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Language: en
America is in a precarious position. We
show no signs of being willing to cut
spending. So without massive growth, we
will go bankrupt. But where is that
growth going to come from? We're
supposed to be the ultimate dealmaker on
the global stage. We're supposedly the
ones holding all of the leverage. Donald
Trump claimed he knew the art of the
deal better than anyone. But what's the
reality behind America's negotiating
power? Are we making progress or have we
lost our edge? Today, Kevin Olirri, one
of the most candid and incisive economic
and entrepreneurial minds around, joins
me to give a rare inside look at what's
really happening. If you want to ensure
your economic future, you are not going
to want to miss Kevin's take on China,
taxes, and the future of the economy.
This is an episode you simply can't
afford to miss. Without further ado, I
bring you Kevin Olirri.
America
prides itself on having the most
leverage internationally on trade. Trump
was supposed to use that strength to
help America win. From your vantage
point though, are we winning or are we
now falling short?
>> Well, it depends which index you want to
use to determine success. If you look at
the stock market market cap uh
valuation, the market is is happy with
uh the outcome of the tariff wars so
far. inflation hasn't uh come back yet,
although many many pundits believe that
you just have to wait a couple more
quarters. Um it probably as a result of
the uncertainty has stalled the Fed for
any rate cuts, which is frustrating
Trump. You hear that every day. I I
think Pal is wise to wait and see what
happens as this comes through the
system. But I I want to make a point
about um the actual tariffs themselves
and how you should look at it as an
investor. um whether you're just putting
aside a retirement fund or you're
actually doing direct investing or
you're a sovereign wealth fund, it's all
the same. Think about it this way. Let's
take um the negotiations going on with
uh England which is not in the EU, the
EU itself, Japan, Thailand, Indonesia,
Canada, Mexico, etc., etc. Most of these
countries have a VAT tax, a value added
tax, which is a tax that is a
consumption tax at the consumer level.
So to keep it really simple, let's say
an American company ships a product up
to Canada in into the province of
Quebec, like a stick of butter. and
whoever buys it in the in the province
of Quebec pays a 13% VAT tax, value
added tax, and that goes to the Canadian
government or the Quebec government.
It's a split. They kind of split it
almost half half. Well, Trump looks at
that and says, "Well, wait a second.
Isn't that a tariff on an American
product?" Mhm.
>> And so all he's doing and and then he
comes back and says to the Canadians,
"Okay, I'm proposing a 35% tariff on you
uh on everything you ship into the
United States." And they say, "Well,
wait a second. That's a little heavy.
We've already have agreement with you."
But basically what Trump is doing, and I
think people should think this one
through, there's no way on earth
Congress is ever going to do an American
consumption tax. It's just not in their
DNA. There's no American VAT tax.
However, what Trump has done is exactly
that and he's called it something else.
So, if the Canadian deal, let's just
take the Canadian deal cuz it's easier
to talk about, which is being negotiated
as we speak today as we speak. If they
end up with a reciprocal tariff of 10%,
let's say, which has already been
established for the oil coming out of
Alberta, Canada, the cheapest source of
energy to Cushing.
It it's it's already been negotiated.
And so it's a 10 10%
tariff on that oil and that energy and
that that gas. What if that's for all of
Canada? So basically, you've got a VAT
tax up in Canada, let's call the blended
rate 10 or 12%. And you end up with a a
tariff, a blended tariff on all goods
and services leaving Canada and the
United States to 10 to 12%. Well, there
you have it. Trump put his VAT tax in
place. Everything's equal. Even Steven,
so to speak. I think that's where we're
going. Now, is that
>> is it just a negotiating tactic though?
Because Trump will have us believe that
we've been getting battered, abused,
taken advantage of by the global
community and it's got to stop or
America is something bad is going to
happen. Is that actually true or is he
causing mass chaos?
>> Trump is I mean I always say this about
Trump. I you know I've known this guy
for 17 years. Um, we actually met when
he started the celebrity, you know,
apprentice show. It was the same year
that that I did Shark Tank for for Mark
Bernett. So, we both know Mark Bernett.
We both sold forwards to the car
companies, the ads in New York. And I
think he has a remarkable presence and
is an extraordinary salesperson. I mean,
I've just seen him in action. But he is
bombastic. He says outrageous stuff. And
what I've learned to do just to be
pragmatic because I have to live under
his policy and and invest under his
policy is to filter out the noise um
from the signal. I think the signal in
the case we're talking about is
reciprocal value added taxes. He calls
his a tariff. The Europeans and the
Canadians call theirs VAT. Who cares
what it's called? It's a tax. And so can
the economies live with reciprocal 10%?
