Welcome back. Today I'm joined by Larry Leard, champion of sound money. Larry's the founder of Equity Management Associates and the author of the book Be Print. For years, he's been warning that America's mounting debt, chronic deficits are pushing us towards a point where the Fed's first job is not controlling inflation, is keeping the financial system afloat. Larry, it is great to have you.
Great to be back with you, Peter. I've always enjoyed our conversations.
So, let's begin with your book. What is the central argument of the big print?
So the thesis is that the way our financial system is constructed requires debt and monetary expansion to keep it going and grow. It's kind of like a shark. It has to go forward or else it's not going to it won't get oxygen going through its u its gills. And um as a result of that, you know, the the um and that's based on the way money is created, which is kind of a long story and the book lays it out, but basically banks lend money into existence. And by lending money into existence, that means you're creating additional debt whenever, you know, you're you're growing your economy. And that's you know, Reagan really kind of started this uh you know, with the notion that we could take on debt, use it to grow the economy. And in the certain measure, there's some sense to that, but when it gets too far down the road, it becomes problematic. And the problem occurs when the debt gets so large and the growth in the economy doesn't match the growth in the debt. There becomes a big gap which is to say that the you know and there's a chart I used to put up on Twitter and X all the time that showed kind of the growth of the debt burden and the growth of GDP and they were diverging. And so yeah
what when that divergence occurs what happens is that something will break on the debt side and um and then the government will have to step in and print money to create more money to service that excessive debt. And we've had a lot of these breaks throughout history. I mean, you know, and these are really kind of credit bubbles that burst. You know, debt debt fuels growth gets too far ahead of the economy, it bursts, and then the economy collapses unless enough money is printed. And the first example that was actually 1929 where there was a lot of leverage and that stock market crash. But we've had other examples since then. The two more recent ones are really um 2008 and then the COVID example. And uh so in 2008 we as we all know we had a housing bubble and the debt just got so large it couldn't be supported and we woke up one morning and the entire economy was going to collapse and secretary of the treasury was uh begging you know the speaker of the house to you know give him $700 billion or else the ATMs weren't going to work and so um that I call that the first big print uh and of course they went from you know 700 billion to multiple trillion over a series of years and and you know this in doing so what government is effectively doing is they're backstopping the banks. They're putting money into in bank reserves and increasing the monetary base. And that's that's good in so far as it does stop a collapse of an overlevered system, but it's bad because all that additional money eventually works its way through the system and creates inflation, right? And so, you know, the first one was was was uh 2008 and then in COVID we did the same thing, but we did it on steroids. I mean, it was even bigger and faster. And so what my book argues is that these are a feature of the system. This is not a bug, it's a feature. And we're going to have another one [laughter] because we're going to get all levered up again and then something's going to break and then the government's going to have to come in and print a ton of money. And so we now, you know, we've now got two examples of it. So we can see that it's a pattern and we we I believe it's going to happen again. And the implication is of course that then you have to you have to try and earn forms of money that the government can't print or or hold I should say save in forms of money the government can't print. Um the natural ones in my mind are silver, gold, and bitcoin. So that's the that's the overall thesis.
Yeah, I've argued um you know I've got a bunch of articles talking about you know whether we should replace the Fed and of course we should but with what?
And the question is always what does the Fed do? And in most people's minds, it fights inflation,
right?
Right. Like usually when you read about the Fed in the newspaper, it's talking about how, you know, inflation is getting, you know, whatever. It's it's too high. And so the Fed is going to do this and that to fight it. And so I think that most voters in their minds, uh, the Fed fights inflation. In fact, there was a study of that and they found twothirds of voters think that the main purpose of the Fed is fighting inflation which is hilarious because we didn't have a Fed for the first what 130 years
right
and we had zero aggregate inflation correct
until we had a Fed so if it doesn't fight inflation what does it do and I think the answer is the main purpose of the Fed is the bailouts I think people underestimate they see the bailouts right so it was you know whatever it was in 2008 2.3 three or 2.7 of which much was allegedly paid back. Of course, there's risk adjusted and, you know, it's a transfer at the end of the day, but that's not the real, you know, goal here for Wall Street, right? The real goal is the year-to-year money printing,
correct?
That, you know, people see 2% uh inflation, but once you include, you know, productivity growth, population growth, uh usage of dollars overseas, right? Once you include all that, you're probably talking closer to 5% money printing, which is what on the order of 1 and a.5 trillion. So, most of which is captured by Wall Street. So, it's not the 2.7 trillion bailouts every, you know, 20 years. It's the trillion and a half every single year. That's what the bailout mechanism is. And that's the function.
I mean, to your to your point, there's a very interesting statistic. since 71 the money supply M2 you know I I kind of measure I'm a monitorist in and Austrian and my economic views and that means that I kind of measure you know the um inflation in terms of how much the money supply grows the broadest measure today of money supply is M2 and if you look at it from 71 it's grown in the high seven seven digit 7 point something area like call it 7.6 six or 7.7. So, you know, the government I think over that same time frame has said we've had inflation of two or 3% on average and they're just they're cooking the numbers. And so, you know, and I I think the 7% is much more in line with what the average, you know, person has experienced. I mean, if for example, you look at housing prices or price of a lot of things that are kind of stable, you know, more stable, they've grown at some percent compounded for years and years. So,
yeah. Well, and you know the gap between those that people don't take account of is that essentially all of the productivity gains since call it 1971 you know so China uh crashing manufacturing costs the stupid software thing the impact of the internet of software of container shipping right there have been all of these advances in technology that should have lowered crisis.
Correct.
