1979: Police State, Digitizing The Dollar, SEC Attacks Crypto, Bank Bailouts, Clive Thompson

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com hey Jason, just wanted to send you a quick message of gratitude. So grateful that I got into the game and got in with properties that make sense because the rent income keeps coming in. So thank you. Glad we connected and I'm glad to be in the income property game instead of the Wall street game for my.

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Welcome to episode 1979. 1979, and that means Friday we are going to have a flashback and a.

10Th episode all in one. I love those.

So stay tuned for that on Friday. Today we've got Clive Thompson back again to talk more about the economy, the real estate market and control. The control the elite class is gaining.

Over the population, especially through central bank digital currencies, digitizing the dollar, digitizing other currencies around the world, done by other.

Governments and central banks. This is a big deal. It is something that we really must.

Keep tabs on because it could mean.

The end of a very important form.

Of freedom, which is spending freedom and spending, privacy and control over your spending.

When you spend, how you spend, who you spend with. Right?

That's a big part of your liberty. So very important episode today.

Before we get into that, I saw this online and I just wanted to share it with you. This is an old thing, the pyramid of the hierarchy of money. And basically this is good but not complete. I don't think this is the way the precious metals people, the gold bugs, look at the world and it is somewhat complete, but not completely complete where they've got assets and liabilities, money and credit, and at the bottom they've got securities. Okay, this is just paper.

It's fiat, right? That's what securities are.

Stocks, bonds, you know, these are paper.

Assets so they can evaporate Very quickly. And we've certainly seen that happen a number of times.

We don't have to go into all.

The scandals over the years in the stock market because you already know about them.

And then there are bank deposits. And so far under fdic, those have.

Not evaporated and people have not lost.

Money on those yet.

However, I would argue that they've certainly lost money through inflation, although not directly in nominal dollars, just in real dollars. There have been real losses.

And then the currency itself, the dollar or the yen or the yuan or.

The Brazilian real or the Mexican peso or whatever the currency is, that's the fiat money, the paper currency.

Fiat, of course, meaning by authority or by decree, something has value because we.

The lawmakers, say it has value.

And then, of course, for the gold bugs, their ultimate form of money is gold itself.

Now, the crypto people will tell you it's cryptocurrency.

The bitcoin people will be much more right than that.

And they will tell you it's actual.

Bitcoin, which is in a different category.

Of cryptocurrency than the others.

But it doesn't mean you can't make money on the others. You certainly can.

And you can also lose a lot of money. So we all, we all know that.

But isn't it interesting how they don't.

Show on this pyramid of money, the.

Pyramid of the hierarchy of money. They don't show real property. They just completely skip this incredibly important asset class that is the most historically proven wealth creator in the entire world. You know, I did a speech yesterday here, by the way.

I'm in Tampa, Florida. So greetings from my hotel room here in Tampa.

And I did a speech yesterday to.

This group of, I don't know, there's about 250 investors and entrepreneurs here at this conference. Conference.

And you know, every wealthy person at some level or other is into real estate.

They're into income, property investing.

They are all into it. It's not like you ever go to a conference or you ever go to.

A mastermind group where there are a.

Bunch of wealthy people in a room and they're not doing something significant with income property, with real estate.

It's always a part of every portfolio.

Yet, interestingly, and if you're seeing this on video, you see that they just. This is just completely skipped. They don't even mention it. It's not even on the hierarchy of.

The pyramid of money. So really interesting, but whatever.

Okay, so the attack on cryptocurrency continues. Now, folks, I called this, what, 11 years ago, I said this would happen.

And it is happening.

Another prediction unfortunately coming true. I don't want this one to be true. This is one of those predictions I definitely do not want to be right.

About, and I hope I am actually wrong about it.

But the attack on the cryptocurrency world continues. So this article is about how the SEC is going after now, Coinbase, right? Coinbase, one of the largest and most credible Americanized exchanges.

Exchanges.

They've already gone after Gemini and other very credible. A lot of people in the cryptocurrency world, a lot of bitcoiners thought, you know, Gemini, those Winklevoss twins, remember, they. They were the ones that got in the big lawsuit with Mark Zuckerberg because they claimed they created Facebook. And of course he claimed he created it.

