wrong. It didn't seem hilarious at the time, but it was completely and totally wrong because the entire global economy nearly collapsed and he totally didn't see it coming. [00:29:24.610] Again, this is a guy that's about to get the Nobel Prize, be honored for winning the Nobel Prize literally tomorrow in Sweden. So as he again reacted to all that slash interest rates to zero, he kept them at zero for pretty much his entire tenure as head of the Central Bank. And when you think about that, zero interest rates are kind of a funny thing. Again, if you go back to the concept of what are interest rates? Interest rates represent the price of money. [00:29:51.280] And if you're talking about the zero interest rates, what you're saying is the price of money is zero means money is free, right? Or more appropriately, if the price of money is zero, you're saying that money has no value. And that's a very dangerous concept. It's a very dangerous incentive. Capital should always be treated as a precious and scarce resource. [00:30:13.260] Because if it's a precious and scarce resource, then that means that the allocation of that capital, where it's invested and how it's invested, should be determined by rational, prudent people. And instead what we're saying is capital has no value. We shouldn't treat it as a precious and scarce resource. We should treat it as something that has literally no value. And so when money is free, it has no value. [00:30:31.980] You can just borrow and borrow and borrow and borrow for nothing. You just get money for nothing. You go to the bank, you borrow 0% and people end up making terrible capital allocation systems. Now, of course, the average guy isn't borrowing money at zero, but if you're a bank and you're able to borrow money at zero, they open up the discount window and big institutional people come in and borrowing money at almost nothing and they end up making really terrible capital allocation decisions. This is how bubbles form. [00:30:58.840] This is how, again, companies who have no hope of ever turning a profit end up being worth $50 billion and they're able to borrow lots of money and buy back their stock. And they don't even generate enough revenue to pay the tiny little bit of interest that they have to pay, but they're able to continue borrowing money. They have no hope of ever turning a profit, but they're just able to keep borrowing money. And all the different things that we've seen in the Art Basel Art Festival, some guy duct tapes a banana to a wall, calls it art and then sells it for $120,000. Who would pay $120,000 for a banana duct tape to a wall. [00:31:36.110] But you do that when capital has no value, or you get $91 million for an NFT of a picture of I think it's a white sphere on a black background, becomes valued at $91 million. I mean, this is the sort of stuff that takes place when capital has absolutely no value, and capital has no value when interest rates are zero. And this is something that comes officially from the central bank. And again, at zero interest rates, money literally has no value. These are the sorts of things that we see over and over again. [00:32:09.850] This policy was continued. It wasn't just Bernanke. The policy was continued through most of his successor's tenure. His successor was Janet Yellen, who is now the Secretary of the treasury. Janet Yellen was actually a very interesting case because Yellen was, you know, she, she admitted, quite surprisingly, she actually admitted that she was caught flat footed on inflation. [00:32:30.040] She gave a speech, she said, oh, and some interview saying, I didn't see it coming. I should have seen inflation, but I didn't see it coming. This is actually really interesting because several months ago there was a reporter who wrote a story actually, I think wrote a book, talking about inside the Biden administration, inside the Biden White House, saying actually Yellen did, though, and she alone was the only voice of reason in the entire administration that was cautioning them about inflation and saying, look, we really shouldn't spend so much money. We really shouldn't have these build back better, huge multi trillion dollar stimulus. Things like this is going to be very inflationary and you shouldn't do this. [00:33:03.480] And Yellen was the only one that knew that this was going to happen, and the reporter published the story saying Yellen was the voice of reason. Yellen knew that inflation was coming, and so there was at least one reporter to say, no, she was competent. She knew there would be consequences, and she said something about it. But apparently just somebody insinuating that she was competent infuriated her so much that she called a press conference. Now, bear in mind that this report, this story came out on a Friday afternoon. [00:33:32.280] She couldn't even wait until Monday morning to denounce the report. She called a press conference on Saturday to denounce the story and insist, no, I was not competent. I had no idea. I was just as clueless as everybody else about inflation. You have to look at this and go, this is the treasury secretary used to run the central bank. [00:33:50.160] That just has to leave absolutely no doubt that she had no idea what she was doing, had no idea about that there would possibly be any consequences. And of course, now we have another guy, Jerome Powell, as Fed chairman. This is the guy that famously rejected the notion of inflation in early 2021 when people said, hey, there looks to be some inflation said, no. What do you talk about? You're crazy. [00:34:12.240] There's no inflation. Then later on, by the summer, they rolled out that transitory. They said, oh, it's transitory. Inflation is transitory, which basically is Fed speak. It's code for prices are going to go prices are higher, but they're going to go back to their original levels later, so it's going to be a little bit of a plateau and then come back down later. [00:34:29.190] Finally, they acknowledge, okay, fine, it's not transitory, but we're going to do something about it. We're going to raise interest rates. We're going to do something about it. I swear to God we're going to do something about it. And then months and months and months went by, and they finally started with this tiny little 25 basis .0.25% interest rate increase. [00:34:46.180] I guess that was in March 2022, and of course, nothing happened. Wow. Inflation didn't suddenly plummet back down to 2%. And so then by the middle of the summer, a couple of months later, they their whole monetary policy had transitioned from this you know, there's no inflation to its transitory to we'll get to it when we get to it. So now it's this hair on fire, ultraemotional panicky. [00:35:09.400] Oh, my God, we've got to do whatever it takes, no matter what the cost, to get rid of inflation. We're going to raise interest rates. We don't care. It's this really panicky signal they keep sending in their monetary policy. It really does make somebody scratch their head and go, these are really the experts who have dictatorial control the money supply. [00:35:30.350] They completely missed it. I mean, not only did they miss it in the case of the Treasury Secretary, who had to go out of her way to make sure everybody knows that she completely missed it, she wanted to make sure she held a press conference to make sure that everybody knows that she had no idea that there could possibly be any inflation. And I mentioned them by name because it's impossible not to. And I'm not trying to disparage. I'm sure they're all perfectly nice people and maybe perfectly honest people and perfectly intelligent, rational people, but it seems pretty clear that they're not the infallible experts that they've been made out to be. [00:36:07.610] And that's the problem when you're dealing with these sorts of things, these experts, is that they're often made out to be infallible. These experts can never be wrong, and of course, they often are. And we've seen this now over and over and over again. To be fair to Powell and Yellen, this whole policy idea of let's slash interest rates to zero and conjured trillions of dollars out of thin air, this started with Bernacki back in 2008. Again, this is a guy he slashed interest rates to zero. [00:36:37.380] He expanded the Federal Reserve balance sheet from $850,000,000,000 to four and a half trillion in a very short period of time. So, I mean, do the math on that. That's trillions of dollars that he conjured out of thin air on the Fed's balance sheet to a level that was considered unprecedented. And then it remained unprecedented for so long, it just became the norm. And they kept insisting that, you know what? [00:36:57.720] Our economic theories suggest that we can print all this money and we could slash interest rates, and there's never going to be any consequences forever and ever until the end of time. And just in case there are any consequences, just in case there might be inflation, I can raise interest rates in 15 minutes, and everything's going to be fine. It was Ben Bernanke who set that example, and his successors continue to follow that. So it is kind of ironic that Mr. Bernacki is in Stockholm right now, where tomorrow morning he will be honored with this Nobel Prize Award. [00:37:26.840] I actually have to pause and say, just technically, people talk about the Nobel Prize in economics. Technically, the Nobel Prize is awarded in, I guess it's five things. It's physics, chemistry, medicine used to be called physiology, I guess. Now it's medicine, literature, and peace. I always have to throw up a little bit in my mouth whenever I said, talk about the Nobel Peace Prize, but we'll get to that. [00:37:46.250] But technically, what's known as the Nobel Prize in economics is actually what's known as technically called the Nobel Memorial Prize, and it's endowed by the Swedish Central Bank, but it's awarded alongside the other five. So it's sort of regarded as the same thing. People call it the Nobel Prize in economics, but it's technically the Nobel Memorial Prize. It's a little bit different, but it's pretty much the same. And they're honored in the same banquet and all of that. [00:38:08.510] So Ben Bernardi is one of the recipients this year. So he's in Stockholm right now getting ready for that big Nobel banquet that's going to take place tomorrow, December 10, which is again coincides with the day that Alfred Nobel died on December 10, 1893. [00:38:23.970] This is the guy who totally missed it, who started this trend of zero interest rates and conjuring money out of thin air and so forth. What's interesting is there's another guy again, if you know economics well, you know the name Friedrich Hayek, who is a very famous guy in what's known as the Austrian School of Economics. The Austrian School does not care for printing money. They don't care for conjuring money out of thin air. They don't really care for central banking either. [00:38:49.660] And the Nobel Prize, the Nobel Memorial Prize and economics, to be technical, in 1974, went to Friedrich Hayek of this very famous Austrian economist, and there was a great quote. He was talking about the Nobel Prize, and he said the great quote, he says, The Nobel Prize, this is Hayek. The Nobel Prize confirms on an individual an authority which in economics no man ought to possess. An authority which no man ought to possess. And he says he goes on to explain because the influence of an economist and he's talking about economists in particular, it didn't apply to physicists and chemists and so forth is particularly for an economist because he said the influence of the economist is an influence over politicians, journalists, civil servants and the public. [00:39:35.450] And this is true, right? Because the Nobel Prize does confer a certain level of authority and it's really true in all things. But Hayek pointed this out. He said it's not the same in physics, right, where a recipient, a Nobel Prize winner's authority is really only as good as his or her work. And you see this this has happened actually in the past. [00:39:54.500] And Rico Ferrema won the Nobel Prize in physics and later actually found out, oh, actually, that thing I won the Nobel Prize for wasn't even right. But I did discover something else, kind of discovered nuclear fission in the process, but I've been wrong. And he admitted that he was wrong. And people respect that when you actually admit that you're wrong. And this is a guy that won the Nobel Prize. [00:40:14.330] And a lot of people come back to Nobel Prize winners and challenge their work and so forth. And this is what happens a lot of times in the hard sciences because the hard sciences, it has to be based on the quality of the work, the ideas. Researchers and academics are constantly proving and disproving each other's ideas. And the fact that somebody's won a Nobel Prize doesn't necessarily insulate their ideas from scrutiny. But in economics, because economics touches everybody's lives. [00:40:40.210] Economists who are Nobel laureates are deified by the media, especially if they're advocating the things that the media likes. The media is generally a leftist institution, a left leaning institution. So you've got some Nobel Laureate in economics and some economist who's advocating for these leftist principles like wealth redistribution, tax the rich and all these sorts of things. They deify these guys and the media will generally believe, hey, this guy won a Nobel Prize. So everything he says is right. [00:41:09.510] And the public just goes along with that because they're being thrust in our faces all the time saying this is what the truth is. And everybody just believes it because it's a Nobel Prize winner. He's an expert and again, not trying to disparage the Nobel Prize or any of its recipients. Plenty of very fine people, plenty of very intelligent people, plenty of really worthy people that have won these prizes. But it's definitely one of these I call it an expert award. [00:41:32.740] And it would be ludicrous if we didn't point out that many, many times that these expert awards, let's say, politely leave us scratching our heads, considering to whom they were or in many cases were not given. The Nobel has a long list of controversies and not just obviously there's the Peace Prize, which is a total joke, but complete and total joke, but even some of the harder sciences. In the early 20th century, there was a chemist. If you study chemistry or medicine, you know the name Gilbert Lewis. Lewis structures, et cetera. [00:42:04.490] This is a guy that's made so many contributions of field of chemistry to literally fill entire textbooks. He was nominated by his peers, who really know what they're talking about, 41 times for the Nobel Prize, but he never received it because he had his arch rival and good buddy, close buddy of his arch rival was on the selection committee. And so Lewis was blocked 41 times from the Nobel Prize. He's like the Susan Lucci of the Nobel Prize. You know, you you won't know that name unless you're like Gen X or or baby boomer, but he's the Susan Lucci of the Nobel Prize. [00:42:36.680] Or, like, almost like a DiCaprio who kept getting nominated for the Academy Award. Finally actually won after he ate, like, some cow intestine or something and then puked. But for a long time, you get these people that just keep getting nominated. Nominated, never win. That was Gilbert Lewis. [00:42:50.530] Never won his entire life. 41 times nominated by his peers. But he kept getting blocked because he had this arch rival who made sure that Lewis never won the prize. Amazingly enough, actually, the Nobel Prize in Literature has a very long and controversial history, again, given who it has and has not been awarded to. So you got a guy like Bob Dylan. [00:43:12.890] I get. No offense to Bob Dylan. I like Bob Dylan. But Bob Dylan won the Nobel Prize in literature a couple of years ago. Kind of a joke, considering that other people that didn't, leo Tolstoy, who's considered one of the greatest writers in the history of the world, who was nominated also by his peers many, many times, never won. [00:43:30.290] And obviously that's owing to if you've read Tolstoy, you know his political views. Tolstoy was an anarchist. Tolstoy believed, if you haven't read Tolstoy, it's great stuff. Tolstoy believed that the government was a force of violence, corruption, intimidation, was not afraid to say it was not liked by the Nobel Committee. It was presided over by the king. [00:43:50.870] And all this, they didn't care for Tolstoy. So never won the prize. The Nobel Prize. Let's see the 2008 Nobel Prize in Medicine. This was partly awarded to a scientist who discovered the link between the human papilloma virus this is HPV and cervical cancer. [00:44:08.200] A lot of people have heard about this. This is the original guy that made the link between cervical cancer and the HPV virus. It turns out, though, that AstraZeneca, which actually had a big stake in a bunch of HPV vaccines, the ones that you probably remember, they were trying to force 14 year old girls to go and get this vaccine. And a lot of parents freaked out about that. No, AstraZeneca owned those vaccines, or at least the biggest stake in those vaccines. [00:44:34.090] AstraZeneca was really like fermenting. They were, they were there. They were linked to key members of the selection committee. They were sponsoring stuff and really heavily influencing the award outcome. So there's a lot of controversy, things like that. [00:44:47.690] The Nobel Prize in economics. Paul Krugman won the Nobel Prize in economics some years ago. Later on, he went on TV during the 2008 financial crisis, talking about the way out of the financial crisis were for the government to just print money. And, and invent actually what he said in this interview, I think he was on CNBC or Bloomberg, and he was talking about the government should invent a hoax threat, a phony threat of an alien space invasion. He said if the government just threatened, just pretended that there was the space aliens were about to invade and we had to go and spend a trillion dollars to defend against this fake space alien invasion, then this, this recession would be over, you know, in a month. [00:45:23.140] And, you know, obviously said that somewhat tongue in cheek, but these are the sorts of ideas you just got to look at it go, really? This guy won our society's most esteemed prize for intellectual achievement. And the ideas are and this is again, a person that usually goes out in the New York Times and writes his editorials about we need to print more money, we need to go into more debt and all this stuff, and it doesn't matter, and it's all fine. These are, these are bizarre notions. And again, we haven't even scratched the surface of these. [00:45:50.260] Again, you get into the, you get into the Nobel Peace Prize, and again, you kind of have to vomit in your mouth a little bit. Barack Obama cousin Barry awarded the Nobel Peace Prize early on in his administration after having done absolutely nothing, and then, of course, his administration was quite noteworthy for going and dropping remote control bombs on children's hospitals in countries full of brown people for his entire eight years of office, he escalated the wars in Afghanistan and Iraq. He destabilized the region, making conditions for ISIS to thrive, made things worse with North Korea, worse with Russia, and yet the Nobel Committee actually doubled down a few years later and insisted that Obama did in fact deserve the award, even though basically nothing he did was in the name of peace. Absolutely ridiculous. Henry Kissinger won the Nobel Peace Prize in 1073, which is just stupefying if you look at all the different, you know, the people that have been awarded the Nobel Peace Prize. [00:46:42.260] Absolutely ridiculous. But, you know, it's not, it's not just the again, not really singling out Nobel Prize or saying that it's a silly award or anything like that. There are some incredibly intelligent people that made incredible breakthroughs. But it's one of these expert awards that confers, just like Hayek said, it confers a certain level of authority that in some cases, just simply not deserved. And there are a lot of these expert awards, and I think, quite famously, we saw when New York state's sexual harasser in chief Andrew Cuomo. [00:47:13.700] You remember that guy? And they gave this guy an Emmy award in 2020 for his courageous leadership on television during COVID And then they went the following year, they took it away from him because he turned out to be sexually harassing all these people and the whole thing, you got to look at it and say, how do you expect to be taken seriously? What a joke. Just these awards, you got a you got a bunch of overpaid pampered celebrities standing around showering themselves with awards. They go and bring this idiot politician to show up and give him this special leadership award. [00:47:44.040] But it's the same sort of thing when Will Smith received a standing ovation when he won the 2022 Academy Award for best actor. This is just earlier this year, literally minutes after he assaulted Chris Rock on live television and then went on and got took