Hey folks, this is part two of the podcast with Richard Duncan. If you have not heard about him, you can check out all the past interviews we’ve done with him at simplepassivecashflow.com/Duncan And if you haven’t checked out podcast number one with him, which we did the past week, I’ll make sure you go check that out.
First, it’ll set the foundation for our continuation of our part two podcast. And a lot of this is gonna be talking more about current EF and future facing where I think a lot of the older stuff is more foundational, credit is getting off the gold standard, things like that, but enjoy the show you.
So you’re a good teacher and I watch all your videos like a fanboy. And I understand this. So at what point are they gonna start to taper off of the interest rate increases?
Is there a certain unemployment rate they key in, on, or trying to shoot for? Cause it, it is a game of a little bit of this, watch that meter put a little bit of that and go back and forth. They’re in a very difficult position of course, because most of this inflation is being driven by the supply chain bottlenecks over which they don’t have any control whatsoever.
They. Semiconductor prices shot up and that pushed up the price of new cars and that pushed up the price of used cars. So in the second quarter of last year, the used car prices were up 40% year on year. And that accounted for a third of the increase in inflation. The Fed can’t do anything about that.
And the Fed has been hoping that these bottlenecks would be overcome quickly and that the supply side problems would be worked out and would be back where we were in 2019 with globalization, putting downward pressure, strong, downward pressure on inflation, but this has just taken so much longer than they had ever imagined.
There wasn’t just the first round of COVID started in February, March, 2020, and then we got Delta and Delta was another big blow. Delta is the first round that really hit Asia and shut down factories in Asia, and then Delta died down and now we have Army and Army shutting down factories across China.
So these supply side disruptions have lasted much longer and then made things much worse. Russia invaded Ukraine, and that pushed oil prices very much higher. And wheat prices are very much higher. So the Fed has been hoping that if they can just drag their feet a little bit, they don’t want to throw millions of people out of work.
They don’t wanna destroy trillions of dollars of wealth by causing the stock market to fall, but they really don’t have any choice. They have to be seen doing something. And this has been going on for so long now that now they’re actually really starting to get much more aggressive with these 75 basis point hikes and now quantitative tightening has started.
Quantitative tightening is selfish, but if somebody’s out there and they have a pretty stable job and it doesn’t happen, they’re working for the oil and gas industry out in Texas or Oklahoma. And they are, most of their portfolio is in assets that go up with the pace of inflation like real estate.
And that cash flow at the end of the day is not residential real estate, which goes up and down with the motion. Aren’t they sitting pretty right now? Let the Fed cut jobs. I know that’s a heartless thing to say, but isn’t that a good place of power in a way? But how many people are in that situation?
Certainly a minority as a small minority relative to the overall pool of Americans. And. There are a number of things to think about. And so far, the government is still suspending student loans, repayments people who’ve borrowed money through student loans are not having to pay interest on it for the last few years.
That’s going to end some time sometime presumably maybe after the midterm elections, but suddenly all of these people who haven’t been able ha who haven’t been forced to pay interest on their student loans for the last two and a half years are going to have to start paying a lot of money on their student loans again.
And this is going to make it much more difficult for them to go out and rent an apartment. And so that when that occurs, there’s likely to be downward pressure on rents and also mortgage rates have shot up from what below. 3% at the end of last year, to as high as 5.8% a few weeks ago, they could keep moving higher because the Fed is going to destroy it by allowing its the fed almost $2.7 trillion of mortgage back securities and which is acquired through quantitative easing over the last few years.
But now they’re going to start allowing these to run off. And as the Fed shrinks its pool of mortgage backed securities, someone else is going to have to buy those. And that’s going to put upward pressure on mortgage rates, further upward pressure on mortgage rates. So we’re likely to move into a position where property prices are falling and perhaps substantially and you, so how long is this going to go on?
I think it’s going to go on until the inflation rate comes. Significantly. And so the most recent employment numbers that we got just a couple of days ago were pretty discouraging. The consensus estimate was that job growth would be 250,000, which is still pretty strong as it is, but it turned out to be 370,000.