And, you know, who knows what's true? But listen, we all know now that Zuckerberg is certainly very ethically challenged. So we know that.

But they've already really taken some big shots at Gemini.

That's the Winklevoss twins, and now they're going after Coinbase.

Earlier this week, the SEC notified Coinbase of its plans to sue the firm for potential violations of investor protection laws.

Remember, it's always for our protection, right?

SEC Chair Paul Gensler has maintained that exchanges such as Coinbase, which allow investors to trade crypto assets that are not registered as securities, are breaking the law. Then, on the other side of the table, Coinbase has adamantly refuted the claims made by regulators. Chief Legal Officer Paul Grenwald said in a statement that, quote, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC has not been fair or reasonable when it comes to its engagement on digital assets.

So many layers interesting about that statement.

But one in particular that I want to point out is, doesn't that sound.

A lot like what Mark Zuckerberg. So we'll go back to him again, what he has been saying to regulators.

About, hey, we need regulation. You got to regulate the social media industry, you got to regulate platforms. Zuckerberg has been asking for that, and.

Now Coinbase is asking for it.

See, when you're the big player in the field, you welcome regulation. Why? Because it sets up a barrier to entry for competitors, and it kills startup culture and it kills innovation. And as I've said many times over many years on this show, just look at Wall street and just look at.

The banking industry, right? Those two are basically the same thing almost. One is part of the other. I guess you would say there is.

So little innovation and there is so little startup culture in this giant financial services industry. It is absolutely appalling. Why is that the case? Because it is so regulated and the only thing regulation ever does, although it's supposed to protect us consumers.

Right. And, you know, certainly there are cases.

Where it does that, but largely it doesn't. What it does is it protects the established players by building a moat around their business and around their turf so that new, innovative startups can't play in their game.

That's what always happens.

Okay, so we'll continue to monitor the.

Attack on cryptocurrency because remember, the government does not want competition for their main.

Product, their main product being their currency.

Eleven years ago I was saying that. Maybe 12, even 13 years ago I was saying that. I don't know, but at least 11 years ago I was saying that.

Just go back and listen to the old episodes.

Check on me and you'll see.

Now, this is absolutely shocking.

I just got to share this chart with you again because it's absolutely shocking.

It just shows how in the past couple of weeks, the backstopping and the borrowing from the Federal Reserve by the banking system is absolutely staggering. You talk about the hockey stick chart. This isn't even a hockey stick because a hockey stick is an angle. Right?

You know what a hockey, hockey stick looks like? Of course.

This is straight up to infinity and beyond. It is absolutely shocking and it shows us massive inflationary pressure. And also kind of in keeping with what I was talking about just a moment ago about the SEC's attack on the cryptocurrency world and, you know, proxy.

For the government as a whole, their attack on it.

This banking crisis is leading to massive consolidation into big banks, so that the elite class, the powers that be, will have much more control over the system and we as consumers will have much less choice. That will lead, of course, to higher fees, higher prices, inferior service, and worst.

Of all, and scariest of all, more and more government control, more spying, less privacy. And ultimately, what we're talking about with today's guest again, central bank digital currency. So it is coming fast, folks. It is coming really fast.

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All right, let's get to our guest. Let's talk to Clive, more about the market, the economy, and most importantly, your freedom, your liberty, and the attempt to.

Take that away through central bank digital currencies. Here we go. You know, I'm sure they would keep this secret like the Berlin Wall. Right. They're not going to tell, announce the reset because then everybody will have time to act. You know, that's why the Fed has so much secrecy around it. And interestingly, Powell isn't that secretive, but Greenspan sure was. So. Yeah, I mean, it's certainly possible. And in principle, you're right. I just don't think they would have the time or the inclination or the ability to pull it off. No, that window.

Well, you're certainly right. As we go through a reset, the lawmakers are going to be extremely busy because there's going to be thousands of complicated situations which need some sort of rule written to cope with it. Again, we come back to the fact if one country resets, everybody else will say we could be next. And there'll be a rush to deploy cash into other assets everywhere, which will force the hand of all governments around the world. So when it comes, it might be. It could be in one country where it starts, but there's a lot of countries where it could happen and therefore there'll be a lot of different rules and it will play out in different ways depending on which country has which rules.