Yeah. What Trump is unhappy about that
he'll never be able to fix. You take a
country like Vietnam, they don't have
enough people to ever have trade balance
with the United States. They simply
can't buy enough stuff to offset
how much stuff we buy from them because
many companies including mine have moved
out of China to Vietnam or Cambodia or
India. So these countries have massive
trade deficits the United States cuz we
manufacture stuff there. Now, can Trump
get all that stuff repatriated? Not
during his mandate. You can't do that in
34 months. I You can't move all the
factories back to us. But the policy
itself will slowly self-correct. I don't
think we need to make plush toys in
America. We don't there's no value added
in making a Barbie doll in the United
States. That job is not a high value
job. I think it makes sense to make
chips here, you know, semiconductor
chips. That makes sense to me. High
value ad, that makes sense to me. So
Trump is trying to balance all that. But
you got to you can't listen to all the
noise. I mean, he he he's a walking
press conference. Like he just says
whatever he wants to say when he says
it. I'm so used to it now. It doesn't
phase me whatsoever. I just focus on the
signal.
>> But is it moving us forward in
international negotiations? I we'll talk
very specifically about China in a
minute, but right now I just like if you
were going to rate his negotiating
skills, is he actually moving us
forward? Because now that the the whole
idea of 90 deals, 90 days, um it's just
sort of dragging on. We're not seeing
like enough wins that really make a
press conference worthy. Like is is
anything actually happening?
>> Yeah. Yeah. I mean, we're never going to
get 90 deals in 90 days. It's never
going to happen. I mean it takes it used
to take two years to get a deal done
with one country. He's just accelerating
it very very quickly and he's getting
sort of letters of intent. What the
market really wants to hear is they
don't care about the the granularity of
the deal itself. They just want to know
what the tariff itself is going to be.
So if you're an investor in in a country
jurisdiction like uh um Switzerland for
me or Canada for me and there's other
places I invest. I just simply like to
know what's the deal. Is it going to be
10 12 15 14 13? what the what is the
actual reciprocal tariff going to be so
I can adjust my capex accordingly and
the rest of it I don't care about I
don't you know I don't care about the
you know the the detail I need to know
what the reciprocal tax is and in the
case of of Canada uh because it's the
the largest trading partner of 28 states
they're going to have to resolve that
one pretty soon because both countries
need each other on that and the
Canadians are going to have to give up
their um uh the their their supply
chain,
you know, um tariffs like on butter and
eggs and milk and in against Vermont,
they have 200% tariff. That's just not
sustainable.
>> You seem pretty um sanguin about the
sort of what many people will point to
as the chaos of Trump, but there are
things that ring your danger bell. Um,
so from a an outcome perspective, what
would make you worried that yo, this is
putting us in a bad place? Uh, either
specifically from an American standpoint
or just from a global investor
standpoint and what would put us in a
good place?
>> Yeah, I mean the the red bells would be
ringing and I would be very concerned
about unsustainable tariffs for a long
period of time like 35%. That wouldn't
work. that would that would never work
with anybody and it it would cause major
chaos in financial markets. Um I think
Trump knows that. Um I don't I don't get
caught up in politics per se or you know
show for politicians even Trump. I show
for policy. So I wait until I see the
actual policy. And lately because um I'm
involved in in certain sectors like um
stable coins or data center development,
I have to get my hands dirty in
Washington and I go there to meet with
senators and governors and
representatives in the administration to
understand where they're taking their
policy. And so because I have to know
what that is or I can't be successful as
an investor. My point is I don't have
Trump derangement syndrome. I don't
care. I only care about policy. And so
if I believe that Trump was going to do
35% tariffs on major economies that I'm
an investor in, that would be a big
problem. And you would see the markets
correct pretty quickly around that. But
the market doesn't believe that anymore.
You've had this volatility in Trump's
now it's 35%, now it's 10, whatever it
is. The only thing that matters is what
is the endgame? What does it end up at?
And if you told me it's 10% reciprocal
worldwide, yeah, I think the market's
betting on that right now. And I think
uh we're going to get there. And and
then at the end of the day, all this
stuff was just a bunch of noise and
volatility based on, you know, nashing
of teeth. And look, there's a lot of
people that don't like this guy. I mean,
they just don't. And they're never going
to get over it. They can't believe he's
president. I say deal with it. He's
president for the rest of this term. Get
over it. Now, if you want to do
business, focus on that and just focus
on policy.
>> All right. So, China, I think, is the
game. I've heard you say similar things.
Uh, I'm routinely trying to refocus my
audience on listen, China matters a lot.
Everything else, for the most part, is a
distraction. Do you think that we can
apply enough pressure to China that
they're going to be forced to come to
the table? Because obviously, Xi would
have us believe, nah, whatever. I don't
care. I've minimized my exposure to the
US more than you guys think. Um, I can
outweight you. You guys are going to
come on our terms.
>> No, he can't do that. It's not going to
happen. And, uh, we need to work a deal
out with China. Um, you're right though.
Everything else is a distraction
compared to China because the these
these two economies are going to an are
entering an economic war against each
other. Hopefully, it's not a a military
war ever, but an economic war and an AI
war because the country with the best AI
is going to win all the wars in the
future. You you got some essence of that
in the Iran situation where very few
American boots on the ground there. Um
the entire operation was done using
technology uh some of it very advanced
and robotics uh and everything else and
very very precise missiles led by GPS
technology that also uses predictive AI
and so all of this stuff that that's the
first time we've seen a 48 hour war that
way. China was watching, the Russians
were watching, everybody was watching.
