"The Fed Will Seize All Your Money In This Crisis..." - Jim Rickards' Last WARNING

Summary

The transcript discusses the current financial crisis and the role of central banks in managing it. Using a domino metaphor, it explains how each crisis has grown larger, necessitating bigger bailouts that central banks may no longer be able to manage. The speaker highlights the collapse of Silicon Valley Bank and other financial institutions, emphasizing that traditional methods like bailouts and monetary policies are becoming ineffective. The growing lack of confidence in currencies like the dollar signals a potential larger crisis, one that regulators and central banks may struggle to contain.

Takeaways

• 🌊 The domino metaphor highlights the uncontrollable nature of crises once they start, with each bailout needing to be bigger than the last.
• 🚧 Bailouts are like placing a barrier between falling dominoes to halt the crisis, but we're reaching the point where bailouts may no longer be effective.
• 💰 The bailout of Silicon Valley Bank is the largest in history, signaling that central banks may be running out of options to address crises.
• 🪙 A crisis of confidence in currencies like the dollar or euro could emerge, as printing more money to solve problems only erodes trust in those currencies.
• 💻 Technology has made financial crises more compressed, with large withdrawals happening quickly and leaving regulators little time to react.
• 🏦 A key metric for bank stability is the ratio of uninsured deposits to total deposits. A high uninsured rate, like Silicon Valley Bank’s 97%, signals risk of collapse.
• 🌱 Silicon Valley Bank had significant investments in green energy and climate tech, contributing to government pressure to intervene.
• 🏙️ There's an exodus from cities to suburbs or exurbs, with cities losing their cultural and economic advantages due to factors like rising crime and remote work.
• 📉 The commercial real estate market is under pressure due to the shift to remote work, leading to lower demand for office space and a ripple effect across related industries.
• ⚠️ Negative interest rates don't stimulate spending as intended, as people save more to meet long-term goals, making this policy ineffective in combating deflation.

Q & A

What does the metaphor of 'Dominoes falling' signify in the context of the financial crisis?

The 'Dominoes falling' metaphor is used to describe how a financial crisis can escalate rapidly, where one failure leads to the next, similar to knocking over a row of dominoes. Each crisis builds upon the previous one, with larger bailouts needed each time.

What is meant by 'trunking' in the context of stopping a financial crisis?

'Trunking' refers to the act of intervening in a financial crisis by placing a barrier between failing entities, such as a steel wall between dominoes. This is likened to a bailout that temporarily halts the spread of a crisis by protecting one entity from another's collapse.

Why does the speaker believe that central banks may no longer have the capacity to handle the next financial crisis?

The speaker argues that each crisis has grown bigger, requiring larger bailouts, and central banks have exhausted their tools ('rabbits out of the hat'). The concern is that the need for future bailouts may exceed the capacity of central banks, especially if the crisis undermines confidence in the currency itself.

How does the speaker describe the bailout of Silicon Valley Bank (SVB), and why is it significant?

The bailout of Silicon Valley Bank is described as the biggest bailout in history. The speaker emphasizes that the rapid collapse and subsequent bailout illustrate how compressed timeframes have become in financial crises, largely due to technology, making it difficult for regulators to respond quickly enough.

What role did technology play in the SVB crisis, according to the speaker?

Technology accelerated the pace of the crisis by enabling swift withdrawal of funds. For example, Peter Thiel's call for businesses to pull their money from SVB resulted in $40 billion being withdrawn rapidly, a process that could happen instantly via digital means rather than people physically standing in lines at banks.

What is the importance of uninsured deposits in assessing the stability of a bank, according to the speaker?

The speaker highlights that a high percentage of uninsured deposits can make a bank more vulnerable to a run, as uninsured depositors are more likely to withdraw their funds in a crisis. In the case of SVB, 97% of its deposits were uninsured, making it highly susceptible to rapid withdrawal.

What does the speaker suggest about the long-term impact of people moving out of cities to suburbs and exurbs?

The speaker warns that the exodus from cities to suburbs or exurbs, driven by rising crime and the loss of cultural attractions due to lockdowns, could depopulate cities. Since cities are historically wealth-generating engines, their depopulation could harm the broader economy in the long term.

How might the reduction in demand for commercial real estate affect the economy?

With companies reducing office space due to remote work, demand for commercial real estate has declined. This could trigger a ripple effect, leading to fewer jobs in cleaning, hospitality, and transportation. It may also lead to landlords struggling to pay mortgages, ultimately affecting the banks and the broader financial system.

