1149: Mortgages as Bonds & Peak Trump, The Undrainable Swamp & the Fantasy of MAGA with Blackstone co-founder David Stockman

I basically found Creating wealth podcast by searching itunes and immediately I resonated with your message. You know, the great return on investment.

Significant reduction in taxes, steady income that could eventually replace my corporate job income. Also, what I found very powerful is along with that message, I was impressed by the high caliber of your guests. And I remember listening to economists, investors, lawyers, authors, basically people who could present their expertise and allow me to judge their response against your message. So as an example, when you talk about inflation, your ideas about inflation going up over the next few years, I could vet that message against your guests and be sure that what you were saying made sense. That was very powerful to me.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, has had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome, listeners from around the world. This is episode 1149. 1149. And this is Jason Hartman. Today we've got another great show for you. We're coming to you five days a week now and we've been doing that for quite a while. Today we will be talking with one of the founders of Blackstone Capital. Yes, this guy is kind of a big deal. That is David Stockman and he is talking about peak Trump and how that impacts the economy. You know, oddly, as I recall, when I recorded this interview, we didn't talk that much about Trump. We talked more about the economy and the financial markets. But of course, this all weave together, as we all know. And first, Adam and I have an interesting article that we'd like to talk to you about. Adam founded and this topic is of interest because it's something that was really one of the cornerstones of the Great recession just over 10 years ago. And this trend is coming back. Adam, is it coming back? And that is the purchase of mortgage pools.

You know, it looks like the first half of the the Great Recession is coming back. So banks and other institutions have been purchasing mortgages that aren't fannie and Freddie backed. But they're supposedly as good as Fannie and Freddie loans.

Right. Which we know those weren't even that good during the Great Recession. Right.

And then they're packaging them up and they're selling them to other financial institutions and they're selling them as bonds. So we're now selling mortgages as if they're 100% secure bonds and going out there and buying them. And it says here that they're not just doing it a little bit. It's gone up threefold since 2016.

Yeah. And so the numbers, in the overall scheme of things, these numbers are not huge that we're about to mention to you in the. What's called the private label securities world. That's the catchphrase. Private label securities, they totaled $3.9 billion last year and just a little higher the year before.4 billion in 2017. And that was, what do you say, Adam? Triple the amount.

Tripled in 2016.

The reason, Adam says this is the half of what happened in the Great Recession. Now, it's really only a fraction because there's a lot more than this to it. But a cornerstone of the Great Recession was this pooling of these bad, what they called toxic loans into these pools. They were being sold off as securities. Right. And then they were being insured, and I'm saying insured in air quotes as credit default swaps. And this was a form of really fake insurance. You know, normal insurance requires reserves and all kinds of regulatory stuff. And the credit default swap was like a form of fake insurance where they didn't have to have the reserves to. To buy this insurance. And what that allowed was this massive, massive, just untold unimaginable amount of leverage in the system because they could go rinse and repeat, rinse and repeat the process of buying and selling these pools and having credit default swaps in there, which there was a tiny premium on the fake insurance, the credit default swap. Right. And this is pretty arcane. It's hard to understand. And Adam, when we were talking before this, we decided we're going to do a whole episode, just to remind you, on credit default swaps because, you know, history has a tendency to repeat itself and we want to know the risk in the marketplace. This is an inkling of some risk in the real estate market because if these loans are toxic, again, very little regulation whatsoever here. Right. These are just private deals. They're being sold off by JP Morgan, Flagstar Bancorp, all kinds of companies are selling these off. And it allows them to not comply. They don't have to comply with the Fannie Freddie underwriting standards which even those had lots of toxic loans in them obviously. And we all saw that post Great Recession. But it does lessen the role of the Fannie Mae Freddie in the housing finance industry and I like that. But who knows if they'll do it right? I don't have much faith in that, do you?