And it gives you an idea that this race
um of technology
and and AI and the economy are all kind
of fit together. So, here's here's the
here's the way to view the Chinese
situation from 30,000 ft.
In my view, this is my personal opinion,
and I've been dealing there for over 22
years now. ever remember they came into
the WTO in um back in 2000 and uh there
was a lot of assumptions about
compliance back then. That was during
the Clinton period. They never complied.
Um they cheated. They stole IP. They
built many of their sectors around
American stolen IP, German stolen IP.
And nobody um made them pay any
consequences for that. They just kept
saying, "Well, they'll as they get
bigger and they'll understand the value
of democracy, this will be better for
us." That never happened. Um, they
basically stole it all and then became
very proficient at advancing it. So,
they're they're particularly their tech,
their automotive and um, you know, all
kinds of different sectors are built off
someone else's tech. Now, you can find
the DNA of any of this stuff just by
reverse engineering anything they build
over there. So, it's we don't have to
argue fact. I believe it's a fact. It's
what matters is what happens now. Are we
going to continue to let them steal
American IP or are we going to somehow
hold them accountable? And I think we're
in it for for for for decades now,
various administrations,
nobody has taken them to task on this
issue until now. And so you've got a
whole bunch of issues wrapped up in this
narrative going on the next few weeks,
including the September 19th decision on
Tik Tok, which is blatant spywear in the
US. There's no question about that. And
the law has been already passed. It's
either going to go dark or somebody's
going to buy it and rewrite it under
American laws. So, who knows how that's
going to shake out and we haven't
decided or or know what she wants to do.
Only he and Trump can decide. But I I'd
argue that by the time this narrative is
over with China, they will comply
because if they lost access to the
largest consumer market on Earth through
massive tariffs,
there'd be a lot of unemployed Chinese
rioting in the streets. And if you're
the supreme leader, you cannot afford
that. You can't afford that. And so she
is not an idiot. He knows that. He
doesn't want to back down. Neither does
Trump. They're going to have to find
that accommodation. But it's not just
about tariffs. It's about IP, access to
their courts to resolve trade disputes,
access to their financial markets. They
get access to the New York Stock
Exchange. And the NYC's rules are not
even abided by. They
>> Have you heard Trump making noises about
that, or is he just focused on the trade
aspect?
>> No. No. Trump has already talked about
this. It started in Geneva three months
ago, whenever that was. But
every everybody knows that within the
administrative narrative with China
right now at the at the level of
discussion, they're trying to resolve
these issues. Each of these is a
separate issue. Tik Tok's a separate
issue. Chip sales from uh Nvidia,
separate issue. Um, you know, all of
these things are separate multi-billion
dollar issues that are unique to the
China negotiation. We're not they're not
having that narrative up in Canada or in
Mexico or in the EU that they're they're
having that narrative with China because
if China wants to play with the big boys
and have equal access to the American
market, they have to play by the rules
now. the legal systems, the IP laws,
access to financial markets under the
rules and regulations of the SEC.
All of these are sub issues, but the old
way of doing it is over. I mean, if if
if China wants to keep stealing IP,
it'll end badly for them because the US
is still the largest consumer market.
That's the stick. That's the hammer.
Trump has that leverage now. He may not
have it forever. Congress understands
that. Um,
and and we obviously I would like to do
business in China. I that's a huge
consumer market. There's many products
and services I want to sell there, but I
don't want to get screwed doing it.
>> And so, you know, that the the I got to
be honest with you that what's happened
over the last 20 years, no one ever
looked at the granularity of this and I
see it through a lot of the small
startups I fund. Let's say you come up,
let me give you an example. Let me give
you a very simple example that I think
your viewers would appreciate. Let's say
I come up with a innovation and I patent
it called drain wig. It's a real
product. It's so simple. You put it down
your drain in your own home or in a
motel or commercial, you know, resort or
whatever and it collects all the hair
and it does it in a unique way that
actually works. Many designs have been
tried to do this. They failed. Drain Wig
figured it out and they patented it and
they sold it for $29.95
and it it really worked. And so
commercial institutions said, "Wow, I
can cut my plumbing costs by 60%." By
just stopping,
>> right? Huge.
The minute it got to 5 million in sales,
40 knockoffs. 40 knockoffs. 40 knockoffs
on the market at $8.99.
>> Wow.
>> They they didn't have to pay back the
R&D the company had spent or all the the
money they, you know, spent creating the
product in the past and creating
distribution. It already had been done
by them and then they got knocked off.
Company went out of business or changed
hands as a result. That happens millions
of times. Nobody made You didn't hear
that tree fall in the forest. It was a
tiny little company of five million.