his award and gave this very rambling, nonsensical self serving speech about universal applause and hugs and kisses from Bradley Cooper and Denzel Washington. Whatever farce. The whole thing is such a farce. The 2018 Pulitzer prize, which is awarded for excellence in journalism, was given to the New York Times and the Washington Post for, quote, deeply sourced coverage of Russian interference in the 2016 presidential election and its connections, obviously, to the Trump campaign. [00:48:28.040] And of course, this all turned out to be a complete and total hoax. And yes, these people won these dire institutions won the most esteemed prize for excellence in journalism. Nobody ever went back and said, wait a minute, that actually turned out to be complete bullshit. But it just goes on and on and on. Vladimir Putin was a word of the French legion of honor. [00:48:46.810] Kamala Harris was the name time magazine's person of the Year, which puts her in the same category as Gandhi, nelson Mandela, and the Apollo Eight astronaut crew. So it's again, not trying to take anything away from people that have received these honors or even the honors themselves. But again, it's just clear that sometimes these expert awards end up on the mantles of very questionable individuals. That brings me back to Dr. Fauci, who, along with his colleague Francis Collins, who's the head of the National Institutes of health, both of these guys were awarded the Presidential Medal of Freedom, and Fauci himself actually won the I think they call it federal employee of the year in 2020. [00:49:30.060] So let that sink in for a moment. The Presidential Medal of Freedom. The Medal of Freedom, these are to went to a couple of guys who advocated for lockdowns and censorship. They were decidedly anti freedom. They worked with their friends in media and big tech to destroy any and all intellectual dissent. [00:49:45.510] And like Constantine and his Council of Nicaea in 325 Ad. They and they alone determined what the truth was. They tried to force it down everybody's throat. They tried to force everybody to believe it. They threatened to excommunicate anybody who didn't believe it. [00:49:59.500] They discredited and disparaged anybody that didn't believe it. And yet they won the nation's highest civilian award for freedom. Now, tomorrow morning, another expert is going to win our society's most esteemed prize for intellectual achievement, being the person that started the trend of zero interest rates and making money literally worthless with zero interest rates, which has been a major contributing factor to the inflation that we're facing today. I've written about this a lot. There are a lot of factors about inflation, including the Lockdowns. [00:50:31.380] I mean, frankly, the lockdown policies, the guys who won the Presidential Medal of Freedom were very much in favor of that has a lot to do with inflation. The demand side has a lot to do with inflation. Supply side has a lot to do with inflation. Zero interest rate policy a lot. It really has to do a lot with demand. [00:50:47.520] And they just really spiked overall consumer demand that contributed to supply chain shortages and so forth. Too much demand, not enough supply. And that's been a big reason why we've had so much inflation and this concept of zero interest rates making money worthless, printing money, giving it to the government, letting the government go and redistribute it, literally putting money in people's bank accounts. That's been a major factor, major contribution to the inflation that we're facing today. And it's interesting because these are the people, they win their prizes, and yet they rarely seem to notice their shortcomings. [00:51:21.620] I mentioned Yellen earlier, actually acknowledges that no, in fact, she called a press conference to make sure that everybody knew that she had no idea what was going on. She completely failed to see inflation. But most of the time, people generally tend to. I mean, Fauci quite famously, just refuses to acknowledge mistakes, refuses to consider the destruction that was waged on people's mental health, on their finances, on their businesses, on the school, on education development, on all these things. All the consequences. [00:51:49.570] Just rejects it, just refuses to accept it. Bernacki famously predicted no consequences when the housing market softened, predicted no consequences, failed to see that the 2008 financial crisis would would play out. In fact, actually had the Fed put out a paper a couple of years later, I think it was in the summer of 2010, after the, after the dust settled in the financial crisis. And the paper, the, the paper that that they wrote basically was it was a complete denial of rejection of the notion that the Fed was was culpable in any way or that they could have seen it coming. And then they actually there's a great quote from the paper that came out in 2010. [00:52:28.050] It said, quote, nothing in the field of economics or finance could have predicted what happened with regards. To the housing bust and subsequent economic fallout. In a speech actually, Bernacki said that standard economic models, quote, did not predict the crisis, nor do they incorporate the effects of financial instability. And he went on to muse. He said, do these failures of our macroeconomic models mean that they are irrelevant or at least significantly flawed? [00:52:56.770] I think the answer is no. So even after it's clear that he's even saying that they did not predict the crisis. But you know what? They're not flawed. They're not irrelevant. [00:53:09.380] They're still absolutely useful. We should continue to rely on these models. These are the models that led to the conclusion that they could expand the money supply without limitation, that there would never be any consequences to zero interest rates. They could make money literally worthless and everything would be fine forever and ever until the end of time. Well, guess what? [00:53:24.710] It turns out there have been a lot of consequences. Record high inflation is just one indicator of that. And the models were wrong again. Now, this is going to be my last podcast for the year. I'll obviously be back in early January, but for the next couple of weeks it's just typical holiday family stuff, etc. [00:53:40.880] But before I sign off for 2022 and in light of all these awards, etc. E. And, and by the way, you know, it's nothing personal, congratulations to Ben Bernacki. It must feel incredible to win the Nobel Prize. But let's be honest, in the midst of all this to say, okay, here's the guy who came up with this unprecedented idea of slashing interest rates to zero, making capital worthless, conjuring trillions of dollars out of thin air, assuming there would never be any consequences from that, forever and ever until the end of time. [00:54:10.160] And just in case there were consequences that he'd be able to, quote, raise interest rates in 15 minutes and all the consequences would go away. This is the same guy that totally missed the housing crisis, totally missed the global financial crisis, and now in the midst of record high inflation, we're going to say here's a Nobel Prize. At a certain point, you got to step back and go, seriously guys, honestly, it's really just absurd. But nevertheless, congratulations. And hey, congratulations to Tony Fauci. [00:54:36.320] After 40 years in the same position, after being put in your job by Ronald Reagan, you're finally stepping down. You're letting it go from your clenches and finally relinquishing control and perhaps we never have to hear that name ever again. Congratulations. And in light of all these awards and big wins for the expert class, I've decided to blow the dust off of a little tradition I started some years ago. I wrote about this a couple of times, what I called the Tommy Franks Award. [00:55:07.740] Now, if you don't know the name, Tommy Franks is a retired four star general. Tommy Franks was the guy who was the head of US central Command in 2000, 2001, I think, to 2003, which basically made him the commanding general in the early days. Right after 911, he oversaw the invasion of Afghanistan, the early days of that war, the invasion of Iraq, all of this. So he's a really prominent guy back in the early two thousands, and his guy from Texas was kind of straight shooter, no nonsense sort of guy. And there's an author named, I think, Thomas Ricks, who wrote a book, and he reveals a story about how one day Tommy Franks, general Franks, was asked about some reporter asked him about one of the senior bureaucrats at the Pentagon. [00:55:51.060] And Franks didn't miss a beat. And he referred to this guy in the Pentagon. He said the guy was, quote, the dumbest fucking guy on the planet. So in tribute to Tommy Franks, this is what I call the Tommy Frank's Award. Everybody else is getting an award. [00:56:04.510] We have all these expert awards. So I would like to award another expert award. I have the Tommy Frank's Expert award for 2022. It's a tough decision, as you can imagine, because if you're thinking about the dumbest fucking god on the planet, there's a lot of stupid, a lot of people to choose from. Vladimir Putin, frankly, is a nominee. [00:56:22.880] But I look at him and go, I don't know if that's stupidity. It's more diabolical insanity than anything. I would also put the German chancellor Olaf Schultz on that list. This is a guy who's really a contender. He's seemingly trying to freeze his entire country to death this winter through completely incomprehensible energy policy. [00:56:40.340] I mean, you think about the Germans. They claim to love the environment, but they're going out and they're buying the dirtiest coal they can possibly get their hands on from every country they can in Africa. They're going and chopping down all their trees, and yet they're turning off their nuclear power plants. So this is the thing. Nuclear is the clean, cheap, efficient fuel source that's environmentally friendly, low CO2 emissions, all that. [00:57:01.130] Instead, they're shutting that stuff off and they're saying, let's chop down the trees and get the dirty coal. It makes absolutely no sense. And there's a huge imbalance here. That was a close call, but unsurprisingly, the person I've chosen this year is Joe Biden. Now, this is actually a tough decision because I feel a little bit bad about it. [00:57:20.280] The guy doesn't know where he is half the time. He goes around shaking hands with thin air, and he finishes his speech. He starts wandering aimlessly around a room until one of his handlers goes, picks him up like a puppy dog and turns him around. I feel a little bit bad about this, but you got to be honest about it. And just this is about results and performance, really, more than anything. [00:57:38.440] And it's like, oh, my God. It's just from a geopolitical perspective, you got the debacle of just you start with the withdrawal from Afghanistan last year, where the locals passing babies over razor wire and people hanging onto an airplanes landing gear, only to plummet to their death trying to escape the invasion of Kabul, which the guy said literally weeks before wasn't going to happen. No way was that going to happen. Then it happened. They said, oh, we're not going to escape like we did in Vietnam, then have helicopters flying away. [00:58:03.310] And that's exactly what you ended up doing. And then leaving behind $100 billion worth of military equipment to your sworn enemy, the Taliban, who you just insisted was not going to come in and take over the country. You've got worsening relations with the Chinese. Watching Pelosi go gallivanting over to Taiwan and supporting all the blank checks to Ukraine, completely mismanaging the Russian sanctions so that Russia benefited substantially from higher energy prices, while US. Consumers saw their gasoline prices double. [00:58:31.250] That then actually went and blamed that on corporate greed. And this is this guy that from day one of his administration had an energy policy that was anti fossil fuel, anti energy company. They said we're canceling pipelines. We're not going to lease you federal property, which they're actually required to do by law. The Interior Department is required by federal law to lease land, federal land that has energy assets, to have a bidding process with energy companies. [00:58:54.160] These guys just refuse to do that. Just in the same way they've over and over again just decided to not follow the law. They just completely make up the laws as they see fit. His CDC director just decided to commandeer the entire US. Housing market. [00:59:07.950] They got constantly just doing things that are in total and complete violation of the law, and they do this over and over and over again. Now you have gas prices. You got energy prices where they are because they've been waging war on energy companies from day one of their administration. And then, wow, what a surprise. Energy prices are high, supply is low. [00:59:25.680] And he's beating up the energy company saying, it's your fault. It's your fault that I haven't been following the law. It's your fault that all these policies are actually the energy policies are actually achieving their intended outcome, which is to screw the energy companies and make it more difficult for them to supply. And now it's more difficult for them to supply. So energy prices are higher, and he's blaming the energy companies. [00:59:44.800] It's completely insane. It's so crazy. It's so stupid. And the stuff that comes out of his mouth about this, he loves beating up on ExxonMobil, and one of my favorite ones is beating up on ExxonMobil and saying, like, oh, look at how profitable they are. They make billions and billions of dollars, and this is so wrong. [01:00:03.070] I'm going to make sure that everybody knows how much money they make, and you just got to go, oh, my God, it's a public company. They're supposed to tell everybody how much they make. It's not a secret. It's not a secret. It's not like you're leaking their profits. [01:00:17.320] They have to report every quarter. They have audited financial statements. They're a public company. They tell the whole world how much money they make, and they like to tell the whole world how much money they make because it makes their stock price go up, but just cannot connect the dots. There's not even any dots. [01:00:31.140] It's like a dot. It's like you've tried to destroy these companies from day one, and now energy prices are higher. Wow, what a surprise. There's not really a whole lot of heavy intellectual lifting that's required there, but that just seems to be out of the completely beyond his grasp. So, look, we could go on and on and on. [01:00:48.590] I know that was kind of an easy target. I got to feel a little bit bad because, again, the guy doesn't know where he is half the time. But we came down, made a decision. It's Joe biden. So congratulations to President Biden for winning this year's Tommy Frank's Expert Award. [01:01:01.770] And congratulations to all the other experts that have won their award. Great year for the expert class as always. And again, would like to thank you, every one of you for listening to this, and we'll come back to you again in a couple of weeks. Thanks very much for listening. Close Podcast Transcription

On the 21st of February, 1978, workers for the state-owned electrical company in Mexico City, Mexico were digging in a neighborhood near city center to bury some cables. After digging about two meters below the street’s surface, they hit a large rock that their equipment could not penetrate. As they dug further, around the rock, they discovered it wasn’t natural… but instead a large stone disk that was at least hundreds of years old. Archaeologists uncovered the rest. And it turned out that site had once been the location of the main Mexica/Aztec temple, known as Hueyi Teocalli in the native language. Over the past several decades, the temple has been a treasure trove of Aztec cultural artifacts, providing incredible insight into how this civilization lived. And among other things, archaeologists have found the remains of more than 600 skulls on the temple grounds– most likely victims of the Aztec’s human sacrifice rituals. Human sacrifice has been a common practice throughout the history of many civilizations, from the Aztec and Maya, to the Celts and Babylonians. And there always tended to be some High Priest or ruler who decided in his sole discretion that a blood offering to their gods was necessary… for the ‘greater good’ of their society. (Naturally the rulers rarely offered their own blood; it was always some peasant who had to be sacrificed.) This decree was rarely questioned. After all, the High Priest was an expert. And anyone who dared question his authority would most likely end up being the one sacrificed. So people had an incentive to keep their mouth’s shut and go along with the ritual. Though we’re not quite as barbaric today, you can still see evidence of human sacrifice in our modern world. And COVID was a clear example. The High Priests of Public Health decided that if anyone died for lack of cancer screenings, a drug overdose, or suicide, that was OK. As long as you didn’t die of COVID. If your kids lost two years on their social and educational development, if your business closed, if your entire life was turned upside down, that was fine too. Everyone was expected to sacrifice for the greater good. Everyone, of course, except for the politicians. Nancy Pelosi was infamously caught going to the hairdresser during home district of San Franciso’s lockdown… and then blamed the hairdresser for the transgression. Clearly Ms. Pelosi cares about the working class. Chicago Mayor Lori Lightfoot was also caught going to the hairdresser after locking her constituents down, but she then justified her behavior saying “I take my personal hygiene very seriously.” Then California’s governor Gavin Newsom was caught breaking bread with friends at a fancy restaurant in Napa Valley during his state’s lockdowns. The list goes on and on. We’re starting to see this same attitude applied towards Climate Change. Most recently, the ruling class had its big climate summit in Egypt called COP27; they flew in on their private jets and ate expensive steak, while their ideas for the rest of us include travel restrictions, taxes on cow farts, and eating bugs and weeds. You just can’t make up this level of incompetence and hypocrisy. The trend, though, is very real. Momentum towards climate regulation is only picking up speed. And it doesn’t look like there’s anything on the horizon to stop it. It would at least be somewhat digestible if their ideas were actually sensible. But instead their ‘solutions’ are borderline insane. They spent an entire day at COP27 talking about gender identity, as if that has something to do with the climate. They obsessed over incredibly inefficient sources of energy (like corn-based ethanol, which has soundly been proven to be one of the WORST and most INEFFICIENT forms of energy). But was there any discussion at COP27 about nuclear power? None. And that makes it really difficult to take these people seriously. They reject good ideas. And they keep coming up with bad ideas… which ultimately means less efficiency, more taxes, and more regulations. I think it’s only a matter of time, for example, before many developed countries require airline passengers to buy carbon offsets when they travel… which will eventually be built into ticket prices. And we could easily see carbon taxes on gasoline, heating, and electricity. This is one of the reasons why it’s so important to have a Plan B. COVID proved that, even in the most extreme situations, there are always some countries and cities that buck the trend and still act rationally. That’s how I ended up in Cancun, Mexico to have my first child last year; it was one of the few places in the world where COVID didn’t really matter… where my wife and I could have a normal life and normal birth experience. Most places in the world went nuts. But Cancun was an example of the handful of places that didn’t. Similarly, there will be places that buck the climate regulation trend as well, and reject the taxes and insanity that most developed countries will inflict on their citizens. So, rather than despair about what the future might look like, it’s far more productive to create new options for yourself… because more options means more freedom. But in addition to these risks (which can be mitigated), climate fanaticism also creates a lot of opportunities. Governments are literally pumping tens of billions of dollars into the sector, and that number is bound to grow in the future. So there are going to be a lot of ways to capitalize on their insanity. This is the topic of our podcast today, and I walk you through the fundamentals of a few key examples, including the market for carbon credits. I explain why the demand for carbon credits is most likely going to soar in the coming years… and why supply is heavily constrained. After all, it takes years. And years. And years… for forests to grow. And for bureaucratic organizations to issue carbon credits. And there is significant opportunity