Why does the speaker believe that inflation concerns may be overblown in the near term?

The speaker argues that while there has been concern about inflation due to government handouts, much of this money is being saved rather than spent. This lack of spending creates a 'liquidity trap,' meaning the economy may slow down rather than experience inflation, leading to falling interest rates.

What are the speaker's thoughts on negative interest rates and their effectiveness?

The speaker believes negative interest rates do not work because they encourage people to save more, not spend. Negative rates signal deflation, causing people to delay purchases in hopes that prices will drop further. Additionally, people save more to achieve their long-term financial goals, undermining the desired stimulative effect.

Outlines

00:00

🟠 The Domino Effect of Financial Crises

The paragraph uses the metaphor of falling dominoes to illustrate how financial crises unfold, growing larger with each event. The speaker suggests that bailouts are a temporary solution, but crises are becoming too big for central banks to manage. They warn that we may be approaching a point where confidence in the currency itself is lost, leading to a crisis that cannot be solved by printing more money, particularly in the case of the dollar and the euro.

05:02

🟢 Uninsured Deposits: A New Risk Metric

This paragraph focuses on uninsured deposits as a critical indicator of a bank's risk. Silicon Valley Bank had 97% of its deposits uninsured, leading to a mass withdrawal that contributed to its collapse. The speaker contrasts this with safer banks, where a more balanced ratio of insured to uninsured deposits (e.g., 70% insured) provides more stability. The example underscores how startups and green energy investments, heavily subsidized, were part of the SVB's collapse and how political and economic pressures influenced government actions.

10:03

🔵 The Shift to Remote Work and Its Economic Consequences

Here, the speaker discusses the impact of remote work on commercial real estate and urban economies. Companies are reducing their office space needs, and this is leading to a domino effect: fewer cleaning staff, lower foot traffic for restaurants, and reduced demand for public transportation. The paragraph also explores the broader macroeconomic effects, such as depopulating cities and shrinking the 'wealth-generating engines' of civilization.

15:04

🟡 The Psychological Impact of Financial Policies

This section explains how fiscal and monetary policies, like quantitative easing and deficit spending, are failing to stimulate economies because people are saving rather than spending. The pandemic caused a psychological shift, leading to precautionary savings as individuals fear unemployment or economic instability. Despite central banks’ efforts to encourage spending, the speaker highlights that psychological factors, such as fear of the future, have led people to save more, further slowing the economy.

Keywords

💡Domino Effect

The domino effect metaphor in the script represents how crises unfold one after another, similar to a chain reaction of falling dominoes. The video suggests that when one event triggers a financial crisis, it sets off a sequence of failures unless a barrier, like a bailout, is introduced. However, the speaker emphasizes that each crisis grows bigger, making it harder to contain with conventional bailouts.

💡Bailout

A bailout refers to a financial rescue provided to prevent a failing company or economy from collapsing. In the script, bailouts are described as a way to halt the domino effect by providing temporary relief to institutions in distress. However, the speaker highlights that bailouts are becoming larger and more unsustainable, raising concerns about the central banks' capacity to manage future crises.

💡Central Banks

Central banks, such as the Federal Reserve or the European Central Bank (ECB), play a crucial role in managing national economies, particularly during crises. The script suggests that central banks have exhausted many of their traditional tools (like bailouts and monetary policies) and may no longer have the capacity to prevent larger financial disasters. The speaker questions whether these institutions can still maintain control in the face of escalating crises.

💡Silicon Valley Bank

Silicon Valley Bank (SVB) is used as an example of a recent large-scale financial failure. The speaker notes that SVB's collapse prompted one of the largest bailouts in history, driven by both technology and climate-focused investments. The situation highlights the fragility of banks heavily reliant on uninsured deposits and how technology accelerates the speed of financial runs, compressing the timeframe for effective responses.

💡Uninsured Deposits

Uninsured deposits are bank deposits that exceed the government-insured limit, meaning they are at risk if the bank fails. In the script, it’s revealed that 97% of Silicon Valley Bank's deposits were uninsured, making the bank highly vulnerable to a run when confidence in its solvency faltered. The speaker emphasizes the importance of assessing a bank’s health based on the ratio of insured to uninsured deposits.