Could have been a hundred million dollar
plumbing supply company one day, but
that didn't happen because it got
knocked off by China. That's what I
testified about in Washington. I gave
them examples of that that they'd never
heard of. They did their diligence and
they realized that's how we're getting
screwed. One innovation at a time.
screwed over and over again with not
because nobody brought them to task.
Well, I think there's a new sheriff in
town. Maybe you like him, maybe you
don't, but basically Congress has had
enough and they're pissed.
>> We'll get back to the show in just a
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Do you think um that we're going to see
two egos that have no they have no
incentive to back down? Trump can be
very pragmatic at times, but uh he's
very bombastic in a way that I think Xi
responds allergically to. I think Xi has
proven with the zero COVID policy that
he'll go hard in the paint and is
perfectly willing to see his people
suffer to get what he thinks is the
right outcome. Um, does this get
disastrous before we find resolution?
>> I think, um, it's a good debate for you
and I to have because I think this will
be the toughest negotiation. I think
you're right about that. Um, I don't
think she wants, you know, when you're
the supreme leader for life, you can't
make many mistakes because you got to
keep everybody happy. You're only the
supreme leader while the people that
support your supremacy back you up. if
they see weakness and you've seen this
happen in China before, you're gone
pretty fast. And so he's got a pretty
big pressure cooker there, a real
balance. He cannot have mass
unemployment. That would be mass
inflation because he would have to print
money, people to buy bread, and the
price of that bread would go through the
roof. And so it's and he knows that he's
not stupid. This is a smart leader. And
I think that's the pressure cooker. So
my guess is there's going to be a deal
and it doesn't cost a lot for Chi at
this point to give up on IP theft. He's
already stolen all he needs and you know
it's sort of at this point he can
compete and and I think he is I think
he's competing in aeronautics. He's
competing in biotechnology. He's
competing in AI and he did it all on the
backs of other people. He stole it all.
And so now you can't take back what he's
stolen. But he is advancing his own
versions of all these things. And I
think it's easy. It's an easy gift for
him to actually comply with the World
Trade Organization to have to have
disputes. He's got a he's got I don't
know how many thousand disputes are
unresolved at WTO. So maybe he should
get kicked out of that or at least, you
know, fix that, which I think the WTO
could pressure him and might do so. But
they're going to need the lead of the US
to start that. And I think China wants
to be playing with the big boys, the G8,
so to speak. I think they want to get
there and I think they're going to be
vicious competitors, but I think it's
good and healthy to have a competitor
like China. And I'd like just for them
to play by the rules. And I think that
messaging is the one that the market is
anticipating.
you if if we really thought it was going
to be disastrous outcome, if you and I
believe that and the majority of
investors believe that this market would
correct 40% right now and I don't I
don't see that happening.
>> Man, fingers crossed. I certainly hope
you're right. Uh the image that plays in
my mind that I'm always looking for
somebody to talk me off the ledge is
that we have the perfect setup for
Thusidity's trap. China has a long
history of being the big dog in the
world. They have the identity of we are
the biggest and the best. That we're
this temporarily embarrassed nation. We
are finally clawing our way back to the
top. Every time you have a rising
superpower and a declining superpower,
they end up colliding and they find
themselves inextricably typically pulled
towards a kinetic war. I think we're
already in the middle of a cold war with
China. Uh, and so I look at if I'm in
Xi's mind and I don't think like an
American inside of a Chinese body.
Instead, I think of the the way that a
collectivist um person would think that
has uh, you know, come up through all of
the horrors of Mao that personally
affected his life. He sees what I call
red light, green light capitalism of
hey, we understand capitalism is how you
move forward. But we also know that if
you kidnap enough of the uh top people
and re-educate them that you can keep a
level of control on this thing. So to
me, this is all going to boil down to
because I think he is going to flex as
hard as he believes he can possibly do
before there's a coup that he can't
squash with violence if I'm really
honest. And it all comes down to how
real is the housing crisis? If the uh
real estate crisis over there is real
and they're like in 2008 levels of
fragility, then I think he's going to
realize, okay, I'm not going to be able
to push this as far as I want, he'll go,
you know, he'll push, but like
ultimately Trump and he are going to
come to the table and both realize, all
right, we're not on strong enough
footing, so we're going to have to come
to an agreement. But if the housing
crisis isn't real enough, I think Xi
will be able to out he'll be able to get
Trump past the midterm elections and
then it's over.