in this demand/supply mismatch. Click here to listen in to today’s episode. Open Podcast Transcription [00:00:00.990] Today we're going to go back in time to March 20, 858 BC, to the Roman province of Galia Sicilipina, which is basically modern day Switzerland. Now on that day, there is a large group of people, a Celtic tribe known as the Helveteans. They've been living in the area, but for the last three years they've been planning a migration south into Roman territory. It's not really entirely clear why. There were a lot of speculations about this. [00:00:28.930] They may have lost some territory to some other Celtic tribes that have been pushing them further and further south. There was one story that came more than a century later from a Roman author named Plenty the Elder. He wrote that there was a Helvetean man named Helico. And this guy, helico went down to Rome and he came back with this vast treasure trove, riches and oils and spices and foods and things that were enough to really excite all the rest of the health veggies and said, oh my God, we got to go to Rome. That place looks amazing. [00:00:56.590] And so for the last several years, they've been planning this move. They were going to go south. And when they committed, they really committed, they said, we're going south and we're going to literally burn all of our villages here in this province, galileo Sicilipina, we're going to burn all of our villages to make sure we are not turning back. We are not coming back here. We are going south. [00:01:15.420] It's Rome or bust. So this was a pretty big deal. And the governor of the province, the Roman governor of Galileo Szel. Pina, he knew he needed to spring into action. He knew that he needed to secure the border. [00:01:30.010] But more than that, he knew, the governor knew that this would be a pretty incredible opportunity for him to raise his political standing in Rome. And the reason for that is that Rome had for a long time felt a threat from the north, from these northern tribes, these barbarians that were located in the region that they called Gaul. Now Gaul is sort of basically modern day France and Switzerland and parts of Germany. And there had been a conflict with these various Gallic tribes going back at least a century, including military conflict. There have been very one in 107 BC. [00:02:02.680] There have been one very humiliating Roman defeat. It was shocking. People couldn't believe it. There was a Roman defeat by a Gallic tribe in 107 BC. And that really stuck with the Romans. [00:02:14.530] This is now decades and decades later, but they still remember that defeat. They read about it in their history books. Their parents and grandparents told them about it. And so people really fretted about their border security from north. They were concerned about these people coming in and that's why they actually had people at the border. [00:02:31.510] They didn't just say, we've been to the border. They actually put a lot of resources into it and that's why they had a provincial governor there and so forth, and the provincial governor there in this province, he knew it. He knew that Romans were going to be terrified, these barbarians crossing into their territory. And he knew that he could harness that fear to justify a military campaign. Rome was a place of laws. [00:02:54.040] You couldn't just go and gather up a bunch of troops and go and wage war and have a military campaign against whoever you wanted, whenever you wanted. You couldn't just do that. You had to have a reason, you had to have a just cause in order to do that. But he knew that this fear would be enough to justify essentially waging war, and not only on the Helvetians, the Helveti tribe, but really on all of Gaul altogether. And that this war of going and conquering and subjugating Gaul, this vast territory, he knew that would really cement his standing among the Roman elite. [00:03:25.480] And that's what the governor decided to do. His name, of course, was Julius Caesar. At the time, Caesar was essentially the governor of this province. And so when the Helveti attempted their mass migration south in late March and early April, caesar decided, I got to stop this. And so he pulled together in 58 BC, a few legions and basically engaged the Helvetia as they were coming down into Italy. [00:03:51.580] He engaged them, he defeated them. A lot of the survivors were taken as slaves. Others were sent back to their home territory, this place that they had just burned their villages and said, there's no way we're coming back here. Well, Caesar sent them back and he even gave them supplies, a little bit of money to rebuild all their burnt villages. He says, you guys aren't coming into Italy, you staying right here, but here's a little bit of money for your troubles and go and rebuild. [00:04:11.760] And God's beat. But he didn't stop there. He didn't stop there. Caesar continued to basically campaign to take over all of Gaul and subjugate the entire all these various Celtic tribes as far away as Britannia. Modern day Britain and the UK sailed across the British Isles to a certain point across the English Channel and tried to subjugate Britain, all of Gaul, and pulled us all basically into Roman territory, at least Rome's sphere of influence. [00:04:36.870] And he knew that what he was doing would be supported because, again, people were afraid. They never forgot the lessons from that defeat in 107 BC. And they were terrified of these people that were going to come into their territory. So he knew what he was doing would be supported by the people. And he also knew that what he was doing was historic. [00:04:53.080] It hadn't really been done before. And Caesar being Caesar, he actually wrote a book as he was doing it, chronicling, basically his military campaign. And this is a very famous book still exists today. It's called commentaries of the Gallic War. You can download it for free all over the internet. [00:05:09.010] There's no copyright on it. Obviously. It's a book that's over 2000 years old. And Julius Caesar wrote a book. And you can read Julius Caesar's book. [00:05:16.780] Commentaries on the Gallic war. Now, if you've ever read memoirs, anybody's memoirs, especially political memoirs, they're so obviously onesided, this takes that to a whole new level. Caesar's account of his own actions in the Gallic War are so ridiculously one sided. He has this massive ego that would make Napoleon blush. It would make Napoleon look like the Dalai Lama by comparison. [00:05:42.640] And to make matters even worse, to make it even more pretentious, caesar, throughout his own book, wrote about himself. He referred to himself in the third person caesar did this, Caesar did that. It's completely ridiculous. And of course, he makes himself out to be Superman. He's so smart and he's so handsome and he's so daring and he's so bold. [00:06:02.320] And of course, in the third person, Caesar was so courageous and Caesar brilliantly did this. And so it's really ridiculous. And historians have kind of discounted most of us, and so there's very little value here, but there is some marginal historic value to the text. And some of that is from Caesar's firsthand experiences. Firsthand information, sometimes secondhand information about the various Celtic tribes that they came across. [00:06:25.920] And remember, the Celts were sort of almost like an ethnicity of all these people in this diaspora all across Gaul and modern day Switzerland and into modern day UK and Britannia, all these various different tribes. And there were some commonalities, some cultural commonality. And Caesar wrote rather extensively about Celtic tribes and Celtic culture and their various cultural practices. And among them, among the more curious ones, at least to the Romans, was the Celtic practice of human sacrifice. So you probably heard of a group of people called the Druids. [00:07:02.340] The Druids were sort of the religious leaders, the high priests in Celtic culture. And human sacrifice was a normal thing for them. It was completely normal. One of the ways, for example, the Druids were charged with trying to foretell the future. And one of the ways they would do that is they would sacrifice people. [00:07:19.020] And as they would sacrifice people, they would watch the sacrificed humans sort of final death throws as they're twitching and twerking their way into death. And based on the person's gyrations, the Druid would then try and foretell the future based on the way a dying person would be gyrating in pain. Obviously, we sort of look at and say that's kind of ridiculous. But those were their beliefs. Caesar thought it was ridiculous as well, and he makes them out to be. [00:07:49.610] I mean, obviously most of the book is ridiculous. Referring to himself in the third person about how brilliant and handsome and courageous he is and all this, but he does make the drugs out to be in the Celt out to be quite an uncivilized group, the Druids and the Celts. Also, they would take criminals and they would enclose and they would construct like, a giant statue made of wicker and reed. This is kind of known as the Wicker Man, a big statue. And they would stop a very, very large statue, and they would stuff people inside of this enclosed in, like, a wicker cage that's made out to look like a giant human being, and then they would set the whole thing on fire. [00:08:25.140] And of course, they were being sacrificed to their gods and so forth. It's not just Caesar. These sorts of stories and cultural practices were corroborated by a lot of other ancient historians. Plutarch actually wrote quite a bit about this, and we heard about this sort of over and over again. But again, this isn't really unusual. [00:08:46.830] In history, we see concepts of human sacrifice even in plenty of religious texts. Frankly, there's a story of Abraham being ordered to sacrifice one of his own sons. This is a well told story in Christian judaic and Islamic texts. So this sort of thing has existed for a very, very long time. It's very common, especially in the ancient world, on the opposite side of the world, in the Americas, in precolumbian America, the Mayan culture, and later the Aztecs frequently performed ritualistic sacrifice. [00:09:19.140] They viewed human blood as almost a delicate sin for their gods. And if they wanted to please their gods, then blood offerings needed to be made. In Tenochtitlan, which is basically the Aztec capital, where today Mexico City is the main Aztec temple there. Archaeologists archaeologists have found 600, more than 600 skulls in that temple there. And the Conquistador, Hernan Cortez wrote extensively about this quite harshly, just like Caesar, about, look at these uncivilized people and their human sacrifice. [00:09:50.500] This is so disgusting to me. And, of course, that was commonplace. Invaders usually took a dim view of the natives that were there. Caesar was very harsh about the Celts. And Hernandez Cortez was disgusted by human sacrifices in Mexico among the Aztecs. [00:10:05.760] But of course, the Spanish burned thousands of people, the stake during the Inquisition. And the Romans, they vanquished native tribes across Latin America, all over Latin America, all the way down to the tip of Chile and Argentina. And the Romans, of course, used to murder people in the Coliseum simply for the amusement of their peasants, the class known as the Plebeians. So this is kind of a little bit of a cultural elitist, believing that their respect for human life is somehow better than everybody else, but it's really not. In fact, you could probably make an argument that the Spanish in particular murdered a whole lot more people than the Aztecs and the Mayans. [00:10:41.380] But in general, this theme of human sacrifice and killing people for whatever reason, this has been a very common theme throughout history. And it usually comes down to one guy, an emperor or some kind of leader or a high priest who makes a decision about what the gods require, that there's some sort of greater good. And we need to appease the gods. We need to placate somebody somewhere. And in order to do that, we need to sacrifice a large number of people for the greater good. [00:11:10.390] Sometimes that greater good is actually not even a greater good. Sometimes it's a very narrow good. In fact, Swedish mythology has a story of a king who had ten sons and shortest story as he ended up sacrificing nine of his sons because he was told that if he sacrificed his sons that he would have a longer life. And eventually people sort of convinced me that, wait a minute, if you sacrifice all of your sons, then the line ends and there's no more king and we're going to descend into chaos and anarchy and all these things. And so they finally convince them, don't sacrifice your 10th son. [00:11:41.110] But again, this is a story, this is a concept that is very, very old, as old as human civilization, where there's usually, again, very seldom do you find a whole lot of people getting together and say, hey, let's just pick each other and, you know, kill some of our own. That's not really as common. What is a lot more common is usually some kind of high priest that asserts a certain amount of authority onto themselves saying, well, I know more than everybody else. I'm the expert. And as the expert, I'm going to make a decision in my sole discretion about what the greater good is. [00:12:13.990] And some of you people are just going to have to die. And people go, OK, that's fine. That's what we're going to do. And sometimes, again, that was a very narrowly defined good. In the case of this mythological Swedish king, sometimes the greater good might even have been a civilization ending existential threat. [00:12:30.790] And there are many instances of this throughout history. There were times where maybe a volcano erupted and it led to a really bad harvest. And again, people looked at back then, they look at things like a volcano erupting and they go, the gods are angry with us. And so the local high priest says that, well, we've got to appease the angry god and so somebody's got to die. And there are many historical instances of this, really of climate disasters, including even periods of climate change throughout history. [00:12:59.400] Thousands of years ago during the Bronze Age in the Minoan civilization, which is really kind of ancient Greece before the classical age, what we think of as ancient Greece I mean, this was more than a thousand years before that, the minimum civilization where during this time in the Bronze Age, many parts of Europe really became actually significantly warmer. And this undoubtedly led to many tribes desperately attempting to placate their gods and say, we've got to do something about this. Sacrifices must be made. And that led to some people dying. If we're really honest, if we're intellectually honest, I think you could make an argument that we just have a more refined version of this today. [00:13:41.370] At its core, there's still some kind of ruling class. Back then, it was an emperor or high priest or something like that, but we still have a ruling class today that's not some kind of conspiracy theory. I don't necessarily think that there's mustache twirling supervillain sitting in the cigar filled room or anything like that, but there are people that sort of think that it's their lot in life to tell everybody else what to do. Many of those people are unelected. Many of those people you know, you've got some of these organizations like the World Economic Forum and so forth that just crank out white papers demanding that they should be able to tell everybody what to do and how to live their lives and so forth. [00:14:19.410] So there are people you know, let's call them global policymakers or the policymaking elite. It's not a conspiratorial statement. It's just there are people that are in a position to have enormous amount of influence in setting these policies. That includes even in the media, that includes in certain businesses, even in the financial sector we've talked about this a lot with companies like BlackRock that have basically weaponized $10 trillion of other people's money in order to put forward an agenda, including, frankly, including a climate change agenda. And there are people that make certain decisions about policy, and those decisions often involve everybody else sacrificing. [00:15:02.950] Now, we're not necessarily talking about let's go on an altar and plunge a dagger into somebody's heart to make a blood offering to our gods. That's not really what we're talking about. But as an example, we saw this extensively during COVID And in respect we still do in places like China, where the leaders, the ruling class make decisions to sacrifice the needs and in some cases, yes, the lives of certain people for what they deem in their sole discretion to be the greater good. And this has happened. And this did happen. [00:15:35.280] Even in some of the most I'm doing error quotes most advanced democracies in the world. We have supposedly a representative democracy, a republic in the United States and in many other countries as well in Western Europe, where there was never any debate about the merits of this strategy. There's never any debate or discussion about defining the greater good. What does this mean? What are the priorities here? [00:15:55.720] Do we actually want to do this? There was no vote. There was only dictatorship. There was propaganda, and there was intellectual suppression, and they simply decided that if you died for other reasons, if somebody died during the pandemic, during the Lockdown era, because they didn't get you know, they didn't have the opportunity. To get a cancer screen because everything was closed or they died because of drug abuse or suicide or any number of reasons. [00:16:21.090] That was OK as long as you didn't die. Of COVID if your children lost years on their social and educational development, if your business closed, if your entire life was turned upside down, that was fine with them, right? You were just simply expected to sacrifice for what they deemed to be the greater good. Now, everyone, of course, didn't sacrifice. The politicians didn't sacrifice. [00:16:43.620] The ruling class themselves. They didn't sacrifice. There are many famous instances of this, and not just politicians, to be fair, there were instances a member in the UK, one of the first guys who wrote he was an academic, and one of the guys who wrote was the key author in this study saying everybody needs to be locked down or everybody's going to die. We got to do this right now. Sound the alarm bells. [00:17:05.380] You know, this is a guy that was going out and sleeping with his mistress when everybody else is supposed to be locked down. And of course, some of the other examples were just hilarious. You had Nancy Pelosi caught on video going to her hairdresser during the lockdown, and then she blamed the hairdresser not to be outdone. Then Chicago Mayor Lori Lightfoot was also caught going to the hairdresser after locking down people of Chicago. And then when she was caught, she justified it. [00:17:28.500] She stared cold into the cameras and said that she takes her personal hygiene very seriously. Not making this up, this is almost verbatim, direct quote, that she takes her personal hygiene very seriously. Therefore it was okay for her to violate her own lockdown rules because she takes her personal hygiene very seriously. Then you had Gavin Newsom, the governor of California, who was caught gladhanding slapping everybody on the back at a fancy restaurant with rich political donors after locking down his state. And the list goes on and on and on and on and on. [00:17:57.970] Completely and totally ridiculous. Because of course, the sacrifices never come from the high priest. Rarely at all. In human history, when we have cultures that engage and practice ritualistic human sacrifice, does the high priest step up and say, let my blood be the first to spill? It just doesn't happen, right? [00:18:15.550] The king, the emperor, or whatever. It's always somebody in the lower classes who gets tossed into the Wicker Man. It's never the high priest, it's never the druid. And we can see this again with the trends that are taking place. I already referred to it with climate change and the recent this top 27 climate change summit. [00:18:37.030] I wrote about this a couple of weeks ago that was taking place in Egypt. Frankly, it was another hilarious example. We've got dozens of world leaders, corporate CEOs, NGO presidents, guys like Klaus Schwab who run the World Economic Forum. Everybody flies in on their private jets to wag their finger at all the little people in the world to tell everybody else what we can and cannot do what we should and should not be able to do. And they do it all in a host country. [00:19:02.680] Egypt, which has a pitiful, absolutely pitiful track record on human rights, has been sanctioned by the United Nations. And all these guys show up and they go shaking hands and slapping each other on the back and basically just to come up with ideas about how the peasants should all sacrifice for the greater good. They're not going to