💡Liquidity Trap

A liquidity trap occurs when interest rates are low, and savings rates remain high, limiting the effectiveness of monetary policy to stimulate spending and investment. In the script, the speaker describes how people, in response to financial uncertainty and handouts, save rather than spend money, contributing to a liquidity trap. This phenomenon exacerbates the slowdown in the economy despite efforts to inject liquidity.

💡Negative Interest Rates

Negative interest rates occur when banks charge depositors for holding money, intending to encourage spending. The script explains why negative interest rates often fail, as they lead people to save even more to meet their long-term financial goals, such as retirement or healthcare. The speaker argues that negative rates send a deflationary signal, prompting consumers to delay spending, further harming the economy.

💡Deflation

Deflation refers to a decrease in the general price level of goods and services, which can lead to reduced consumer spending as people expect prices to fall further. The script discusses how central banks’ focus on deflation, signaled by negative interest rates, can cause people to delay purchases, thus undermining efforts to stimulate the economy. Deflationary expectations can deepen an economic crisis by lowering demand.

💡Commercial Real Estate

Commercial real estate refers to properties used for business purposes, such as office buildings. The script touches on how the shift to remote work has reduced the demand for commercial real estate, leading to lower rents and financial strain on landlords. This trend has broader economic implications, as it affects banks, public transportation, and ancillary services tied to downtown office buildings, potentially triggering a ripple effect in the financial system.

💡Precautionary Savings

Precautionary savings refer to the money people set aside during uncertain times to prepare for future needs or emergencies. The script explains how fear of unemployment or economic instability causes people to save more, even when receiving government handouts. This behavior contributes to the liquidity trap and reduces overall economic activity, as less money is spent in the economy.

Highlights

The metaphor of falling dominoes is used to describe a cascading financial crisis, where one event triggers a series of failures.

The problem with continuous bailouts is that each crisis becomes larger, eventually reaching a point where central banks may not have the capacity to bail out the system.

The Silicon Valley Bank (SVB) bailout was the largest in history, highlighting the increasing scale of financial crises.

Confidence in central banks and currencies, like the dollar and the euro, is eroding, and a dollar crisis cannot be resolved by simply printing more dollars.

The regulators are facing limits to their ability to contain future financial crises, with growing public skepticism about their effectiveness.

In the Latin American debt crisis of the early 1980s, the intense phase lasted three years, showing that crises can take time to resolve.

Technological advancements, such as fast electronic transfers, have compressed the time frame for financial crises to unfold.

97% of deposits in Silicon Valley Bank were uninsured, leading to a large-scale bank run that contributed to its collapse.

Silicon Valley Bank heavily invested in green tech startups, many of which were subsidized by the government, increasing their exposure to risk.

The collapse of SVB was announced on a Friday, and regulators worked over the weekend to prevent further fallout, demonstrating the rapid pace of modern financial crises.

Residential real estate prices are rising in suburban and exurban areas as people move away from cities due to crime, lockdowns, and the shift to remote work.

Commercial real estate in cities is underutilized as remote work reduces the demand for office space, potentially leading to a long-term economic impact.

Negative interest rates don’t work because they signal deflation, leading people to save more rather than spend, exacerbating economic slowdowns.

Quantitative easing and deficit spending by governments may not be effective if consumer psychology leads to more saving and less spending.

The global pandemic has caused a psychological shift toward precautionary savings, leading to reduced consumer spending and slower economic recovery.