No, not a whole lot. And it's also interesting because as they start doing this their share has grown a lot since the Great recession because in 2008 it says here the amount of loans that were being originated through Fannie and Freddie was 65%. But now in 2018 it was only 45% of mortgages. So in up to 55% of these mortgages, obviously it won't be. All of them could be packaged into bonds and sold.

Yeah.

And as this continues on you're getting more and more at risk because you know, you know as soon as they start making money on these things, they're not going to stop.

Yeah. It's just going to become another feeding frenzy.

Another feeding frenzy. And before you know it, CDSs are going to be back because they this time it's safer, right?

Yeah. Somehow, somehow this time it's different. Famous last words.

Yeah, very interesting. Well we'll keep an eye on this for you and tell you about it on future shows of course. But we kind of see an inkling of this. It seems as though it may put some additional risk into the market as if we already didn't have enough. I mean you look at the high end markets around the country and they are really in trouble. I just heard this morning that in New York City the average time on market now for a residential property is 132 days. And that market of course has collapsed. And you know, this is one of the many markets where everybody living there, you know, repeated and love to repeat in a braggadocious way about oh well this is New York City. I mean it's a world class city, it's a world destination. You know, people will always want to buy properties here. It'll never go down. Yeah, well guess what, I told you so. It's already happening.

People may want to buy there, but not at that price.

Yeah, exactly. The question is at what price? Right. And we're seeing this happen with high end markets all over the country. You know, the cyclical markets are really showing signs of significant trouble. But it is a tale of two cities folks, because the linear markets that we recommend, these prudent markets where buyers are following commandment number five, thou shalt not gamble property. Makes sense the date you buy it. Those markets are super strong. Now we're going to be presenting eight of these markets, well I should say eight local market specialist groups will be at our upcoming Meet the Masters event. And so we'll be talking about that. And Adam, you know what I told you this morning I'm super excited about a presentation from a non practitioner. A guy with zero agenda, has no financial interest. And that is my friend Drew Baker who's been on the show many times where he's going to talk about self management and he has a slideshow that he's going to share at Meet the masters with over 100 photos. And I said, Drew, the rule is a minute a slide, you can't take this long. So I'm going to see if I can pare that down a little bit for him. He's going to talk all about all the stuff he's learned self managing his properties and it's like the real practical roll up your sleeves, rubber hits the road type of stuff. You've heard him on the show before on prior episod. Just super excited about that presentation. I think it's going to be highly practical. The other highly practical thing is we have a very good home inspector who's going to be doing a presentation. This is the first time ever we've done this a presentation on home inspections. I mean practical stuff. This is likely going to be the most practical Meet the Masters ever. Remember the theme is the big boring and profitable idea. So yeah, it's going to be good. Good stuff, Adam. I will look forward to seeing you there. Less than two weeks away. Well, a week and a half away. Right? Yep.

I think yeah, we're right at whenever this airs, it'll be 10 days away.

Yeah. Good stuff. Well, Jason hartman.com masters for your last minute tickets. We still have a few seats left. Jasonhartman.com Masters Adam, let's go to our guest.

Join us March 23rd and 24th for the 2019 Meet the Masters of Income Property.

Let's break this down and look at some of the strengths of income property as an asset class. I found that this event is really.

Helpful because I'm totally a newbie to.

Real estate investment and so I picked up so much information. One of the great things about it is that it's so fragmented. Right. Embrace the fragmentation.

I've actually been learning a lot about tax benefits to real estate and a lot of I've been investing actually well over 10 years now and I learned a lot of new things today. The other advantage of this weekend is networking. Meeting new property managers, meeting new area specialists and seeing the product they have to offer that changes year by year. Register now@jasonhartman.com masters it's my pleasure to welcome David Stockman. He's a former two term congressman from Michigan and director of the Office of Management and Budget under President Ronald Reagan. He's the best selling author of the 1986 book the Triumph of Politics as well as several others, the Great Deformation, the Corruption of Capitalism in America and A Nation on the Brink of Ruin and how to Bring It Back. And his newest book, Peak the Undrainable Swamp and the Fantasy of Mega Meaning. Make America Great Again, of course. David, welcome. How are you?