Sure, yeah.

But as a generality, large cash balances won't be converted over. As a generality, bonds probably won't be covered. Well, won't be converted over. Mortgages probably won't be converted over. Rents probably will by legislation.

And that's good for investors and property owners right there.

It's good for property owners, yeah.

So what would you do? Would you receive your income in the new currency and then make a conversion.

And then pay your mortgage in the old currency?

So it's quite likely we'll have two currencies running alongside, one by one to one. Now, there's a very obvious way that this might happen. As we've talked about earlier, we've got the CBDC coming, which is a central bank liability, but is different from the US Dollar, Even though it's one to one. In the event we get into a crisis, it'll be so easy to say. Sorry, we're going to limit your ability to move your dollars into cbdc. But you still got to pay your taxes in CBDC and buy everything in cbdc. But that million dollar apple bond which just matured. You can't convert it those old dollars into CBDCs unless you get permission or unless you go through some anti money laundering rules or unless you prove you paid your taxes on it, or unless we check you're not a Colombian drug dealer or you just weight because you're.

Rich or we have to make sure your social credit score is high enough and you haven't posted anything on social media we don't like. I mean this could be just very draconian.

Well that's great. That's exactly what's, that's happening already in China. Yeah, of course, you probably know that. So, so it's exactly what might happen.

Oh, it's coming. No, it's no question about it. Very scary.

That would be very bad. But really the reset, I mean they're unlikely to do the reset with a new traditional currency.

That's going to be with the central bank digital currency. Right. It'll just be so much easier to roll out.

And the way I see it happening, Clive, I mean this seems like the.

Easiest way it would be for government. And by the way, the one other thing I didn't say before when I talked about those articles during the COVID.

Era is that I remember when the.

First set of stuff stimmy checks came.

Out, they claimed that they couldn't find people to give them their money.

What a lie.

Right? They could somehow find them to tax.

Them, but they couldn't find them to give them the money.

And I think that was like laying the pr, the public relations groundwork to say this is why we need a cbdc. We need to give people this money.

Electronically on their phones.

And so it'll either be engineering another.

Crisis or being complicit in another crisis or just getting lucky and having one, it doesn't matter how it comes down or just having a UBI Universal Basic Income. And so the money comes on your phone and then it's all electronic and then they control it and they have all those other controls we talked about previously. And that would make the reset so easy. I mean the rollout would be just incredibly easy for governments, wouldn't it?

Once the CBDC is up and running and being widely used and everybody has a digital wallet, it'll be extremely easy to say, okay, the old currency you can't use it anymore and you can't change it at one to one. It's now you have to, it'll, you'll get 90 cents or 80 cents or.

70 cents and the sooner the more you'll get. So if you wait to convert, they'll.

They'Ll incentivize you to convert by inflating away the value of your old currency.

They'll say you got to convert it.

All now because your currency is going down in value and they'll just keep making that exchange rate worse and worse. I bet you it'll work like that.

Well, I mean they'll bottleneck. They don't want it all converted because the crisis would be caused by the, the people not trusting the old currency. So they would like people to, or rather like to bottleneck people so they can't convert all their money. Now if you've got 5,000 or 10,000, there shouldn't be a problem. But if you're a multi millionaire, I can see that they're not going to want all of that money rushing into the economy and emptying the shops. There'll be favored classes. So if you happen to be the man in the street, you'll be fine. And then the government will decide who wins and who loses. You're not going to get such favorable treatment if you're a foreigner to the country. You're not going to get such favorable treatment if you are extremely wealthy and can so called afford it. And you're not going to get such favorable treatment if you happen to be a foreign government who happens to own a bunch of overseas dollars or pounds because they'll say we still owe you the pounds or the dollars. We'll get it, but we're going to pay you. But we still got, we owe you US Dollars. We're going to pay us do. Sorry, you can't convert them to CBDCS though.

Yeah, well you didn't mention political correctness in there. I mean you're not going to get favorable treatment if you're in a disfavored race or sex or you know, God forbid you're a white Christian male. Your, your conversion is going to be worth nothing. You know, but if you're, you know, one of the favored genders, races or whatever, you're going to, you know, get a better deal.