Transcripts

the Domino's falling is a good metaphor

it's you know you got 100 Dominoes you

knock the first one they're all going to

fall that's just physics how do you stop

that how do you stop that crisis well

you trunk it you drop a steel wall

between two dominoes this one hits the

wall and this one's Still Standing but

that's the bailout the problem is each

crisis tends to get bigger than the one

before which means each bailout gets

bigger than the one before my question

that we now at the point where the need

to bailout is bigger than the capacity

of the central banks that they've pulled

all the rabbits out of the Hat played

all their cards and again this goes back

to what I did say about the Silicon

Valley Bank it is the biggest bailout in

history and I can explain why but if

that's the case what else do they have

so now we're dangerously close to the

point where in as the crisis gets worse

it's no longer OG let's wait for the FED

to bail it out or let's wait for the ECB

to bail it out you get to the point I

think we're there where you say no these

guys actually can't stop it and you lose

confidence in the currency itself

the crisis is the dollar itself and the

Euro you know goes along with that and

then that's the crisis and there's no

way to bail out a dollar crisis with

dollars because you're just pumping more

of what people have lost confidence in

and then where do you go and there are

good answers to that we've seen it all

before this is big It's Not Over The

Regulators will attempt more bailouts

but we're at the point where I think you

can start to question The Regulators

themselves the Brazil Mexico Argentina

the Latin American debt crisis broadly

defined of the early 1980s that played

out the intense phase lasted about 3

years you know 82 83 84 it wasn't until

1990 that we got around to Brady bonds

which were the ultimate refinancing

technique but the intense period lasted

about 3 years come forward to 1998

long-term Capital Management that was

about three months that was July August

September 1998 spbb was three days or

less it was like Wednesday Thursday

Friday and done and you I talked to a

guy no reason to mention names but you

know uh runs a very one of the largest

endowments uh in the world and he said

Jim we moved we were moving $8 billion

out of the Silicon Valley Bank and we

got the wire transfer request in but we

didn't know because you know you get to

close business Thursday we didn't know

until Sunday that the money was going to

move we got a confirmation on Monday we

did end up moving the money but there

was this about a 48 hour period there

from Friday to Sunday when no one knew

the wires had been completed the

recipients didn't have them it was just

in limbo you know and it worked out one

of the big crypto promoters they had $3

billion in Silicon Valley bank and they

talked about you know all these small

entrepreneurs and startups they got 100

employees and 5 million working capital

and that money's gone and they're all

going to fail there was something to

that but the fact is you had Roku Cisco

uh eBay I mean there were huge companies

with multi-billion dollar deposits in

that bank it wasn't all bunch of little

guys but yeah you can uh in the old days

you have to line up around the block and

maybe it was raining you're standing

there in the rain waiting for your turn

to get up to the tower now you can be in

line of McDonald's you know with your

cell phone then just a couple hits QR

code and boom uh you know $10 million is

gone and what Peter teal did uh and he

was right I mean I'm not criticizing him

he got his own money out but he sent out

like an SOS to Silicon Valley he said

all of you whoever you are get your

money out now and a lot lot of people

did and that was that $40 billion so the

time frame is becoming more compressed

because of Technology you're exactly

right about that which means that the

response function has to be equally

compressed or else you are going to have

all the consequences of a you know

honestly goodness Global financial

crisis and I'm not sure if everyone

knows the sequence but on Friday night

March 10th the FDIC took over Silicon

Valley bank and they issued a press

release and they said here's what we're

doing we're taking over uh we're putting

it into what's called receivership

anyone with $250,000 or less your

deposits are fully insured no wores

you'll have your money Monday morning

and over

$250,000 your deposits are gone they

didn't say Frozen they didn't say

suspended they said gone and they gave

you a receivership certificate basically

an unsecured printed up IOU from the

FDIC but not money and as a reive a ship

certificate and they said hang on to

them we're going to sell assets uh and

as and when we realize proceed some

assets we'll give you something we'll

give you distributions on these things

don't know how much don't know when

we'll do the best we can remember in the

RTC days in the early '90s it took them

two years and they were very efficient I

worked with them at at the time that we

were in their offices we were sitting on

boxes cuz they didn't even have

furniture but they were doing deals so

they had write attitude but that took

two years and that was it that's when I

call the billionaire crybabies came out

and force you know Bill acman all these

guys oh you got to save us you know I

like well you got to trade on Bill me

five billion is not enough but anyway

they pounded on the White House all

weekend here's something that very few

people say almost nobody knew at the

time except the management although they

seem to be asleep with the switch

everyone's like yeah startups venture

capital there's a lot of Truth to that

97% of the deposits of silon Valley Bank

were uninsured and by the way that's my

new metric for assessing Banks you used

to look at you know working capital and

debt Equity ratios and you know Bad

Assets government there are lots of ways

to measure the health of a bank but the

most relevant way right now is and this

is publicly available take the ratio of