Very good and happy to be with you.

It's good to have you. And you're coming to us today from one of my very favorite places. I visit often and that is beautiful Aspen, Colorado, is that correct?

That's correct. And it's a great time to be here. Three feet of snow and perfect weather outside.

Yeah. One of my friends in Aspen, Alicia, just told me that a couple of days ago. So she said, come up and ski. It's a good time. You've got quite a history. I mean, you served under Reagan for five years. Just to take it back, way back to 1986 and then in 1987, you were one of the original founders of Blackstone. You have quite a Wall street career. You've done a lot of stuff. But what is the thesis of the triumph of politics? That was sort of before my time a little bit. Yeah.

Well, the thesis was that despite his best intentions, which was to balance the budget, shrink the federal government, unleash private enterprise in the private sector, President Reagan didn't make a lot of progress because he was thwarted on Capitol Hill at practically every turn, on spending cuts and even on numerous areas of deregulation. And not just because of the Democrats or because of the, you know, permanent government bureaucrats who have so much influence or even lobbyists, but also because of the Republican Party. They talked a good line about spending cuts and deficits are bad and the national debt is out of control. But that was at $1 trillion in national debt. And yet when it came time to vote to reform food stamps, for instance, or to bring Social Security back to its original intention of a retirement program, not a quasi welfare program, they were nowhere to be seen. So Reagan probably end up getting less than 5 or 10% of the spending cuts he asked for he got a much bigger tax reduction than we proposed. And the defense budget just soared out of sight once the military industrial complex got up ahead of steam. And so instead of ending up with a balanced budget, he ended up creating 2 trillion of additional debt during his term in office, eight years, which was double what his predecessors in the previous 180 years had put on the book.

Sure. And compared to today, it's like nothing I know.

Exactly. And that's the key point, the takeoff point for present times. It started us down a path of just rampant borrowing and not just in the public sector, but the private sector as well. It set up a situation where the Federal Reserve, which had historically been economically independent, became essentially the handmaid of the treasury and bought up huge amounts of treasury debt, thereby making it easier to finance these deficits but at a cost of creating enormous financial bubbles, instability in the private economy that we're still struggling with today. So yeah, no question it was a mixed legacy. The intentions were all perfectly aligned. It was an exciting time in 1980 to think we might be turning the corner, the direction of history back towards fiscal rectitude, sound money, free markets. But frankly, it just didn't happen because of the title of the book, the Triumph of Politics. It got stopped on Capitol Hill.

Yeah, yeah. Well, maybe that's the point, is that you know, that to tie it in with your newest book, the Swamp is Undrainable. Right?

Yes. Well, I think that we learned that in the 1980s. And the lesson has only been compounded in the three decades since. But now it is a far more serious matter because see, when this whole thing started in 1980, the public debt was only 30% of GDP. It had actually been declining ever since World War II when it peaked for war finance reasons. And so therefore there was a lot of headroom to make a mistake. You could have too big a tax cut and too small a spending cuts, much larger deficits than you planned. And yet there was room on the clean balance sheet of Uncle Sam of the federal government to absorb that for a while. But what it did was set in motion an incorrect mindset assumption that you could do this till the cows come home, year after year, decade after decade, and it would never count. So today we're at 22 trillion of public debt, not 1 trillion. Back then it was 30% of GDP. It's 106% today. But the worst thing is the habit of deficit finance is so deeply ingrained that now we have a trillion dollar per year deficit built in. In other words, if no one went to Washington for the next five years. We'd still borrow a billion dollars a year or more and the national debt would keep rising. And one of the things that I point out in my book is that on the automatic pilot that the budget is on today, the fiscal side of this, we'll end up with 40 trillion of public debt by 2028 at the end of the next 10 years, or double where we are today. And the problem with Trump is that he recognized the economy was failing, but he did not have a program to address it.

