“Dedollarisation?” 🛑 THIS is what EVERYONE is MISSING | George Gammon

Summary

In the J Martin Show, George Gamon, the 'Rebel Capitalist,' discusses macroeconomic trends, focusing on treasury and currency markets. He shares his insights on the yield curve's inversion and its historical correlation with recessions, emphasizing the importance of economic indicators. Gamon also addresses the potential impact of market corrections and the Fed's role in economic cycles. He outlines his investment strategy, including a focus on gold, T-bills, and call options, while cautioning about the risks of relying solely on government intervention and the potential consequences for the economy.

Takeaways

• 📉 The recent market correction confirms existing economic indicators, particularly the significance of the treasury curve as a recession predictor.
• 🔄 The inversion and un-inversion of the yield curve are seen as a gradual process, often leading to a recession when the curve is no longer inverted.
• 💼 Insiders in the banking and corporate world, with access to information not available to the public, are believed to influence the yield curve by buying long-term treasuries in anticipation of economic downturns.
• 🌐 The global nature of financial markets means that local economic issues, such as those in Japan, can have broader implications affecting the velocity of dollar liquidity.
• 💡 The idea that the Federal Reserve can prevent a recession by cutting rates is challenged; historically, rate cuts have occurred in response to recessions, not as a preventative measure.
• 💸 The conversation around dollarization and the potential for a shift away from the US dollar in global trade is complex and contingent on various economic factors.
• 🏦 Banks play a critical role in the creation and destruction of money supply through lending practices, impacting the broader economy and financial stability.
• 📊 The treasury market is seen as an indicator of future growth and inflation expectations rather than just a reflection of supply and demand dynamics.
• 🚨 Concerns about the potential unwinding of the yen carry trade and its impact on global financial markets highlight the interconnectedness and fragility of the global economy.
• 🌳 The focus on personal financial planning and diversification, including commodities and gold, is suggested as a prudent strategy in the face of economic uncertainty.

Q & A

What is the primary focus of the J Martin Show?

The J Martin Show focuses on dissecting the greatest minds in geopolitics and finance to better understand the world's current state.

How does George Gammon approach macroeconomic analysis?

George Gammon approaches macroeconomic analysis by digging deeper than most to get to the root cause of economic events and trends.

What does George Gammon consider the most powerful economic indicator?

George Gammon considers the treasury curve as the most powerful economic indicator due to its historical correlation with recessions.

What is the historical correlation between an inverted yield curve and a recession?

Since the 1950s, an inverted yield curve has preceded almost every recession, making it a strong predictor of economic downturns.

How does George Gammon view the Federal Reserve's role in economic cycles?

Gammon believes the Federal Reserve typically drops interest rates in response to a recession rather than to prevent one, and that their actions often follow market trends rather than lead them.

What is George Gammon's perspective on the current state of the US economy?

Gammon suggests that the current soft economic data, combined with the yield curve's behavior, indicates a high probability of a recession or hard landing in the medium term.

What is the significance of the yield curve un-inverting according to George Gammon?

The un-inversion of the yield curve is seen as a confirmation of economic concerns and a potential precursor to a recession, rather than a sign of economic improvement.

How does George Gammon interpret the actions of financial insiders in relation to the economy?

Gammon believes that financial insiders, with their advanced information and connections, are often early indicators of economic trends, as they adjust their investments in response to upcoming changes.

What is George Gammon's view on the potential impact of a global recession on the US dollar?

Gammon suggests that while there could be short-term inflationary pressures if foreign holders of dollars repatriate them, the long-term impact could be a strengthening of the dollar due to reduced global demand for US currency.

What investment strategy does George Gammon recommend in the current economic climate?

Gammon recommends a cautious approach, starting with a gold allocation for insurance, followed by conservative investments like T-bills, and using call options to maintain upside potential while waiting for better investment opportunities.

How does George Gammon perceive the role of government intervention in the economy?