sacrifice for the greater good. They fly in and out on their private jets and their security, and they tell us we shouldn't eat meat, and then they've got filet mignon on the menu. Again, it's hilariously. [00:19:31.570] Bad tone deaf policymaking at its worst. But this is the way it always is to them. Everything that everybody else does is bad. Meat is bad. Travel is bad. [00:19:42.280] Any economic activity is bad. God forbid somebody has a factory and produces something. Any of these things, it's all bad, bad, bad. Basically, these guys want us to simply consume less and go back to being neanderthals where we're just eating weeds and bugs and we never travel far from home. That's to them, kind of the goal of what everybody wants is just a way of consuming less. [00:20:03.510] They want to have a pastoral lifestyle. And again, I'm not making this up. [00:20:09.860] You go to the World Economic Forum and you can read the white papers where they put out things like, we need to eat. We need to start eating weeds. Human beings can be conditioned to eat and to like weeds, to eat and to like eating bugs. We can be absolutely conditioned to do so. They want to train us to eat weeds and bugs while they fly in and out of their summits on their private jets and have fancy steak and all these things. [00:20:35.510] Honestly, it would be hilarious. If it's not so disgusting. I kind of have a glasses half full approach to life, so I do find it hilarious also because there are ways around this, and that's really kind of what I want to talk about. Before that, anytime there's any discussion about climate change, I'm not making any statement on climate change. In fact, I will be even more direct and say, just in case anybody's wondering, yeah, of course the climate is changing. [00:21:03.180] I don't think that's a controversial statement to say, yes, the climate is changing. For me, I have a background, a lot of different businesses. I started an agriculture business some time ago, and I focused a lot on agriculture. And so from an agricultural perspective, you can grow corn in North Dakota now, and you used to not be able to do that, but now you can, and you can. You can grow corn in North Dakota because the climate has changed sufficiently to make that possible. [00:21:29.290] And so to me, it's not really a question of whether or not the climate change of course the climate is changing and the climate frankly, has changed so many times throughout human history because the climate constantly changes, just like the universe constantly changes. And I don't know, when did anybody promise any of us that from the day that we're born, nothing at all in our lives is going to stay the same forever? I don't know. Anybody that came out of the womb and got a contract that said nothing in the universe will change. Everything will stay exactly as it is right now today. [00:22:03.910] Like, of course, not everything changes. And when things change, there are advantages and disadvantages. There are costs and benefits and sometimes crises and sometimes incredible opportunities and problems that just need to be solved. And there's, of course, a certain amount of really over the top alarmist fanaticism. Again, I'm not suggesting that the climate's not changing or anything said I like clean air. [00:22:29.470] I like clean water. I like clean soil. I think it makes I like organic food. I think it makes sense to consume resources efficiently. I think it makes sense, especially considering that fossil fuels are finite and once we run out, we run out. [00:22:40.870] So of course it makes sense to consume things efficiently and look at better technologies and so forth. But it's difficult to take these people seriously when they're constantly screaming. They have this ultra alarmist, endoftheworld is nigh scenario and yet A, they refuse to lead by example. You know, again, they fly in on their private jets. They can talk about how everybody else should not be doing any of this sort of stuff and we should all be vegans, eating bugs and weeds and so forth. [00:23:08.890] And then they go and have a fancy steak on their menu, and B, they refuse to engage the most obvious solutions that exist that are already on the table. If they were actually serious, for example, about reducing CO2 emissions and slashing fossil fuel consumption and so forth, then they would be all in, all in on nuclear power. Nuclear power exists. It's a technology that has existed for decades. And if the world actually went nuclear, then CO2 emissions would fall by at least half. [00:23:35.290] They would easily surpass their carbon neutrality goals and all these things. But instead they get together at Cop 27 in Egypt and they dedicate an entire day to solving climate change through gender identity. And if you think I'm making that up, I encourage you to go to the top 27 website and you can see the agenda and you'll see there is literally an entire day devoted to gender identity. Somebody could possibly explain to me, what does gender identity have to do with climate change? And yet these people screaming, the end of the world, the end of the world. [00:24:06.190] And it's just really hard to take these people seriously. Of course it makes sense to who wouldn't want to have nobody's just say, I like dirty air and I don't want to drink clean water. It's ridiculous. Of course these sorts of things make sense, but they're ultra alarmist, end of the world's nigh, complete lack of leadership, going and putting resources and manpower and research and everything into terrible, terrible ideas is just completely and totally ludicrous. But that's the standard. [00:24:37.540] The thing that's obvious out of all this is that the momentum is not slowing down. They're down this war path and they're just going to continue and continue, continue. The momentum is not slowing down. It's building. It's growing. [00:24:49.830] And it's going to continue to do so and most likely become a much more dominant part of our lives. The rules and the regulations and the taxes and the fees and the scowling and the finger wagging and all these things is only going to increase. And we can see a lot of examples of this. In the United States, for example, there's a big push from government regulators. And so for companies to have to put their climate liabilities, their CO2 emissions on their corporate balance sheets. [00:25:15.250] And if that weren't I'll just be polite and say difficult enough, the rules that have been proposed are completely absurd where they are essentially impossible to deal with. Where a company is supposed to put on its balance sheet essentially what the potential climate impact would be to what the climate impact would be as a result of its customers and contractors, potentially employees and suppliers and so forth. It's not even sort of what one company does and say, okay, well, we have a factory and here's what we think we might be. You know, our greenhouse gas emissions, what they might be. It's like, well, somebody's buying our products, so now we have to know what their greenhouse gas emissions are going to be. [00:25:57.960] How would anybody even know that? And you end up basically double, triple, quadruple, counting every single thing. It's so completely ridiculous. They take something and they make such an absurdity out of it. Again, it's very, very difficult to take these people seriously because you just look at this and go, really? [00:26:13.020] That's your solution? It's so completely ludicrous. But it's a trend that's not slowing down. And we see these pushes. We see activist investors, the tiny little hedge fund that puts a couple million dollars into ExxonMobil and ends up taking over, basically taking over the board of directors and forcing huge oil companies to invest, to divest some of their fossil fuel assets, divest their refining assets, and invest in hugely inefficient wasteful projects. [00:26:42.570] Say, oh, let's get into Coronethanol, because every single study about corn ethanol shows that it has negative energy return on energy invest. It's one of the worst things you could possibly do. But you know, it ticks certain boxes in their, you know, their little green circles that they really like these sorts of things. Even though it makes absolutely no economic sense, it makes no environmental sense. It's actually a terrible idea. [00:27:05.140] For the environment, but they do it anyways because it's not oil and that's all that matters. So this is a trend that is not going away, and it's not going away. It's getting bigger and bigger. It's already so big and it's just getting bigger. And because of that, it's really important to understand. [00:27:19.930] And I want to walk through one aspect of it today because again, change is constant. The universe itself is constantly changing. The universe is not stationary. The universe is expanding. We have expanding galaxies, we have contracting galaxies, we have solar systems. [00:27:34.740] Everything is just constantly changing and including human beings, we're constantly changing. Our relationships are constantly changing, our businesses are changing, our children are changing. Everything is constantly changing and change. Economies change and political trends change. All these things change. [00:27:50.370] And whenever we have change, there are sometimes crises and sometimes opportunities. There's costs and benefits, advantages and disadvantages, risks and rewards. And it's important to understand those. And one of the things that I want to talk about today, one trend in particular, all this really big trend of climate change and really not just climate change so much as people's reaction to climate change policymaker's reaction to climate change, this human sacrifice element of it. One trend that's really growing, one sub trend is carbon credits. [00:28:20.440] Now, carbon credits, you most likely have absolutely heard of carbon credits. Most people have because they've been around for a while, but they kind of back in the algorith days when he was going around giving his climate change presentation, people started talking about carbon credits and then it sort of died for a while. It got really quiet and there are a lot of reasons for that, but they're starting to really make a big comeback, especially among global policymakers. Global policymakers are really starting to get behind carbon credits. And if you think about carbon credits, the basic idea boils down to carbon neutrality, to treat the environment as a zero sum game, an asset that needs to be maintained. [00:28:58.380] So polluting it as a negative, emitting CO2 or some kind of greenhouse gas is a negative. So if you're emitting some kind of greenhouse gas, then the first step is to reduce that negative as much as possible. And the next step is whatever negative you have remaining is to offset that remaining balance in some way so that it balances out. That offset basically means buying carbon credits. So one carbon credit generally represents one metric ton of CO2 or what time would you say, a CO2 equivalent that has been captured or sequestered, etc. [00:29:33.810] So, for example, if you have a company, you have a factory, and your total gross carbon emission is whatever, one metric ton, then you buy one carbon credit to offset that so that you become carbon neutral. So you have minus one from your emissions, plus one from your carbon credit to offset that. So minus one and plus one offset. So you are now zero. You are carbon neutral. [00:29:54.330] And you've got all these companies that are already pledged to be carbon neutral. And I'll get to that in a minute. But the way this sort of market works is you have on one hand, you've got companies, factories and big Fortune 500 companies, and everybody saying we need to reduce our carbon emissions and we need to become net zero, we need to become carbon neutral. And so they're buyers of carbon credits. On the other hand, you've got people that are suppliers of carbon credits. [00:30:20.070] These are people that plant trees and conserve trees and so forth. Because of that, they have there's some math behind this that shows, okay, depending on this species of peak or pine trees or whatever, this many trees on this many acres will sequester x number of tons of carbon. So basically they say, okay, we'll give you x number of carbon credits per acre of this kind of species of tree you have. And so you have people that are going to plant those trees or conserve those trees that already exist, then they get a certain number of carbon credits. So you have the producers of the trees, basically people that are managing the trees and the forestry projects that are supplying carbon credits, and they're selling them to the companies need to buy the carbon credits to offset their CO2 emissions. [00:31:07.630] And so because of this, there's this creates a marketplace where you've got the suppliers of carbon credits and the buyers of carbon credits. And so the price of carbon credits goes up and down based on that supply and demand. There's more suppliers, there's more demand, et cetera. So that price goes up and down. And then, of course, there's interest. [00:31:23.340] What really drives a lot of the price of carbon credits is interest from speculators. So you have speculators that come in, and they think the price of carbon credits going to go up, and so they buy a bunch of carbon credits, or they think the price of carbon credits might go down, and so they start selling carbon credits. But ultimately, in the long run, it comes down to speculators get into everything. They get into stocks and get into forex, and they get into options. They get into every gold and commodities, everything for which you can speculate, real estate, etc, etc. [00:31:50.160] But at the end of the day, longer term market prices are determined by supply and demand. There's either there's more demand for carbon credits or there's less demand for carbon credits. That's what ultimately drives supply and demand of just about everything in the long term, supply and demand. [00:32:07.540] The other thing I think to understand about this, and I want to talk about supply and demand of carbon credits, is that it's not enough. The marketplace is really quite broken. There's no marketplace. There's a lot of different individual marketplaces. I won't say it's decentralized, it's just really fractured. [00:32:24.900] It's very disparate. A farmer doesn't really sit with a factory owner in exchange credit. It's not like a guy who runs a forestry project shows up to the local factory and says, hey, I got 1000 acres of peak here and so it's this many tons of CO2 and you're admitting this many tons, so let's do a deal and you're going to pay me for this. That's not really how it works. How it works is there's some bureaucratic organization that stands in the middle of that. [00:32:47.700] And they go with their clipboards and their studies and their surveys and they go to a farm or forestry project and they say, OK. Well, you've got this many acres and this many or hectares in the metric system and this type of tree and blah, blah blah, carry the one, etc. And so we're going to award you this many credits. But it's kind of you lick your finger and stick it up in the air and figure out which way the wind is blowing. It's really not an exact science. [00:33:13.110] As much as these guys love to brag and praise about their science and science people and following the science, whatever, it's actually not really a terribly precise or scientific process. It's also incredibly bureaucratic. Sometimes these projects, in order to be certified by one of these kind of bureaucracies, these nongovernmental organizations that stand in the middle there, it could take a really long time, sometimes even a couple of years. And so then you've got the exchanges themselves where people go onto an exchange to try and buy and sell carbon credits. There's no global market for carbon credits, no standardized contract like there is for something like gold or oil or coffee or Apple stock or whatever. [00:33:53.800] I mean, you can sell Apple stock in exchanges all over stock exchanges all over the world. And a share of Apple is a share of Apple. But with carbon credits, every place is different. But more importantly, the rules and the regulations are different everywhere. So it creates a really confusing and highly bureaucratic process. [00:34:10.090] That's kind of one of the reasons why it sort of got quiet for many, many years and people didn't really hear very much about carbon credits because it became a little bit too difficult for it to take off. Now again, if these policymakers were actually serious, then they would come up with a simplified standardized process for carbon credits at this. But of course, they're not interested in real solutions. They're interested in the appearance, the optics. They're interested in giving the appearance that they care about the climate as opposed to actually doing something and coming up with real solutions. [00:34:38.820] Now my view is that there are challenges in, in this, this fractured and disparate marketplace. But long term, and again, long term is really the long term. Supply and demand is what sets prices and really drives prices. And I believe wholeheartedly that demand for carbon credits will soar based on the trend that we see right now, there's almost an unstoppable momentum in this sort of climate fanaticism from policymakers, where it's every month, every year, it's more and more and more. It's more regulations. [00:35:11.350] In New Zealand now they want to tax Cal Farts and all these things no joke. These are real policy ideas and solutions that people are coming up with. Again, it's ludicrous. It's hilarious to see some of the stuff that they come up with. And so every day it's just more and more and more. [00:35:29.010] And I think that that drives long term demand for carbon credits. We already see this right now that a bunch of companies, for example, if you look in the United States and the SP 500, whole lot of companies have made some sort of climate pledge. But honestly, right now it's a relatively small number, which is well under half of the SP 500 companies. And way below that, if you look at a broader index like the Russell 2000, it's just a fraction of what it's going to be in the future because I think probably within a decade. Again, I could be wrong on the timing, but we're going to get to a point, I believe, where pretty much, I mean, not only every company in the SP 500, but probably nearly every medium to large sized business. [00:36:12.180] At least in the developed world, will have to be moving not only towards some kind of pledge, but hardcore carbon neutrality, whether they like it or not. They'll either have to do it because they're being forced to by the government, or they're going to have to do it because their consumers aren't going to forgive them otherwise. And again, it's all about the optics. We don't really care. We just have to look like we care. [00:36:31.260] And so we're going to come up with this pledge, but it's got to be a big pledge like carbon neutrality. And carbon neutrality again, means A, I got to cut my carbon emissions as much as possible and B, I have to offset whatever negative emissions remain with some kind of positive offset. That means carbon credit. So the demand you can sort of see already that if you're looking at the longer term trend here, demand is absolutely going to soar. And on top of this, that's just corporations, right? [00:36:59.310] On top of that, you've got pretty much nearly every country in the world has pledged carbon neutrality by different timelines. 