Before you go on, let me just say a couple of things, if I may. Number one, way back to the Reagan def. Or offense spending, whatever you want to call it. Yes. And the military, it was offensive.

I justified that and I still do. Like part one is I say that was okay because that was really a business plan to bankrupt the Soviets and it worked. I, I think that was a success. But the problem is you set up all these. The reason we've got this, the military industrial complex gets a hold of that or is any special interest group, and that's just another big special interest group, you know, and they, they form these iron triangles and this infrastructure gets in place that can never be taken away. And that's the problem. It's not like the government can do anything for a few years, which might make sense. It might make sense to, you know, spend like a drunken sailor. I love Reagan's saying about that, you know, it's an insult to drunken sailors for a few years. But the problem is you set up a complex and that complex is an iron triangle and it never goes away. That's the problem.

Yes, you are absolutely right. It gets institutionalized. It becomes permanently embedded and then the original reasons are lost. But the bureaucracy, lobbyists, the deep state, if we want to use that term, just makes up new missions to justify what they have because they live off the largesse. Now, I would disagree with you slightly on. It was a business plan to bankrupt the Soviet Union. The Soviet Union was nearly bankrupt when Reagan was elected because socialism inherently leads to bankruptcy. They were spending 40% of GDP on defense. They couldn't even mobilize their tanks because they didn't have enough fuel. The threat simply wasn't there. They were about ready to keel over and crash from.

Well, he made it happen a little faster. Right, maybe it happened a little faster.

But my argument today was be it wasn't worth the price because you see, I was there fighting that damn thing and I knew we could never balance the budget if you're going to take defense spending from 140 billion to 300 billion in two or three years, which is exactly what they wanted to do back then. But they got so much money. And this is a really important point because it leads to where we are today. They didn't know what to do with it. And so instead of going into strategic weapons that allegedly could counter the Soviet build up of first strike capacity, that never really happened, but it was argued.

But you heard all the liberals and all their Star wars junk.

Yeah, but you know, the point was they couldn't spend 10% of that money on strategic weapons, the Minuteman missile upgrade and all the other things. We were going to do the rest of it. And here's the key point, went into conventional capacity, you know, more aircraft carrier, battle groups, a much bigger air force that was conventionally intact, tactically oriented. But what good was that against the Soviet Union? We weren't going to have a land war with the Soviet Union. You know, we were going to deter a nuclear war. And if deterrence failed, it was the end of the world. That was simple. But when they built all these new naval capacity, the 600 ship Navy, a whole new generation of tanks, new helicopters in various kinds of airlift capacity, it was perfectly made to begin invading countries all over the world like Iraq and Libya and Syria, they should have left.

The name alone and called it the Department of War like it used to be called, because that's the proper name.

But you see, now we're the warfare state. Now it's the American empire spread all over the world. Now we're in these wars that are bankrupting us. 17 years in the Hindu Kush in Afghanistan. And here's the key thing. It was enabled by the Reagan buildup because frankly, if someone would have said in 1990 to Bush, his successor, if you want to go rescue Kuwait, who's having a fight with Saddam Hussein that didn't amount to Hill of Beans from our security point of view, then I'm going to have to raise taxes in order to finance the military capacity I need. It never would have happened. And if the first Gulf War wouldn't have happened, the second one wouldn't have happened. And if that wouldn't have happened, we wouldn't be mired in Syria. All right, all right, all right, I got it.

You got the point. Okay. But here's the question, here's the question I have for you though. With the debt and deficit on this disastrous course to, I believe you said 42 trillion, trillion or something. Yeah. With a T, that's trillion with a T by what year?

By the, at the end of the 10 year cycle that we're in 2028.

And that's if we don't get a spendthrift in office. Right. And make it to make it worse. That's just on the current trajectory. So my question for you is this, does that mean inflation?

It doesn't mean inflation unless all the central banks of the world go craz printing even more money than they have been over the last two decades.