Right. If we look back to the late 1800s, which was a, you know, that was also a period of enormous technological gain. Uh, the so-called Great Depression in the 1870s, which was actually economically fantastic, but prices went down. That's what depression used to mean. That's
right.
And we didn't see any of that over these past 50 years. We didn't see anything from China. The average American does not appreciate. They think China just stole the jobs. They don't understand China also slashed the real cost of manufactured goods. And the reason people don't see that is because all of it was gobbled up in money printing
correct
yeartoear as you say I think if you take the aggregate number the change in M2 since Nixon killed off the gold standard in 71 I think you're looking at what I think it's around about a trillion or more than a trillion a year. Of course that's that's that's compounded. So at this point it's probably about a trillion and a half or north of that in money printing every year. People don't understand what a massive swindle this is, right? This is not learing centers 20 million at a time, right? This is this is enormous sums of money being siphoned out of the pocket of every, you know, dollar holder, every pensioner, uh, anybody on a fixed income, anybody with a contract that, you know, that has nominal prices, which is almost everybody. Well, and that's the thing, Peter, that I think most of the world doesn't understand. I tried to address this a little bit in my book, and Austrian economists do understand is that over time, the natural course of prices is they should fall as mankind becomes more efficient and smarter and we do things better, cheaper, faster. And I mean, you can actually see that very well in an area that we're all very familiar with, which is electronics and technology. I mean, remember what you paid for your first huge flat screen TV and remember the quality of it? you know, it was thousands of dollars and it was much lower quality than today. And you can buy the same TV today for, you know, a fraction of that and it's higher quality. So, [snorts] [laughter] excuse me. That's the kind of thing that could be and should be happening in all areas. Not not entirely because some things are it's hard to make certain processes more efficient. But, as you pointed out, I mean, there have been things like the China price or or even oil. Finding oil has gotten cheaper um as a result of fracking. Do you know what I mean? and the technology to to locate oil deposits has gotten better. So, so yes, we should be living much better lives than we're living. And everyone thinks, "Oh, isn't this great? We've got all this technology. We're living pretty well." But a lot of it has been stolen and rad by the people at the top who, you know, benefit from this system. I mean there's a whole there's a term we have for called canillionaires which are basically people who know how to borrow cheaply and invest in things that are going to work and grow and you know they they get ahead and so that's why we have such enormous wealth concentration at the top whereas the average citizen is they're only four s they have two sources of borrowing one is against their house and that's a good asset and they can generally borrow at 6 7 8% or you know lower at some points in time but their second source of borrowing is a credit card and that's basically usery, you know, the credit card companies are all between 18 and 30%. So, you can't borrow at 18 30% invested things and get ahead. That's pretty hard to do. So,
um yet if you're on Wall Street, you know, you can borrow at the Fed funds rate and of course they do. So, so yeah, it's a very unfair system. It's very broken. Now the so Kevin Walsh one of the things that he he's talked about uh even before becoming Fed chair was this idea that artificial intelligence is going to be massively deflationary
right
and so that's going to create the you know
the space to cut to cut rates
space to cut rates so I guess the first question is do you think that's going to happen uh you know given all of the equities that Kevin Walsh has to deal with at this point. Number two, if it does, are we going to see a giant everything bubble? Everything is going to go up again. It's going to be like CO squared.
Yeah. Well, there's a lot in there. Um, look, I I think AI is real and I think AI is going to increase overall general human productivity. There's no doubt about it. I've experienced it myself. We've all experienced I have people who are friends who are parallegals and and so forth. I mean you can just do you know it's a great a is a great tool and you can do more better cheaper faster just like the spreadsheet was a great tool and the internet was a great tool and email is a great tool these are all things that improve productivity and so that's that's a positive is it going to completely solve the problem the way that worst describes it happen instantly and we've got this enormous boost in productivity that therefore you know prevents inflation I I don't buy that I think that's all that's a dream that's like doge is going to cut a trillion dollars out of the budget which never happen. Um, you know, it's a nice it's a nice fairy tale to talk about, but it's not realistic if you actually examine the numbers. I mean, you know, we have to basically grow this economy very rapidly or else the debt is going to overwhelm us. And the only way historically to do that is to have a lot of inflation. I mean, they did it after World War II. You know, the the thing that's interesting now is that debt to GDP now is in the 124% range and after World War II is very similar. It's about 114% range. And basically the way we got out of that after World War II was we grew we grew the economy like crazy. I mean we went from producing a million cars a year to producing 5 million. We went from you know uh 200,000 housing starts to millions of housing starts. And so you know that that kind of and and that was all good and that it it allowed us to grow the economy and reduce the size of the debt relative to the economy. The other thing they did is they balanced the budget and so the debt didn't get any bigger. I mean that got very big when they were fighting World War II but then it didn't get any bigger. Here's the thing that's important to notice is that in that period where we were growing, inflation was really high throughout the 40s and 50s, there was one year in 1952, inflation was 18% a year.
So, you know, the whole I mean, but Santa has been out there saying we're we got to grow our way out of this debt burden. And he's right. I mean, in a sense, he's right, but guess what? You can't do that without having inflation. [laughter] You know, you just can't because because you can't get 18% productivity improvement. It's just not going to happen that quickly. You're going to get some but not that much. Right.
Right. Well, the Doge example is nice uh because in theory so you know Singapore for example kept growing at 6 7% even after it was a rich country. However, if you look at the, you know, package of taxes, regulation, uh, frankly, government involvement, you know, Singapore comes in and like proactively seeks out startups and say, "How can we help you?"
Right.
Um, like what we do with, you know, people on welfare, Singapore does with startups. Right.
Right.
