Kind: captions
Language: en
The world continues to reel from Trump's
tariff madness. Vietnam backs off. China
claps back. The stock market falls off a
cliff. Besset warns everyone to chill.
Trump calls for the Fed to lower rates.
They ignore him. And we had a record
setting live talking about it all. Drew,
welcome to the jungle. Uh, feels like
we're on a tight rope without a net
below us. And the whole world hates it.
Hey man, the markets are red, Teslas are
on fire, everybody's losing it. It's
It's This is a real moment, man. This is
uh this is crazy. And I I need to make
light of it because there's so much
tension in the air. But this really is a
dramatic moment that could break
horrifically for the global economy and
I think given social media and how rapid
information travels, everyone is so
aware of it. Uh that that increases the
level of anxiety that everybody has.
Yeah. Let's break it down though because
during co everybody was scientists. Now
everybody has a PhD in economics.
There's five different include us.
um help us break this down. How do we
approach this moment? How do we weed
through the noise and really understand
what's actually happening? Okay, so it
does seem to me that Trump is a like he
is perfectly designed in a laboratory to
create chaos. And I'm going to guess
that that is intentional. Uh some of it,
I'm sure, is just natural personality,
but everything from the way he talks to
what he's trying to accomplish to his
vision of how you negotiate, it is quite
literally designed to create chaos. Now,
there are plenty of people that are
going to tell you this is Tessarak
chess. He's got it under control. Don't
worry about it. Um, but there are three
voices that are really anchoring me, and
there's tension between the three of
them, which is good. That's helping me
triangulate on what's really going on.
And those three would be Scott Besson,
the secretary of the treasury, Ray
Dallio, uh the most successful hedge
fund manager of all time or certainly
one of the most who's gone into like
this professorial mode in his career,
unbelievable at navigating global
economics. And then Thomas Soul, who as
an academic anyway, not a practitioner,
but as an academic, has uh been somebody
that's been guiding my thinking for
years and years and years. So, uh, I
think the three of those guys are really
able to paint a very clear picture, but
now I want to talk about Bessant and
Seoul. Um, let's start with Bessant. He
went on Tucker Carlson. Remember, this
is a secretary of the Treasury. This is
somebody that has a global voice. He is
speaking to the whole world when he
speaks to Tucker. Um, previously in an
interview that he did, I think with CNN,
he literally said it would be unwise for
people to be retaliatory in tariffs
because traditionally the debtor, so the
people that are behind in trade, end up
winning in a tariff war. We are the ones
behind in trade right now. Um, so this
was a followup that he did with Tucker
after uh the tariff madness. So let's
hear what he has to say. president had a
press conference yesterday um next door
in which he announced a whole new tariff
regime global um he'd been promising to
do this well for 40 years really. It
came not out of nowhere but it was
clearly his intent all along as stated
but it it did rattle people including
some of his supporters. So I just wanted
to ask you big picture where do you
think this leads? Well, Tucker, and
thank thank you for having me. And as
you said, the president's been talking
about this for four decades. Yes. And th
this is transformational for the
American economy, for the American
worker, and for the new Republican
alignment. And you know, it's a
combination of the old and new ideas.
Some of the old ideas were put away. You
know, I always tell everyone, and they
don't want to hear it, the original
tariff man was Alexander Hamilton. Yes.
and he used tariffs to fund the new
nation and to protect American industry.
President Trump has added a third leg to
the stool and he uses tariffs to
negotiate. But I I think this is not
unlike I was a freshman in college when
Ronald Reagan came in in 1980 and new
day in America. And when I talk to
people now and they look back and they
look at the Reagan years so fondly. Yes.
it. I I remember what it was like and it
was choppy and the president very choppy
very choppy for years. The American
worker middle middle class has been
eviscerated. American workers have taken
it on the chin and you know we're just
starting to see some of the research now
like we're seeing research on what's
called the China shock from 2004. It's
just coming out now and it's what you
know, it's what I know. But finally,
academics are saying, "Oh, the gosh, the
American workers never recovered from
the China shock." What a surprise. And
President Trump sensed it 40 years ago,
but out on the campaign trail starting
in 2015 up until last year, he has
promised the American workers that the
old standard of living can come back.
There's a very important idea that I
want people to be aware of. So he brings
up Alexander Hamilton. Love it the most.
He really was the initial tariff man. It
is still insane to me that Alexander
Hamilton basically went away, thought
for a minute while running his law
practice and was like, "Let me invent
the American economy." Nuts. Uh did it
incredible. But he pointed out, ooh, the
role of the Secretary of Treasury is
going to be largely a PR role because
this is a confidence game. So, I think
Scott Besson is a very important person
to pay attention to for two reasons.
one, he's one of the greatest capital
allocators of our time and has just made
immeasurable amounts of money winning by
predicting where global markets are
going to go. Um, and that as a member of
the administration, you have to remember
he's positioning you. He wants you to
look at the world in a certain way. So,
while I'm going to put him forward as,
hey, this is somebody who sees things
pretty clearly, he is he has to choose
every word out of his mouth. And he is
going to choose words that position you
to see things in the most favorable
light possible. And this is why I think
Thomas Soul is going to be important for
us to talk about later in the episode
because he's far more concerned uh about
the choices that are being made than Mr.
Bessant would have you believe. But that
that's a a very important idea to
understand what what is at least the
theory behind why Trump is doing this.
And uh I do promise people that think
that I have an absurd read on Trump, we
have varying voices. First of all,
Thomas Soul certainly disagrees. Uh and
we're also we're going to we're going to
look to 4chan. We we've got a take
coming later from 4chan as well. So um
hang with me. What I want people to do
is be thinking through a series of logic
and we'll get deeply into my take later.
Okay, so that's Scott Bessant. He's
setting the stage. Um, between the
previous interview that he did and this
one, he's trying to tell everybody,
listen,
this is how the game is played. You
you've had the China shock. you've
hollowed out your ability to manufacture
and you've cut all these jobs that the
um there is a segment of the American
population that without manufacturing
jobs just there's been nothing for them.