[Music]
So, let's just break down what you just
said there because I I think you're on
to a very good point here and I think we
should look at it.
you just described a scenario um where
if I were a a young bright individual in
any country anywhere and I had the
opportunity uh cuz I was an entrepreneur
and I wanted to exploit my ideas and I
wanted to build a business and I wanted
to be an innovator. um would I want to
go to a geography that you just
described or or or would I like to
immigrate to America where for over 250
years it's proven that if if I'm good
enough and I'm and my ideas are are
validated and they do solve a problem I
can build a business and create freedom
for my family. So I started that basis
as being what makes any country
competitive. Can you create an
environment even with all the faults
that anyone has? Like
there is not a chance in hell I would
want to go live my life in China. Not
when I could starve or supreme leader
could re-educate me. I love that word
you brought up. I don't want any of
that. Why would I want that? And so in
the in the pursuit of intellectual
capital that creates all the innovation
globally, who's going to win on this
one? And I think the constant signal
between these two economies is just that
the human being who wants to live in
freedom, who would rather go to a place
with all of its faults. I mean, there's
a reason people risk their lives to
cross rivers under barb wire to get into
America. You don't see that happening in
China. I don't see anybody trying to get
into China. And that's why. And so, I'm
going to bet my capital on that. And I
think the rest of the world is betting
their capital on that. And it's sort of
then you can get into the mishmash of
you know who's the president and all the
rest of that stuff. But I'm confident
that my assumption is correct about the
pursuit of freedom being the reason that
economies are successful.
And
I think you can you can steal all the
stuff you want, but if if people don't
want to move there, you have to rely on
your own internal policy, which can be
brutal.
And ultimately, you'll never be the
winner. You'll always be number two. And
maybe that's okay for Chi. Maybe he can
live as number two in perpetuity cuz I'm
pretty sure he'll die one day. I mean, I
don't think he's a vampire. And so, if
they really want to compete and they
want to win long term, the only
successful philosophy, period, is
democracy. Period. Period. That's it. or
a form of democracy that is so trusted
such as BVIN, you know, or or trusted
leadership like the UAE, which is not a
democracy, but has proven for at least
this last 50 years that they understand
what democracy is and they rule that
way.
>> That's the only way it's going to work.
You don't you see a lot of people trying
to get into the UAE and getting a
passport there. They want that. they
they they like the the system the policy
there but
that's a very democratic in a form
country. So and and I'd argue that they
are the petri dish. They could have that
country is only 52 53 years old. They
could have chosen the Chinese way. They
could have chosen the Russian way. They
could have chosen Venezuela or Cuba or
North Korean way. They didn't. They took
the best of culture around the world,
the best of policy, and they created a
behemoth economy that's competing now.
And the metric I use is China's number
two and AI spending, the US is number
one. Who's number three? UAE, how they
do that. And so it's sort of
that, you know, I teach this stuff. I'm
an executive fellow at Harvard. So I
have classes with people
ex explaining to them what I believe
works, trying to convince them to think
that through and trying to convince at
least a third of the class not to become
consultants cuz that's what they they
just make consultants at these business
schools. Then those people live a life
of mediocrity. It's a shame to see it
happen. But that's a long answer. So,
I'm not as worried as you are because I
think long term you can't beat what
America has proven works. I I agree with
you on that. Uh, however, where is your
confidence level that America the the
voting public is going to maintain their
belief in that freedom. When I look at a
mom donnie or I look at just the look at
Minnesota and and the types of
candidates that are running for uh
governor, running for mayors of local
cities, you're there there is a real
populist push to the left for policies
whether you call them blatantly
socialist policies or you call them
social democracy for reasons that I can
outline in detail. I believe that uh
American youth is losing their
enthusiasm for capitalism. Full stop.
>> Yes, I've heard that. Um and I think
it's it's a valid concern and it's a
it's a fair point to bring up and you
definitely have evidence in New York
City and and other states as you've
detailed 100%.
But I've also heard that same claim
back in the 50s. I'm I'm a you know I
I'm I go back and I look at history.
There was a time when communism was
rising up and it was occurring in places
like New York City. There was a very
bohemian vibe to it and people claimed
that it was a better way of life and
young people swarmed to uh they were
some of them were called beatnicks that
far back. It we have this move I've seen
this movie before and so
>> what knocks it back though.
>> Well, I'll tell you what happens.
Reality strikes. It's sort of like um
what you what you hear happening right
now in New York because that's a good
case study. This mandavi mumavi thing
that's going on if you listen to his
rhetoric it's basically money for
nothing and chicks for free. I mean and
I totally get it. I totally get it and
it's it's very it's it's a great message
if you want to be elected as mayor. His
problem is going to be delivering on
that. New York is already the highest
tax jurisdiction in America. Um, and
it's it's obviously not that wellrun
already. And so it it's what happens for
these kinds of cycles. And my argument
to you is going to be very simple. The
American uh democracy, the the way it
was built, it has the ability to
self-correct and does. It self-corrects
in 4 to 8ear cycles. and it has since it
was formed and you just saw it happen in
the general election. The country was
moving too far to policies that didn't
make sense to the kitchen table in
Champagne or Val Orbana, Illinois. And
so boom, it selforrected and and it
selforrects at the municipal level, at
the mer level, at the state level, and
it'll do it again because when you offer
money for nothing and chicks for free,
you can't deliver. The system doesn't
provide for that. And so it's a classic
case of you won't get fooled again
because these young people that are
voting for him are going to want the
free food, the free, you know, grocery
stores, the free subways, the free and
there's not a chance in hell he can
deliver that. And so they will be pretty
unhappy with him in the next cycle. Now
I'm not sure he's going to win. um
there's a fair amount of people what
willing to to start to examine his
policies but my whole point and I don't
want to get too far is that yes people
have gone into this young people today
want communism young people today want
socialism not actually the majority of
them want a job they want to raise a
family they want to be able to support
it and about a third of them have that
burning desire of the American
entrepreneur that wants to create
something magical for themselves not the
greed of money, the pursuit of freedom
which has driven this economy and I live
that every day and I can guarantee you
every year and I'm I'm the investor in
them. I see a new crop of them.