So, like it it, you know, like with Doge, it's a great idea to slash a trillion dollars. Yes, we should absolutely do that. What are the odds? Similarly, it's a great idea to grow at 67% like Singapore. What would it take to get from here to there? We're sitting here right now. You know, Bernie Sanders wants to ban AI. Like,
the, you know, central debate points for us on economic policy are nowhere close to where they
Well, [laughter] that's, you know,
that's right. I mean, we don't have the kind of industrial policy necessary to to drive that growth. But but you know to be fair I mean I'm I'm very supportive of growing. I mean growth is a good thing. I just think it's going to be inflationary growth and it has to be inflationary growth and that that's probably the least painful way out of this thing. I mean the other the other way to solve it would be to just let it all collapse and you know that's a a 1929 kind of scenario and and that's very destructive and a lot of people suffer in that. There's no point in doing that. So, I I think that, you know, the and really the the correct solution, Peter, I mean, I talk about this in the book, is is a one-time monetary reset where we say, "Look, we've been living off our, you know, debt too long. We need to return to sound money, and here's how we're going to do it." Now, that would have a certain very, you know, it'd be like tearing off a band-aid. It would hurt. But if we then return to a sound money standard, um, things would rearrange themselves very quickly and we'd be off to, you know, very non-inflationary growth, which would be a great thing. Um but the you know the debt means that we've got to continue growing. And the other thing that's just really disappointing is the lack of will to address the deficits. I mean
just this weekend I read you know that um another party had come out and said that if we don't spend 1.5 trillion in defense you know we're going to lose the we're going to lose the Middle East. Well you know one I'm not even sure that's true. But two you know where are we going to get the 15 trillion? I mean we're already spending 800 billion. So that's add another 700 billion and we're running a deficit of north of two trillion a year, you know, and and theoretically in a full employment or relatively full employment economy where the record high stock prices. I mean, you know, imagine if one of those things changes. Imagine if the stock market turns down or we get a business downturn, the deficits are going to get even larger. So all of these things in a big picture sense are what I call the symptoms of a sovereign debt crisis. And the United States is behaving in a way that in histo in history was much more common among smaller and emerging countries which is they spend more than they have. They borrow to do it. Eventually they can't make the debt payments and the interest payments. They print the money to do it. People realize they're printing the money to do it. They abandon the currency and the currency has super high rates of inflation and or potentially even it fails. And all of those things are now kind of occurring. And and we saw that we've seen this in Venezuela, Ecuador, Wymer, Germany, you know, Zimbabwe. I mean, there hundreds hundred examples of it. I I lay them out in the book. And and as a result of that, that's I think we're doing the same things in the United States. Now, we happen to be the biggest country with, you know, the biggest military and we're kind of the reserve currency still, even though we've lost some of that. And uh so it's going to take a little bit longer and it's not like we're going to fail overnight, but if you do the same things, you're going to get somewhat like the same results. And I think at a minimum it means we're going to get very high inflation. And you're really seeing that now. I mean look at look at the diesel pricing. You know look at the I mean at you know I mean wars came in and he was talking about how he wanted to shrink the balance sheet and he thought we could cut interest rates because of this AI productivity miracle. And of course now all the numbers have gone against him. And so he's faced with a very difficult decision. I mean this week they have a Fed meeting.
And I think the market is saying it's like an 80 or 90% chance he's going to hike. And maybe he will. I don't know. I I I actually don't think he will. I think he'll try and find some excuse not to, but but maybe he will. Um, and uh, you know, it's it's a problem. I mean, this inflation, they're not going to slay this inflation beast easily. Once it gets started, this is like the 70s. Uh, it tends to each wave tends to get bigger. So, if you own gold, and many of you do, you already understand how it protects your wealth from the insanity coming out of Washington, the inflation, the recessions, the wars. But with monetary medals, there's a way to actually earn a yield of up to 4% on your gold, paid in more ounces of gold. You retain ownership of real allocated physical gold with no storage costs while your ounces grow every month outside the banking system. If you're serious about protecting your future and building your legacy, head to monetarymetals.com/per to get started. Now, back to the show. Yeah. Before Walsh came in, uh, he was t he'd actually been talking for years about this. He calls it Robin Hood monetary policy,
right,
where they can cut rates because they're going to sell down the Fed's balance sheet, which is the stash of money the Fed's accumulated by printing money in the past. And it's
right
something like six trillion or 7 trillion.
Yeah. Yeah. 6 and a half trillion I think the balance sheet is today roughly. Yeah.
Six six and a half trillion. And so if you do that then it cancels the dollars and then in theory you can let the real economy rip with low interest rates and that's going to be soaked up by the balance sheet roll off. And I think it was about 3 or 4 months ago where they started I can't remember the mechanism you probably know this better uh but they got kind of a scare out of financial markets sort of a a uh echo of the so-called taper tantrum where essentially you know markets were seemingly unable to digest the reduction of the Fed balance sheet and so they they pivoted back to so-called not QE in other words
they call They call it reserve management and it happened in December when Powell was still Fed chair
and they said it wasn't QE and it wasn't money printing both of which are technically lies but um and and and yes so they so they did start printing money and they are printing money now admittedly not at big print like rates I mean this is I I call this right now we're kind of in small print land and then they're doing some other things around the margin which I'm sure you and your listeners have been familiar with which is to say Treasury Secretary Bassant who used a lot of money to sold a lot of bills to build up the Treasury General account has been using that account to buy back um longer term bonds because you know the real so the trigger here just for everybody to understand this is we're in potentially we're in kind of a debt doom loop where um just describe that quickly. Government runs a deficit. They have to finance the deficit by selling debt. That's more debt into a fixed number of debt buyers, which means the interest rate goes up to get that debt sold, which then and by the way, the US government's one of the largest payers of interest in the world. We pay $1.3 trillion a year in interest on our 40 trillion of debt. And so that that then gets larger. You know, the the interest payments get larger if the rate goes up. So then the deficit gets bigger. So then we got to sell more debt. You see where I'm going with this? It's a we call it a doom loop. It's recursive. And you know, it just the more interest rates go up, the bigger the deficit gets. The bigger the deficit gets, the more debt you got to sell. So, so that's the risk that they're facing and they know it. And um historically, because they've acted aggressively several times to prevent it, the real trigger rate is to see the US 10-year bond yield go through 5%. And as I look at it right now, we're almost there. In fact, we might be there this morning. We're 4.98 this morning. So, we're right on the edge of that. and um you know and and so what Bent has been doing is he's been buying back bonds to try to keep that rate from going out of control but I I'm not sure he's going to be successful. Right?