20, 30, 20, 40, 20, 50. China says 2060. Who knows if they'll actually get there? And again, this is very long term, but there's a whole lot of this even by 2030. [00:37:15.540] And by 2030 we're going to have this much of our carbon emissions last, or this percentage that's carbon neutral. And for governments that are signing up for this stuff, this means they have to do it that's state, provincial, local, federal, national governments, schools, hospitals, port facilities, etc. Are all these different entities, governmental, governmental related, that are having to purchase carbon credits to offset their carbon emissions. So that's a really big increase in demand for carbon credits. At the same time, the ramp up period, if you think about supply, has significant lag. [00:37:50.350] It takes years and years for trees to grow to the point that you can actually say they're really sequestering or capturing a lot of carbon. Years, not to mention the bureaucratic process to approve those credits can also take years. But that aside, if you just think about nature itself, it takes a long time for trees to grow. So if all of a sudden there's this really big increase of all these countries that want to go, and corporations and all these different facilities and institutions that are trying to reduce their carbon footprint and go to carbon neutrality, et cetera, and you have this really long lag period because it takes such a long time for trees to grow. There's a massive gulf between the demand for carbon credits, which could go to the moon, and supply, which will certainly increase, but will do so at a much slower pace. [00:38:36.930] And so that gulf of the difference between demand and supply, I think you can make a case, as a case to be made, that the price of carbon credits could really take off. I would say. Speaking of taking off, actually, we could also see incredible man from consumers as well. Take off, I say a little bit tongue in cheek, but if you've ever bought an airline ticket from some airlines I know British Airways does this, for example. It always gives you the option to there's an option right now where they offer you carbon offsets when you purchase your airline tickets. [00:39:06.640] So you get to the end, you go to your shopping cart, and of course, they always offer you that travel insurance, which is a total scam, and everybody knows that they offer you travel insurance. By the way, if you're traveling and you're thinking, geez, I need travel insurance, never buy it directly from the airline. That's crazy. If you want travel insurance, just go and search for specifically travel insurance and you'll get a much, much better deal. Travel insurance in and of itself is not a terrible idea because if you get sick and you have to go to the hospital or something like that, it's not a bad idea to have some insurance. [00:39:34.210] Just don't buy it from the airline because you'll pay three, four, five times the price easily. But in that sort of shopping cart part in the end, and you say, okay, would you like to buy a carbon offset? This could easily become mandatory, right, so you won't see it in the price. There'll be some law passed or they say every airline has got to charge carbon offsets. And when they do that, you're not going to see it. [00:39:54.150] It's going to be invisible, but your fare is going to go up to include the cost of the carbon offset, or they might add it to the fare. So they'll do like with rental cars, when you reserve a rental car and they say, oh, it's $75 a day, and then by the time they add all the taxes and fees, it's like $180 a day, you go, whoa, what happened to $75 a day? It will be the same thing where they go, okay, your fare is $249. And they go, oh, there's this fee, this fee, this fee, this fee, this fee, the 911 security fee, blah, blah, blah. And then, oh, there's a carbon offset fee. [00:40:23.290] So instead of $249, you're actually paying $486 or whatever. So it'll be something like that. And that is really inflationary. And I think we could easily see the same thing for gasoline and electricity and all sorts of things. I mean, ad valorem taxes, carbon taxes on automobiles in general. [00:40:43.080] If you have an automobile, they don't like that, so they create certain disincentives and taxes, and there's a carbon tax on vehicles, all sorts of things that we could see, all in an effort to offset individual CO2 emissions. This could be one of the most inflationary events of our lives if we all start having to offset individual carbon emissions on all these things travel and transportation, energy consumption, etc. And that could be an incredibly inflationary event. But again, these are people who are all about human sacrifice for the greater good. They've unilaterally decided in their sole discretion what the greater good is. [00:41:22.380] There's been no discussion about it. There's been no national debate. If you have a different opinion, they shut you down. They say you're a conspiracy theorist and you're anti science and all those things, and then they'll just force you to sacrifice whether you're willing to or not. Again, they want everybody to go back to this almost neanderthal pastoral lifestyle, eating bugs and weeds. [00:41:42.340] And that, to them is this ideal situation. And I say a little bit tongue in cheek, and I don't know really how serious they are about that. But again, you look at this cop, 27. You go, really? You devoted an entire day to gender identity, but there was no discussion of nuclear. [00:41:58.920] Zero discussion of nuclear. And you just how do these people expect anyone to take them seriously? That's why you can hear me almost laughing as I talk about this, because it's comical. Their incompetence is just so comical. It's hilarious. [00:42:15.860] And it would be I think there's probably a reason to be afraid if you don't have a plan B, if you're not thinking about this stuff. Big picture. And I think that's the important thing is to think about this really, really big picture, look at the trends, step back and take a much larger view of some of these trends. And you'll see here, sure, there's risk and there's also opportunity. So part of the risk needs to be mitigated is them trying to force feed things, no pun intended, really jam things down, whether it's carbon offsets or taxes or just different rules and regulations and things like that. [00:42:53.190] Because again, they've decided what's the greater good and they want you to sacrifice. And there is a lot of precedent for this. If we look at COVID, et cetera, lots and lots of precedent for them just forcing everybody to sacrifice, whether it makes sense or not, where it's economically rational, where it's environmentally rational or not, they don't really care. It's all about the optics. But there will always be countries that don't participate. [00:43:14.430] And COVID, again, was another great example of that. Whereas most of the world certainly was hardcore, hardcore locked down and keeping people in their homes, like where Felons locked up in a maximum security penitentiary. There were countries that didn't participate. There were places even within countries that didn't participate. And I've told this story a lot, but it's why I ended up my wife and I ended up in Cancun, Mexico, to have our first child last year. [00:43:40.120] It's because we wanted to be in a place where COVID didn't matter. And the Riviera Maya region, coastal Mexico, near Cancun, this was a great place to be. And I remember the first time I walked into the gym in Cancun and nobody was wearing a mask. And this was like peak insanity during COVID nobody wore masks, nobody cared. Because there are always going to be places that buck the trend. [00:44:03.700] Everybody else might be going along with it, but there will never be 100% compliance. Even with something as crazy as COVID, there was not 100% universal compliance across the world. And it would be the same with this. There will be people to go, no, we're not going along with this nonsense. We're not going along with this gender identity solutions to solving climate change. [00:44:22.170] We're not going to play by those rules. That's silly. And those countries will make themselves known. And this is why we talk about things like residencies and passports and so forth, because you will have options. And when you have options, when you exercise those options, more options means more freedom. [00:44:38.220] And this is why it's something that we can look at it and see all this sort of insanity. We can see the wokeness and the incompetence and all these things that we can be afraid of it, or we can say, you know what, I'm just going to make sure that I have some options. And if you have options, you're going to be okay. You're going to be okay. And this is a really big risk mitigating factor. [00:44:58.840] Again, with change, there's risk and there's reward. There's consequences, an opportunity, and it makes a lot of sense. The whole concept behind having a plan B is making sure that you're in a position of strength regardless of what happens or doesn't happen next. And so some country, a whole bunch of countries go down a very destructive road and say, we're going to regulate this. We're going to make this happen, we're going to increase this tax, and so forth. [00:45:21.220] If you have some other options, you're going to be okay. And if that stuff doesn't happen and things turn out to be just fine and the risk never materializes, then big deal. You're not going to be worse off because you have a second passport that still allows you more freedom and rights to live in other places and you can pass that down to your children and your grandchildren and so forth, that you have the ability to go and live in a nice place. At least go on vacation on the beach somewhere or whatever. There's no downside to that, right? [00:45:51.580] There's no downside whatsoever. But if the worst does happen or even anywhere near that adverse scenario takes place, then you have options. And those options mean that you're going to be okay. That's the whole point of the Plan B. It's not to go and spend crazy amounts of time and money and energy and stress on things that don't make sense or they only make sense in some cataclysmic scenario. [00:46:13.930] That's not really, in my view, a sensible approach or a sensible plan B. If your Plan B only makes sense if the world comes to an end, then it doesn't work, right? Because there's going to be 99.9% that like this one specific scenario that you're planning on doesn't come to pass, it's going to be something else, right? And so the idea is to do things that are sensible no matter what happens. If everything turns out to be fine and the unicorns and the rainbows and the buttercups and everything's great, then your Plan B should make sense in that scenario as well. [00:46:46.260] And that's why I said having a residency or a couple of residencies and other places that you actually like to go and visit that might even end up later on down the road after a few years awarding you a passport that your children also end up getting and their children can end up getting. And great. There's no downside there. There's no downside. Oh, well, I take a vacation every couple of years and I go to some nice place on the beach that I enjoy. [00:47:10.710] There's no real downside there. And that's the way to think about it. And again, in a scenario like this where they get really draconian on climate regulations and so forth, it does make sense to have some other options. We can talk about some of that other time. We talk about that sort of thing a lot. [00:47:26.850] I don't want to get too deep into that today. But the flip side of that is once you've mitigated the risk, again, these changes and trends and so forth, they come with risk. They come with rewards that come with consequences, that come with crises. Sometimes they come with opportunity and the opportunity here is these guys are creating a massive industry, really, really massive industry, and there's going to be a lot of money to be made. [00:47:50.590] It's undeniable because they are putting so much money behind it. They're putting just hundreds and hundreds of billions of dollars. I mean, you see these estimates about stopping climate change. You know, it's going to cost hundreds of trillions of dollars. Oh, my god. [00:48:04.080] I mean, if they even put if they even put 1% of that money towards this, I mean, it's trillions of dollars. So there's a lot of money to be made in that trillions of dollars. And it's important, I think, to look at all this with a very long term view. I have to say here as well. Like, this is not me giving anybody any investment advice. [00:48:27.930] This is a guy I'm recording this on December 2, 2022, a time when the first amendment in the United states still exists. So this is a guy who's just exercising his first amendment right to have an opinion. But in my opinion, one, again, hedging your sovereign. Risk, as we talked about before, does lead to more freedom. Having a plan b makes a lot of sense. [00:48:46.720] And number two, you can make money from this insanity. And one of the ways to do that is through carbon credits. I think it's definitely sensible to look at if you have a long term view. There is potential, as we talked about, for the price of carbon credits to grow substantially simply because there's a mismatch between demand and supply. You got all these companies, all these governments, potentially individuals and so forth, that are going to demand more and more and more. [00:49:12.670] We can see easily an exponential increase in demand for carbon credits for supply. There's not a whole lot in the marketplace. And the growth process, just the cycle of nature, takes years. The approval process for that bureaucratic issuance of carbon credits, that takes a long time. So there's a lot of constraint on supply, but a lot of momentum for demand. [00:49:36.270] And so you look at something like that and go, well, geez, that makes a lot of sense. And in a way, in a weird way, it's actually a little bit like bitcoin. If you think about bitcoin, ten years ago, there was very little penetration. Most people never heard of bitcoin. There were people that knew about bitcoin. [00:49:51.730] They were studying it. They were looking at it, and they were buying it, and they said, okay, there's going to be a time where demand is going to increase a whole lot for bitcoin. So I'm going to buy right now. Supply of bitcoin, as we know, is fixed. So there's clearly constraints on supply and probably going to be a lot more demand. [00:50:05.760] I mean, we were writing about it long, long time ago and thinking like, yeah, demand is probably going to increase. And so in many respects, carbon credits are a bit like that, where it's like bitcoin in 20 13, 20 14, where there's very little penetration, really disjointed, disparate fragmented markets. There's not a whole lot of standardization in the marketplace. And so, yeah, at some point, just as we saw the price of bitcoin suddenly spike, we could see the price of carbon spike. And because it becomes the thing that everybody wants to invest in here, one of these days in the future, people sitting around the Thanksgiving table talking about investing in carbon credits, it becomes a hot trend. [00:50:46.180] The chart, the price chart for carbon credits goes parabolic all of a sudden, and I think that's a possibility. Again, there are no guarantees about financial outcomes. There are very few guarantees in life at all. But I think this view is on fairly solid ground, just given the supply and demand fundamentals and where this momentum is going. There are other ways to do that, though. [00:51:11.620] There are other ways to invest. And personally, I'm not much of a speculator. I'm more of a business guy. I view businesses as real assets. I think it's businesses a great business is the realness of real assets. [00:51:24.430] And I've talked about this before. I think that real assets in general, real assets always make sense. They especially make sense in an environment where governments and central banks have proven their incompetence. They're rapidly losing the confidence of the world. And in a very inflationary environment, stagflationary environment, real assets tend to make a lot of sense. [00:51:44.170] If you think back to the 1970s, real assets did very well. Gold did incredibly well. Agriculture did incredibly well. Farmland specifically did very well. Energy did very well. [00:51:55.690] The stock market, on the other hand, was pretty dismal. The stock market was not a good place to be in the 1970s. And so in an environment like this I've said this before, I think real assets do make a lot of sense. And I view businesses as a fantastic real asset, a productive business that's managed by talented people of integrity, that produce a valuable product or service that's in demand. This is a great real asset. [00:52:23.520] And I'm a business guide. I think about business. Businesses, unlike other asset classes, like real estate, for example, real estate generally has a fairly fixed upside. If you buy a single family home or an apartment complex or something like that, you can only do so much to raise the rents right. You can fix up the kitchen and spruce up the bathrooms and these sorts of things. [00:52:45.580] But you can't take a place, can't take a house that's running for $2,000 a month and all of a sudden charge $20,000 a month. But at business, revenues can grow really limitless boundless. It's really a function of, as opposed to market constraints. It's a function of human ingenuity, creativity, talent. And that's one of the reasons why I like business so much, is because the potential is literally unlimited. [00:53:09.270] And there. Are already and will continue to be businesses that look at this trend, look at this momentum, and capitalize on some of those opportunities. And so businesses that are really related to whether it's carbon credits or different technology, whatever. I'll give you a few examples. I mean, I help manage personally an investment fund that has invested pretty heavily in some of this. [00:53:31.270] And one of the things that the fund got into was a forestry provider. Often it's in Africa where land is literally dirt cheap. And the fund came in and bought thousands and thousands and thousands of acres to produce carbon credits. And there are going to be a lot of businesses that focus on this. And I look at something like this and go, okay, if I think that demand is going to soar in the future, I want to be a supplier of that. [00:53:55.240] I want to be a supplier of that thing, and I want to get in early so that as demand really starts to skyrocket, now, suddenly my trees are coming online, my permits are coming online, my credit is coming online, and we can start selling those things and make a lot of money. And there's going to be funds, there's going to be businesses and so forth that do that. Technology is always in. These sorts of things can be a really great idea. We invested as well alongside with many of our Total Access members in our group here, in a company that has developed just, again, another example here, really incredible satellite AI technology. [00:54:28.860] So this is so that companies can determine exactly how much CO2 is being sequestered. So this way they really streamline and even bypass that insane NGO bureaucracy. So if you've got a big company that says, you know what, I don't even care. We're not going to buy carbon credits. We're just going to go and get our own land and offset stuff ourselves. [00:54:48.630] We're going to go get our own teak plantations. We're going to outsource and contract with some teak providers. But I want to know exactly how much CO2 is being captured here so we can look at our balance sheet and get some really precise determinations. Well, these guys have created technology to be able to do that. And I think that's going to be really, really valuable technology, looking at the trends and the momentums and so forth. [00:55:08.380] Again, nothing is risk free, nothing is 100% certain, but it's just an idea of a couple of ideas of ways to sort of get into this. It's directly into carbon credits and some businesses that have exposure to that and businesses that are basically tackling some of the problems and the challenges in the marketplace. But ultimately, again, it just to me seems that there are a whole lot of opportunities here based on this big trend. These bureaucrats, these policymakers, the high priests are demanding their human sacrifices. They're creating a gigantic industry. [00:55:39.490] And we do hear about it a lot right now, but if you think we hear about it a lot now, you ain't seen nothing yet. This is still fairly nascent. If you compare what's happening right now in the climate market and the carbon credit market, etc. But if you compare this today to the ambitious climate and carbon goals that they've set for 20, 30, 20, 40, 20 50 and so forth, again, so I said you've got to have a longer term view. This isn't some overnight thing where you can just go, oh, I'm going to buy something and I expect it to go up 40% tomorrow. [00:56:09.400] That's not really what we're talking about here. This is something with a very long term view. It's not anything that somebody says, oh, I got to get in right now, or anything. We spend a lot of time studying this, trying to figure out the best ways in the best approaches, the right people to work with, etc. Or spent really a lot of time studying this. [00:56:27.820] And it's something that, again, you should never invest in anything that you don't understand. You should really, really do a lot more research and understand everything about the market and what you personally think are the risks and the opportunities. But there is literally so much money being put into this and a lot of it is completely silly, nonsensical. Some of these are just terrible ideas. But the momentum is what it is and it doesn't seem to show any sign of slowing down, let alone stopping. [00:56:53.650] And because of that, they are creating really a mountain of opportunity here for people that can see this and understand where these trends go. They are like the high priests of the Mayan civilization or the Celtic druids, or even the Roman elite who put their thumbs up and down or really sideways for the whether or not people live and die in the Colosseum, they're more than happy to watch people suffer. Or at least they're turned a blind eye to the suffering that they create, to the sacrifices that they demand for their sole definition of the greater good. Again, you don't have to accept that. You don't have to be the sacrifice. [00:57:27.390] And that's why we have a plan B. That's why we create options for ourselves. And there will always be options because like I said, there's never universal acceptance for these things. Even with COVID there were options. There were places to go where you could still have a sane and normal life. [00:57:43.470] And it'll be the same with just about everything. You rarely have universal blind acceptance to a single rule around the world, and COVID taught us that. But at the same time, we shouldn't ignore the obvious momentum of this trend because there will be a whole lot of opportunities that come along with it. Thanks very much for listening and we'll talk to you next week. Close Podcast Transcription