Well what about just our central bank? I mean doesn't it have to mean inflation?

No, I don't think so. What it'll mean is a crunch in the bond pits where the demand for borrowing will vastly exceed the supply of private savings. Yields will soar. That will cause a crunch time on Main street, in corporate America, in households and everybody else that is levered to the Hill. Remember, remember we have 70 trillion of debt on the US economy, public, private, households, business, finance and government. And we can't afford to have an interest rate crunch that's implied by the amount of new debt that the federal government is going to be issuing.

So if it doesn't necessarily mean inflation, does it necessarily mean higher interest rates to fund?

Absolutely, yes, absolutely. Because it's the law of supply and demand. Now here's the key difference. For the last two decades the Federal Reserve has been doing the heavy lifting. Instead of the squeezing out or crowding out of private investment through higher interest rates as the federal government borrowed and borrowed and borrowed, the Fed stepped in and bought up the bonds, monetized the debt, expanded its balance sheet by, and this is a staggering figure, huge 4.4 trillion. Because you know when Greenspan started this whole thing and he's the culprit, where it all began.

Oh, I always say that if you want to lay the whole financial crisis at the feet of one person, it would be Alan Greenspan. Thank you.

Yes, but let me just add, when he took over the balance sheet of The Fed was 200 billion. Now that's 1987. So it had taken 73 years to get there from when the Fed opened the doors in 1914. And when he left it was 800 billion. So it quadrupled in his years in but it paved the way for his, what I call proteges, assigns and heirs to double down and triple down. And that's what Bernanke did in Yellen after him and to some degree Powell today. So we reached 4.5 trillion. Now I want to tell you, in 30 years, if you Take the balance sheet of the central bank from 200 billion to 4.5 trillion. You have printed a lot of money out of thin air. You have totally undermined the healthy balance of supply and demand. You got false prices in the bond market, prices too high, yields way too low. And that outcome gave signals to both private and public actors. Don't worry about the debt because it doesn't cost very much. And so, you know, the system was put on a kind of doomsday cycle where because there was so much debt, the central bank kept pushing rates lower. And the lower they pushed the rates, the more people borrowed, the less financial discipline there was, the less fear of risk there was. And we basically painted ourselves into what I today would call a $70 trillion corner. That's how much debt we have today compared to the 5 trillion. And listen to this number.

Are you taking into account all the unfunded mandates too? No, tell me.

I know we can add that.

I've had Lawrence Kutlikoff on the show a few times and you know, I mean, that just. Wow, that's mind boggling.

Yeah, but let's just take the visible contractual debt, loans and bonds that are out there. When Greenspan started this whole thing, and you and I are in the same wavelength here. The total debt in the US economy, public and private households, business, government, was 5 trillion. It's now 70 trillion.

Right.

When he started this, that 5 trillion was about 150% of GDP, which was 3 trillion or so a little more at the time. Today GDP is 20, but the debt is 70, so we're at three and a half times, not one and a half times.

Okay, so let me ask you about that debt. You're talking about the private and public debt or just private?

Yes, combined.

Okay, so wait, wait, wait, on the private debt though, is that really that bad? And here's why I asked that question. Like everybody talks about the derivative crisis, right? And they talk about the debt. For both of those things, you have a counterparty. So it's not the same as the government debt. The government debt is a different animal. The private debt though, because you've got a counterparty, I don't know, it's not as bad as it seems. It's bad, but I'm just saying I think it's less.