So in the late 1990s uh the tenure was running about 7%
right
in the 1980s the early 80s was running 12 a.5. Now, that was the overhang coming off the 1970s. But just taking the late 90s, why could we digest 7% in the '9s because that was the miracle economy, right? Everybody was excited. That was the dot era. That was Bill Clinton, new Gingrich.
It's a great question, a great point. The biggest the biggest difference is that we weren't running the huge deficits, Peter, and we didn't have the debt to GDP that we have now.
Yeah.
I mean, when Paul Vulkar came in, so so we had an inflation. We went off the let's just to recoup the big picture. We went off the gold standard in 71 and people started losing confidence in the dollar and they were buying gold. So gold went from 22 to $800 in the course of the decade of the 70s. It was very inflationary. Debt to GDP at the time was in the mid30 range like I think it was like 38%. Paul Vulker said look I know how to solve this problem. We're going to jack interest rates up to 20%. and we're going to create an enormous positive, you know, interest rate on the bonds and people will buy these bonds. Um, and we will we will put we will stop inflation and moni, you know, the money supply growth debt in its tracks. And he did and they could do it because the numbers the balance sheet numbers allowed that. Okay. Um, the balance sheet then, you know, came down as a percentage for some time because we really didn't run that big of deficits, you know, post that time frame. Um, and then Reagan came along and he started running deficits, but they in today's terms they're quaint. They were like, you know, hundred billion or something. I mean, we're running$ two trillion dollar deficits. I remember when Reagan's deficits first were announced, I think his first one was like 180 trillion or some billion. And everyone was like up in arms. We can't run a deficit that big. It's enormous. And now, of course, it seems quaint. Um, but you know, and in the Clinton era actually, if you recall, and it was somewhat based on accounting ledger demand, if you recall, there was actually a year where we ran a surplus. So, um, part of the reason we could do it was the debt burden wasn't so large and the and the the fiscal dominance, which is, you know, a term we can define in a minute, wasn't as present. We weren't as as monetarily out of control. And and that's really the core of the problem. I mean, yes, having a lot of debt is a bad thing, but hey, Japan's had a lot of debt for 20 or 30 years, and people said, Japan's going to collapse, right? Well, yes, but they also had a ton of savers, and they weren't running huge deficits. So, you know, the difference here is that our deficit's what's really doing us in. And and that's why when I talk to people who are looking at investing my fund, I always say that, you know, they say, "Well, what could go wrong? How do we not make money in this investment, Larry?" And I'd say, "Well, we don't make money if the government gets responsible." Of course, they always laugh, right? Because we all know that the odds of that are pretty low. But, you know, look, I mean, my investment thesis would be severely tested if the government started to get serious about balancing the budget. I mean, the reason that the reason they have to keep printing the money is that they they keep spending more than they're bringing in and issuing debt to do it. And so that's that's the real core of the problem, right? All right. So, explain fiscal dominance. So, traditionally, the alleged purpose of the Fed was to manipulate interest rates in order to get the Goldilocks economy with just enough growth and just enough inflation. you've argued and I think it's a you make a great case that the Fed is no longer that's no longer the predominant uh goal, right? Uh you know they're not they're not trying to walk the line between growth headlines and inflation headlines rather at this point their main goal is fiscal dominance. So explain what that is and how the chang.