And so the whole learn to code meme just
it it didn't work. And so you've got to
do something to address those people.
And then the other part of his message
is everybody needs to chill because if
you try to be retaliatory and obviously
he's looking directly at China um you
guys are not going to farewell in this.
And later I will go into great detail
about why it's important to understand
that 70% of America as either first or
second in GDP depending on how you count
it. People argue about whether we're
bigger than China, China's bigger than
us. We're the two big boys on the block.
Uh and that 70% of our GDP comes from
buying things, which I don't think most
people even really understand that that
is a huge part of GDP. Again, I'll go
into more detail in a minute, but so
that is the the part that people need to
take away from
Bessant. Okay. Um any channeling of the
community that you want to do on Bessant
and where he's setting the field? Let me
just lay it out so that way I see if I
could understand you correctly. So
Besson is saying this is going to take
some time. I'm I'm I'm giving him some
grace with this message. This is going
to take some time. He gave the Ronald
Reagan example of how it started off bad
and then it eventually swings good. But
in the
interim, if this actually goes full
trade war, the debtor, the America, the
people who's buying most of the stuff
ends up coming out on top versus China
and other countries who sell all their
things to us. So it seems red now, but
it ultimately will net for our benefits
if this gets to fully play out. Yes. Now
I would ask people to put the emotional
veilance. It's a bit like Russia saying
to Germany, we can let we have more
soldiers to kill in Stalenrad than you
do because the what's hiding in his
words is this will be bad. We'll just
survive it better than you. So, it'll be
a little bit worse for you than it will
be for us. So I do not want people to
hear in my recitation of him or what
he's saying that this isn't going to be
very choppy as uh they say choppy means
people losing money. Choppy means people
freaking out. Uh but Trump, if you can
believe the words he says, if you can
believe Bessant, if you can believe um
Lutnik,
Trump is trying to reset the economic
world order. And the only way that
you're going to do that is to go in and
break the current world order so that
you can put the new one in place. And
the net benefit is for those middle of
America jobs that were previously eaten
up in 2004. And when globalism really
kind of hit, those are now coming back
and we can increase quality of life for
those middle America cities and people.
Yeah, it a
this is exactly what people should be
debating. But a Reed is that Trump is
taking from the rich to give to the
poor. And again, we're going to get into
more details on all this stuff. Get it?
I got my Scott Bessant. I think we
understand that viewpoint number one.
Amazing. Okay, so uh the madness is
continuing. Everybody's freaking out.
Trump in the middle of that puts a
public message out on True Social saying
um to Jerome Powell, the head of uh the
Fed, I got to put it right here. This
would be a perfect time for Fed Chairman
Gerone Powell to cut interest rates. He
is always late, but he could now change
his image and quickly. Energy prices are
down, interest rates are down, inflation
is down, even eggs are down 69%. And
jobs are up. All within two months, a
big win for America. Cut interest rates,
Jerome. And stop playing politics. Okay,
so obviously a very blatant appeal for
him to drive uh interest rates down.
when he says that interest rates are
down there, he is almost certainly
talking about um the 10-year yield on
Treasury bonds. So, not that he's
saying, "Hey, rates are already down, so
lower them even more." The Fed rate is
different than the the Treasury. So,
okay.
Um with all of that in mind, Jerome
Powell does not want to be seen as
responding to uh public officials. They
are an independent organization. I mean
technically they're a company. Uh so
they are not supposed to be influenced
by politics. So you can think of Trump
as any person yelling into the void. Uh
and
so Jerome Powell went live today to talk
to the American people to let them know
this is how we see the economy. Uh and
so I'm trying to put all the pieces on
the chessboard for people. So what
you're about to hear from Jerome Pal.
It's very important you understand he's
looking backwards. He's going to talk a
little bit about looking forwards, but
primarily what he's going to recap is
leading up to this moment, how does the
economy look? After a couple of years of
solid growth, many forecasters have
anticipated somewhat slower growth this
year. The initial reading for first
quarter GDP will be released later this
month. The limited hard data are
consistent though with the slower but
still solid growth outlook. At the same
time, surveys of households and
businesses report dimming expectations
and higher uncertainty about the
outlook. Survey respondents point to the
effects of the new federal policies,
especially related to trade. We are
closely watching this tension between
the hard and the soft data. As the new
policies and their likely economic
effects become clearer, we will have a
better sense of their implications for
the economy and for monetary policy.
Looking across many indicators, the
labor market appears to be broadly in
balance and not a s a significant source
of inflationary pressure. This morning's
jobs report showed the unemployment rate
at 4.2% in March, still in the low range
where it has held since early last year.
Over the first quarters, a quarter,
payrolls grew by an average of 150,000
jobs per month. The combination of low
layoffs, moderating job growth, and
slowing labor force growth has kept the
unemployment rate broadly
stable. Turning to the other leg of our
dual mandate, inflation has declined
sharply from its pandemic highs of mid
2022. It has done so without the kind of
painful rise in unemployment that has
often accompanied periods of tight
monetary policy that are needed to
reduce inflation.
More recently, progress toward our 2%
inflation objective has slowed. Total
PCE prices rose 2.5% over the 12 months
ending in February. Core PCE prices,
which exclude the volatile food and
energy categories, rose
2.8%. Looking ahead, higher tariffs will
be working their way through our economy
and are likely to raise inflation in
coming quarters. Reflecting this, both
survey and market-based measures of
near-term inflation expectations have
moved up. By most measures, longerterm
inflation expectations, those beyond
just the next few years, remain well
anchored and consistent with our 2%
inflation
goal. We remain committed to returning
inflation sustainably to our 2%
objective.