You’ve probably been following the news that FTX, one of the largest cryptocurrency exchanges in the world, is in hot water. And frankly that characterization is an insult to hot water. FTX has already filed for bankruptcy. Potentially $10 billion or more of customer money is at risk. The new CEO states that the company’s internal controls were “a complete failure”. And the company’s founder, Sam Bankman-Fried, has proven himself to be, at a minimum, an irresponsible, reckless child, if not a full-blown fraudster. It’s easy to lay the blame exclusively on him. And he clearly deserves a lot of it. But a failure (if not fraud) of this size cannot be perpetrated by a single individual. Even Bernie Madoff had accomplices. Or people who should have noticed but were totally negligent at their jobs. In fact the Madoff scandal is a great example. Madoff’s firm had to undergo routine regulatory examinations. And yet, year after year, the Securities and Exchange Commission completely failed to notice the rampant fraud. In the aftermath of the Madoff scandal, a US Department of Justice investigation concluded that in the SIXTEEN YEAR period between 1992 and 2008, the SEC had “more than ample information” and that they “could have uncovered the Ponzi scheme well before Madoff confessed.” The report further blames the regulatory agency’s failure on “systematic breakdowns in which the SEC conducted its examinations and investigation.” Talk about being asleep at the wheel… In the case of FTX, there were also a lot of people who failed to notice what was happening. Most notably, Sam Bankman-Fried became the #6 biggest political donor in the United States; 99.6% of his contributions went to progressive candidates. Did any of those politicians really scrutinize where the money came from? Did any of them ask for audited financial statements to make sure the money was clean… or to make sure that the guy wasn’t spending his customers’ money? Apparently not. Politicians happily cashed the checks and didn’t ask any questions. This is an outrageous failure. Politicians constantly pass rules and regulations making financial compliance far more onerous for everyone else. (If you don’t believe me, try going down to your local bank and withdrawing $25,000 in cash… and see how quickly they treat you like a criminal suspect. You’ll be there all day filling out forms and justifying your actions.) But do they apply those same rules to themselves? Absolutely not. They just take the donations. It’s a despicable double standard. Also culpable in this massive failure are the prominent venture capital firms who enabled this overgrown man-child to go rogue. Sam Bankman-Fried raised at least $1 billion from investors, including firms like Softbank and Sequoia Capital. Softbank, of course, is infamous for its enormous investment in WeWork, effectively encouraging CEO Adam Neumann to recklessly spend other people’s money. It seems that Softbank didn’t learn its lesson, because they once again dumped a mountain of cash on a guy who is even worse than Neumann. More importantly, however, Sequoia and Softbank are hard core, sophisticated investors. They have huge teams of lawyers, bankers, and analysts. And, even though FTX is a private company, as investors they would have had access to the company’s financial statements. In other words, they should have seen the impropriety. They should have seen it, and they should have done something about it. But they didn’t. They stood by once again in silence, enabling Bankman-Fried’s irresponsibility. Despite this colossal failure of a major player in the crypto sector, however, it’s important to separate FTX (the company) from crypto (the idea, and the asset class). In my view, FTX isn’t even a crypto business. It’s a financial institution, little different than Bank of America. Whenever you make a deposit at Bank of America, that money becomes BOA’s asset. In other words, legally it’s no longer your money. It’s Bank of America’s money. You become an unsecured creditor of the bank. And, subject to certain regulatory limitations, Bank of America can go and gamble away your money on crazy loans and investment fads. We’ve seen plenty of examples of banks recklessly speculating with their depositors’ funds in the past. The entire 2008 financial crisis, in fact, was because banks gambled with their customers’ money. And it almost brought down the banking system. This is basically FTX’s business model. They took in customer deposits, including cash and crypto. Those deposits became FTX’s assets, and customers became unsecured creditors of FTX. This is the way any financial institution works. And FTX was essentially a financial institution– highly centralized with a distinct lack of transparency… with the added risk that a single moron had total control over everything. Frankly this is the opposite of what crypto represents. Crypto is all about decentralization and transparency, and that no single person or group has control. So FTX in no way represents crypto; it’s just another conventional financial institution that acted irresponsibly with other people’s money. It’s not the first. It certainly won’t be the last. And its failure underscores even more how important a decentralized financial system is. This is the topic of our podcast today. I walk you through the history of several other industries, starting with railroads, that underwent spectacular financial bubbles rampant with fraud. But even after the bubbles burst, the good ideas still remained. Railroads were a great idea that fundamentally improved our civilization. And even after the railroad bubble burst in the 1840s, great companies and great technology remained. The same goes for the Internet– it’s a great idea that has fundamentally improved our civilization. And even after the dot-com bubble burst in 2000, great companies and great technology remained. Crypto is still a fantastic idea. It has the power to move the needle on human civilization. (When you think about it, it seems almost bizarre that in 2022, highly centralized and bureaucratic financial institutions still exist and operate largely in the same way they did in 1822.) And despite some of the recent failures in the crypto sector, some fantastic assets and great technology still remain. You can listen in here. Open Podcast Transcription [00:00:01.060] Today, we're going to go back in time to October 6, 1829, to the tiny village of rain hill in the northwest of England, where a 25 year old British inventor by the name of Robert Stevenson was about to do something profound. Stevenson had entered the competition of his life, and the stakes were so high, he knew they would either ruin his family's reputation, everything his family and especially his father had worked for for so long, or he was going to fundamentally change human civilization forever. It was only one of those two outcomes, and he knew it. Robert Stevenson's father was George Stevenson. George Stevenson was a very prominent, very famous inventor during the British industrial revolution, whose most closely associated with advances in railroad technology.   [00:00:47.260] In fact, George Stevenson is actually known as the father of railways. Now, that didn't mean that he invented railroads or railroad technology. In fact, archeologists have uncovered a tremendous amount of evidence going back to even the neolithic era, thousands and thousands of years ago. The oldest really rail there's a timber causeway that dates back to more than 3800 BC. In southern England, about 50 miles from where stonehenge is sort of near the welsh border.   [00:01:17.310] It's so old, actually, it even predates stonehenge. It was built by a civilization that's so old that archeologists and historians don't even actually have a name for it. So this is really, really old technology. The babylonians had some very crude sort of rail and track technology going back to 2200 BC. The ancient greeks had actually quite impressive five mile track that connected the peloponnesian peninsula to mainland Greece, dating back to around 600 BC.   [00:01:44.670] So this is very, very old technology, but at the time in the ancient world, it was basically stone or wood or timber, where you could basically put a little wheeled cart that was being pulled by horses along a track. And they would use this either to take raw materials from, say, open pit, mines, maybe fields, or they would chop down trees from forest and put the timber inside of a cart that was being pulled along a track by horses. And maybe it would even go across a short waterway over very, very short distances. This is primarily what it was for, but the cost was very high. As you can imagine, it was all human and animal muscle at the time.   [00:02:23.230] So it was a lot of effort for human beings to actually lay track. They didn't have machines, they didn't have really any equipment. And a lot of these civilizations, this was, even if we go back to the one in England, this was pre bronze age, they were really still using stone tools. So it took a lot of effort to lay track. They hadn't really perfected iron working.   [00:02:42.840] So the tracks were basically made of timber, and because of it was made of timber, can break more easily, and they couldn't put very much weight in the cart it was being pulled by people and horses. So the cost benefit wasn't really worth it. And because the cost benefit wasn't really there, the technology developed very, very slowly. But eventually, and I'm talking over very long periods of time, there were advancements, metallurgical developments that made iron working a lot easier. And once iron became cheaper, easier, better, and this took literally thousands of years, then iron rails were eventually introduced where people realized, oh, we don't have to use wooden track anymore.   [00:03:19.630] We can actually use iron rails instead of wood or stone. But the rail itself, the carts were still being pulled by horses. Everything was still powered by horses. But then came the real revolution in 1776. And of course, 1776 is very famous for the American revolution, but that's not the revolution I'm talking about.   [00:03:38.610] 1776 was also the year that James watt finished his design, perfected his design for the steam engine. We actually did an entire podcast about this, about how important that was to human civilization. 1776 was also the same year that adam smith wrote and published the wealth of nations, essentially giving birth to capitalism. So three really important things happened in 1776 the birth of the United States, the birth of capitalism, and the development of the steam engine. All three of which also fundamentally changed human civilization forever.   [00:04:10.240] Now, inventors and engineers after 1776, and they saw the steam engine, they thought, oh, my god, this is amazing. Now, all of a sudden, instead of having to use horses and people and so forth to do manual labor, now we have this inanimate fuel source. We can take wood and eventually coal, and we can burn it. And using that heat energy, we can heat up water, which is going to create vapor and steam, and use that steam to actually power and drive pistons and turn wheels and crankshafts and so forth. And from this, they actually began to apply that steam technology to rail.   [00:04:44.380] Now, it took about 30 years, three decades, but the first real steam powered locomotive engine came in 18 four. And so they used steam technology to create something that could actually pull a car. This was a locomotive engine built on steam technology, but it was way too heavy. The engine was so heavy, it crushed all the tracks. They put this big engine on the tracks, and all the tracks just crumbled.   [00:05:07.610] But at least it worked. That was in 18 four. Now, eight years later, in 1812, amidst all the gotta think about what's going on in 1812. In Britain, they're fighting the US. In the war of 1812, they're fighting against Napoleon, who's running all over europe.   [00:05:21.120] All these things were happening in 1812. And yet, despite all of that, there was still a lot of advancements in technology. In 1812, the first sort of actually commercially, economically viable locomotive engine was introduced. It was another steam engine, and they were able to make it a lot smaller, a lot more power efficient. So it wasn't so heavy that it just crushed everything below it.   [00:05:42.010] It crushed the tracks and so forth. And it was in 1812 that's when George Stevenson looked at the technology and said, okay, I think there's something here. I'm going to get involved in this. Now, george Stephenson was a remarkable guy, really remarkable guy. Talk about a kind of rags to riches story guy that just pulled himself up from his own bootstraps.   [00:06:00.090] He was born in 1781 in northern England, near the Scottish border. So if you've ever been to England and you're familiar with regional accents in England, he had a very heavy northern English accent that was actually a bit of a chip on his shoulder, on top of which, he grew up in an extremely poor family. He wasn't educated at all. He had very limited formal education. And George Stevenson was actually even illiterate until the age of 18.   [00:06:24.570] He came from a very, very low class working family, limited education, but was completely self taught, had an intellectual curiosity, was a voracious reader, learned everything that he could, was constantly doing experiments, and self taught in science and technology and engineering, really, through trial and error. One of his early inventions, when he was in his mid 30s, he made an improvement on something called a safety lamp. Safety lamp was a really important invention at the time, because, again, if you think about the 1800s, they had invented after James Watt had perfected the steam engine, and there were more and more advancements in that. And they realized, wow, we need a heat source, something that we can burn to produce heat, to heat up that water, to make the vapor and the steam. And so instead of burning wood, they realized that they could burn coal.   [00:07:09.430] Why coal? Well, because coal is a much more efficient fuel source than wood. If you think about the amount of BTUs or joules or calories, whatever unit of energy you want to use per kilogram of wood versus coal, coal is a much more dense energy source. You get a lot more BT use of heat out of a kilogram of coal versus a kilogram of wood. They realize we need to use coal because it's a much more efficient fuel source.   [00:07:33.970] So they had coal mines all over the place, people mining for coal. Now, most people probably never been in a coal mine. They're really dangerous places, and you've got all sorts of dangerous chemicals in the air and so forth. And obviously, they're also very dark. And so back then, they had lanterns and lamps everywhere.   [00:07:50.200] And you're talking about actually putting flame in an environment where you've got dangerous chemicals in the air. And a lot of times, a lot of coal mines actually just literally explode from the combination of the heat, the flame in the lanterns, and all the toxicity in the air. And they would just exploded the air itself would combust. They were really dangerous. And so they created these things called safety lamps to try and cut down on the explosions in coal mines.   [00:08:15.040] George Stephenson created one, a version of a safety lamp to actually reduce and eliminate explosions in the combustible air that existed in coal mines. And he created a really nice version of a safety lamp, something that was actually better and safer than existing versions of safety lamps that existed. Now, George Stephenson had a lot of records of his invention, all the experiments that he had done. He had witnesses of people that saw him conducting experiments and so forth. And yet when he came out with his final version of, he said, OK, here's my safety lamp, he was actually accused of stealing the idea because they said, no, no, no, you're an uneducated poor person from northern England.   [00:08:51.420] You couldn't have possibly invented that. And there was actually almost a mini trial of sorts where panels of experts convened and determined whether or not somebody with his lack of formal education, his lack of fancy titles, his lack of a noble upbringing, etc, could have possibly invented something so good. Now, George Steven was eventually exonerated from that, but for the rest of his life, he maintained a very healthy distrust for experts and scientific committees and so forth. And he actually went out of his way to make sure that his son Robert was formally educated. He went to private school, took elocution lessons to actually speak with a nonregional English accent and so forth.   [00:09:30.520] He really had this chip on his shoulder for the rest of his life. And he hated experts. Oh, did he hate experts. But he ended up having a great deal of success. And eventually, again, after this sort of first commercial viability of railroad and steam engine technology, he realized, this is the future, rail is the future, and I'm going to get in on this.   [00:09:50.620] And he became very, very successful in applying his brain towards developing locomotion engines that were based on this steam engine technology. Now, the first engine that he completed was in 1814, and it was a pretty remarkable feat at the time. It could haul 30 tons. 30 tons. It had a 30 ton towing capacity.   [00:10:09.850] It could actually tow up a hill at about 4 miles an hour. That was a remarkable feat at the time. 4 miles an hour, obviously, is nothing today that's about as fast as a relatively casual stroll on foot. But to be able to tow 30 tons up a hill at 4 miles an hour was an incredible feat in 1814. And that really catapulted George Stevenson into prominence in the rail industry.   [00:10:32.060] Now, that brings us back to the beginning. That brings us back to October of 1829. The Industrial Revolution was really heating up. The British economy was booming. There were factory owners everywhere, and lots of factories, by the way, in northern England, and they were looking for a cheap way to transport raw material to their factories.   [00:10:49.480] There was a group of entrepreneurs that had launched a new railway, and the railway was actually called the Liverpool and Manchester railway, obviously, because it was a railway between two northern cities in England, liverpool and Manchester, two trading cities, commercial cities, manufacturing hubs. And originally, the directors of the company had planned on using they knew that steam technology was where it was at, but there are a couple of different ways to do it. And one of the things that they had originally envisioned was they said, well, let's just use stationary steam engines. So the idea is that we would have sort of an engine office at one end of the track, literally dozens of miles away. And we'd have this stationary engine room.   [00:11:31.110] And the engine room would just sit inside of this room and it would use cables. And the steam engine would power the cables and basically pull the track. So you have an engine room on one end of the track, you've got the trains on the other end, and the trains are attached to cables. And the engines that just sit in this room essentially power the pulling of the train cars all the way to the other end. And George Simpson said, no, no, that's crazy.   [00:11:56.580] Don't lock the engines in a room. Put the engines on a car and let the car let that steam engine tow the rest of the train behind it. So you've got the engines actually on the track instead of sitting in a room that's pulling everything with really big heavy duty cables. Now, the directors of this Liverpool and Manchester railway were a little bit skeptical at the time, so they decided, let's hold a contest and let's see if George Stevenson was right, because they knew what they could do with the stationary steam engine. They knew that they could pull their train cars at this point.   [00:12:29.610] Now, again, this is 1829. They knew. They said, well, look, we think we can get to about 10 miles an hour here, and that's a pretty big deal. So if you think you can do better than that, then we'll adopt your technology. And so they announced a big competition.   [00:12:41.290] And the competition, because it took place in this little tiny village of rainhill, the northwest of England. It was known as the rainhill trials. And today, we would almost kind of call this a hackathon, right, where some big companies says, all right, let's all get together. Let's have a competition. Whoever has the best software code wins.   [00:12:57.160] They did this in 1829, and the rules were, they said, look, if you think you've got a steam engine that you can or some kind of train that you can mount that can pull all these cars, we want you to enter our competition. And the rules are pretty simple. The entrance you had to run the train. The train had to do ten round trips on a 175 miles length of track. So basically it was going 35 miles.   [00:13:20.980] Ten round trips times one point. So it's basically 20 times 1.75, so 35 total miles. And they said you have to have an average speed of 10 miles an hour. There are some weight limits and things like that to make sure that they didn't completely cause the iron rails to buckle. But the rules are fairly simple.   [00:13:37.770] And you had ten people that came in and said, okay, I'm going to compete in this ten entrants. Now, of the ten, only five actually showed up. The other five couldn't even finish their designs in time. Of the five, four failed to actually complete the trials. So the only one that actually completed was George Stephenson's engine, which he nicknamed the rocket.   [00:13:59.850] That was actually kind of funny. The other couple of engines, for example, there's one called Cycloped. Cycloped was the name of this engine. It wasn't even actually a steam engine. It was almost hilarious at the time.   [00:14:11.560] These people went backwards in time. Instead of force, instead of using the steam engine, they used a horse. And their engine was basically a horse walking on a drive belt. If you think about almost like a horse walking on a treadmill, that would power somehow this engine that was pulling all these other cars. But during the competition, the horse actually fell through the floor of their engine room, and so they were disqualified from the competition.   [00:14:35.660] One of the other major entrance that was actually sort of the favorite at the time among the media and everybody. It was sort of the if you're a fan of the rocky series, if you think about rocky four, it was called novelty. This was the Ivan drago of the competition. It was lean, it was tough, it was fast, and coincidentally also built by a Swedish guy. Dolph luncher is also a Swedish guy, although he was playing a Russian in the movie.   [00:14:58.110] But a Swedish guy named Johann Erickson. Johan Erickson was a very famous inventor. This is a guy he ended up actually moving to the United States and designed the very first iron warship for the union navy called the USS monitor, fought a very famous naval battle during the US. Civil war. But the novelty, which was Johann Erickson's version of the steam engine, which was the favorite, it was tough, it was fast, it was a really, really good machine, but it was really temperamental.   [00:15:26.080] And it was so, so many moving parts, so many complexities to it, that it actually didn't last the trial. And it collapsed and broke down so many times that I had to actually withdraw from the competition. Stevenson's, George Stevenson's version of it was called the rocket. It was the only engine to complete the trials. He kept the design simple so it wouldn't constantly break down and so forth.   [00:15:48.610] And because, again, stevenson had a lot of mistrust for judges and panels of experts and so forth. He actually put his son Robert in the competition and let Robert run the exercise, let Robert actually conduct the train, and so forth, because Robert, again, he was educated in private school, he spoke with that nonregional accent. So George Stevenson felt that people would take his son Robert more seriously. So here we are in 1829, October, we're in the rain. He'll trials, Robert Stevenson, he's got the rocket, he's up against novelty, he's up against this ridiculous Cycloped, the horse on the treadmill that fell through the floor, and Robert Stevenson won.   [00:16:26.350] With his father's design, george Stevenson's rocket engine was the only one to complete the trials. And after that, the directors of this railroad, the Liverpool Manchester railway, said, that's what we want, that's exactly what we want. And that really did fundamentally change everything. The implications were enormous. George Stevenson proved that his locomotion technology was superior to everything else, including and especially this idea of having stationary engines mounted in an engine room 30, 40 miles away, pulling cars.   [00:16:55.620] Because Steven said, look, if you do that, there's going to be a limitation to how far these cables are going to go. And then what happens if the cable breaks, whatever. He envisioned national railways and rails going hundreds and even thousands of miles and so forth, and he said, you just can't do that if you've got a stationary engine room with cables pulling the railroad cars. You gotta put the engine on the track pulling the vehicles. And that really fundamentally changed everything.   [00:17:22.450] It changed everything in transportation, it changed everything in terms of economic and trade and growth, and it really kicked off a major boom in railroads. So the Liverpool and Manchester railway opened literally months later. And to much fanfare, everybody made a big deal. They said, this is the future, it's coming, and it's actually here today, thanks to George Stephenson. And they actually had a big ceremony where the Prime Minister was in attendance, a lot of politicians were in attendance.   [00:17:50.020] And at one point, it was a horrific accident where George Stevenson's rocket engine was being put on demonstration. There was a local member of parliament that apparently was on the track and got fatally, mortally wounded by the steam engine that was being demonstrated at the time, literally right in front of the Prime Minister. Now, fortunately, as unfortunate as that was for the MP that ended up getting killed by that accident, it didn't dampen anybody's enthusiasm for railroads and railroad technology. And the more people saw what this could do, the more the technology improved, the more people got interested in this. And of course, like any great technology, it didn't take very long for the bankers to get involved.   [00:18:30.690] The Liverpool and Manchester ended up going public. The stock price soared. A lot of railroad companies at the time were public companies. Their stock prices soared, and it didn't take very long again for the bankers and the stockbrokers to go, hey, we could make money off of this. So next thing you know, you've got stockbrokers promoting every railroad company they could find, going around to investors saying, you've got to get in on this technology, this is going to be huge, this is going to be enormous.   [00:18:52.660] And the stock prices soared. And then not shortly after that, not long after that, you've got new companies now that are going IPOing into the marketplace. You've got the stockbrokers that are taking all these railroad companies public. In fact, this really starts seeming up. By the mid 1830s, between 1836 and 1830, 70 had 59 new railways popped up on the market.   [00:19:14.140] That was actually a really big number at the time. And rail stocks in general absolutely boomed, really, really boomed through the mid 1830s. And then all of a sudden they turned and fell by about 50% by the end of 1837. Now that was basically a sort of entire boom and bust cycle. It took about eight years from 1829 when George Stevenson's rocket technology was first commercialized, and then grew gradually, then boomed, and then busted by the end of 1837.   [00:19:44.980] So between 1829 and 1837, the whole boom and bust in railroads took about eight years. That was the first cycle in railroad technology. But then the cycle began anew and there was actually several years from about 1838 to 1843 which the industry was in a low. And during this period of time, there were a lot of railroad projects that were entirely abandoned. The total miles of railroad track in England declined, the number of railroad companies declined.   [00:20:11.470] And people thought, oh, there's not really any money in this, and so I'm not even going to pay attention to it. But eventually enthusiasm started to rise again in about 1844, and there are a lot of reasons for that. There was even some legislation that was passed. Parliament got together and started passing bills and laws advancing railroad technology once again. And then investors started looking at saying, hey, if the government's in on this, then there's probably something to it.   [00:20:32.470] So I'm going to get back into railroad stocks and next thing you know, it's 1840, 418, 45, and people start buying railroad stocks again at a really, really feverish pace. And in 1844 alone, railroad stocks increased by about 40%. And again, it brought out the irrational exuberance. Local media, including names that still exist today, like the Times and the very vulnerable economists had entire sections of their papers devoted to railways. What was going on with rail stocks and who were the hot rail stocks of the day and so forth.   [00:21:04.600] And a lot of it, honestly, there's even a lot of allegations that many of newspaper reporters are being paid off by stock promoters in the railroad industry just to write puff pieces and get investor enthusiasm to. Soar there were a lot of fraudsters that began inventing stories even people went out and they would start fake railroad companies just to raise capital from unsuspecting investors. And anybody who was even in a hint who would just go out to the marketplace and say, hey, I'm starting a railroad business. That was enough to get investors to throw money at you. There are even celebrities that got into it.   [00:21:38.160] Charles Darwin, charlotte bronte, who wrote Jane aer, if anybody went to high school in the United States, probably had to read Jane Eyre at some point, that was Charlotte Bronte. Got in on rail stocks. A lot of politicians got in on rail stocks. A lot of former politicians ended up joining the boards of railroad companies. All these noblemen who were sitting in the house of lords ended up on the boards of railroad companies.   [00:21:59.440] A lot of people that were on the boards of railroad companies ended up being elected to parliament. There was a revolving door in parliament between the government and the railroad industry. And it got to the point where railroad stocks were so prominent that rail stocks made up more than 70% of the entire British stock market value, and nearly half of all the listed companies in the stock market. Right? That's crazy when you think about it.   [00:22:23.200] Half of the listed companies in the stock market were railroad companies. That's totally insane. Especially a couple of years before, there were hardly any railroad companies, and then a few years later, nearly half of all listed companies are railroad companies. Many of them were unprofitable. There was one famous rail line called the York and North Midland rail line, for example, that before this kind of boom in the 1840s, they were profitable.   [00:22:48.490] They had a return on equity of about 10%, which is a decent return on equity before the boom. And then all of a sudden, during the boom, they took in all this investor capital. They started throwing it away at stupid projects, things that actually lost the money, and their return on equity fell from plus 10% to minus zero 3%. So basically they went from being profitable, being unprofitable, simply because capital was so cheap, it was so easy to get. It led to a lot of really stupid decisions and misallocations.   [00:23:16.650] So this is now we're in the mid eighteenforty s, and England's economy began to suffer. You might be aware of something called the very famous Irish potato famine. Well, this actually starts taking place in the mid eighteenforty. There's a bad harvest in England, a fullblown famine in Ireland, 1840, 518, 46. This creates a political crisis in parliament.   [00:23:37.120] The bank of England has to raise rates. They have an outflow of gold out of England, they start losing money. Money supply actually falls and it turns into a fullblown by 1847, a fullblown financial crisis. This lasts for years, and obviously during a fullblown financial crisis like this, all asset prices fell, including and especially rail stocks. Rail stocks had blown up so much and gotten so high, so frothy, that when the financial crisis kicked in, they were the ones that plummeted the most.   [00:24:06.210] And they finally bottomed out years later, in 1850, to the point that rail stocks, the sort of the london stock exchange railroad index was 25% below the previous low in 1843. So it was a pretty cataclysmic decline in these railroad stock prices. But there is something you could argue. Some good that came out of this, and the good that came out of this is that even though there was a big stock bubble in railroad companies, and a lot of I mean, there was fraud and there was deceit, and there was all sorts of crazy things that happened, rail technology still fundamentally changed human civilization forever. Even still to this day.   [00:24:46.060] Even to this day. So much of world trade is actually based on rail. In the United States, railroads are still a really, really important part of the transportation systems, what they call the intermodal system. The US. Imports all sorts of junk, basically from china.   [00:25:01.650] And these boats come to the port of los angeles, or port of long beach, where they're loaded onto rail and they move across the united states on rail. To this day, railroad technology is still so critical to global trade and transportation. It really did fundamentally change things forever. So yes, there was a bubble, and yes, there were a lot of crazy things that happened, but it left behind a fundamentally good, strong technology. It's also important to point out that even after the bubble burst and the market bottomed out in 1850, there are a lot of really, really good railroad companies left in existence that made a lot of money for investors.   [00:25:36.490] Because they were still fundamentally good, well managed businesses that continued to make lots and lots of money for their investors over a very long period of time. Now, this story is familiar, and it's not just rail. In fact, something I've already written about before, there was another period in british financial history called bicycle mania. bicycled mania was in the 1890s, where bicycles are still a relatively new technology. You've probably seen those old photos of bicycles where you have one giant enormous wheel and one teeny tiny little wheel in the back.   [00:26:07.960] Those are called the penny farthing model, and they were really dangerous, as you can imagine. The cool thing about those bikes is that they can get really, really high rates of speed. You see people zooming across the streets of london. The other problem, the big problem though, is that they were very unstable. Those penny farthing bikes were so unstable that if you hit just a little bump or a little pothole or something like that, of which there were many numerous potholes on london streets at the time, you would really just flip over the handlebars.   [00:26:35.820] They called it taking a header. And it was incredibly dangerous. People had all sorts of. Injuries from this. And so they developed better technology that made bicycles safer and faster and cheaper and all these things.   [00:26:47.530] And this is the big thing that happened in the 1890s. By the mid 1890s, we saw that this bicycle, you know, the index of bicycle stock source 258% just in the first six months of 1896. So we're talking about nearly tripling of the index just in six months and 1896. That's pretty frothy. On top of that, you had 238 new bicycle companies that were floated in the first half of 1896.   [00:27:14.700] Most of these were just empty shell companies. They had nothing to offer but fancy promotion, made a lot of sort of high promises, but they had absolutely nothing, they had no intention of ever manufacturing a single bicycle. It was just a bunch of unscrupulous stock promoters that were trying to make a bunch of money off of a bubble. And yet similarly that bubble burst and yet the underlying technology remained. Bicycles were really good ideas, still are a really, really good idea.   [00:27:38.820] I would say probably not as important as railroads. Although, I don't know, I guess if you're in Denmark or the Netherlands or one of these places, it's a really big bicycle culture. Maybe it is for you, but this is still bicycles were really, really good idea. And the idea remained even after the bubble burst. And there's still plenty of companies that actually were responsible.   [00:27:57.190] Professional businesses that still made money with bicycles continued to develop bicycle technology for decades and decades to come. We saw this with.com bubble. There were lots of idiots, lots of speculation in the late 1990s, the bubble, the dotcom bubble was outrageous, but the internet was still a good idea. And after the dotcom bubble burst, the internet still remained. It was a great idea.   [00:28:19.470] And there were still plenty of companies, including from the dotcom bubble, that survived, that did well, that continued to exist and even to this day are highly profitable. We can already see this in other industries. We can see this in the electric vehicle industry, for example, when Tesla was really one of the first major players in the market. Now you've got all these electric vehicle companies coming out, it's becoming this really hot industry to be in where some guy comes out and says, I'm going to start an electric vehicle company and investors are throwing money at them. And you get the saga of this company, Nicola, where the CEO, I believe Trevor Milton is his name, who has actually been indicted and convicted.   [00:28:57.130] It's just making stuff up. I mean he went to investors, said, look at my vehicle and how it's moving and completely powered by electricity. And it turns out that the engineers just put the car in neutral and had it rolled down a hill. I mean the whole thing was a complete and total scam. It was a total fraud.   [00:29:13.560] This guy's already been convicted. So we can already see that exact same thing. You got a lot of knuckleheads doing dishonest things, but it doesn't change the fact that there's still some good technology there. Now, not all bubbles are created equal. And again, if we go back into history, we can see there are some bubbles that are completely stupid and totally pointless.   [00:29:32.670] Like tulip mania. Tulip mania was so stupid because you're talking about something that's literally you're talking about a flower that's literally going to die and people are paying outrageous sums of money and bidding up the price of that stuff. Something that's literally going to die, that has no real utility or value in the marketplace or anything that actually is going to move the needle for human civilization. But a lot of bubbles that we see financial bubbles are actually based on really sound ideas, including obviously railroads and bicycles and the dotcom bubble and so forth. There are a lot of examples of this.   [00:30:06.280] There was also in England, actually, there was an emerging market bubble in the 1820s, 1830s. This is a time, a period of time where there were lots of independence movements. In Latin America in particular, you had places, Chile and Argentina and Brazil and so forth, all these places in the early 18 hundreds that started winning their independence from Spain. Now you have these brand new countries in places where there's a lot of natural resources in the 18 hundreds, natural resources, really big deal. Remember, this is a time where everything we're mining coal and so forth.   [00:30:37.840] And so you've got now places that have really rich deposits of natural resources and investors in Europe are saying, hey, that sounds great, we should invest in these countries. And these brand new countries are thinking like, well, we have investor appetite in Europe. We should probably go and borrow money. We can issue sovereign bonds. Bankers from London get on boats and go out to Brazil and go to Argentina.   [00:30:59.370] And they sit with the government, they say, hey, we can bring you a lot of money and you can issue these bonds and so forth. And there became actually this big kind of emerging market bond investment fad. And there were some people that took a lot of advantage of this. There was one guy, very famous fraudster with the most spectacular Scottish name, Gregor McGregor. Gregor McGregor created literally just made up a country, it was called Poyes.   [00:31:24.900] And he just invented this country and said, oh, there's this country called Polyass. And he made it sound like it was the city of El Dorado. The streets are paved in gold and they're sitting on huge natural resources and they're borrowing money right now. And so he raised all this money for a bond, a sovereign bond for a country that didn't even exist. And so obviously that was an incredible fraud and people lost money.   [00:31:47.560] But it doesn't take away from the fact that sometimes actually loaning money to sensible governments and resource rich places is actually a good idea. Investing in emerging markets can be a good idea. The internet was a good idea. Railroads were a good idea. Bicycles were a good idea.   [00:32:04.480] And obviously all of this leads us to crypto. Crypto, the original technology bitcoin, the genesis block. This goes back to the white paper in 2008. The genesis block for bitcoin was mined on January 3, 2009, and the growth since then has been ridiculous. It was in a stealth phase for a really long time.   [00:32:25.150] It went to a major mania phase in 2017. A lot of you guys probably remember that, where quite famously, thanksgiving 2017. So it would be five years ago, right around now. We're coming up on thanksgiving week here. So thanksgiving 2017, bitcoin was like the talk of the thanksgiving dinner table.   [00:32:44.800] And, and, and, you know, coinbase opened up millions of accounts in the next couple of weeks, and there's all this crazy mania with people coming in buying bitcoin, and the price went up to a record high and then had a pretty significant crash after that. And that was really similar to the first railroad bubble. The first railroad bubble, again was nine years from 1829 to 1837. And with bitcoin, it was 2009 to 2017. So actually a similar nine year period in that first cycle where the technology was sort of invented and perfected to the time that you had this huge bubble.   [00:33:19.770] Then bitcoin had a cooling off period, basically all of 2018 and 2019, and then with the pandemic, but probably by summertime in 2020, crypto got really, really hot again. And what do you know, the government was printing all this money and paying people to stay home and all these sorts of things. A lot of people sat at home and they bought crypto. They started trading NFTs and so forth, and it got really, really hot. And of course, they rolled out all the celebrities.   [00:33:46.870] They had matt damon and tom brady and all these people. Basically, matt damon was daring people to invest in crypto. You're a coward if, you know, fortune favors the bold and all these sorts of just silly expressions. And it's quite hilarious if you've ever watched south park, they got panned on south park for this. And again, the super bowl commercials and all these things, just like we saw in the railroad period right in the 1840s, where we had the celebrities and the politicians and so forth.   [00:34:16.380] And it was the same sorts of things. We've seen so many shenanigans with crypto, all sorts of ridiculous ways that promoters invented to just take money from people. The ICO craze that went back to the last cycle. All these new constantly with new tokens and people saying, oh, I'm you know, anybody that just went out with a white paper was able to go out and raise a bunch of money and sell their ICOs and pretending that they're creating new blockchain technology. There's an entire industry of people who did nothing but write white papers specialized in promoting specific tokens, paying celebrities to do all these things, bringing politicians into it, bringing even central bankers are very highranking.   [00:34:55.240] Central bankers that got pulled into the crypto sector. And that leads us to 2022, where this year we've seen several highprofile failures. We saw terra, celsius network, and now most recently, just over the last few weeks, this spectacular collapse of FTX. FTX is the most recent one, probably the biggest one, where you've got, I mean, honestly, the story of FTX, it just doesn't make sense. In less than three years, they came from literally nothing.   [00:35:28.450] They started to being this huge company, this guy's, this multibillionaire, throwing cash around. You've got a CEO who in one respect seems to be a very intelligent person, but in another respect a complete and total moron. They had horrendous internal controls. I don't need to tell you all this, you probably have been following it. You can read the stories for yourself if you're listening to this far off into the future.   [00:35:50.440] This is a pretty big deal in the crypto industry. And you've got a company that's holding on to an enormous amount of other people's money, other people's assets. They had horrendous internal controls where the CEO is basically using other people's money as his own personal slush fund. And honestly, to say that this behavior was completely unethical doesn't even scratch the surface of how much rampant fraud and corruption there was in all this. And because of this, it's interesting is that most asset prices have been taking a nosedive lately because the economy is turning down, interest rates been going up and so forth, and crypto has been falling as well.   [00:36:34.350] But this particular issue with FTX has caused cryptocurrency to fall even further simply because of this FTX debacle. And what's important to understand is that just like the bursting of the railroad bubble didn't actually invalidate rail, and neither did the bicycle, and the dotcom bursting didn't invalidate the internet. I was talking with some friends over the weekend and one guy said, you know, it's not like when pets.com went bust in the 1990s. That meant that the internet was a bad idea. Of course the internet was a great idea.   [00:37:04.530] Regardless of what happened with pets.com and some of these really spectacular dotcom failures, what's happening with FTX fundamentally has nothing to do with crypto. When the enron scandal in the early 2000s, bernie madoff, one of the biggest stock scams of all time, it did not invalidate stocks as an asset class. It meant that Bernie Madoff was a bad guy. It meant that obviously investors need to do more due diligence on their counterparty, there needs to be more internal controls in the industry, but it didn't invalidate owning stocks as an asset class, and the dotcom bursting didn't invalidate owning technology stocks. The fact that FTX was a total fraud and that frankly, the guy that runs the show and owns the company seems to be a total criminal here.   [00:37:54.660] It doesn't say anything about crypto as an asset class or an idea, or the value of cryptocurrency as an idea. It's important, actually, to point out that FTX, in my view, is not even actually even a crypto company. FTX is a financial institution in the same way that bank of America is a financial institution. What does bank of America do? They take other people's money.   [00:38:16.180] Other people's money? Depositors money sits on bank of America's balance sheet. Once you make a deposit in bank of America, it's no longer your money legally. It's bank of America's money. You're now a creditor.   [00:38:29.290] You are an unsecured creditor on bank of America's balance sheet, right? So that's the same thing as FTX. You go and you deposit your crypto. FTX is holding on to your money, and it's actually not even crypto. People go and deposit fiat money, dollars and euros and pounds and so forth, and FTX is holding on to that money.   [00:38:49.860] Well, guess what? That's not your money anymore. That's FTX's money. It's the exact same thing as bank of America. It's a highly centralized institution, just like bank of America.   [00:38:59.880] There's very little transparency, frankly, even worse than bank of America. Bank of America, at least, has to issue quarterly audited, financial statements. They have to have management discussion. They have regulatory disclosures they have to make. Even with all that, the transparency sucks, right?   [00:39:15.210] Because bank of America has all these assets on their books, and there's very, very little detail about those assets. Do we actually know what's the quality of the loan portfolio? Do we know the quality asset portfolio? Are they buying all sorts of toxic assets and crazy derivatives and using other people's money to do it? Well, we don't really know.   [00:39:32.440] They just have huge line items where they say, we have $800 billion in loans, and we go, okay, we don't actually know anything about the loans. We don't know. Are the loans good? Are they safe? Are they made to credit worthy counterparts?   [00:39:45.070] We really have no idea. We just have to trust the bank of America knows what they're doing. With FTX, it's even worse because FTX doesn't even publish financial statements. So essentially, what FTX has done is the same stupid stuff that banks did in 2008, where banks were taking their customers money and they were making crazy gambles on wild financial speculation and silly investment products and so forth, buying toxic securities and all these sorts of things that became very famous back in 2008. FTX was kind of doing the same thing.   [00:40:15.510] FTX is taking other people's money. They were funneling it into a related party company that was then gambling it away and doing all sorts of crazy stuff. And a lot of those investments lost. And because those investments lost, all of a sudden you've got people that have deposited cash with FTX, they're now going to lose a lot of money. You got the CEO.   [00:40:33.940] This guy, Sam Bankman Freed, who claims that FTX was audited. So either he's a complete liar and they weren't actually audited, or you've got auditors. Now that it's yet another major regulatory and accounting failure. Auditors are supposed to look out for the shareholders. If this company had actually been audited, the auditors should have flagged this in a second and said, no, no, no, this stinks.   [00:40:58.600] None of this makes any sense. These guys are gambling with their customers money. When you have customers money that should be sacrosanct, that should be so wholly and sacred, you don't mess with other people's money. And so, again, either this guy is a complete liar or the auditors just weren't doing their jobs. Or both.   [00:41:19.170] It could have been both. Who knows? And again, this is just outright fraud. Just like this guy at Nicola who was saying, oh sure, look at our vehicles moving by themselves, when in fact they were just rolling downhill. Or Bernie Madoff telling everybody, oh sure, look at all these investment returns you're making.   [00:41:33.990] This seems to be a case of a guy that just made it up, just made up everything that he needed to do and was making an enormous amount of money. What was he doing with that money? Well, it turns out this guy was also one of the biggest donors. He happened to be a donor to the Democratic Party. I don't know if that really matters in this particular case, but he was doing it seemingly with other people's money.   [00:41:53.400] So this is another massive political failure where you've got a bunch of politicians, they're taking in huge amounts of money from this guy. Nobody's asking any questions. What's interesting is that there are so many industries right now, especially in the financial sector, that are required to conduct all sorts of compliance checks, things. For example, the banking industry called KYC, know your Customer. And I know these things because I own a bank.   [00:42:18.100] And it's a crazy process where people make deposits and withdrawals and trenches, and bank compliance departments have to go and understand where is this money coming from and where is it going and who's the person that's going to and is this person a criminal? All these sorts of things that go on behind the scenes a lot of times without customers even knowing that politicians aren't doing that at all. Some guy comes in with his crazy hair and his big personality and shows up and says, here, I'm going to write you a huge check. And they go, OK. And there's no compliance checks.   [00:42:49.590] Nobody is there wondering like, hey, where's this money coming from? And are these audited financial statements or any of this? Nobody. They just take the money. So this is a huge failure.   [00:42:59.880] They just take the money. Politicians, what a surprise. They don't hold themselves to the same standards that they expect everybody else to. They just take the money. There's no compliance checks whatsoever.   [00:43:10.230] And this guy, it turns out, that could have been writing checks with other people's money to politicians that were just happy to accept the money and never asked any question about where it came from. This is also so on top of an accounting and regulatory failure, failure of the auditors, failure of the politicians to even ask any question go, well, this guy's writing a lot of checks. Does that even make sense? There was a failure of investors vestors that cheered on this guy's recklessness. Once again, the usual suspects you got I believe Sequoia was in on this.   [00:43:40.080] SoftBank was in on this. A lot of these big investment funds, I gotta say, it's a weird culture with venture capital firms who I think have been consistently I mean, there's been so many moral and ethical failures. These are the same guys who cheered on, for example, Adam Newman, famously, of WeWork who stood by and just scratched their butts while this guy was double dealing, pretending like he owned the word we and just milking the company for millions and millions of dollars and just sat there and did absolutely nothing. And it's this classic sort of startup investor culture with these VC funds. They love the crazy guy.   [00:44:22.780] It's like the weirder the founder, the better. It's just this bizarre culture where investors are attracted to crazy founders that have whatever it is, they got crazy hair and crazy personalities and crazy habits and all these things. And there was one story, quite famously, where this guy, Sam Bankman Freed, was going out during an investor pitch, was playing video games during an investor pitch. He was playing League of Legends during an investor pitch. And investors actually like that.   [00:44:51.570] I mean, people will take a guy like that and write him a check, write him a big check for tens of millions, hundreds of millions of dollars because, oh, look at that, he's so unorthodox. He plays video games during investment no, he's a child. He's a child. He's an irrational, irresponsible child. And if he's going to play video games during an investor pitch, what is he going to do with other people's money?   [00:45:14.520] He has no respect for anybody's money. He's not going to respect investors and investor capital. He's sure as hell not going to respect customers and customer money and internal controls and accounting standards and all these grown up things that businesses actually require. And so to me, this is a major problem. I believe in the startup culture where you've got these people, these investors, these venture capitalists that deliberately go out and find irresponsible, crazy people because they think it's that famous line from the SoftBank Founder that if you saw the movie on Apple TV, you know, he said, who wins in a fight between the I don't remember exactly what he said.   [00:45:55.710] It was like the smart guy or the crazy guy. And he says the crazy guy always wins. And so they want to bet on the crazy guy. No, don't bet on the crazy person. Bet on the smart person.   [00:46:05.110] Bet on the person that's actually honest and talented and hardworking and actually has a real vision that's an actual sensible investment. Instead, I got to go, like, if you got some crazy thing, you got crazy hair, crazy personality, crazy habits, all that. Investors love that sort of thing. And it's nuts. It's completely nuts.   [00:46:23.160] And that kind of culture is responsible for this fraud, where you have these very, very smart big investment funds, venture capital funds, they should have known better. They should have been looking I mean, these big investment funds that invest hundreds of millions of dollars and are supposed to be run by responsible adults, those people should have been looking at this. Where were they? Where were their lawyers? Where are their accountants?   [00:46:47.890] And all this, to me, they have just as much blame as the accountants and all the political failures and so forth. These people that are also investing their investors money, the venture capital fund should have been looking at this and they weren't. And shame on them. Shame on them. This is a horrible fraud that touches a lot of people, and there are a lot of people at fault here.   [00:47:09.990] But again, FTX is not crypto. Everything that I've been talking about here I haven't even scratched the surface of the fraud or at a minimum, the malfeasance, the impropriety, the lack of responsibility. But the point of all this is that FTX is not crypto anymore than Pets.com was the Internet. I'm not even suggesting go and invest in crypto or anything like that. Leave that to yourself.   [00:47:35.790] My whole point is that you should separate the fraud from the asset class, separate the spectacular failure of an individual business or even multiple businesses and multiple enterprises that have failed from the asset class, and even more specifically, separate the fraud from the idea. And the idea with crypto is very simple. Does the world need a decentralized financial system? Yes, absolutely. In fact, if anything, this whole issue with Ft X and the accountants who failed and the politicians who failed, and the big hotshot suit and tie venture capital funds who failed, proves more than ever, the world absolutely needs a decentralized financial system.   [00:48:17.170] And will there probably be more uses of this? Will there be more use cases? Will there be more use and demand for crypto, for blockchain, for distributed ledger technology, for DFI in the future? Yes, probably. There probably will be in the future.   [00:48:31.080] Regardless of Sam bankman freed and FTX. The thing to keep in mind is that regardless of what happens with individual instruments and securities, good assets survive, good ideas survive. They prosper long into the future. The railroad bubble burst in the 1840s and it wiped out all the fraudsters. But what survived were the real companies.   [00:48:54.160] The real companies survived and they bounced back and they thrived. It was the same after the dotcom bubble that bursts. It will be the same with the electric vehicle bubble that's already forming. It'll be the same with crypto. The tulips died, right?   [00:49:08.610] The Tulip mania and the Netherlands, it died. The tulips literally died. But rail got better and the railroad, the bicycles, the dotcom investors, etc. People that got into that invested in solid IP, people that invested in responsible managers, that grew professional businesses, that continued to develop fantastic technology that actually changed the world for the better. Those people still made money.   [00:49:33.570] Those are still valid investments and valid ideas. And that's absolutely still out there with crypto. Again, I'm not encouraging you to do anything with your money, not suggesting you should buy crypto or crypto related businesses or anything of the sort. My point here is you should absolutely separate a bunch of idiots and fraudsters from the idea and the entire asset class. Those two things are completely unrelated.   [00:49:56.730] And with FTX, by the way, I just gotta say, I mean, this was talk about, this is anticrypto. FTX was highly centralized and complete lack of transparency run by one guy who could do anything he wanted to. That is the opposite of what crypto stands for. Crypto stands for decentralization. It stands for transparency.   [00:50:15.930] It stands for no single individual having control over everybody else. So as far as I'm concerned, FTX wasn't even a crypto company. It was just another highly centralized, frankly criminal financial institution that steals money from its customers. Just like we've seen over and over again so many financial institutions stealing money from their customers. But you know what?   [00:50:38.460] If passed this prologue, sambafi doesn't have anything to worry about because we never see any of these bankers go to jail. They stole so much money from their customers, never seen any of them go to jail. Occasionally get a slap on the wrist. So if this guy's lucky, then pass his prologue and he'll get a slap on the wrist and he'll be like Adam Newman, he'll be out in a few years raising money for his next venture. But regardless of all that, again, it has nothing to do with crypto.   [00:51:03.060] It has to do with one guy who set up a business that's not even a crypto business. It's a centralized financial institution that has failed. It's failed in every way. It's failed financially. It's filled with its customers, it's failed in its mission, but it is not crypto.   [00:51:17.080] And you've got to separate the fraud from the asset and the idea. Thanks very much for listening. And since we're coming up on Thanksgiving, we're going to take next week off, but we'll talk to you again in early December.   Close Podcast Transcription

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