So the Fed has had a lot of mandates if you recall when it was set up in 1913. It was set up because of the panic in 1907 when JP Morgan bailed out the banking system. And what the bankers at the time realized is that if we could get the federal government to back our play um every time we got out over our skis, they would print the money to protect us and we wouldn't go bankrupt. And so so that was the initial reason behind the Fed. you know to have a we need a permanent backs stop to secure the financial system. So that was there for quite some time. In the 70s the Fed charter got amended to focus on um you know full employment and um you know low inflation or monetary stability. Um and that that third item wasn't really talked about very much but we know it's there and I call it the Fed put. um which is yeah we want to have as you say we want to have monetary um we want to have a balanced monetary system but but if something breaks they're there um and and so what happens is once you get into fiscal dominance the the Fed really what they do really can't control things that much and by fiscal dominance I mean the point where they are spending more money than they are bringing in and the market is starting to trade interest rates and stocks and bonds and gold and and Bitcoin and all more on is this government creditworthy rather than does this interest rate compensate me for my risk. Um and and the fact of the matter is that the government the market is coming to see that they're not getting compensated for the risk. The bond market is the sucker at the table. I mean it's amazing how how much bonds have gone down in gold terms since you know we started running these huge deficits. I mean they've just been getting killed. And that goes back to my point about we we're in a sovereign debt crisis. So the history of the Fed is that when a bubble burst, they reinflate it. You know, when the.com bubble burst, I remember very clearly Greenspan saying, you know, we need to get a housing bubble going. You know, and he even advised people, go out and take out a heliloc against your house, borrow against your house. And so they got the economy going after the collapse of the dotcom bubble. And then the.com bubble burst and they took interest rates down to zero again. And they were like, well, we, you know, we got to get the economy going again. And they held him there for a long time. I mean, 0% interest rates is just an outright crime. I mean, it's a crime against capitalism to have money have no value. It implies the money is worthless, which kind of is, but um and so basically what then happened is, you know, now we've blown a bubble at the next level up. So each level, you know, with with stocks burst, we we we printed a housing bubble. Housing bubble burst, we printed a a bubble in kind of everything. COVID came along and now we're you know and that at that point in time they really took the gloves off as you know they sent out checks they handed money to you know to companies um that they didn't have to pay back. I mean, they just really let the printing rest run wild and it was, you know, it was over $5 trillion worth of stimulus. And so, you know, now what they've done is they they've called into question, you know, is the currency itself worthless. I mean, they they've always said, don't worry, you know, we Bernaki said, we we have a technology of printing press. We are not going to let deflation happen here. Even though deflation is good and natural and we want deflation, they've said they've determined that it's not good because they're Keynesians. Fine. So, if they're not going to let deflation happen, we know that at the end of the day, if things start to go sour, they're going to print more money. And the math of the situation is such that they're going to have to print a ton of money, which is why I named my book The Big Print. It's not going to be a little one. Each one's gotten bigger. I mean, in the [laughter] in the '08 example, they printed, I don't know, $3 trillion over four or five years. I mean, that was QE1 and two and QE Infinity and Bernaki. And I I remember Bernaki telling Ron Paul, "Oh, yeah, you know, the balance sheet is 1 point some trillion. We'll bring it back down." Well, They went to three, you know, and then in the COVID one, they took it from three to nine at one point. They brought it back down to six something. But um and the point is with each one of these, it gets bigger. Has to get bigger because of the way the debts compounding. So, you know, another one of these events is coming. Uh we don't know when. Um but I've never been more certain of anything because of the math. So, that's why, you know, it's just it's absolutely essential. So, I think the average person um is aware of this issue and has a piece of their savings in money that can't be printed.
A word from our sponsor. No amount of time spent learning about macroeconomics or politics can save you from the fact that our money is broken. You can protect yourself by taking full control and holding Bitcoin in 100% self-custody. Now, there's a learning curve, but it's not rocket science, and you'll be in expert hands with my friends at the Bitcoin way. They'll guide you through the process step by step from setting up your hardware wallet to running your own node one-on-one and at your pace. Download your free self-custody guide from the Bitcoin way by scanning the QR code or clicking the link below. The time to become sovereign over your wealth is now. Stocks and even gold are all over the place. If you're ready to diversify abundant mines makes Bitcoin mining simple, transparent, and human, you can deduct every penny thanks to Trump's big beautiful bill. It's a 401k for Bitcoin mining. Founded by husband and wife team Bo and Christine Marie Turner after losing half a million dollars to broken promises in the mining industry, Abundant Mines was built to protect investors. You own the machines. They make it turnkey with hosting at their facilities in Oregon. Pricing is clear with one flat monthly fee and no surprises. And they guarantee uptime so you can keep earning day in and day out. If you want easy diversification without pressure, learn more at abundantminds.com/peter to get some of your first Bitcoin mind for free as a gift to my audience. Now back to the show.
So walk us through what you think is coming next here. One of the key questions I want you to kind of put in the sequence is
timing
the next recession. So since the Fed has been created, we have recessions almost like clockwork.
That's because of the Fed's monetary manipulation. It makes rates too low and then it hikes them too high.
We're at the potentially too high stage at this point. But walk through so what happens first?
Uh is a recession necessary for that sort of doom sequence to start? It's a great It's a great question. I I don't know because we're kind of in uncharted territory. I mean,
we could just go right into what Austrian economists call a crackup boom where they just everything keeps going up,
but the inflation gets worse and worse and worse and, you know, the um we don't head towards hyperinflation, but we head towards very high inflation. Um I think that, you know, my sense is that right now real interest rates are pretty negative. um you know, inflation by my calculations, even though they reported at three or four, I think it's running closer to seven or 8%. And so, you know, if that's the case in a 10-year time frame, why would you want to own a bond that's paying you four or 5%. You wouldn't. Um, and so I I think what's going to happen is the bond market's going to be the trigger for it. And it's actually happening right now. I just looked, the 10ear actually just went through 5%. And so, you know, that's in my view eventually what's going to happen is the government is going to be forced to step in and put in what we call yield curve control, which is they're going to say, "We stand ready to buy all these bonds at 5%." And by the way, they did this in World War II. This is not something new. I mean, when they were financing World War II, they knew they were going to have to sell a ton of bonds. And they knew that if interest rates went up, that was going to be a real problem because the cost of those servicing those bonds was going to make the problem bigger. So, what did they do? They said, "Okay, short-term rates are 38 of a percent and long-term rates are 2.5%." And we stand ready to buy everything at those prices. And my sense is that's probably what's going to happen here. And when they do that, you know, the bond market's going to look at the Fed and go, "Sold to you." And so the Fed balance sheet is going to go from 6 trillion to 20 trillion. And you know, you might ask, well, okay, the bond market comes to the Fed and says, "I want to sell my bond to you because I don't like this 5% anymore." Where's the Fed going to get the money to buy that bond? Easy. They're going to print it. They're going to issue a reserve to a bank and the bank's going to buy it. Um, and so that's going to grow M2 again and the money supply is going to explode upward. And so so they will keep the system running. Um, but it will be very very inflationary, Peter. And does does it mean, you know, do we have a recession? Does the stock market go down? I don't know. Stock market's pretty overvalued. Um, but that doesn't mean it has to go down. I mean, I I've said in my letters, and I believe truly that what they're going to try probably try and do is a run it hot strategy, which is to say, I mean, if you know, okay, inflation's eating you alive, but hey, you all have jobs and the economy is still running and the stock market's making record highs in nominal terms, not in gold terms, not in Bitcoin terms, but in nominal terms. And so, my suspicion is we kind of tend towards that side of things. But, you know, along the way here, if anything goes wrong and we do have, you know, an economic downturn or something breaks, I mean, candidates for that are commercial real estate and private credit and the insurance companies and there a lot of different areas where they're a
AI debt probably.