Turning to monetary policy, we face a
highly uncertain outlook with elevated
risks of both higher unemployment and
higher inflation. The new administration
is in the process of implementing
substantial policy changes in four
distinct areas: trade, immigration,
fiscal policy, and regulation. Our
monetary policy stance is well
positioned to deal with the risks and
uncertainties we face as we gain a
better understanding of the policy
changes and their likely effects on the
economy. It is not our role to comment
on those policies. Rather, we make an
assessment of their likely effects,
observe the behavior of the economy, and
set monetary policy in a way that best
achieves our dual mandate goals. Looking
backwards are saying, "Hey, we were in
really good shape. Things were going
well. inflation. Uh we don't see any
signs that there's going to be anything
pushing this back up. Again, this is
looking backwards. Um jobs are great.
We're nearing maximum employment. Uh
inflation is getting very close to our
target. We're going to keep working, but
it's getting very close to our target.
So, dual mandate, check, check. We're in
good shape. Uh not our job to comment on
whether Trump is out of his mind or not,
but we do expect that the tariffs are
going to have some sort of inflationary
pressures. Uh but he doesn't want to get
into it. He's being very political and
saying like, "Hey, we just need to see
how this plays out." He says it in his
most monotone voice, which is not a
mistake. You want him to sound like
that. You don't want him to broadcast
any emotion whatsoever. You just
literally he could be like, "The economy
is absolutely imploding." Like you want
him to say it as sort of robotic as
humanly possible. So that's all uh
shtick. Okay. So the Fed is saying
looking back good. Looking forward we're
a little bit nervous. We'll let you know
as we go. Now u is
Powell going to move too late? So the
question becomes why does Trump want to
drive rates down right now? I think
there are two arguments on the table. Uh
argument number one is this is going to
goose the economy. So I know I Trump
through these tariffs am going to cause
instability. Let's drive the rates down.
Let's push people back into assets that
have a higher yield. So, you're going to
want to risk on because right now if you
can get a better yield on uh the 10ear,
which is crazy. They actually want the
rates going down on the 10-year. Um so,
you want to drive people back into the
stock market, back into these riskoff
assets. That's one read. Another read is
um what he's trying to do is refinance
the debt. and he actually wants
instability in the market and he wants
the rates to be low enough for him to
refinance the debt. Um so that if you're
driving people more and more people into
uh the into treasury bonds, what you're
going to do, you've got all this supply
going in to grab up that demand. And
people are doing it because they want to
get out of the risk assets. It's just
too volatile all over the place. So, if
we go in here, there's a ton of people.
You don't have to incentivize them to
come in and buy it. So, you can drive
the rates even lower. So, as you drive
the rates even lower because there's so
much demand for it. Um, and the reward
is basically stability with a lower
yield. Now, you've got these low rates
and you can begin to refinance your debt
on the low rates. And that is a take.
Again, which one of these ends up
playing out and proving themselves to be
true is a question that only time is
going to tell. Those are the I think two
most logical ways to look at what he's
attempting to do um in his appeal. Okay.
So, we had Scott Bessant kind of setting
the stage on the ultimate end goal of
why they're doing this and that it's
going to be bumpy in front of us. Then
we have Jerome Pal says economy was in a
good place. Historic um unemployment uh
we got away from the blood bath that was
COVID inflation. We're starting to get
back to normal, even uh optimal growth
levels. But with these new trade
adjustments, we do see cloudy footing in
front of us, and we have to monitor and
see what happens going forward. Yes.
Read another way, Trump is a psychopath.
He's absolutely smashing the market in
the face. Uh and we're going to ignore
him until we figure out how this is all
going to play out. He's he's doing
hokeyp pokey tariffs for reasons that
we're not going to comment on. and we
need to see this [ __ ] chill
before we set policy. That that's what's
really going on. So, you've got Trump
being like, "Do it now. You can see I'm
creating this chaos. It will help me
tremendously if you go in and um give
people some more confidence. Read one or
it will help me tremendously if I can
refinance the debt." One, one of those
two things is true. He's looking for one
of those playouts. Um you've got people
arguing on both sides of that fence. And
so, he's
that that's like the between the lines
read on what's going on. So, uh, don't
be fooled by Jerome's demeanor. That's
why Trump is saying you're just playing
politics. We'll get back to the show in
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back to the show. We talked about this
indepth today in the live. Uh it was our
highest performing live literally of all
time. So something that a lot of people
care about. I'm not saying because my
take was a banger. I'm just saying
people care about this a lot. Uh and so
yeah, take a look. This is the debate
that we went through with the community
this morning. Here's how this goes. Uh
keeping in mind this is me trying to map
a string of cause and effect not me
saying this is guaranteed to work like
this. Okay. So the the map of cause and
effect is we use gross domestic product
GDP as a proxy for the economic health
of a country. It's not literal. So
people have to be a little bit careful
but it is the proxy that we use.
Most people I think believe that gross
domestic product are the things that you
make and sell. But that's only one part
of it. It's an important part, but it's
only one
part. A for America, a huge part of GDP
is what we buy.
So our GDP is 70% made up of things that
we buy. Mhm. Now, that's good because
you're saying, well, if we can buy it,
then things are going well. The problem
is we're buying it with debt. Okay. So,
it's a bit elusory, but nonetheless,
it's a sign of our economic health that
we can borrow that much because we're
the world's reserve currency. All right.
So, we borrow a ton of money. We buy
things. Let them eat flat screens.
That's part number one. Got it. Part
number two is wouldn't it be awesome if
you could make things because it creates
jobs and then you could sell those
things to other people. Now you could
sell them in your country for sure. And
that's largely what happens when
countries start tariffing is you just
say ah [ __ ] all these guys I'm just
going to sell to my own people. Hey for
us not such a bad deal. We're 70% we buy
[ __ ] Other countries not so much
because they're not balanced like that.
So they're like, "Fuck, if we can't sell
to the biggest economy now, this is not
good for us." Yeah. But okay, so from a
GDP perspective, um, buying things rad,
making things and selling them, I would
say even rder. So if you're a country
that sells a bunch of [ __ ] to other
countries, you're in an awesome spot.