And the unemployment rate stayed at 3.6%. So that means the people still have jobs they’re still going to spend. So that means the Fed has much more work to do in terms of tracking up interest rates before the number of new employees stops increasing and starts shrinking. So we’re in for many more interest rate hikes over the rest of this year and on into next year, I think.
Yes, unless the economy just slows. So suddenly that it goes into a significant recession in the near term. That prices start to fall. Now the one positive note that we’ve seen recently, just over the last couple of weeks is commodity prices are falling pretty sharply over the last three weeks or so.
Oil is down from a peak of 140 to about 100, but also copper wheat, timber loss of metals. They’re all falling very sharply. And so that will help some in terms of alleviating the upward pressure on inflation. But it’s going to take a number of months, even in a good scenario before we see a significant downward shift in the inflation rate.
And before the Fed is in a position to become a little less hawkish. So if I put myself in the head of a business owner, or like a man, like an old school manufacturing company, The feds raised my interest rates. I predict slowing growth, still growth potentially next year, but I may downsize my employment or downsize my head count, but also not buy as much raw materials.
So that makes sense. Yep. And the chances of a recession are really quite high. Now, in fact, technically we may be in a recession because the first quarter, the GDP, and now most people think the second quarter will shrink as well. Although the official data is not out yet. And the traditional definition of a recession is two years of two quarters of economic contraction.
That’s a bit technical, but looking ahead, the chances of the economy shrinking more are really very significant because. The main two themes that run through my work macro watch is that in this new world of creditism credit growth drives economic growth and liquidity determines whether asset prices go up or down.
So credit growth is now contracting when adjusted for inflation, it contracted for two quarters in a row. And as I mentioned earlier, the credit grows by less than 2% adjusted for inflation. The US goes into recession and it’s not only growing at 2% is actually negative. Now for the last two quarters credit growth has been a negative number and that’s signaling something that everyone should be very worried about.
Cuz if it grows by less than 2%, if history isn’t a guide, any guide, the US goes into recession and moreover. The wealth effect that was supplementing credit growth and generating economic growth. After 2009, of course, wealth is being destroyed on a very significant scale. It’s quite possible that total wealth in the US contracted by 10% in the second quarter, that’s my estimate.
Something like 15 trillion of wealth has been destroyed in the first half of the year. So with credit contracting and wealth contracting, those are the main drivers of growth. And so we’re, it looks like we’re moving into a period where there is going to be a significant recession. It just hasn’t hit yet, but it’s likely that we’re going to continue seeing more and more signs of this.
And with the fed, continuing to hike interest rates until a lot of people lose their jobs and the inflation rate comes down well, that hasn’t really even got underway yet. So as the Fed keeps tightening and as the Fed, right now the Fed has started destroying money through quantitative tightening at the rate of 47 billion a month.
That will be 47 billion in June, July, and August. And then it doubles to 95 billion in September and every month after that. And so what that means is because of quantitative tightening, the Fed is going to destroy something like 1.1 trillion a year, as long as this continues. And if it destroys $1.1 trillion, that’s 11% of all the dollars.
And so this is going to cause liquidity in the economy to shrink. Now I have an analogy for this. It’s like quantitative tightening, just imagine. All the investors in the world are in one big ballroom, right? Having a party. And the loud speaker makes this announcement that we’re, here’s the news. We’re going to start pumping the air out of this ballroom gradually.
And the partiers are having a pretty good time. This is going to occur over many months. They don’t really care immediately, but give it a few months, three months, six months. And it starts becoming difficult to breathe in the ballroom. Then panic starts to set in and everybody runs for the exits and people get trampled and it creates quite a calamity.
And so we’re just now at the point where they’ve just made the announcement that we’re about to suck the air outta the ballroom that no one’s having problem breathing now, but give it six months. Yeah. And it will become much more difficult. And they did suck some air out of that, the room, they bumped it up.