Yeah, AI debt. I didn't thought about that one, right? I mean, got all these companies taking on enormous AI debt and now we discover the Chinese are offering the same thing for a fraction of the cost, right? And of course, you're already seeing the AI guys starting to position for how the government's going to save them or bail them out, right? I mean, it's just
it's it's just it's horrible. And so, you know, look, it it we don't know exactly how it's going to pull. We don't know the time frame, but I will make two predictions. I've said many times other podcasts, I think we're coming to a head in the next 12 months. I mean, this kind of feels to me like 20 2007. You know, some of the things that have happened, you know, with the with the, you know, the private credit guys gating their investors, etc. These kind of remind me a little bit of summer of 2007 when the the Bear Stern CRS CRS funds failed or CDE funds failed and and so if you think about summer of 7 2007 we didn't actually get the crack up until September of '08. So, you know, I kind of feel like in the next year this going to become a real problem and they're going to have to do something like yield curve control or drop interest rates substantially. I mean one way by the way you know if you think about the US government deficit right we're running a $2 trillion deficit u but you know say a trillion of that round numbers is interest expense well how do you solve that you take interest rates down to zero and you're not paying anything on your bonds you know your your deficit gets reduced and so your interest expense is much lower now in turn you know the bond market then the bond market really revolts you know what are you kidding me you know you're you're printing money and you're you know you're doing something that's massively inflationary Because don't you know don't get me wrong reducing interest rates will create borrowing which will create M2 which will lead to inflation. So if we go down that direction fine um but it's going to be massively inflationary right and so so I think within the next year it's going to come to I think within you know longer term I think within you know call it six or seven years there's a good chance the whole monetary system fails or we have to have a reset which is to say you know inflation's incredibly high it's persistent um and maybe we elect some politicians you know um like you know Thomas Massie or Warren Davidson who say Hey, we got to return to sound money. Um, so I I kind of that's that's the longer term view, but but we're not there yet. Um, you know, we're not even close to being there yet. I think I think we're at the stage where most of the world knows that inflation's a problem. Um, and I think we're in the stage where maybe 10 or 20% of the world has a sense of how to address it, which is, you know, real estate, gold, silver, and Bitcoin. But I think we're, you know, we still got 80 or 90% of the country that really doesn't understand why we've got inflation. and they and they tend to believe the Fed narrative that oh well don't worry the Fed will hike rates and we'll get this all back under control again when mathematically that's just not possible. That's the whole thing is this isn't really this isn't a valuebased judgment. It's actually based on the math you know.
Yeah. I think uh definitely uh Wall Street people at large are sort of assuming maybe they don't realize it but they're assuming that the Vulkar solution you know jacking rates up that can fix it. Don't worry about it. there's a solution to it. And as you said earlier, you know, the debt as a percent of GDP is more than three times higher than it was when Vulkar worked his magic.
Uh you [laughter] there aren't enough dollars uh to hike it to 20%. Like if you did 20%, right? If you had 20% rates at this point on 40 trillion of government debt, the government debt alone would be 8 trillion in interest expense. Right.
I think they collect something like six trillion.
Yeah, that's right.
And and then you know there's a lot of things to buy like trillion and a half defense budget. So I mean that would be enormous.
So if you just take the gap on that you're talking 7 trillion let's say.
Yeah.
And the entire money supply is 20 trillion. So that would be just naive math. 35% inflation per year.
You're absolutely right. It it just but the bottom line Peters it just doesn't work. It just mathematically doesn't work. And it's it's kind of stunning to me how obtuse so many people are that they just don't see this because it's just sitting there in plain sight. It really I mean you just laid it out very very well. I mean it it's it's sitting there in plain sight. I mean if they actually hike interest rates that's going to make it worse. Now maybe tomorrow, you know, this week he's going to there's a Fed meeting at this week. I think it's on the 16th. Maybe he's going to hike rates 25%. Maybe he's going to hike them 50%. who the hell knows and trying to establish himself as a as a inflation fighter. If he goes down that road at some point something's going to break and you know and and it's possible that that's their strategy, you know, to to hike rates, have things break, have the market break, have everything break, and then come in as the firefighter and drop rates quickly. I mean, this is what they've done in the past and and try to save everything. But in my view, that's kind of a stupid strategy. um you know, they'd be much better off to cut rates now and say, you know, we're going to let inflation run hot. Um you know, nobody likes that, but everyone will at least keep their jobs. We'll keep the economy moving forward. I mean, obviously everything will get more expensive and those on fixed incomes are going to get crushed. But um I mean the re, you know, look, the real the real solution here is to do a one-time monetary reset, but [laughter] excuse me, there's no political will for that from what I can see. So
yeah, I mean generally historically it takes a crisis to get there and for better or worse we're not at a crisis and if we were at a crisis that's not necessarily a good thing for the accelerationists out there. If we look at every crisis in American history, uh you could argue Andrew Jackson was a crisis that made things better. He got rid of the Fed,
the precursor to the Fed. Every other crisis has made things substantially worse. Right? This is the crisis and leviathon ratchet book by Bob Higgs.