I do disagree though, Clive, that I mean if you're, if you're wealthy, yeah, it's probably going to be a bad.

Deal because they're going to go under the guise of you can afford it. Right.

But if you're extremely wealthy. You're going to be in the elite.

Class and there's going to be exceptions because those people, of course, have lobbyists and connections and, you know, don't have to worry. Right. The rest of the wealthy people do.

They'll make up the rules to decide who wins and who loses. It's not you and I who will make up the rules. Having said that, the wealthier you get, the smaller your exposure as a percentage that cash will be. But bonds might play a big part if a wealthy person's been well advised. That would be my job in the last 47 years. He will have a large, wide variety of assets, most of which will survive a currency reset, but his bonds will not and his cash will not be under certain point. You know, if he's a property owner, he'll probably have mortgages, so he'd be very happy about that.

Boy, this is a lot to think about. How quickly is this coming and which countries will be some of the first.

Countries to have these resets and roll out their CBDCs.

I used to say a few years ago that I could see something like this happening in the next decade, but I think we're getting a lot faster and a lot closer to it. So I would say maybe within the next three years, but it will happen in a moment of crisis. So, for example, if we. If we have a meltdown in the bond market, and there's some reasons why that might happen in lots of countries. Examples are uk, Japan and the United States, by the way. But let's say we have a meltdown in the bond market for technical reasons. I can explain why that might happen in different places where bonds are crashing. This is going to cause the interest rates to spike up a lot. It'll be happening as there's a distrust of the currency, people running away, and there'll be a general crisis and people will be then rushing to the shops to see what they can buy. Now, obviously it depends how it works out. Are they burning cars? Is there rioting? It's a lot of civil unrest, but.

You know, how about mostly peaceful protest?

Well, yes, that was the famous line.

During the BLM riots, you know.

Yeah, I know. You know, so, you know, one of the solutions to all this is to say we don't like all these people emptying the shops like this and there's nothing for the, you know, people aren't able to go and buy their. Whatever they wanted to buy in the shops because they're emptied. We're going to limit that by Bottlenecking it effectively. So you can't have more than a certain amount of spending power with your CBDCs, which is the only way you can spend money. And you can't take your millions and shove it into CBDCs and rush down to the shops buying toilet rolls or copper wire or whatever tin beans or whatever people would buy with their money.

Yeah. So people will rush, as they always do during inflationary times and times of crisis.

They'll rush to trade fiat currency for.

Things that have intrinsic value, whether that be real estate, gold, toilet paper or now eggs, because we have an egg shortage. Things have intrinsic value that aren't tied to any one currency. You just need them every day. You need shelter, you need food, these types of things.

So tell us about how they would engineer that crisis.

And you were talking about specifically the bond market.