You've got a weakness, but the awesome
spot that you're in is you know how to
make [ __ ] The things we know how to
make are
guns, Netflix, Instagram, Facebook,
software. Exactly. We're a nation of
technology. It's great. I love it.
But I don't know that I want my biggest
industry to be people watching movies
and TV. And I'm the guy that wants to
make movies and TV. Makes me a little
nervous that fang stocks are uh all
technology. Yeah.
So to give you a stat, it these are
directionally correct, not literally
correct. America makes one battleship a
month. China makes 220 a month.
You want to go to war with somebody that
outproduces you 200x. I don't. So if we
go to war, we Yeah. Let that linger in
the background. Uh imagine they're like,
"We'll take to Taiwan. Thank you very
much." And you're like, "I'm going to
send my one battleship to your 220.
That's tough anyway. So, you're in a
really good position if you make a bunch
of [ __ ] and you sell it to other people.
Your fragility is if other people go, "I
don't want your [ __ ] anymore. Now you're
in trouble. You just made a whole bunch
of stuff. You've got nowhere to send it.
It's deflationary." But crisisled
deflation. Remember, there's two kinds
of deflation. Good deflation, we made
this amazing thing cheaper. Computers,
phones, cameras, flat screens. So, all
of these things just going down in
price, quality going up. Absolutely
insane. We all love it. It's amazing.
And that ends up being the battle is if
you're the guy that's buying everything.
Let me use an analogy. If I invite you
over to my house and I feed you and I'm
like, "Hey man, like I want you to treat
this like your own house. Like if
there's something you want out of the
fridge, you literally don't even have to
ask. Just go grab something." And then I
go to your house. And uh first of all,
you're like, "Oh, hey, wasn't expecting
you today, but okay, you're here. Come
on in. Take your shoes off. Please leave
them outside. Put these booties on." And
then I'm in your house. I'm like, "Hey,
man. I'm really hungry." And you're
like, "Oh, you didn't bring anything."
Um,
yeah. I'm super sorry, but I'm saving
the food in the fridge. My kids are
going to be home later. They're going to
need that. I'm so sorry. We do have I
can get you a water. Oh, cool. Uh, do
you have sparkling? No, just tap. And
you grab a glass and you give me like
this little bit of tap water in a dirty
glass and I've got my booties on and I'm
like, whoa, this feels pretty different
from me inviting you over to the crib.
So, you start to feel some kind of way
about it. That's non-rescrocal tariffs.
Now, there are reasons why you might do
that. You might say, "Hey, uh, we went
and kicked the [ __ ] out of you in World
War II." And for reasons that still are
incredible to me, obviously selfish as
well. Let's not get it twisted. But
America was the only nuclear power. And
instead of saying, "All of you do what
the [ __ ] I say," we said, "We're going
to help rebuild you guys." And look, it
was awesome. As we got into globalism,
it was rad for a minute. That [ __ ] was
rad. Mhm. So, let's not pretend that it
didn't have huge benefits. Huge. Pulled
probably billions of people out of
poverty if we were to really run the
math. Awesome choice. Love it the most.
So glad that we got to do
it. But now, in constantly letting you
come to my house, you like were able to
get your protein up and you got yolked.
And now I'm like, uhoh. Like I need some
protein. and you ate all my [ __ ] and
I've been eating like all this soy stuff
because it makes you feel full and you
don't realize that it's giving you [ __ ]
tits. Can I say that? We good? Uh, and
so now I'm over here with the [ __ ]
tits. My estrogen levels are through the
roof. You're [ __ ] jacked off the
protein you ate out of my fridge. Wild.
And now I'm like, uhoh, we're going to
have to make a change. And now I'm like,
I'm going to stock my fridge with
protein. And if you want some, you're
going to pay for the [ __ ] privilege.
Hey, you guys have been ripping us off.
And the way that I know you've been
ripping us off is this math equation
that says you guys are doing unfair
things because remember there could be
so much slide of hand in the um
non-tariff
uh trade, oh god, what do they call it?
barriers. The non-tariff trade barriers.
So you guys uh we looking at China say,
"Hey, you might say you only have
whatever 7% tariffs, but the reality is
you have all these non-tariff trade
barriers." And so he gave an example. If
we tried to ship uh McDonald's French
fries, and they said, "Ah, well, because
you can't tell us where the potatoes
come from, unfortunately, we we're going
to have to reject this." The US right
now in 2025 has to change it the
trajectory that it's on. Every empire
that has ever existed has collapsed
because of
debt. Debt. Debt. Racing towards a
fiscal cliff. That is
Armageddon. AI is going to change the
world so profoundly you literally can't
see the future. And then the third one
is you're already in a cold war with
China. Now, if you're young and you
don't know what a cold war is and you
don't understand that th this is two
countries trying to destroy each other
through the human and cyber version of
um viruses. So, you're trying to implant
mine viruses, you're trying to do
economic warfare, you're trying to do um
spy [ __ ] like all of it. It's slowly
dis dis uh dismember the country and the
society. Isolate them, [ __ ] them up so
that you can get your power back. Yeah.
And countries don't relent. So one wins
and one loses or you escalate all the
way up to kinetic warfare. the number of
videos of current politicians saying
like almost verbatim Trump rhetoric uh
from 10 20 years ago it it is hilarious.
Uh John is exactly right that you travel
around South Carolina uh and you see the
textile mills uh that John's father
worked in uh closed all over the region
and it is absolutely true that NAFTA was
a mistake. I know that you know Hillary
uh on occasion has said that this was
just last year said this was a boon to
the economy. I think it has been
devastating because our trade agreements
did not have labor standards and
environmental standards uh that would
assure that workers in the US were
getting a square deal and it is
absolutely critical for us to understand
that NAFTA was an enormous problem. the
permanent trade relations with China
without some of the enforcement
mechanisms that were in there that you
voted for was also a significant problem
and we've got to all move forward as
Democrats to make sure that we've got
trade deals that work for working people
and not just for corporate profit.