Gammon is critical of excessive government intervention, suggesting that it leads to economic distortions and inefficiencies that ultimately decrease the standard of living for the average person.

Outlines

00:00

📈 Market Analysis and Investor Strategy

In the introductory segment, host J Martin welcomes George Gamon, a prominent educator in macro finance and an investor, to the show. They discuss the significance of treasury and currency markets, and how George's investment decisions are influenced by his analysis. The conversation begins with a timely discussion on the major market correction and its implications for the medium term, focusing on the next six months. George emphasizes the importance of the treasury curve as a leading economic indicator, and shares his insights on its recent inversion as a potential precursor to a recession, a pattern observed since the 1950s.

05:00

🔍 Deep Dive into Economic Indicators and Market Cycles

George Gamon expands on his approach to macroeconomic analysis, detailing why he starts with the treasury curve and its historical correlation with recessions. He uses the analogy of a child testing cold water to describe how the curve's inversion can signal economic shifts. George discusses the need to consider a broad range of economic data, including unemployment rates, corporate sentiment, and consumer behavior, to form a comprehensive outlook. He also addresses the common misconception that the Federal Reserve can prevent recessions through rate cuts, clarifying that such measures are typically reactive rather than preemptive.

10:01

🌐 Global Economic Insights and the Impact of Information Asymmetry

This paragraph delves into the correlation between yield inversion and recessions, challenging the misconception that the yield curve alone causes economic downturns. George explains the role of insider information and the advantages that banking insiders and financial experts have over the general public in predicting economic shifts. He discusses how these insiders, armed with superior information, influence the treasury market, which in turn affects the yield curve. George also touches on the potential implications of the COVID-19 pandemic and the subsequent economic policies, suggesting that the curve's inversion in 2019 might have been an early indicator of the ensuing crisis.

15:01

📊 Debunking Misconceptions about Unemployment and Economic Data

George Gamon addresses and refutes two common arguments against using unemployment rates and yield curves as economic indicators. He explains that the current methodology for calculating unemployment may actually understate the true rate due to not accounting for recent immigration. He also counters the argument that the lack of long-term treasury issuance is causing an inverted yield curve, by pointing out that the actual amount of debt outstanding is higher than in previous years. George emphasizes the importance of scrutinizing economic data and the narratives surrounding it.

20:01

💵 The Dynamics of Dollarization and its Global Impact

The conversation shifts to the topic of dollarization, where George clarifies the difference between dollars lent into existence and those printed. He explains how the demand for dollars can influence their supply and the potential implications for global economic stability. George discusses the risks associated with a large-scale shift away from the US dollar, such as the potential for increased velocity of dollars returning to the US, which could lead to inflation or other economic disruptions. He also considers the possibility of a short-term increase in the value of the dollar outside the US if foreign entities were to pay off their dollar-denominated debt.

25:02

🏦 Financial Institutions and the Creation of Money Supply

George Gamon explores the mechanisms behind the creation of the money supply, particularly focusing on the role of banks in lending money into existence. He discusses the potential for a decrease in the velocity of dollars outside the US, which could lead to a shortage of dollars available to service debt. George also considers the consequences of bank insolvency and the deflationary impact of dollars disappearing from the system. He emphasizes that all dollars, except for physical currency, are liabilities on global bank balance sheets.

30:02

📉 The Risks of Unwinding the Yen Carry Trade and its Global Implications

The discussion turns to the potential triggers that could reduce the velocity of dollars outside the US, with a focus on the recent activities of Japanese banks. George Gamon highlights the risks associated with the unwinding of the yen carry trade and the impact on financial institutions that have borrowed dollars to buy US treasuries. He explains how rising interest rates have led to a negative carry for these banks, forcing them to liquidate their treasury holdings at a loss and seek higher-yielding assets, such as CLO derivatives, which are potentially risky.