First of all, I don't think it's the government who wants to engineer it. They want to keep kicking the can down the road and inflating the system away so they inflate away the value of their old national debt. But in a number of countries we're reaching a crisis point. Well, we're actually well, well past the crisis point in this in terms of the national debt and the financing of it. I can take the USA as one example. Back in after we'd had the 2008 banking crisis, the debt to GDP ratio was rising towards 100%. I think it was in the sort of 80s, 90s and it was going up rapidly. So the US government passed what's called the Debt Reduction Act. Basically the plan was to bring down the debt to gdp ratio to 60% for the near 100% by about now some. So between 2011 and 2024 we're going to bring the debt to GDP ratio down from over from nearly 100% to down to about 60. Where are we today? We're at 130%. So it's gone completely the wrong direction. Now. The advantage the government's had in the last decade has been very low interest rates, which means that it's been to some extent possible to service the national debt by just borrowing more. But we're now in an era where it looks like interest rates are on the rise. They're going up from the quarter percent that it was in the United States to over 4% now. And that over time will increase the servicing cost for the US government and it will accelerate away. And as you know, we've reached the debts ceiling. So how are they going to pay for that? Well, they can't borrow any more money. So where are they going to get the money? Do they raise taxes? Well, they're already spending massively more than they're collecting in taxes at the moment. They're collecting about $4 trillion a year in taxes. I think I wrote the number down somewhere here. Yeah, they collected $4.9 trillion last year in and spent 6.3 trillion. They spent 128% of their income and then they've got to service the national debt on top of that. No, it's not new. It's been going on for decades. And that's why the level of central bank balance sheets have been growing and growing because as the government needs to spend money, it goes along to the central bank and said would you lend me, lend us another 100 billion? And the central bank said yeah, certainly will give us a, a Treasury bill or treasury note for 100 billion and we'll print 100 billion of electronic money and give it to you so you can go and spend it. And that increases the money supply and it increases the amount of indebtedness of the United States government and it increases the size of the central bank's balance sheet. So where we've got today is the balance sheet of the Federal Reserve is several hundred times the size of its reserves and capital. That's a very, very leveraged position. We've got the government of the United States in a situation where it's not allowed to borrow anymore until they raise the debt ceiling. And that will probably happen in the next three or four months. I'm saying I don't know the timescale. Meanwhile, the central bank, the Federal Reserve is in need of recapitalization. And the reason it's needed in need of recapitalization is it's losing money hand over fist due to the fact they're now paying market rates of interest to their depositors, which are the money market funds and the commercial bank who are depositing money with them. Meaning they're paying out 4 point something percent in interest to them, but they're only earning 2.1% on the portfolio of bonds that they bought over the last decade which won't mature, a lot of them won't mature for another 10 years or more. So they're stuck with this very low yielding portfolio of assets, but at the same time with roughly the same number of liabilities where they're paying out an interest rate which is effectively doubled what they're earning. So the capital is being is wiped out.

I've Always wondered, why does the Fed tolerate that? Why would they do that deal?

I mean, are they just waiting for a government bailout? I mean, the government bails out the other commercial banks. Why not just bail out the Fed too, right? So many people think, by the way, you know, that that's a government agency. It's not, it's a, it's a private corporation. But you know, we all know the various odd bedfellows the two make. But, but go ahead.

Well, what you say is in fact the only solution, except it can't be done at the moment because of the debt ceiling in the United States. So the way that would work if the government was to bail out the Federal Reserve is the government would borrow a ton of money from the Federal Reserve and then pay it back to the Federal Reserve. So the money goes around in a big circle as capital, but it would increase the indebtedness of the United States, something which it can't do right now. And it would increase effectively the money supply out there. So at the moment it can't happen. Meanwhile, we've got the Federal Reserve. It's got about eight weeks to go before its entire capital and reserves are wiped out by the losses it's making. It's losing approximately US$2 billion per week.

Wow, that's more than a dysfunctional overfunded tech company.

So, so what you see on this line, which I'm just putting my mouse on now, I'm just looking to on the other screen, is the amount of earnings remittances that they have to make to the Treasury. So every week they used to earn money and remit their money to the Treasury. So you see at the top it's always positive territory until they started raising interest rates. And now what they have to remit to the treasury is a negative amount. They can't remit to the Treasury. In other words, one could say the treasury should remit to the Federal Reserve, except it's not happening yet. So as we look at this picture here, as of January 18th, the Federal Reserve had losses accumulated of 24 billion. Their capital reserves are about 40, 40 something billion. So half of their capital reserves are gone at the rate of 2 billion a week. All their capital reserves will be gone in about eight weeks.

So I mean, this is a near term problem and it is a giant pro. I mean the jig is up. What's going to happen here?

Well, there's the problem. Maybe all the commercial banks will step up and capitalize the Federal Reserve.

Oh, that would be a reverse.

I Don't see that as likely. But, but yeah, obviously one of the liabilities of the Federal Reserve is the cash in circulation. So nobody's going to turn up at the Federal Reserve and say here's my cash, give me something for it. So we're not in a situation quite yet where all the depositors, the money market funds and the banks are depositing will, if they turn up and say give us our cash back, that the Federal Reserve will say sorry, we don't have it because there's still going to be that massive cash in circulation. But what I just showed here, the 24 billion is only part of the problem. There's two other problems lurking on the Federal Reserve's balance sheet. The first one is they have an, an asset of three hundred and something billion which doesn't actually exist. And that asset, 312 billion, can you see that?