Further up, what they have said is that
we need to not worry about manufacturing
in America because what we should
establish is a policy of unfeted free
trade. We don't need tariffs. What we
need is to allow corporate America the
freedom, the freedom to throw American
workers out on the street, people who
are making 15, 20, 25 bucks an hour,
healthc care, pensions, throw them out
on the street because somehow, Madame
President, we are going to create wealth
in America and good paying jobs in
America as we shut down plants, we move
to China, corporations there, pay
workers 20, 30 cents an hour, and we
bring the product back into this
country. And anyone who goes shopping in
a mall knows how difficult it is today
to find the product made in America. But
that is the philosophy. And I have to
say in that regard, the champion and he
is honest on this one. Senator McCain
has been criticized recently for not
being the most honest candidate we have
seen in terms of his ads and so forth.
He has been honest on this one. He is
the lead advocate of unfeted free trade.
And that's an also important part of
this right-wing ideology that it is good
for America that corporations can go to
China, bring products back into this
country. All right, that was my take on
everything. I welcome and encourage
people to debate. Tell me if you think
that I'm wrong. All I ask is give me the
layout of your logic so that I can
sharpen my own thinking. What I was
trying to do is just walk people through
here are my base assumptions. This is
the cause and effect of how I think
things lead from one to the other. We'll
get back to the show in a moment, but
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netswuite.com/ theory. And now, let's
get back to the show. I'm trying to be
right in the sense of I'm trying to map
things out accurately. I'm not trying to
be right from an ego perspective. So,
I'm perfectly willing to accept my
thinking currently uh does not map
accurately to reality and that there is
a way of looking at this that has higher
predictive validity. And please put it
in the comments. I really do want to
know.
Um now, speaking of people that take a
different approach than I do, so you
just heard mine, um there was a post on
4chan that I actually thought was really
interesting. I'll leave out the
offensive beginning uh and just go. So,
uh you heard me mention some of this
earlier. Trump is trying to crash the
stock market at least 20%, causing a
flight into treasuries. This will cause
the Fed to slash interest rates so he
can refinance the debt at near 0% and
cause a deflationary spiral which will
lower the cost of everything. He also
intends to use tariffs as an incentive
for companies to build in the US to
avoid having to pay them. the tariffs,
meaning to pay the tariffs, the tariffs
and the resulting global trade war will
also force American farmers to sell more
of their goods in the US due to
retaliatory trade measures by other
countries. I mean, he's whether you
agree with him or not, he's got internal
logic and that will directly lower the
price of groceries in the US. More than
94% of all stock is owned by just 8% of
the US population. Wow. Trump is
literally taking money from the rich and
giving it to the poor. This is why Trump
is playing a game of hokeyp pokey
tariffs. I swear I did not read this. Is
this you on for chain, Tom? This is your
for this. This is my burner. I'm arguing
with myself. Uh, one day he has 25%
tariffs on Mexico and the next he
doesn't. This is to cause extreme
volatility in the markets and a
desperate need and demand to flee
towards Treasury bonds, which are much
more stable but offer much lower
potential return. Here's where he lost
me. Uh, this is also why eggs are
cheaper now than they were under Joe
Biden. Okay, I if I'm not mistaken, the
reason that eggs were so expensive under
Joe Biden was there was an outbreak of
bird flu and so they had to kill some
ungodly number of chickens. I mean,
that's just supply and demand. Uh, so I
don't know about that one, but it would
also get caught up in the things that
he's doing. Now, uh, I would love to
know, Drew, if either on your own behalf
or if on you playing the role of the
guardian of the community, do you think
people follow his logic on the
deflationary aspect of this because this
I found this originally hard to wrap my
head around. No, I I was going to be for
I'm still at the Trump is taking money
from the rich and giving it to the poor.
I know I want to spend time there, but
deflationary spiral that went right over
me. Okay, the way that trade wars lead
to a deflationary spiral is utterly
fascinating. So, this is where we have
to go back to what I was saying in the
live that 70% of our GDP is that we buy
things. So, you've now got a country
that is buying things uh sorry, making
things and selling them to us. And the
second that we say, uh, that's going to
cost you more money to sell into us
because of tariffs, the demand in our
country that China's used to selling
into, just to get really specific, that
demand just goes away, but they still
have the products, or even just the um
available manufacturing capacity. So now
you either start firing workers, you
start making your goods because they've
probably purchased a ton of inventory of
the parts that make the things that they
end up selling to us. So they're caught
in this really horrible spot. They have
inventory. They got cost and you just
said you're not you're going to get 70%
of the stuff we're used to selling as
opposed to 100% of the goods we used or
I just said uh more like 50%. So the
demand is going to diminish greatly.
When the demand diminishes greatly then
they're going to sell in their own
country because they can't just sit on
the inventory. So now they're going to
flood their own market with all of these
goods and the market's going to be like
we don't need all that stuff. And so
that means you have to create
incentives. Lowering the price is the
most obvious incentive. And so now
you're in a crisisled deflationary
situation. I always want to beat the
drum. There is a big difference between
crisisled deflation and innovationled
deflation. They are very different. You
want innovationled deflation. You don't
want crisisled deflation.
Um so now you've got these goods in your
market, China, that you can't now move
to the American market. And the
Americans still want the goods. And so
they're going to turn. In this case,
he's very careful to point out, let's
just talk groceries. Yeah. American
farmers for the point. Exactly. So, uh,
let them eat flat screens. He's he's
trying to get everybody off that idea.