So maybe, let me help me if I understand this right. So best case scenario, the war ends and, or COVID kind of gets a little bit more under control and knows supply chain issues. They dissipate, right? And then the fed will probably lower their, or stop hiking rates and keep it, get back to baseline.
People are pessimists out there. The war and cold goes on for a lot longer. And they are fed in a good way, they guide us to a soft landing where they hike up interest rates. They are metic looking at unemployment pops up, but then they catch it at a right, that frequency to land soft landing.
Is that. Is that a, do you see that happening? Or that’s the middle case. And then we can talk about the worst case, I guess later, but is that kind of a good understanding? Yeah. So there are two scenarios, there’s a really bad case scenario where COVID gets worse and the supply chain bottlenecks get worse and the war spreads and globalization completely breaks down.
In which case inflation goes to a much higher level and asset prices lose another 75%. That’s the worst case scenario, not to mention the potential of world war. So that’s the extreme, horrible case scenario. The best case scenario is the war in Russia ends tomorrow with a happy ending and the sanctions are all removed from Russia.
This is a very unrealistically positive scenario and COVID ends tomorrow and no one else catches COVID and it’s all over. And it’s very positive scenario. The. Positive scenario imaginable. It would still take quite a few more months before the inflation rate is going to come back down just because of the momentum.
You still have things like rents are higher and are going to be factored into the CPI numbers. But in the very positive scenario, the yes, say a year from now will be back. And this is an extremely positive scenario. The year from now will be back where we were in 2019. The Fed can possibly even start cutting interest rates and ending quantitative tightening because we got a lot of dry powder at that point because he shakes.
But the more realistic scenario is somewhere in the middle where, not being wildly optimistic or wildly pessimistic, trying to be realistic. This war in Ukraine is not going to end anytime soon. It doesn’t appear. And even if it were to end. There’s no certainty that the sanctions are going to be removed.
And Putin is threatening to essentially cut off not only gas supplies, but oil supplies now. So we could, even though it’s been a little bit weaker recently, it could, some people fear that it could shoot up to two or even $300 a barrel. That’s not impossible if Putin suddenly decides to stop shipping oil at all, and COVID is not going to end immediately.
So what we’re likely the most probable course is somewhere in the middle, where the war keeps going, sanctions keep going. COVID keeps sputtering around China and causing some supply chain bottleneck disruptions, but gradually because of a combination of some of the supply chain bottlenecks being worked out.
I mean for exact, for example, already semiconductor prices are coming down and as I mentioned already, commodity prices are coming down. So this is good news, but it’s going to take some time, the fed strips out the commodity prices. Anyway, when it looks at the core inflation that it really reacts to.
So the most probable scenario is that the Fed is going to continue hiking interest rates probably into the middle of next year. And as it does, inflation will gradually move down in part because of improvements on the supply side, but also because of demand destruction on the demand side, as lots of Americans lose their jobs.
And as more wealth is destroyed. So it is, asset prices have already fallen a lot. NASDAQ is down 30% and a lot of the stocks in NASDAQ of course, are down far more than 30%. A lot of wealth has already been destroyed, but the chances are that we haven’t seen the bottom yet is probable. That stock prices will continue to fall and that property prices will join them.
And so I think we’re in for more paying before, before we get to the other side of this, even in a reasonably good scenario and in the kind of the worst case scenario, the fed totally knocks out the economy and goes overboard with the interest rates, spikes, the fed, the economy overreacts to a adverse reaction to the COVID vaccine in a way it just goes in a tailspin and goes into depression mode.
Yeah, no. There are lots of ways to paint a very bad scenario. The US, if the war expands in Europe and the US then decides to impose sanctions on China, the way it’s done on Russia, because China’s supporting Russia, then globalization would really suffer under that scenario.
And we would probably have much higher rates of inflation, which would mean much higher interest rates and of course, much higher interest rates in the us. This Causes not only problems in the US, but all around the world right now. We have a super dollar, the dollar there’s like a Superman dollar right now.