35:03

🌪️ The Potential for a Systemic Risk and Economic Downturn

George Gamon and the host discuss the possibility of a systemic risk that could lead to an economic downturn. They consider the impact of commercial real estate and junk debt on the global monetary system and the potential for a 'doom loop' of financial instability. George also contemplates the severity of the next recession, comparing it to historical events and considering the potential for a worst-case scenario akin to the Great Depression.

40:03

🛑 The Role of Government Intervention and its Economic Consequences

In this segment, George reflects on the role of government intervention in the economy, discussing the potential outcomes of both inaction and aggressive policy responses. He anticipates that central planners will likely continue to prop up asset prices, even at the expense of increasing wealth gaps and societal issues. George also touches on the societal changes he has observed since 2019 and the impact on the standard of living for the average person.

45:05

🌍 The Fragility of the Global Economy and the Pursuit of Personal Sovereignty

The conversation concludes with a discussion on personal preparedness and the importance of having a plan in the face of economic uncertainty. George emphasizes the need for individuals to control their own financial destiny and to be aware of the potential for a difficult period ahead. He also highlights the opportunities that may arise from economic downturns and encourages a proactive approach to personal financial planning.

50:08

💼 Navigating Uncertainty: A Personal Investment Strategy

In the final segment, George shares his personal investment strategy for navigating uncertain economic times. He outlines a model portfolio that includes gold as an insurance policy, T-bills for safety, and call options for potential upside. George discusses his approach to managing risk and the importance of being prepared for various economic scenarios, including a potential commodity super cycle and market downturns.

Keywords

💡Geopolitics

Geopolitics refers to the study of how political dynamics are influenced by geographic factors. In the context of the video, geopolitics is likely discussed in relation to global finance and the interconnectedness of political and economic systems. The term is often used to describe the strategic positioning of countries in terms of power and influence, which can significantly affect financial markets and economic policies.

💡Macro Finance

Macro Finance is a branch of economics that studies the behavior and performance of an economy as a whole, rather than individual components. It includes the analysis of large-scale trends and patterns, such as inflation, gross domestic product (GDP), and employment rates. In the video, George Gamon is described as an educator in macro finance, suggesting that the discussion will focus on broader economic trends and their implications for investors.

💡Treasury and Currency Markets

Treasury and currency markets are where government bonds and foreign exchange transactions are traded, respectively. These markets are critical indicators of an economy's health and investor sentiment. In the video, the guest discusses his observations in these markets, which likely pertain to trends that could influence investment strategies and economic forecasts.

💡Yield Curve

The yield curve is a graphical representation of the interest rates on debt for a range of maturities. It is a crucial tool for predicting economic growth and recessions. In the script, the yield curve is mentioned as a powerful economic indicator, with its inversion historically preceding recessions, which is a significant point of discussion in the video.

💡Recession

A recession is a period of negative economic growth that lasts for at least two consecutive quarters of a fiscal year. It is characterized by a decline in economic activity, often marked by high unemployment and low investment. The video discusses the possibility of a recession, its indicators, and its implications for the economy and investment strategies.

💡Fed Rate Cuts

Fed rate cuts refer to the Federal Reserve's monetary policy decision to reduce interest rates. This action is typically taken to stimulate economic activity during a slowdown. The video script mentions that Fed rate cuts are often misunderstood, as they are a response to a recession rather than a preventative measure.

💡Carry Trade

A carry trade is an investment strategy where an investor borrows money at a low interest rate in one currency and invests it in another currency that offers a higher interest rate. The video discusses the unwinding of the yen carry trade, which is a significant event in the financial markets and can lead to increased volatility.

💡Dollarization

Dollarization refers to the process where a country adopts the US dollar as its official currency, either fully replacing its own currency or alongside it. The video touches on the topic of dollarization, discussing the dynamics of global currency transactions and the potential impacts on the US dollar's status as a reserve currency.