We're very healthy there. We're we're in
great shape. So within my own family, we
have these debates. I've got young kids,
too. And uh believe me, you know,
Thanksgiving dinner is full of this
rhetoric. But I look every year at how
they too have advanced the minute they
got a paycheck and saw tax. They went
from being screaming liberals to raging
conservatives. And that's kind of what
happens. I watched it happen in my own
family. It just happens. People want to
know where where did half my paycheck
go? Who did I just give that to? As soon
as you get a job, you move from being
that socialist to that conservative.
That's how America works.
>> All right, guys. We'll be back to the
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And now, let's get back to the show. All
right, I'm going to give you my best
black pill pitch and uh then I hope that
you can dismantle this argument. So, I'm
a big Ray Delio person. I believe that
Rey has gotten to the physics of how
money works effectively by looking at
debt. And we're we're nested inside of a
big debt cycle. And the problem is in
the 50s, we had not reached phase five
and a half, which is effectively where
we are now. Phase six being total
collapse. Just the debt becomes such a
burden that you there's nothing to do.
who have to default. It seems to me that
we're on that path, especially given the
big beautiful bill. But I don't want to
get distracted by the wise right now.
Just the structure of the debt goes like
this. Um, in a fiat money system where
the only way out of the kind of interest
payments that we have to make now to
keep giving everybody the money for
nothing and chicks for free is that you
print money. Printing money makes assets
go up. Houses are the only asset that
people understand intuitively. So
suddenly that housing becomes
unavailable to the whatever 40-ish% of
people that otherwise just aren't going
to own assets because they don't
understand financial markets. And so now
you get this hollowing out of the middle
class by pushing the people that
otherwise would have been in the middle
class up to the upper class because they
do understand assets. And then you push
the 40ish% of people in the middle class
and low class down even farther because
they don't understand assets. And that
hollowing out creates this massive
inequality which triggers something that
is so embedded in our DNA which if
you've ever seen a monkey do a task next
to another monkey doing the same task.
You pay them both cucumbers, everybody's
fine. You pay one monkey a cucumber and
the other one a grape and the one
getting the cucumber freaks out. And
that's what we have now. And so it the
jinny coefficient which is the basically
it doesn't matter if everybody's poor,
everybody's rich. What matters is are
there poor people who can look to their
neighbor and see them being rich? That's
when people go ballistic. That's the
setup that we have. The middle class
essentially doesn't exist anymore.
Housing is completely out of reach.
Somewhat uh somewhat of an illusion
because it's really just money printing.
But anyway, you create that setup. So
now even these kids that would they want
to be raging conservatives, they still
don't see how they're ever going to get
on the property ladder. And so that
resentment just builds and builds and
builds.
>> Well, that's a very eloquent job you
just did there of of I read Ry as well.
I'm an advocate of uh understanding his
point of view and it's an important one
for me. I'm basically a debt guy and
always have been. Um, and and I I came
up in in the fixed income market. And
so, um, 100% he he he's he's a very
valid thinker in strategizing that
scenario. And and the question is why
wouldn't that happen? So let's examine
because you know one of the things you
have to risk when you're an investor
like me is if if I really believed that
um we that scenario is going to roll out
my portfolio mix would be completely
different than it is right now. Uh but
I'm basically um believing that the debt
markets which you know they call them
the bond vigilantes um are asleep right
now. The smartest investors are not the
equity guys. The smartest investors are
the debt guys array and the reason is
they take duration risk. So they have to
be historians in the sense they look
back to try and forecast the future. Now
here are some things you got to think
about. The big beautiful bill which
caused chaos in the relationship with
Elon Musk and Trump that's still playing
out
was Elon had the understanding in his
mandate his 120day mandate that he would
try and create a balanced budget.
Instead we we took on another 3 trillion
of debt if we just score this budget the
way it is. What Elon didn't understand
and I think he understands now is
to get stuff done in Washington and the
primary mandate of getting that bill
through was to anchor the tax rate
because the reason the American economy
is and we just got new consumer numbers
today economy is on fire. It's doing so
well right now. And that's because this
tax rate is competitive against the G20.
We don't want to change that. We can't
have our tax rates go up into the top
quartile of tax, the G20, because it'll
slow down GDP growth. That was Trump's
goal. He achieved it with a big
beautiful bill. Now, how do you deal
with balancing the budget? You got to
find a way to save $3 trillion.