Yeah, well, I think what you're saying is, and that's true of government debt, actually, that for every debt issuer who has to pay interest, there's some debt hold who gets, you know, receives the interest. Okay, that's True, but it's not the same people. And that's the same problem that you have with derivatives. Yes, you can, you know, balance out the equation. So if it's 500 trillion gross, the net, you know, might be 30 trillion or 40 trillion or something. But the problem is the people that owe and the people that own aren't the same thing. And in Today's economy, basically 80 to 90% of U.S. households are tapped out. They can't borrow anymore. And so they, that source of growth that we had for the last 10 or 20 years is simply gone. Business, on the other hand, borrowed a huge amount of money in the year 2000. Business, this is corporation and unincorporated mom and pops and all the rest of them, had 6 trillion of debt. Today it's pushing 15. Now here's the thing. Had they used that huge increase in debt to fund, you know, plant equipment, technology, intellectual property, all the rest of it, that is productive assets, it would be one thing. But they spent the overwhelming share of it on the margin for stock buybacks, special dividends, MA deals, most of them, which, you know, end up failures. And then they just unwind them and say, don't, you know, we're writing them off and don't mind the write offs.

But my point, that's the same thing Wall street does with mutual funds. They close their bad funds, act like they were never there, so they don't go into the stats. It's such a scam.

Yeah. So my point is it didn't go into productive investment. It basically got channeled back into Wall street as stock buybacks, dividends, M and A cash based M and A deals. It all goes back to Wall street, which then got cycled back into new bids for stocks and other risk assets at higher and higher prices. So in a sense it set off a kind of financial Ponzi scheme in which the corporation business borrowed and borrowed, put it into Wall Street. Wall street speculated on stock prices that encouraged businesses to borrow more, shrink their stock in order to drive up their stock price and the value of options. And the whole thing got out of control. And that's where we are today.

So what can we expect? I mean, you look at, you have got a tremendous resume. Founder of Blackstone. What else on Wall street, you, you had some other.

I started on at Salomon Brothers and that was right at the peak of the prominence of Salomon Brothers, when it was the king of Wall Street.

Okay.

And it intended mortgage backed securities and it was a huge trader and purveyor of bonds that's where Long Term Capital started. John Merriweather.

Good old lctm, right? Yeah, yeah.

So so much came out of there and came there when I was 40 years old because I'd spent the first 20 years of my life in Washington in government. But you couldn't have had a better lesson in corporate finance and how Wall street works than to be at Salomon brothers in the mid-80s and then after that to be in the leveraged buyout business and private equity business for a long time.

Okay, so what can we expect next? That's what I want to get to all of this. I mean it's a tremendous concern obviously, but what is going to come of the economy over the next 10 years and how should investors prepare themselves? How should they deal with it?

Well, I think the investors need to hunker down. I think investors need to recognize that we're at the end of a 30 year cycle in which the debt grew enormously. As I said, 5 trillion to 70 trillion worldwide. In the last 20 years it's gone from roughly 40 trillion to 250 trillion. It was all fueled by massive central bank expansion. Central banks had balance sheets right before the turn of the century at about 2 trillion. Today it's 25 trillion. That was the motor force that drove the debt. The debt created this debt based global economy of which China is the epicenter. I call it the red Ponzi sitting on 40 trillion of that debt. And I think we're at the end of that road because even the central banks have now recognized they can't expand their balance sheet forever at the rates that were being incurred, especially after the crisis in 208, 209 and they've pivoted. The Fed is now for the first time in recorded history shrinking its balance sheet under qt at a $600 billion rate. And that is big. And the Fed is the leader of the central bank convoy. And whether others like it or not, sooner or later they will have to stop buying bonds and begin to shrink their own balance sheets or they will have huge capital flight, exchange rate problems and so forth. So I say to investors we're at a historic pivot point where the 30 year money printing party led by the central banks is over. And we're now going to have to wallow in the morning after for years and years to come as policymakers try to struggle with a debt encumbered economy that simply can't grow, even as populations get older and Social Security and welfare costs keep soaring. So it's not a positive okay so.

You talked about cost soaring, but not inflation. You don't think that's necessarily inflationary? See, to me it seems like high debt, high spending means the government is going to want to inflate their way out of it. Right. You know, it's just they may want.