Like a lot of the things that China are
selling into you, uh, are not
essentials. So now, instead of Americans
exporting their goods, they're going to
have that same issue where, oh, we were
exporting it, but now the countries
we're exporting to are going to do the
same thing to us that we just did to
China. So now we're like, "Oh [ __ ]
we've got all these um agricultural
goods that we would otherwise be
exporting. We can't export now. So we
have to hold it. So we have to lower the
price." And so now this is sort of the
everybody's narrowing your focus on
those things. That's amazing because if
you're driving the cost of essentials
down, that's great for the American
buyer. It's not going to be great for
American companies. And this is why he's
saying they're taking from the rich and
they're giving to the poor. So he's
[ __ ] up all your assets. So, if you
had your money in uh the stock market,
that goes down. If you had all your
money in a house, well, as the stock
market goes down, people have less money
to spend on the houses. Um, but the good
news is this is where it all gets so
complicated. If he's really driving
rates down, houses become more
affordable because of the rates. But if
they're still inflated, ah uh so this
all gets very comp because I want to
just lock in that grocery thing. So,
just so I understand it. So, for
example, we grow oranges in Florida,
right? So, we are used to sending those
oranges in Florida to Europe. But
because what we just did to China, the
34 retaliatory, it's more expensive for
them. Europe is now saying, "You just
taxed us on our wine, for example. So
now we're not going to take your
oranges." So the American farmers that
wanted to sell their oranges to Florida
to Europe now have a bunch more oranges.
So now they have to turn to the American
people and like, "Okay, I got twice as
many oranges. I'm going to lower the
price by 20% so I can sell and get all
these oranges out of my fields." That is
correct. So it'll be cheaper orange
juice for us at home. So the consumer
hypothetically speaking, Yeah. Consumer
wins, asset holders lose, uh, company
owners struggle. The bad news is company
owners struggle too much. You start
laying off employees. And this is this
is the Thomas Soul take, which we'll
play his own clip in a minute. Uh, but
he's like, "Bro, this is the shoot me in
the ear strategy. It's so dangerous." It
it is. Okay, so that was the second
paragraph. We got the first the
deflationary spiral. We got why
groceries in in the US can be cheaper
hypothetically. Yep. Now break down the
90 the how is Trump giving to the rich
to the poor because that's opposite of
what everybody who ever read anything
about Trump thinks. Okay. So this is the
one you got to really like land a plane
for me. Yes. Okay.
So asset holders right now are what
people call
rich. We don't have to debate right now
whether paper money versus in your bank
account money
difference market. Yeah. So, for now,
we're just going to allow asset holder
to be a standin for the rich because you
certainly put your money in assets if
you're wealthy to avoid one, you're
trying to grow your wealth and two,
you're trying to avoid inflation. So,
it's a it's a fine proxy for this
discussion. If you're doing things that
are unfriendly to that at a systemic
level, like literally down in the way
the economy works level, you're breaking
something. So you're not just scaring
people, you're actually breaking
something. That's where it's, okay, now
those asset prices are coming down. So
you're taking from the quote unquote
rich. It's far more complicated than
that, but that's what the value of their
assets are dropping. The value of their
assets are dropping. And the thing that
he has broken, the tariffs, the free
trade, he's broken it for a reason. And
the reason is to take this is his
argument. I want to be very clear about
that. This is 4chan guy for Yes. for Mr.
4chan. Do do we have a username? Should
we be I feel like we should be
acknowledging. Oh Jesus. Anonymous ID.
Okay. So, Mr. Anonymous on 4chan. Um,
which by the way, thank you for a very
cogent
argument. Uh, very very easy to take
step by step. Okay. So, uh, he breaks
the he breaks the free trade, spooks the
economy, all of that, because
theoretically what he's trying to do in
this guy's argument is drive people out
of the stock market into treasuries. The
flood of demand in treasuries means that
you don't have to coax them in with high
interest rates. So, those come down and
now there's a double whammy. can
refinance our debt, which frees up more
tax dollars for the American people to
have used in an intelligent way instead
of going to servicing your debt, which
is better for everybody. Uh, and for the
deflationary spiral reasons that we've
already explained, it also lowers the
cost of groceries. So when people sell
off when they turn because you go from
stocks to bonds when the market is a
little shaky, it's a why why? Yes. So
stocks are like risk on. So it's high
risk but it has a much higher potential
return. The treasuries are a much lower
return but they are far more stable. So
they call it the risk-free rate of
return. Got risk- free because the
government would have to go bankrupt
before you would lose your principle. So
that's why as we see the market now red
people are selling off to move it from
the volat volatility of the stock market
into a treasury something that's you
can't say that they're doing it
specifically for treasuries but some
huge that's an option of available to
them will do that correct and the logic
is certainly there that if somebody's
exiting out of the stock market it is
because they are very specifically
saying either I'm overleveraged and I'm
worried I'm going to get liquidated so
I've got to get out now before I hit the
point where my collateral will no longer
cover this and then they take my stock
as a way to um collect on their
collateral. So, people want to get out
before they get liquidated. Uh so,
you've got people selling off for that
reason. But then you also have people
that are just like, I don't know how
long this is going to be down. I put my
money in the stock market thinking that
this was like a two-year thing, but I am
going to need my money back. I I can't
wait three years. Yeah. So, I don't
trust that what Trump is doing isn't
going to last longer than whatever their
duration is. A month, a year, two years,
five, whatever. So, I need to get out
now before the losses get worse. And so
they're willing to take the the they're
willing to take a paper loss and turn it
into an actualized loss in order to fly
to safety as it is known a flight to
safety. And so they'll move out of the
risk-on assets into the uh risk-free
rate of return which is going to be
lower but is better than oh [ __ ] I could
lose all my money. Copy. And now when
all the um assets are out of the stock
market into things like the bonds, the
treasuries and things like
that that
is and then I guess the poor's benefit
is one the their essentials the price of
their essentials are coming down. Is
there anything else that comes? I'm
looking at that second sentence. Trump
is literally taking from the rich and
giving to the poor. Like, okay, I
understand the sell off of the assets,
but where does the giving to the So,
one, let's I love the Robin Hood
language, but in its over simplicity, it
may be creating some of the confusion.