The dollar index has moved up to more than a 20 year high. The Euro is about one to one with the dollar right now. And the yen is at a 30-24 year low. And normally when the US dollar gets stronger, It’s very bad for the rest of the emerging markets in particular, because they have tended to borrow in dollars.
And when they have to repay the dollars, it’s much more expensive for them to do that. So recall back in the early eighties, when Voker hyped the interest rates to extremely high levels to crush inflation, then that created the third world debt crisis with many of the south American countries defaulting on their debts, which reverberated back to the us banks, which had lent them a lot of money.
There was a period when the US banks were in danger of growing bankrupt because they’d lent so much money to the south American countries and the south American countries couldn’t repay it. So high interest rates you’ll start seeing, corporate defaults all the high yield junk bond defaults, emerging market defaults.
And a lot of problems just through the very strong dollar. Now I wanna get into some of the ideas in your new book, the money revolution. You guys can check it on Amazon, but before we go into kind of the bigger picture, for that the little lowly investor out there who might have a $2 million net worth, we always chuckle and say, that’s the average guy, what should they be doing now with these three past and front that we’ve overlaid?
So 2 million on, in one way is a lot of money. And then another way is very little money. If you’re talking about net worth, then how much of your house is it? What portion of your house is that? Usually I’ll tell you what, like usually when I find these guys, it’s like half of their net worth is in their house, locked up as dead equity.
So they’ve got a million dollars to work with elsewhere then. Yeah. There’s not. Yeah. And, but out of that, it’s even the dimer. So the dimer outlook, like I would say 60 to 80% of that’s locked up in their company sponsored for Wayne K plan. So it’s locked in that stock market game. So I think, for most, for people like that in terms of what they need to be doing is they need to be investing in their business and make sure that their business keeps growing and that they have a business that is resilient as possible and focus on making money through their business rather than trying to make focus on speculating.
These guys, they don’t have businesses, right? Most of these listeners here are like working professionals, employees. I guess you could call your little rental property portfolio or your alternative investment portfolio, an entrepreneur, but for the most part, they’re employee mode.
Sure. I think most, and it’s okay. You can tell ’em they’re screwed and just hopefully that you keep their job, that’s what employees are. So as I mentioned earlier, the net worth of the American public has risen by 90 trillion since 2009, everything went up and looking ahead, starting really from the second quarter of this year, now everything is going down.
There’s really no place to hide. No one guarantees you that there’s always going to be a chance for you to invest somewhere and make money. There are times like these, when you’re likely to lose money, wherever your money is invested, it’s just. Just as it was hard to lose money over the last many years as asset prices inflated.
Now it’s going to be hard not to lose money. It was hard before it was hard not to make money. Now it’s going to be hard not to lose money. That’s just the brutal fact of life. But looking for the long term, young people for instance can invest in rental properties with a long term horizon by, I don’t mean condos.
But I mean buy a piece of land with the rental house on top that you can rent out and build up a long term rental portfolio over the next several decades, okay. Property prices may drop over the next year or two, three years, who knows, but over the long run, as you pay off these mortgages on your rental properties, You can develop a nice portfolio of rental properties over a number of decades that will give you a very comfortable environment when you’re very comfortable retirement when you’re, when you do retire.
So that’s one area. I think that is open to most normal Americans, something that they can manage themselves and don’t have to worry about corporations blowing up or something being mismanaged or fraud, or some exchange going bankrupt and locking up all your assets overnight. I think that’s a reasonable long term strategy, even in this kind of environment with the realization that you may have to watch your property prices fall in the near term.
Yeah. What do you like? I think the common thing I hear a lot from folks is. Oh, geez. I’m just not gonna do anything and just sit on cash. That’s one possible way to play it. You’ll lose some on the inflation side, but you may not lose. As much as you would certainly not be going to lose as much as you would playing a lot of the most speculative asset classes.
Yeah. Certainly not gonna make it big if it is a good, soft landing. That’s true. All right. So let’s go into what, so you have a lot of progressive ideas and what the government should be doing. What’s on your list here, and we don’t have to go into all of ’em, some of the big ones that are in your new book, just to wet people’s appetites and get ’em thinking.