Y
you know every war, every 2008, every COVID, we don't come out the other end of it purified.
No,
leaner and meaner. Well, no, but but but having said that, there are cycles and you know, if you um you know, look, I mean, what Vulkar did was extremely painful, but then he did pave the way for a bunch of years of falling inflation and and generally um healthy economic growth. I mean, it would have been better if we'd been on sound money to begin with and, you know, a lot of that um, you know, the productivity increases that we enjoyed would have flown through to people, but but they kind of had it all in balance back then to some degree. Um, you know, and and that's why I mean, I think a lot of people out there are missing the fact that this is the kind of thing you got to look at in hundredyear cycles. I mean, the last we're in a sovereign debt crisis. The last sovereign debt crisis was World War I. you know, when basically the cost of the war forced all the European countries to go off the gold standard. Um, you know, and so, um, that's the model. Um, and nobody was around then is alive today. So, um, you know, everybody's using the old playbook, which is, yeah, the Fed will raise rates and we'll get inflation under control. We'll go back to it all being normal and the stock market will go on to make new highs because, hey, you know, buying the dip has worked since 1980. and it has, you know, generally uh but I I'm not so sure it's gonna continue to work. [laughter] I'll take the other side of that bet.
All right. So, speaking of which, last question here.
Yeah.
How should an ordinary American like what should they own? And a key point here, I think you're familiar with the book When Money Died. Yeah.
By uh
very good book. Yeah.
Yep. By Ferguson. and he talks about the VIAR uh episode of hyperinflation and one of the points that struck me in that book is that early on in VHimar stock markets reflect the future right and so when the hyperinflation started coming in stocks responded to it first
yeah so in terms of how people should position themselves I mean the point I make to most people I think is that um you know if you have savings um I mean and by the way if you know, if you're young and you don't have a lot of savings, I mean, it's u this is less relevant. And whatever the new money is going to be, you're going to you got your whole career in front of you to make money. But, um, the point is if you're older and you have savings, it's generally important to hold on to those savings because in your later years, you're not going to have as much earnings power and you want to have, you know, be able to live, okay? Um, and and I guess the point I try to make is that we clearly live in a period of monetary debasement and we clearly live in a period where inflation is going to be a problem. And the the best traditional protection against inflation are to own things the government can't print. So real estate qualifies, but the negative there is you've got t taxes and maintenance and a lot of issues and some areas are a bubble. So, you know, real estate's I think a poor substitute. I think probably the best pure play qualifier is gold. Um and then if you want something that's got more alpha to it and obviously has a lot more volatility, Bitcoin, uh in my opinion is great as well. My book talks about both of those. um silver works too. Um you know because these are these are forms of money that cannot be printed and I think they have you know although they've gone up a fair amount in the last year or two I think they have much much further to go as you know the governments continue to debase the currency. how you know what what you should be looking out for is if if that changes then you know maybe lighten up and and like all investments the way to deal with this I mean I happen to be about 100% in on both of these two assets but I'm a professional and I can do that um you know given my circumstance I think that most people um you know I think a lot of people just have their IRA or their 401ks in the stock market and I think the stock market is very pricey I'm not saying it's going down but I don't think it offers the riskreward benefits that gold than Bitcoin do. And I often say to people, if you don't have 20% or 30% of your savings in something that protects you from this inflation, I think in five or 10 years, you're going to have regret. Um, and and by the way, stocks kind of protect you from inflation because they, you know, they're they're productive enterprises that will go up in value over time. But traditionally, in highly inflationary periods, stocks have been kind of, you know, subpar. Like take the 70s as the last big inflationary period. stocks were kind of flat to slightly up over the whole 10-year period, whereas gold was up, you know, gold and oil, the two major commodities, were up 30% a year, compounded for 10 years. I mean, it was enormous. And I think that's the kind of environment we're going into, an inflationary environment. So, I think that people need to make a make a decision, you know, take a decision to have some of their assets in these assets that that will be protecting them from inflation. Yeah, that's a great point that you know stocks are kind of a halfway hedge. They are real things.
However, they get overvalued in the inflationary period and then uh you know that point about the 70s is great. They held value. Uh but I think housing went up quite a bit during the 70s although in 1980 it wasn't as high as you would think. I mean it did go up quite a bit but remember in 1980 interest rates were 20%. And housing was really driven by interest rates. And I remember
that's true.
You know, at the time frame and my I I saw my parents house a good example. So my parents um
bought a house in Ann Arbor in the 60s for I don't know 40,000 50,000. That's kind of what it was, right?
And uh so the 70s came along and there was enormous inflation. I think by the end of the 70s that house was worth I don't know maybe you know 150 you know so it gone up 3x which was nice
but interest rates were high and it was only 150. Well, as interest rates came down over the next, you know, from 80 to 90, that 150 became 800 or something. I mean, you know, because people can now afford, you know, the higher housing prices. So, uh, yeah, it's, um, housing is it's got a interest rate component to it.
Yeah.
All right, Larry, thank you for coming on.
Thank you. Um, if you don't mind, I want to show my book.
100% show your book. Yeah. I was going to ask, all right, how do people follow you? And please show your book.
Yeah. Okay. Well, you follow me. I'm on Twitter. It's just under my name, Lawrence Leard or X, I guess it's called now. I'll always call it Twitter. Um, the book is available on Amazon. It's the only place it's available. I didn't have a formal publisher. I self-published it. I sold about 60,000 copies of it. Um,
wow.
Yeah, it's in all Well, it's it's okay. It's in all formats. It's called the big print. It's in all formats. um you know, hard cover, soft cover, um uh Kindle and audio.