uninsured deposits to Total deposits 30%

is comfortable if you're like I you know

70% of my deposits are insured which

means they're not panicky they're not

necessarily going to run for the hills

30% okay unassured but I have assets I

have that much cash or more that's a

comfortable ratio when you get over 50

you're in the danger zone well silicon

value Bank was

97% uninsured which meant all the money

was going to run and it did so that's a

way if you're looking at these big Banks

or uh any institution or your own

savings institution to look at it but

Silicon Valley Bank was a climate Bank

were they investing in startups yes were

they investing in Tech technology yes

but these were climate these were green

new scam startups looking at you know

Battery Technology uh chemistry physics

you know to try to make a better battery

but not much improvement in the battery

in 200 years but they're working on it

you know wind turbines you know other

sustainable fuel Alternatives Etc again

I'm not do that if you like if that's

your field of research but so much is is

subsidized by the government and then

further subsidized by Silicon Valley

Bank and that's where the assets were

that's where the loans were by and large

and so the white house is getting

hammered not only because of

entrepreneurs job losses and by the way

we are in an election cycle here in the

United States but from the Greenies who

are extremely powerful so that was

Friday night so Saturday everyone's

crying to the White House Sunday night

at 6 o00 by the way Mark that on your

calendar Sunday 6 p.m. is when they tell

you what they're going to do you know 6

p.m. Sunday March 12th they came out on

Silicon Valley Bank the following week

19th that was credit Swiss and then the

week after that or something else but

they always they always announce the

collapse on Friday and they

relief on Sunday so they have the

weekend to work on it you got to be

careful about 3-day weekends we you know

Easter is an example but um why are

those residential real estate prices

going up and the same thing's happening

in the United States the answer is that

there is an exodus and I don't think

that's too strong a word out of the

Cities people are put off by I mean

cities have always been a tradeoff

cities are okay you have a lot of noise

and some dirt and some hassles and maybe

slightly higher crime rate but on the

other hand you have art and culture

museums and shows and restaurants and

bars so you you make the tradeoff you

say I'll accept these annoyances in

exchange for all this you know culture

and Buzz and cities attract you know the

brightest people so whether it's uh you

Bankers or lawyers or doctors or artists

playwrights actors whatever it's just

there's a lot of Buzz that's why people

go to cities with these lockdowns we've

Amplified all the negatives and taken

away all the positives we've shut the

museum the restaurants the bars the

plays Office Buildings things that

attract the people but meanwhile uh

again probably not as bad in Australia

as it is here but crime has On The Rise

murder rate in New York has doubled

rates across the country have tripled

and that's New York s race National

there are all these dysfunctions and of

course when you have highly concentrated

populations which you do in cities a lot

of that so what people are doing I say

people it's the people who can afford it

they getting out the cities and they're

going to nearby suburbs or even further

out what we call exurbs which are you

know the the next ring beyond the

suburbs and so there is that demand for

housing I I'll I'd be willing to bet

money that the place you're describing

is a pretty attractive neighborhood so

they're they're booming and the same

thing's true in the United States but

what's the other side of that we're

depopulating our cities cities are the

greatest wealth generating phenomena in

the history of civilization I mean

that's what civilization means it means

cities and so so if we're depopulating

and draining our wealth creating engine

what does that do to the economy long

run so is as an individual Choice it

makes sense and I understand it but the

macro effect is we're depopulating these

wealth generating places I mean just

take any downtown area could be

Melbourne or Adelaide or Sydney or New

York for that matter if there's an

attractive downtown office building

let's say you're a large company

insurance company whatever and used to

have 10 floors as your corporate

headquarters well now everyone's working

from home that's nothing that anyone

would have recommended but we were

forced to do it and guess what it works

uh employers employeers are finding that

hey it works you can communicate and get

stuff done and maybe there's some

attractions to it so this work from home

thing is here to stay what companies

will do they'll say well instead of 10

floors I only need two floors and I'll

have attractive offices but you'll

reserve them you'll call up say hey I

need an office two days next week to

meet some clients Don they'll build

locker rooms that won't be like high

school locker rooms they'll be very

attractive you'll keep your laptop and

your sweater and your scarf or whatever

and your locker you'll show up take your

stuff out of your locker some receptions

will tell you which office is yours for

those two days set yourself up meet your

clients go home and work from home what

does that mean if you cut commercial

real estate capacity or utilization by

80% uh we'll start with the cleaning

crew and the reception but what about

the food trucks the restaurants the

shopping the public transportation

drinks after work you know on and on and

on all the things that are ancillary to

that downtown office location you cut

that by 50 to 80% what does that tell

you your economy so these are examples

and by the way this will take a year to

play out this is not an overnight thing

so the tenants are not paying rent if

they are they've called up and

negotiated a 50% increase I'm I have

some involvement in commercial real

estate and I see this in real time so