Okay. So the new book is called the money revolution, how to finance the next American century. And it has three parts. The first part is called money and it’s a history of the Fed since it was created in 1913. And it’s important for investors and for everyone to understand the Fed because the Fed is the world’s most powerful economic institution.
It is the US government’s most effective economic policy tool. And last year, if it had been a corporation, it would’ve been the most profitable corporation in the world, more profitable than apple. So what the Fed does, has an enormous impact on the economy and on asset prices. So it’s very important to understand how the Fed works and what it does.
And that is what. Part one explains the most important thing in the Fed’s history in recent decades was when it stopped backing dollars with gold, setting off this money revolution that we’ve been talking about that turned capitalism into creditism. The second part of the book is called credit and it discusses the evolution of creditism and explains how the US economy became addicted to credit growth and why the US economy must have 2% credit growth adjusted for inflation to stay out of recession.
And the third part of the book is called the future. So this book covers a span of 120 years, the first 110 years from the time the Fed was created in 1913, up to the present 110 years, roughly. And the final part of the book is covered in parts one and two. But the final part of the book looks at the next 10 years, the future.
And it tries to draw on the lessons from the past to make recommendations as to what we can do to make the future better. Now, this book was written primarily in, in 2018 and 2019, and it was largely finished by the time COVID started. And as you’ll see, COVID created a very big problem for this book because here’s why, so what I was looking at in 2018 and 2019 was that what we just lived through was the crisis of 2008 and the government’s response to that crisis.
So during that we had a big global credit bubble, it started to blow up into a new, great depression in 2008. And the government by running trillion dollar budget deficits and the fed by creating trillions of dollars in financing, those budget deficits at low interest rates, they managed to reflate the bubble.
And despite all of this extremely aggressive fiscal and monetary stimulus, there was no inflation. The highest rate of inflation we got at the CPI level was 3.8% in 2011. And by 2015, there was actually deflation again, during the first few months of 2015, the CPI was negative. So what lesson should we draw from that?
For just using the Fed, when the Fed creates money, it adds to the monetary base. In 2009, the monetary base grew by 110%. Now, this was roughly four times higher than the peak of world war II money supply growth in world war II. And we still didn’t get any inflation. Now, the classical economic theory, it always, and the Austrian theory tells us that, like Milton Friedman said, inflation is always and everywhere, a monetary phenomenon, but clearly that’s not true because the money supply grew by 110% in 2009.
And the inflation peaked at 3.8%. So the lesson that I drew from that was if in fact we can, the government can run trillion dollar budget deficits, and the fed can create trillions of dollars to finance those deficits. At low interest rates in this new economic environment, we find ourselves in creditism, then we should make the most of this.
And what I recommend in the third part of the book. Is that over the next 10 years, the us government should finance a multi-trillion dollar investment program, targeting the industries and technologies of the future, because it seemed that it was very easy for the government to to spend trillions of dollars and the fed to finance trillions of dollars with no inflation.
So when COVID started and the supply chain bottlenecks erupted, and then the war in the Ukraine occurred, suddenly we have high rates of inflation now. So this causes a very real, very serious blow to my thesis and my recommendation that the government can get away with this without causing high rates of inflation.
But if one of our more positive scenarios plays out. And the supply chain bottleneck is overcome. The war ends COVID goes away in a few years from now. We’ll probably be back in the same situation we were in 2019, where globalization is once again. So disinflationary, the inflation rate will be under control and the government then would be in a position to finance a very large scale investment program over the next decade.
And so the inflation has been quite a blow to this argument in the book, in the third part of the book. But on the other hand, the government’s policy response to the COVID pandemic has actually in some ways supported my argument. I’m calling for a multi-trillion dollar investment program in the industries and technologies of the future over the next 10 years or over a 10 year period.