To, they may want to, but what we've learned in the last 10 years is central banks on a worldwide basis can't cause inflation. You can have one, one godforsaken country like Zimbabwe, well, or Venezuela, you know, because they import inflation when their exchange rate collapses. But on the total global scale, there is no imported inflation. But when central banks all over the world drive interest rates down to zero or below, and you know, we had something like 14 trillion at one point of debt that was trading below zero yield, they simply cause massive mal investment, as we call it, over investment. So we end up with so much capacity, we bring the latent labor out of the rice paddies into the tradable world economy. We cause all kinds of new infrastructure and shipping capacity and factories and steel industry.

It just creates another business cycle. Right, because it's oversupplying.

So what I'm saying is, is the ultimate effect of money printing is not what some people told you 25 years ago, inflation. It's actually deflation that we create so much excess capacity that prices don't go up, savings are crushed because nobody's making any return. And as a result of that, we get a highly lopsided supply demand equation that will undermine the whole system unless the central banks keep printing money, which I think even they realize is far too dangerous at the present time to do.

But I would argue that they did cause inflation immediately following the Great Recession. And the reason I say that is because the question I always ask is compared to what? Maybe that spiral of potential deflation would have been much greater had they not done all the qe. Right. And so the QE did cause inflation. You just, just didn't notice it because we were still so underwater. You know, it took years to get our head above water. Right. So there really was inflation there. It was just compared to the deflation that otherwise would have happened, you know, it would have been more.

Well, you know, I, I buy that to some degree, but I think the inflation was overwhelmingly in financial assets, not in main street goods and services.

Because.

Okay, because all of this excess liquidity, which is really what the balance sheet expansion tracks or measures, you create 4 trillion of liquidity out of thin air and it never escapes the canyons of Wall street. Because we're at peak debt on Main Street. It therefore causes prices in the financial markets, asset prices to be bid up rather than the price of labor goods. So that's what's happened. But the danger is you get markets high enough like we saw with.com in 2000, they eventually crash on their own. The, the private economy then adjusts negatively for some reasons. We can go into OR 208, you get another financial asset boom going. It finally reaches unsustainable levels this time especially in mortgage backed securities. It crashes, the economy set back and you get up and dust yourself off. But I think we're now at the point the third time around where the Fed is out of dry powder.

You know, that's why they're raising rates now, so they'll get, they can reload their.

Right. They're desperately trying to make up for lost time because Yellen was a chicken hawk, okay? Bernanke was delusional. And so they spent four or five years keeping rates on the zero bound when anybody with common sense, in a sense of historical cycles and reality and financial markets would have said we got to get these rates normalized so the economy can function in a healthy way. They never did that.

You're certainly right. But you know, no one wants to take the punch bowl away at the party. Right? They don't want to be the bad guy. Only Paul Volcker was willing to do that.

Well, you know, that is true and that's why he's the greatest central banker of modern times and we don't have him anymore. I would say also though, if you go Back to William McChesney Martin, who's Fed chairman for 19 years, this like Greenspan, he's the guy who invented the phrase it is our job to remove the punch bowl just when the party is getting started. Can you imagine a Bernanke or Yellen or even a Greenspan?

Oh, Greenspan, never. Yeah, yeah, he was a sellout. Yeah, very interesting. Good stuff. Give out your website and you know, anything else you want to say about your books. I know we got to wrap it up, but fascinating discussion.

Well, the book again is Pete Trust Trump the Undrainable Swamp and the Fantasy of maga. And you know, it's essentially saying Trump peaked out last September when the market hit a artificial and unsustainable high. It's all downhill from here. And he's going to suffer for embracing a big fat ugly bubble that he identified during the campaign but then adopted once he was in office. A rookie mistake. That book is now available on Amazon as an e book book I also publish daily, something called David Stockman's Contra Corner. You can Google that and it's a subscription based service, but it's easy to sign up for.

Fantastic. Good stuff. Well, David Stockman, thank you so much for all the insights and for joining us. A fascinating discussion.

Very good.

Thank you.

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