rents are down by perhaps half or all

the way to zero if they're not paying

everyone says well landlords take the

rents but they have mortgages so if the

tenants aren't paying the landlords the

landlords can't pay the mortgage e and

that falls on the banks right except the

banks are clever they've securitized it

and sold it probably to you and me we

have our 401ks is like a super uation

fund but you look in the fund and do you

have some uh you know commercial real

estate or something that Morgan Stanley

sold you well maybe you do and what's

inside no one knows but take a look but

that ripple effect I just described can

take a year to to play out so we haven't

seen the end of this so the bottom line

in all this is that in anticipation of

inflation based on handouts the reality

is the handouts are not being spent

they're being saved which does nothing

for inflation and it's also not

sustainable which is what are you going

to do hand out a$2 trillion doll Debs of

spending package every six months

because that's kind of what we've been

doing since last summer they keep saying

this is the last one it'll be

sustainable it's not sustainable it's a

handout and people need the money but if

they put it in the bank which they're

doing this is a classic liquidity trap

so what's going to hen that's going to

slow the economy further we're already

seeing mortgage applications dry up uh

we're seeing the housing bubble not

bubble but pretty steep increase in

residential housing starting to level up

so by you know hard to say but I would

say by March or April this whole thing

is going to go in reverse everything we

just talked about is going to go in

reverse the econom is not going to have

the traction unemployment is going to

remain high velocity is going to

continue to drop there's not going to be

in inflation those interest rates are

headwind they're going to drop and the

price of gold is going to shoot up so my

advice to uh the potential gold

investors is uh it's on sale go get some

right now it's always better to buy low

and sell high and but I would expect the

price to be much higher in theory you

can go to negative rates but negative

rates don't work we have experience from

the ECB uh Sweden Japan Switzerland

elsewhere the negative rates don't work

they're negative rates but they don't

it's not more the saying cutting rates

from 3% to you know zero has a

beneficial effect but cutting them from

0 to1 now you're through the Looking

Glass you don't get any more pop you

don't get any more buying for The Bu and

there are reasons for that which are

what as a central bank what signal are

you sending see the idea of negative

rates is you're going to spend the money

because if I'm going to take it away you

put money in the bank even at zero you

put money in the bank you go away for a

year come back the same amount of money

should be there that's the zero interest

rate but a negative interest rate

negative 1% you put uh $100,000 in the

bank you go away for year to come back

you only have

$99,000 because I took $1,000 that's 1%

negative interest so the idea is I'm

going to take your money you're going to

spend it fast because you don't want me

to take your money and that's going to

have the stimulative effect that we

talked about that's not actually what

happens what happens two things number

one people have lifetime goals um their

retirement their health care their

parents healthare their children's

education buying a house there's some

large lifetime goal you have and that's

why you save money in the first place if

I'm taking your money away you're going

to save more not less you still want to

achieve that goal I've made it more

difficult but you're actually going to

save more they want you to spend it but

now you're saving more and the second

thing is what signal is the Central Bank

sending when they have negative interest

rates they're saying that they're

worried about deflation not inflation

deflation so if they're telling me if

central bank is telling me that

deflation is problem I'm going to wait

and why should I buy anything right now

wait till the price drops and by the way

a negative interest rate negative 1% my

example is a nominal phenomena but in

real terms if you have deflation my

money is worth more so even though my

dollar amount may be less my purchasing

power went up because prices went down

and so that's why negative interest

rates don't work because a you're

sending a deflation signal so people

defer spending and B they have lifetime

goals so they actually save more so

negative R don't work so you see you're

right you're stuck at zero there you are

pardon you can do QE you can do

quantitative easing and usually what

happens is they hand the ball over I

it's a rugby match or whatever but they

they hand the ball from monetary policy

which is now impotent to fiscal policy

which is deficit spending but there you

have other kinds of headwinds having to

do with very high debt levels more to

the point uh in terms of what a central

bank can actually do they can't

stimulate they can print money and

governments can spend money and incur

deficit spending but again none of it

does any good if people don't actually

spend it and that's a psychological

phenomena and the fed or The Reserve

Bank of Australia or any Central Bank

can print money uh no doubt about it but

they can't change people's psychology

you need we had an external shock an

exogenous shock in the form of the

pandemic that caused people to stop

spending say more or they were

unemployed or if you're the unemployed

individual you're you're not taking your

friends out for dinner these days you're

putting money in the bank and even if

you still have your job you're going to

save money because you're worried you

might be next you might be the next one

to get laid off or your company might

shut down next week or next month and so

you're going to save more it's what

economists call precautionary savings or

you know in plain English saving for a

rainy day and that's what's going on

it's going on all over the world