In one month in April of 2020, the government borrowed 1.4 trillion in that one month alone. And during the second quarter of 2020, the government borrowed 2.8 trillion in just three months. So that’s a multi-trillion dollar stimulus program in three months, I’m calling for a multi-trillion dollar investment program over 10 years.
So just the fact that the government was able to borrow 2.8 trillion in three months with the fed financing, roughly 70% of that during the same period through money creation demonstrates how easy it would be for the government to finance a very large scale investment program now. What I’m suggesting is government finance, a large scale investment program, targeting industries like quantum computing, artificial intelligence, genetic engineering, biotech, nanotech neurosciences, renewable energies and those sorts of new technologies.
So, so like some of those, like those technologies, you discuss green energy. Now, maybe I’m a conspiracy theorist. I read too many of these things, but don’t a lot of the large companies, like big oil companies, do not want that stuff to happen. There’s some headwinds with that.
Sure. There, there are some headwinds, but. There have always been headwinds to change, so I don’t think they’re powerful enough to block these sorts of investments. Maybe they can slow them down, but you can see there’s already been a lot of innovation and growth in, in the green energy areas of the, for example the cost of solar panels is what, 90%, less than it was not too many years ago, as more investment has occurred.
And the cost of solar has come down very radically. So I don’t think that’s going to stop it. Now. The government could do this all by itself. Just like it sent a man to the moon through NASA. NASA had a lot of very positive, long term, benefits to the country and to the development of basic research and technology.
Have rained down on us in the decade since then, but perhaps a better approach would be for the government to do this in a series of a large number of joint venture companies with the private sector. So for instance, the government could select the 10,000 most promising entrepreneurs and scientists in the United States and set up joint venture companies with them, with the government, borrowing the money and funding, these companies lavishly and in exchange for financing, these joint venture companies with the private sector, the government would keep a 60% equity stake and the entrepreneurs and the scientists would keep a 40% equity stake.
And when one of these companies, the entrepreneurs would keep the 40% equity stake for managing the company. And when one of these companies. Discover a cure for cancer or kidney disease or Alzheimer’s disease, then it would be, how much would it be worth if you listed it on NASDAQ, trillions of dollars, right?
And the US taxpayers would own 60% of the company because the government has a 60% equity stake. And so this sort of investment would pay for its these companies would be so profitable, an investment on the scale that I’m discussing. And I go into great detail in this, in the book, the investment I’m discussing is so large that it would be almost certain to produce miracles.
It would induce a new technological revolution that would not only turbocharge US economic growth, but result in medical breakthroughs that would radically enhance human wellbeing. Not only in the United States, but all around the world. So that is the money revolution and the opportunities that exist through the money revolution.
Very similar to I think co the COVID vaccine was there was a JV where the US had, not only Pfizer and Moderna, but multiple companies going after the same goal. And it also reminds me of most recently, like Korea, a lot of their government backed their bigger companies.
That’s what’s fueled their growth the last couple decades. That’s right. Not only of course, Japan, Korea, Taiwan, they were all government directed through the ministry of finance in most instances. And just today, Europe is subsidizing, large scale construction of new semiconductor factories and.
China, of course is a very government directed economy with the government investing very aggressively in new industries and technologies. So there are really three reasons. I see this sort of investment program as being absolutely crucial to our future in the United States. And first as I’ve said, several times, the US needs credit growth to stay out of recession in crisis.
This sort of government borrowing and investing would ensure that we have enough credit growth to make the economy grow. But secondly, there is a real national security threat. Now from China’s investment relative to the size of their economy 22, 20 is 42% of GDP. That’s twice as high as US investment to GDP.
So China relative to GDP is investing twice as much as the us. And in terms of basic research, in terms of research and development in 19, in the year 2000, the United States invested eight times more than China did in research and development. But in 2019, China overtook the United States in research and development investment.
And if current trends continue, then by the end of this decade, China in 2030 will invest 40% more in research and development than the United States does. And if that happens, China is going to very quickly become the dominant superpower. Economically, technologically and militarily and the real threat, the biggest threat perhaps is the risk that they’re going to develop artificial intelligence before the United States does.