Yes.

It's called unamortized premiums on securities held outright. And it's this little note 5 if you look at the note, basically it's where they have bought bonds, U.S. government bonds at more than 100%. So they book that at 100% and then they book the other half at this premium, let's say they bought 106%. They bought the 6% as an unamodized premium on the security held and then they write down the value of that premium over the life of the bond towards zero. So they've got 312 billion of premium on the bonds they bought. Now we all know there's no longer any bonds trading at above 100% so that 312 billion doesn't exist. Those bonds, when they mature, the best you can hope for them, unless they're lower interest rates, the best you can hope is that they are going to mature at 100% in five or 10 or 15 years, whatever their maturity is.

And they'll be inflated away by then.

Yes, but the problem is we've got an asset here which doesn't exist. And don't forget the capital reserves of the Federal Reserve are the about 40 billion. So we've got 300 billion of assets which don't exist. So the capital's gone in that respect. And then we have on top of.

This is really shocking by the way. Yeah, you're gonna, this is now you'll talk about the next issue, right?

Yeah, yeah, it gets worse. Let me just bring up already. This is the maturity distribution of the bonds and mortgage backed securities held by the Fed. These are their assets. So if you look at the column with the red rings, you can see they've got about 4 trillion of assets which will mature more than 10 years out. These are bonds, and we all know that bonds are down a good 20% this year. Longer the dated bonds are, the more they're down. So let's just assume they're down 20% for simplicity. On 4 trillion, that's 800 billion underwater on the value of those assets. So those assets which are being carried at face value, face value of 100, are actually worth 800 billion. This is an approximation less than that figure you see on the Fed's balance sheet there. So if everybody came calling for their money tomorrow, they don't have it.

So tell us how this plays out and let's wrap it up with that. What is your interpretation or projection as to how this plays out? This is very shocking stuff.

Well, at some point the little boy will shout, the emperor has no clothes. And the man in the street will say, I see it now. And people will try to deploy their cash into other things and there'll be an asset price spike making a lot of things unaffordable, making a lot of things unavailable. And that in itself could be the crisis which will precipitate the government restricting how much of your old currency you could convert into the cbdc.

And that is very inflationary, that scenario.

Right when, that's when in the run up to it, it's very inflationary. But that's what they're going to have to stop. Because as this is happening, interest rates will be rising, which will be incre cost to the US Government of servicing its debt as its existing bonds at 1 or 2% come to maturity and they have to replace them by a bond yielding much, much more than that, therefore increasing the servicing costs. So it'll spiral when it does come, and we don't know when it'll come. I said it could be next month or next year, could be three or four years out. But when it comes, it'll happen very quickly. And those who haven't prepared themselves ahead of time will find they don't have a lot of time to do anything about it, because everybody will be trying to do the same thing at the same time. So people should get themselves prepared ahead of time, decide if they have more cash than they did. And I don't say get rid of all your cash, but if they have more than they need, they should be thinking about how they can deploy that cash into things that will retain their value no matter what happens, or simply spend it on things they might need in the future. So if you're thinking of buying a exercise bike, I'd say buy it now. That's not a lot of money, but you can probably do a more expensive things like a home extension or a loft conversion or buy another property or buy a field or whatever you, whatever you can spend your money on. I'd say do it earlier than later.

Food and basic prep is included in there as well.

But, but again, that's not much to deploy. I mean, look, I think the, the action item is you want to own.

Assets that have universal need, things that.

Everybody needs that aren't attached to any.

Currency, things that have intrinsic value. And that's why I say always. And there are other things beyond this, of course, but I like the ingredients that make up houses. Those ingredients, lumber, copper wire, concrete, petroleum products, glass, steel. I have them in the form of packaged commodities investments. They're houses, little cheap rental houses with mortgages on them because that mortgage is debased by inflation. And all those commodities are indexed to inflation. So you're getting a double inflation arbitrage as I call it. But certainly other things. Gold, of course. You talk about food, supplies, maybe a little bit of bitcoin. I don't think any other cryptocurrencies are really very intriguing because they're just completely different than bitcoin. But anything else?