Well, that's where his new task is. And
he can't do reconciliation
except every 12 months. But you may not
or you may know this, the government
timetable starts in September in the new
year. So, as soon as you get past
September, and this is what I don't
think Rey is giving much consideration
to, if the economy continues to grow,
the amount of tax income that comes in
just on a normal day basis goes up. In
addition, if the tariffs are successful
at a 10 to 12% rate, that in itself has
not been scored yet. That brings in
trillions of dollars against this
deficit. The third aspect and I give you
on this one is does Washington have the
stomach to actually take these new
revenue streams and deploy them into
debt reduction as opposed to pissing
them away with stupid programs. And that
is the challenge that I think is next
because it it wasn't long ago that we
had a balanced budget in America. It
doesn't have to be this way. There may
be, for example, just doing a means test
on social security.
Maybe not everybody should get that
check. Maybe it's a different form of
tax. Maybe if you're making over a
million dollars a year, you don't need a
$4,000 a month check. And so that's one
aspect. Health care could be better.
That's another aspect. I'm I'm an
optimist
in the sense that Ray hasn't given any
credit to these other sources of income.
He has taken the baseline, assumed it
doesn't change. I'm not there yet. And
apparently the market isn't there yet
either on either bond vigil vigilantes
or on the equity side where we continue
to see new highs. I'm more in the
bullish on America camp. And Rey, as you
know, spends a lot of time or I do in
Abu Dhabi. He's a global thinker and I
like that.
But even he knows where half of his
dollars go. More than half as the rest
of the world's sovereign wealth goes.
Where do you find it? Here in America,
because there's no other market like
that. And if the rest of the world
believed that collapse was eminent,
they'd be sitting with all that cash
under the streets of Zurich. So I don't,
you know, I'm not I'm not agreeing is
what I'm saying. I'm I'm the other side
of that argument and I'm going to stay
with it and I'm going to watch it and
I'm going to be part of it. You know, I
I work very hard in Washington on behalf
of and my last point on the Ray thing is
70% of jobs in America, 70%
are created by companies between 5 and
500 employees. Those are my people.
Those are the companies I invest in. I
am their advocate in Washington. I
actually read the Tax Act. You didn't
read it. I read it. It's just you, I
think, at this point, which thank God
you did, by the way. So, the more info
you can give people to look out for, the
better.
>> And I saw stuff in there I didn't like.
And I worked with Senators Hagerty, Rick
Scott in Florida, and Ron Johnson with
their staffers, and I said, "Guys, this
is bad for small business in America.
This line, this line, this line, this
line, this paragraph. help me ward off
this catastrophe cuz I can't do it. I
can only be the advocate for these
businesses. And if you don't believe me,
why don't we talk to some of these
businesses? And thank goodness these
great senators had the guts to get in
there and fight for these changes. And
I'm extremely proud to have been
involved in that that took out some
extremely bad policy. But that's the way
America works. If you really believe
that it's going to hurt 70% of job
creation, you have to stand up and go to
Washington and sit down and meet these
people. They're not stupid. They're
pretty smart. And if if they can if they
if they're influential enough and those
three senators, they are the pillar of
small business in America. And I'm so
proud to know them. I mean, it worked is
my whole point. And so if you're a small
business in America and you are first or
second generation, my message to you is
I have your back. I have your back as I
do for all the companies I've invested
in. And I now work policy also. You
know, I'm just I'm just a guy that says,
"Look, here are the facts. Let's fix
this mistake before it becomes law." And
thank goodness we did. And now I'm a
believer in this bill. Now, are we going
to solve the three trillion? Yes. In the
ways I spoke of previously. Well, talk
to me about how we unlock growth because
as I look at it, it as of right now, my
bet is and I'm literally moving my money
in accordance with this bet uh that
America the bond market cracks within
the next 10 years. My barring uh a
radical change in policy or the
unlocking of growth that that's just
math. So, um
>> well, you're talking you're talking mass
inflation there,
>> correct? So yeah, they're going to
either have to print money or or openly
default. They're both defaults in my
opinion. But how do we how do we open
that growth? Because there is that that
that's a real thing. If we can unlock
enough growth, like we can really do it,
but what would that take? So let's
examine that um uh with granularity
because it's important what you're
raising there. the
in order for that scenario to play out,
you'd have to have a lack of confidence
in the US Treasury bill. Period. You
would have to find another place that
people are comfortable putting their
liquidity in every country on Earth
outside of the US Treasury bill, which
which is considered the risk-free asset.
And so, right now it is. And under your
scenario, in the next decade, that is no
longer the case. It would be more like a
Venezuelan telco bond. And so, you know,
it's is that going to happen? Now, why
would that happen or why why would it
not happen? I want to point you to some
policy uh that is going to become law
hopefully uh to on uh on Friday. Um the
stable coin act. So, let's talk about
the stable coin act, okay? And talk
about the treasury bill and talk about
inflation all in the context of what
you're bringing up here, a lack of
confidence in the US Treasury bill.