If the country gets to artificial general intelligence. First, the point where machines are as intelligent as humans is that after that, they’ll become exponentially more intelligent, very quickly, whoever controls artificial intelligence. First, it will be the 21st century equivalent of that country.
Having a nuclear weapons monopoly. The rest of the world will be at their mercy. And at this rate it is going to be China that gets there first. And that’s why the US needs to invest much more aggressively in these new industries and technologies just to ensure our national security. So that’s the second reason the US should invest.
But the third and the most compelling reason I believe is. It would be so easy for us to finance an investment on this scale. And it would be so certain to deliver just extraordinary breakthroughs and technological and medical miracles, and do so much to improve human wellbeing and increase job opportunities and national wealth and prosperity.
That is a moral imperative. We must do this because we can do this. And so that’s what the book is all about. It’s called the money revolution describing this, how we got to this new economic environment. We find ourselves in and the opportunities that this new economic environment opens up to us, how to finance the next American century.
That’s the subtitle. Yeah. So folks, if you support the book, if not that the Chinese are gonna check our butts, get the AI, gotta push these ideas forward. But. I would also say check out Richard’s website, Richard Duncan, economics.com. We’ll put a link. I’ve got a lot of our older interviews with you, Richard at the website, simple Passit casual.com/duncan.
So if one, if people wanna go back and see if he changed his mind with anything, which I don’t think he did, they can go back and, review this stuff, listen to some of the older interviews. And if you guys are really interested in this stuff and in a pretty efficient manner, check out his market watch subscription too. I don’t know what’s the best way of checking that out, Richard.
Yeah. So my video newsletter, which has been going for nearly nine years, is called macro watch. And what macro watch is every couple of every two weeks, I upload a new video. It’s essentially me making a PowerPoint presentation with audio describing these slides, discussing something important happening in the global economy and how that’s likely to impact asset prices, stocks, bonds, properties, currencies, commodities.
And so for example, some of the recent videos, the main themes of macro watch are that credit growth drives economic growth and liquidity determines whether asset prices go up or down. So last year, the big theme of macro watches was there. The Fed was creating 120 billion a month. And so this was creating a liquidity tsunami.
I called it that was likely to drive up asset prices. And in fact, it drove them into a frenzy, but starting around September last year, the Fed started changing its tune in letting it know that it was going to taper quantitative easing. And it turned around from being, having very loose monetary policy to very tight monetary policy.
And so at that point I started, I turned Barrish around September last year, saying liquidity tsunamis, coming to an abrupt end. And since then I’ve published probably at least 10 videos with titles, such as fear, the fed and prepare for a very hard landing that have worn that as liquidity dries up, it’s going to be a very difficult environment for asset prices and sure enough, asset prices have been crushed.
So these are the two types of videos that I produce. And so if your listeners would like to learn more, they can visit my website, which is Richard Duncan, economics.com as Richard Duncan, economics.com. And if they would like to subscribe to macro, hit the subscribe button and I’d like to offer your listeners a 50% subscription discount.
So if they hit the subscribe button, they’ll be prompted to put in a discount coupon code. If they use the coupon code lane, your name, they can subscribe to a 50% discount. So I hope they’ll check that out at Richard Duncan, economics.com and at the very least, while they’re there, they can sign up for my free blog and follow my work that way,
Line I’ve just lost your audio. I oh, there, there am. Yeah, so folks, I would say, if you’re really interested in this type of how the economy really works, I would suggest, going there and learning yes. Or at least checking out some of the free videos. There’s just so much fear mongering out there these days.
And when you start to learn how credit works and how we’re not on. Economics and how the code standard is no longer here. It really puts a lot of these headlines and more context as opposed to just taking whatever the media says. But it’s Richard, before we let you go, what’s a couple, like one or two things that you’re seeing in the headlines that from your opinion’s just, doesn’t really, it’s not more like finger mongering or things that don’t really move the needle in terms that we talked about how foreign Ukraine and the COVID impacting the supply chains.