So he's not literally take like what
people want is go tax the rich and then
actually give me their dollars like
there were dollars in Elon Musk's bank
account that are now in mine. That's
what people want. That's not what he's
doing. What he's doing is altering the
way altering what parts of the economy
are high functioning. That's probably a
better proxy for what he's doing. Uh so
again, I'm using tariffs
to put people in a position such that
jobs are returning to America even if
they're um even if we have to pay a
higher wage and so it's quote unquote
less efficient from uh um comparative
advantage. So maybe it's more expensive
to make pharmaceuticals here in the US,
but we're going to do that anyway
because that means that we're going to
employ American workers. There's the
whole national security element of this
which cannot be overstated. like that's
just so so so important that people hold
in the front of their mind but does not
speak to what he's talking about. Um so
yeah, he's he's adjusting what part of
the economy is high functioning. So
we're uh willing to risk a trade war, a
global trade war so that we can lower
prices here in America. Uh so that we
can increase jobs here in America. So
that we can increase our manufacturing
prowess here in America. Copy. And then
now do you want to set up our last
viewpoint which is the Thomas Soul
viewpoint? Yeah. So Thomas Soul is an
unbelievably brilliant economist who has
seen so many things clearly without
getting caught up in the emotion of it
all. Um and I
think you want to build up from here are
the base assumptions I have. Here is the
string of cause and effect that I think
is most likely. That's how people should
build their worldview. So I will very
frequently touch base with Thomas on a
whole host of topics and so when he and
I do not agree I don't take that
lightly. Uh and right
now I am bringing into my worldview his
level of anxiety. And so partly based on
that and some other things, I went and
did a historical look at like how
tariffs have functioned in the past, why
people are worried about it. Um the
Smoot Howie, I believe, uh is what it's
called, the Smootley tariff act, um that
we did after the 1929 crash, I think it
was put forth in either 1930 or 1931. Uh
and how people say, "Oh, that so clearly
made the depression worse." uh is this
time different than that time or is this
just actually how tariffs work
foundationally? So anyway, let uh let my
man Thomas say his piece and then we'll
talk about it. What do you make of the
present president of the United States
and his tariffs? It's
painful to see what a ruinous decision
uh from back in the 1920s
uh being
repeated now in in so far as he's using
these tariffs for to get very strategic
uh things settled and and and that and
that he is satisfied with that. But if
you set off a worldwide trade war that
that has a devastating history, uh,
everybody loses because everybody
follows suit and all that happens is
that you get a great reduction in
international trade. The other it's it's
it's disturbing in another
sense. Frank Franklin D. Roosevelt when
he was president in the 1930s said that
you have to try things and if and if
they if if they don't work then you
admit it you abandon that you go on
something else and you try that until
you come across something that that does
work. Now that's that's not a bad uh uh
approach. If you are operating within a
known system of rules,
[Music]
but if you are the one who's making the
rules, then all the other people have no
idea what you're going to do next. And
that is the formula for having people s
hang on to their money until they figure
out what you're going to do. And when a
lot of people hang on to their money,
you can get results such as you got
during the Great Depression of the
1930s. So if this is just a set of
shortrun PS for various various uh
limited uh objectives limited in time,
fine maybe. But if the if this is going
to be the policy for four long years
that you're going to try this, you're
going to try that, you're going to try
something else, a lot of people are
going to wait. uh I think what happened
in the stock market recently when things
came down uh but substantially for for
for quite a while and I note that
various people uh uh are holding on to
their to their money uh before they do
anything because they don't know where
this is going to lead.
Yeah. Th this is exactly what you have
to be careful of. Okay. So I went back,
I looked at the um Smoot Howie Tariff
Act with an eye towards is this time
going to be just like it was in 1930 or
is the setup of things different now?
And just like at the very beginning of
the country, you could fuel everything
with tariffs, but we're at a point now
where the odds of that are, I think,
effectively zero. The government is just
so big. Drew, when you think about when
Washington was president, for like the
first month, the government was George
Washington. Like, think about that being
literal. The entire federal government
was George Washington. And now he starts
hiring people to be sure. But I mean,
you really started with a zero, a blank
sheet, and you built on top of that.
That's such a different world than
you've got whatever a thousand people
that you have to appoint. I mean, it's
just like a totally different ballgame.
So, we're in a period now where it's
already just wildly different. So, then
the question becomes, are we in a period
that's different than 1930 or is this
time very reminiscent of that? And we
come back again to the thing that we've
talked about multiple times in this
episode. And the answer for me is no.
This time is very different. And the
thing that makes it different doesn't
mean it will have a different outcome.
It just means we are starting at a
different starting point. And that
starting point is that 70% of our GDP
comes from us buying things largely from
other people. So we do have a pretty
aggressive stick that we can use because
everybody everybody around the world,
dude, is counting on being able to sell
into us. So the setup I would say is
different enough that there is a chance
that this works. That that by no means
is a guarantee, but as Besson was
talking about um we've done this before.
So, we did something similar back with
Reagan. It was choppy, but if you see
things through, if you've got the
political capital, which we talked about
during the live, if you've got the
political capital, then you might be
able to see this through. If he loses
the political capital, he's toast. Like,
I just don't see a way um that if you've
got Congress working against you, you
can't get things passed, you hit
gridlock, the basically the economy gets
stuck where it's at. that that would be
I think the end of Trump's presidency.
Um so if this happens fast enough, if
he's able to, as Thomas was saying, if
he's using these as negotiating tactics
that put himself in a strong enough
position um to get things across the
board, and then like Vietnam has said,
hey, we're prepared to take our rates to
zero if we then go, cool, we'll take
ours to zero as well. And that ends up
happening with a lot of countries, but
we're now able to sell into them.
They're able to sell into us and we get
something that actually approximates
free trade. That could be. Or if Trump
is using it, no, we're not going to zero
with anybody unless someone like China
maybe we really do hit parody. Uh
because we're peers. We we'll see how it
plays out. I I literally have no sense
of glimpsing into his mind on that.