Well, your strategy of owning homes with mortgages is one which has always worked throughout all of history because currencies have consistently and non stop been debased until the point where they go out of existence and then they start a new one. It's always happened and the winners have been the landowners, not the owners of the debt.

Yeah, yeah.

The inflation is, and currency crisis in.

General is a transfer of wealth from lenders to borrowers. And that has happened throughout history.

It happens subtly right now.

Last year it happened More so at 9% inflation or real inflation rate of 15 to 17% probably. If you have a million dollars in.

Mortgages, you're literally getting 90 to $170,000.

A year paid off of that mortgage. I mean, it's just that inflation induced debt destruction is a fantastic deal. So. Yeah.

And if you have a mortgage, make sure your interest rate is fixed.

Yep, yep, yep.

And I would only say that in.

A period of hopefully transitory high interest rates. I'm going to use, use Powell's word, his favorite word. You can take a five to seven year arm. I don't love it. I'd much rather have a 30 year fixed at two and a half percent, of course. But what so many prognosticators don't account.

For is the fact that we have.

A centrally planned economy.

And they always try to interpret market forces.

And you know they're right, that would be true if we had a free market.

But they don't interpret the Fed's reaction.

And the government's reaction of the monetary and fiscal policy.

And you know that when we go.

Into a recession officially the Fed will.

Ease and they will loosen. And you know that when we are.

In a boom time and it's inflationary.

The Fed will tighten. I mean of course they'll always be behind the curve, but you always know that they will do these things when, when we go into a crisis.

They're going to do stimmies, they're going.

To do omnibus bailout. Right.

They just always do that. You can hang your hat on it.

It's gonna happen.

Can I finish off with one last slide?

Absolutely.

Which is this one, which is the cost of insuring yourself against a default by the United States. The cost of insuring yourself by, against a default over the next 12 months or by the United States is now very high. Relative speaking now it's in risk terms it's only about half a percent chance or 1 in 200 chance that the USA would default. Very, very unlikely. But compared to where we were a year ago or six months ago, the cost of insuring yourself against default by the USA is currently very high.

So tell us what that insurance is.

That's some kind of collateralized debt instrument I'm guessing. Right. What is the insurance?

They're known as C. It's not Lloyd's, it's those CDS's collateralized debt swaps. I've never touched them, never traded them. But the big banks who have assets do trade them and do buy and sell them. And why would you buy that? Maybe you're a pension fund in Germany and you fear that the USA may default in the next six months for whatever reason you might take out insurance that if it defaults you'll get paid back a certain amount. So a CDS is basically like buying an insurance policy against default. Just to put that in perspective. It's about if I, I bring up the table for the five year ones here, I'll just bring that, here's the table of the cost of insurance. Not it's not the cost of the insurance. The probability PD is the, what you see here under the column PD is probability of default as priced by the market. So the least likely default at the moment seems to be the United Kingdom. At least that's what the financial markets are saying. The United States is, has got a half a percent chance defaulting on a five year bond according to the pricing country.

Look at Russia.

100. That's the 100 chance of defaulting. That's kind of where the math sits at the moment. This information is all out there for people to see.

I mean, this is interesting.

Clive, leave that up for just a second. Russia and Turkey are very high probability. I mean, Russia is just catastrophic default risk, basically. There's no S and P rating available. It's not even rated. Yeah. Wow, that is unbelievable. And then we know what the inflation rate is like in Turkey. It's just insane. Yeah. And Brazil's not looking good. Wow, this is really, really interesting. Fascinating stuff.

Clive, great conversation.

Thank you for joining us.

Anything else you want to say to.

Just wrap this up in an elevator?

Pitch.

Elevator speech. And give out any website or resource you want to share, Twitter, whatever.

Okay. Well, that's great talking to Jason. If anyone has any questions, they can get me through LinkedIn. That's the only way I can really communicate with people these days. I mean, email is, is hopeless now with spam, but at least with LinkedIn, anybody who starts to advertise to me can be quickly cut off.

Good stuff.

Well, Clive Thompson, thank you so much for joining us. Appreciate it.

Thanks, Jason. Bye bye for now.

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