Let's just stay focused on that. So
when this law passes and you're a the US
so just to describe this the Genius Act
Hagerty bill Senator Hagerty um we're
going to create a product in America
that is now legal that allows you to
create a digital dollar. So a product
that you buy, let's USDC is the one I'm
using out of a company called Circle and
full disclosure, I was an early
shareholder in Circle. I believed in
what Jeremy was proposing, although
nobody believed him 7 years ago. Nobody.
And today he is, you know, the CEO of a
very successful public company that
trades today that generates and creates
these stable coins. Why is this
important? So if I can I can buy a
stable coin as I do right now and he is
forced by law or this pending law to be
audited for every stable coin he has
it's backed by a US dollar. He has to
prove it to be totally transparent. So
instead of holding paper dollars I could
just own USDC on my phone which I do
right here on this phone. I have
a whole bunch of USDC.
I can send it to anybody on the in the
world I want if they have a
corresponding account and you just
transfer it, which I do.
But think of it this way. Let's go back
to your your your point about the T
bill. Under your scenario, the T bill
has to collapse as a secure uh form of
risk-free investing.
If I live in Turkey, you and I talked
about Turkey just a little while ago, or
I live in Venezuela, or I live in
any unstable regime,
I can take my local currency and I can
buy a stable coin backed by the US
dollar.
The law says this,
it must be backed up
by the dollar or an equivalent including
the T bill under 92-day duration. So,
complete liquidity. Can you imagine if I
had that option in Turkey and I'm just
working there as a plumber and I'm
watching my currency have 12% variations
in volatility yeartoyear. Or I can take
half of it or maybe twothirds of it or
all of it and put it in USDC on my
phone.
I'll buy that USDC even though it pays
me no interest whatsoever
just to have the stability of my trust
of the T bill. So all of a sudden what
you didn't take into account and Ray
didn't take into account is every
country on earth I believe over the next
three to five years is going to take
advantage of an ability to digitally own
something they have faith in the
American economy and the American tea
bill. Now under your scenario and it's
fair you know to be a critic. You're
you're you're arguing that it the
country will continue to mismanage
itself with deficits that at some point
this faith cracks. I'm not there. I
think what's happened with this
legislation is we have found a way to
let every human being on Earth buy into
the trust of the 2-year or or or 90day I
should say T bill. And if there's a
better place to put their money, they'll
put it there. But there isn't because
they're not going to put it in China
ever. Ever. They don't trustqi
at all. And I'm I'm talking about people
that don't have to live in China like
the rest of the world. Who do they
trust? Not the president of the United
States. The American economy. They know
the president's going to change every
four or eight years. But they trust the
way the country operates and how it's
delivered value for 250 years. That's my
argument. And so far it's worked. So I
don't think in your scenario you've
taken into account the innovation
America brings forward. Not the
regulation, the innovation that's going
to solve for demand of the most trusted
piece of paper on earth, the American
tea bill. That's my case. It's a great
debate I'm having with you and I think
the listeners should think about it and
I think I just won that argument.
>> All right. It it is a great argument and
I'm very glad that you're making it.
There are a couple caveats that will
determine whether you win in reality uh
which is are they going to make that
inflationary or is it going to be you
can only buy the debt backing it on the
open market? That would be question
number one.
>> Yeah. Well, in the context of, you know,
the liquidity of the tea bill,
the more liquid it gets, the more the
market determines its value. You'd agree
with that, right?
>> Sure.
>> Okay. So, between Circle and Tether, the
two different stable coins that until
the law was passed, you could call them
rogue if you wished,
they're now bigger than most countries
in terms of owning
tea bills. bigger than most countries,
the sixth largest, and I I think
probably by 24 months from now, they'll
be the third largest, bigger than any
country or bigger than 90% of countries
ownership. And that diversity is global.
I'd argue the people that can own these
things are going to be the billions of
people around the world. And so that's
pure open market price discovery. Your
scenario is going to be very difficult
if it's not liquid. But I'm arguing it
gets more liquid by the second. And the
demand for tea bills, the more the
world's volatile, the more there are
rogue nations, the more people that live
in these rogue nations don't trust their
governments, the more liquid stable
coins will become. So, I think there's
always going to be rogue nations.
There's always an Iran. There's always a
North Korea. There's always a Russia.
All of those people are not stupid
people
in the US bill. They will trust and I
rest my case your on that. And so in my
scenario, your your the probability of
what you're worried about never happens,
which is a lack of liquidity. The
inability to get out of a bill to buy a
T- bill and not be able to to to sell it
for what you paid plus interest. Very
difficult for that scenario to happen in
the way I'm seeing the world coming
together. We'll get back to the show in
a moment, but first, here is the brutal
truth about scaling. Most entrepreneurs
don't outright fail, they plateau. And
if you're stuck right now, you know how
true that is. It could be that your
revenue flat lines every time you step
away. Or maybe you're trapped in a
commodity market that's racing to the
bottom. Or maybe you're one of the lucky
people who is navigating a very complex
partner dynamic that turns every
decision into