The other thing that if it happens fast
enough would be if prices really do come
down. So if the average American's like,
"Oh, my wages haven't gone down." That's
critical. If their wages don't go down,
unemployment doesn't drop, but uh the
cost of things go down, we're able to
refinance the debt at a lower rate, then
people are going to feel pretty good
about things. Even if the stock market
is getting slapped about the head, neck,
and chest. So the only thing is you are
still talking about I think it's like
52% of people have some exposure to the
stock market. So they're going to make
noise. Like if you can't end up at at a
minimum stabilizing that uh you're going
to be in trouble. But if he can
stabilize that and people aren't
panicking about their retirements, if
the cost of essentials is going down, if
wages are at a minimum holding steady,
or if they I I think it's probably a
little too fancful to expect them to
start going up as well. But if he can
hold wages steady, stock market
stabilizes, and actual jobs start coming
back, meaning manufacturing really does
start returning to the US, I think
people are going to feel very good about
what's happening. Now, there's a ton of
ifs in all of that. I'm well aware of
that. Um, but that I think is the right
way to hold these three guys in tension.
I know we haven't talked a lot about Ray
Dallio today um but he's basically just
a midpoint between um Bessant who's
hyping all this up and Thomas Soul who's
like Jesus Christ we're repeating the
sins of our past. Um and the the idea
that people will hold on to their money.
That's the thing to watch out for
because the great irony of a recession
it's a confidence game. If people lose
confidence you've got nothing. Um, if
people are spending money and money's
moving around because they feel like,
oh, this is all going to be fine, then
hey, it then it magically is fine
because everyone believes that it's
going to be fine and therefore they're
spending their money. Uh, and on the the
corporations, I do worry that despite
all the big promises that people are
actually going to sit on their money and
wait to see how Trump does at the
midterms before actually investing in
those kind of stuff. Yeah. All right.
Gut feeling, lightning question. Do you
think it works out in the end?
Nothing ever works as well as you want
it to. It will be so in the gray area
where people are getting clobbered in
the stock market and they're hella
pissed. Uh costs are coming down. Those
people are excited. Some jobs are coming
back but way too slowly. Most of it
feels like spin and everybody's like h
is this working or not? So I think it's
going to be a nailbiter at the midterms.
Copy. Uh what KPI ultimately do you
think is going to make or break this uh
policy? I mean, the only real thing is
sentiment. How do people feel if because
here's a great thing, and Jerome Pal
actually spoke to this, but I think that
people miss it. Jerome Pal doesn't give
a [ __ ] that your costs are high. He only
cares about are your costs going
higher. So, this was the thing that made
me want to club people uh with a fishing
bat when everybody was like, "You don't
know that when you get a fish, you beat
them to death." It's a real thing. Not
that like a I thought bat is baseball
season. Sorry. Go ahead. No, I do mean
that. just it's a smaller diet. It's a
that the fisherman used to club uh the
fish. So when people were saying that um
h inflation isn't high anymore. What are
you guys complaining about? Because
[ __ ] during co it went up like
25%. It's not like the prices have come
back down. Yeah. So people are still in
a position where they're like I can't
make ends meet. So uh it's cold comfort
that it's only going up by 2.5% or
whatever. They're already high. Yeah.
So, uh, I need deflation, but everybody
thinks deflation is bad, bad, bad.
Crisisled deflation is bad. I want to be
clear, but even this, it's it's
possible. God, I don't want to give him
Tesserat credit, but it's possible that
he really is trying to break something,
uh, which would be crisisled
deflation. If people lose their jobs and
you have crisisled deflation, it doesn't
[ __ ] matter. People like, uh, great,
it's cheaper, but I don't have any
income, so you have not helped me. Uh
but if he can lower the value of the
dollar, make things cheaper, and keep
employment high, I think you've got a
shot because then be remember he is a
populist president, which means he's
capturing the energy of the 92 people,
92% of people that um don't own the vast
majority of the wealth. I'm saying the
stat kind of wrong, but 8% hold over
what 96%. Uh so that means that 92% of
people are far less impacted by a
decline in the stock market. And so
right now the play for a populist leader
is take care of the 92% that care a lot
less about the stock market. Make sure
that their average price of a insert
your object here goes down. And if it
does, he's going to win. And if it
doesn't, toast. Is there anything that
could be true that you could be like,
"Yep, Trump completely failed and this
was a terrible idea. He should have
never done it." Of course, if we get to
the point where people are losing their
jobs uh and prices are not coming down,
it was a total [ __ ] up. If even worse,
we go into a global recession because
everybody does become protectionary and
we are back in the uh
smoothe territory of we just shot
ourselves in the foot. Mhm. Uh, I want
to be very clear. This is not me trying
to go to bat for Trump's tariffs. This
is me trying to explain what he's
attempting to do. That's it. Whether
this works, that that's a crystal ball
question. Uh, way above my pay grade.
I'm just saying if it works, it's going
to look like this. If it doesn't work,
it will look like this. And now
everybody build a chain of logic and at
each gate ask yourself, what do I think
the likelihood of this happening is?
What's my confidence level? Um, and
that's it. So, I know that people
perceive me because they're trying to
fit me into the typical bucket. They're
trying to perceive me as somebody who's
saying, "This is right. Let's do this."
I'm saying very specifically, "I don't
have any [ __ ] idea." Nobody does. And
so, Trump has to make a bet. That's what
he has been elected to do. This is why
I'm not running for office. It is hard
enough to run a company where at least
I'm the only one that loses money if
this messes up. Um, there's a reason I
don't do public companies because if I
crash and burn, losing my own money, I
can live with that. Losing other
people's money, act, don't love.
Well, that's all I got. All right,
everybody. If you have not already, be
sure to subscribe. And until next time,
my friends, be legendary. Take care.
Peace. If you like this conversation,
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