And then I I also um I run a fund and my partner and I, David Foley, we run this fund called EMA, Equity Management Associates. And so we have a website, EMA2, uh Edward Markalpha 2.com, where we publish our quarterly commentary. And that quarterly commentary is about a 15-page writeup of, you know, what happened this quarter in the monetary debasement world, more or less. and and it's free. You can sign up. There's a place if you go you scroll down on the page, there's a place you put in your email address and we won't ever spam you. And so you can read our quarterly commentary of, you know, how we see things going and and that's free. So So those are really the best ways. And um yeah, no, I I just also I'm on pods a lot so and I I'm kind of I kind of keep I'm a broken record. I keep saying the same thing over and over again, but it is coming, you know, and I think that you know I mean one one of the things we didn't cover, Peter, I think a lot of people ask me kind of where do I these prices are going? I mean, let me just give you a sense. You know, I I kind of feel like gold is going to, you know, between 6 and 10,000 in the next couple years. Um, I kind of feel like Bitcoin is going between 150 and 250,000 in the next couple years. So, and I have pretty high level of confidence in both of those. Um, but I could be wrong. I mean, I I thought Bitcoin would be higher by now than it is. So, um, I could be off, but I think they're both going higher.
Yeah. I didn't want to put you on the spot. I know that uh you know the trick as a financial uh analyst or commentator is always that if you make a concrete prediction
I'll say the time. Yeah.
Yeah. You're going to be wrong in some sense, right? Either it's going to go you know much higher than you said like like the likelihood that you know gold in 5 years is exactly what you said it is is nearly zero. It's going to be somewhere around there. And so you know there's a lot of people who uh who avoid making predictions. So yes, that is bold. You're actually putting a number on it.
Well, I'm just giving a time frame. Yeah, general rule of thumb. I mean, I I think they will both be significantly higher as this sovereign debt crisis unfolds. And it's just math. And you know, how and when it unfolds, we don't know. Um, you know, if there's some kind of big break, and I think there could be, you know, if something really breaks at some point, then, you know, the history of this, I mean, after 2008, gold, we keep in mind that in 2008, gold got hammered right in the beginning. um until they printed. And in 2020, it was the same story. And so, one of the things I would caution people who are thinking of buying these things is that you really have to be prepared for the possibility that in a in a in a something breaking scenario, you kind of get a liquidity squeeze and everybody sells everything and everything will go down.
Yes.
And so, you know, Bitcoin went down 50%, gold went down 25 and and that could happen again. Now, you know, it didn't last very long because in both instances, the Feds stepped in and printed a lot of money and 3 months, 6 months, a year later, they were both much higher than they were when the whole thing started. But, um, you know, it's a uh it is a volatile trade and I I caution people, you know, to be aware of that. I mean, you don't want to buy into these two things. See the see the market break, they go down and then you panic. you know, these are these are long-term holdings that I'm quite certain math will reward you. Um, but you've got to think in a couple of year time frame.
Yeah, really good advice. Um, specifically for anybody considering Bitcoin, it's a very common pattern that if somebody comes into Bitcoin and they don't really understand it, you know, they haven't gone through the [laughter] years of uh content to really become familiar with it, then they'll panic at the first drop. And the key on all these things is, you know, you decide what your thesis is ahead of time. And, you know, as you say, in in 2008, everything went down for a minute because the market, broadly speaking, considers dollars as out of the market. They shouldn't, but they do think of it that way. And so, you know, everybody dumped they dumped everything, right?
Correct.
Uh, but then, of course, the snap right back. And if your thesis is correct, then the snapback should be violent. Like it should be COVID level as in stuff dips for a minute. And it did dip right early in co like midFebruary there was a moment there where stocks went down that I want to say 10 or 12%.
That was more than it actually went down about 28%. And then and then POW panic and came in with just all those programs and all that money
and they just took off and you know Bitcoin as I recall was roughly eight or 9,000 and I co it dipped into the five maybe four five six area is just by memory
and then in October it went from 10 to 60
you know over the next over the next year. So I mean [laughter] um and that's that's the pattern you know they they they wait for something to break it breaks they print money and the money flows into the system and the hard the hard assets go up. So and and for the record the pattern that you're describing of you know gold and bitcoin going up. I mean in gold's case that's a 55 year trend without the system collapsing
right. So you know people you know they say ah yeah you know you've you've said the system's going to collapse for 55 years. Okay. But gold has been, you know, it was what, $23?
Oh, yeah. Or
Yeah. It was $35 in 1971. That was the last $35. So, it went from 35 to what is it today?
4,400.
Bingo. So, you you know, even even if the big print doesn't occur, if we just have another 55 years of little print, apparently that's stellar.
That's right. I mean, that's, you know, I can't say for certain that we're going to have runaway inflation. I, you know, or hyperinflation. the currency is going to collapse. Total sovereign debt crisis. But what I am extremely confident of is that given the fiscal situation, we live in an inflationary world and it will continue to be inflationary until something changes, you know, until they they cut back on spending or balance the budget.
And I don't see any evidence right now that that's going to happen.
Agreed. I think everybody listening was [laughter] that snowballs chance.
Yeah. I mean, actually, I forgot about the most recent one. I mean, how about those $5,000 checks Trump's going to send us, right? Oh lord.
Where's the money? That's $1.2 trillion. Where's the money for that coming from?
We're We're, you know, three weeks from Democrats doing 10 and why stop at 10?
Well, that's right. Yeah. Yeah. Vote for us and we'll give you 10, right?
Yep. It's just nuts. So, anyway, I really enjoyed talking to you. Thank you very much for taking the time.
Yeah, it's always great. Thanks, Larry. And folks, thanks for tuning in. Until next week, we'll be watching. See you next time.