But what are other things that you see out there that just to give people some insight on that? So one thing that really worries and bothers me about what people here in the United States, not so much on, CNN or any of the major news channels, but there’s the undercurrents people are really ha are given this idea that.
The fed is evil and the government is somehow evil and it’s all corrupt and hopeless and that the people running the fed are out to get them. And it’s like some big conspiracy. That’s just all wrong. These people are not evil. They’re not out to get you. They’re doing the best they can possibly do under the circumstances they have inherited. They’re not perfect, but they’re certainly not trying to crush the middle class or, in any way, harm anyone.
So this entire negative view that is shared by such a large number of Americans now is really very damaging. And I’m sure that sort of message is being fueled by our enemies being sponsored by China and Russia. A lot of these websites who perpetually send out messages to the US are failing. And, the dollar is going to collapse and become worthless and you can’t trust anyone, that’s completely wrong.
The United States is a democracy and it is, it has the rule of law and it remains, the best hope I think for, or given its size the best hope for the future of humanity. And we don’t want a totalitarian government, like China has where if you, you can criticize the government in the us.
You criticize the government in China and you disappear. You criticize the government in Russia, you disappear. We don’t, we’ve got a much better system. Now, sometimes these totalitarian governments, like China, can be very effective because they can just steamroll over all opposition. But if they’re the president who now appears to be president for life.
Now, if he becomes senile 10 years from now, the way dun the way mal became senile in his later years, that was catastrophic for China. We’ve got a great political system in the United States. It’s not perfect. Us. Foreign policy has certainly not been perfect, but is better than the alternatives.
And it’s wrong to think that our system is badly falling apart. Crumbling, not too long ago, people were arguing that the dollar was about to collapse. Now the dollar’s at a 20 year high and so you know, have faith in your government and have faith in people at the fed. And us policy makers, because they’re certainly trying to do the best for our country, given the situation that they have inherited, which poses a lot of challenges and problems, but they’re trying to do their best.
So don’t don’t assume the worst about American policy makers, because this is our country and we need to make it stronger. Not tear it apart. Thanks. I, and I think I agree with that positive sentiment at the end, a little, it always fun is it’s always fun to talk bad about the government, but I do agree with you on that one, Richard, but yeah, if you guys wanna form your own opinions about this stuff, check out macro watch if not just steal what you get from Yahoo finance, we’ll see you guys next time.
What was the last couple of podcasts that was really like Richard Duncan. And it really
puts a lot of faith in the fed, like how he was closing out there. It’s a hard job, right? Like these guys in the Fed, they’re running this intricate balance of managing inflation to two to 3% while manipulating inflation one way with unemployment and interest rates.
And it’s a fine balance without this thing toppling down and staying in the middle. Now, there was one thing that he mentioned that I took exception to, which was with a lot of millennials out there finally having to pay their interests on their. Now you’ve mentioned that.
Yeah, like a lot of ’em aren’t gonna be buying houses to live in, which makes me, as an apartment owner, it’s good residential home prices that I don’t invest in residential properties for that reason because it is very emotional and to me, less and less people are gonna be buying houses. The one thing I did during the session that he said was lowering rents. I don’t think rents will be going down for any long period of time. And I’ve said it before. It can go down for maybe a few quarters in a row, but I find it hard to believe that it’ll go down for more than a year, three years more than that.
Rent is just one of those things. That’s just as things get more and more expensive, it gets passed on to the poor consumer at the bottom. And as things get more, more difficult, millennials have problems qualifying for debt buying houses to live in because they become more and more unaffordable. What do they do? We got vacancies. They can come up and rent the apartment if they want. And that’s why I essentially like to invest in commodities that cater towards the lower middle class, that kind of catch people as they come.
So if you haven’t yet make sure you guys check out some of our future events. We’re gonna be doing a couple here and the January retreat in Hawaii. Martin Luther king weekend. Join our club to get access to more details simplepassivecashflow.com/club, and we will see you on next week’s podcast.