💡Insider Information

Insider information is non-public, material information about a security that could impact its price. While not necessarily illegal, it is often used by well-connected individuals to make investment decisions. In the video, the concept is discussed in the context of how certain investors might have access to information that influences market trends before the general public.

💡Asset Prices

Asset prices refer to the value of financial securities or real assets in the market. The video discusses the central planners' focus on propping up asset prices to maintain economic stability, even though this approach may widen the wealth gap and create other societal issues.

💡Commodity Super Cycle

A commodity super cycle refers to an extended period of high prices in the commodity markets, driven by strong demand and limited supply. The video mentions the belief in the beginning of a long-term commodity super cycle, suggesting that investors should be prepared for potential opportunities in this sector.

💡Liquidity

Liquidity in the context of finance refers to the ease with which assets can be bought or sold without affecting their price. The script discusses liquidity in relation to the potential for a decrease in the velocity of dollars outside the United States, which could impact the ability of entities to service their debt.

💡Risk Assets

Risk assets are investments that are considered to have a higher potential for volatility and loss, such as stocks and real estate. The video suggests that risk assets may be negatively impacted by economic indicators and cycles, which is a consideration for investors when structuring their portfolios.

💡Unemployment Rate

The unemployment rate is the percentage of the total labor force that is unemployed but seeking employment. The video discusses the unemployment rate in the context of economic data, suggesting that it is a critical metric for understanding the health of the economy.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video mentions inflation in the context of its impact on currency values and the economy, and how it is perceived by investors and central banks.

Highlights

George Gammon, a prominent educator in macro finance, discusses his investment strategies and insights on the treasury and currency markets.

Gammon emphasizes the importance of the treasury curve as a leading economic indicator, often preceding recessions.

He explains the concept of yield curve inversion as a precursor to economic downturns, with historical context dating back to the 1950s.

Gammon discusses the current market correction and its implications for the medium term, suggesting it confirms existing economic trends.

He argues that the Federal Reserve's rate cuts are typically a response to, rather than a prevention of, recessions.

Gammon shares his perspective on the relationship between soft economic data and the market's reaction to it, indicating a shift in narrative.

He addresses the misconception that the yield curve inversion causes a recession, clarifying its role as an indicator rather than a catalyst.

Gammon provides an analysis of the potential impact of immigration on unemployment rates and its significance in economic data.

He critiques the argument that the US dollar's status as a reserve currency is threatened, outlining the mechanics of dollar liquidity.

Gammon discusses the implications of a global recession on the velocity of dollars and its effect on debt servicing.

He examines the potential outcomes of countries defaulting on dollar-denominated debt and the subsequent effects on the banking system.

Gammon shares his investment strategy, focusing on gold as an insurance policy and the use of call options for potential upside.

He provides insights into the potential opportunities in the commodity market during a recession, anticipating a long-term super cycle.

Gammon discusses the societal and economic changes observed in the US since 2019, highlighting the impact on the standard of living.

He contemplates the potential for government responses to economic crises, suggesting a cycle of increasing intervention and spending.

Gammon reflects on the role of sound money and the challenges of implementing it in a society accustomed to government handouts.

He concludes with a discussion on personal preparedness and the importance of having a plan in place for various economic scenarios.

Transcripts

welcome to the J Martin Show where we

dissect the greatest Minds in

geopolitics and finance so that we can

better understand the world now my guest

today is one of the best Educators in

macro Finance but most importantly he

puts his money where his mouth is he's

an investor first educator second and

today we're going to talk about what

he's seeing in the treasury and currency

markets and why this matters and most

importantly where he is putting his cash

as a result this is the J Martin show

and here is my guest George gamon the

rebel capitalist

enjoy this is J

Martin all right here I am with George

gam George it's great to have you back

in the show man good to see you hey

thanks for having me back I appreciate

it always fun to chat so look here's

where I want to start you've always got

an interesting take on things and your

content is one of my first STS whenever

something big in macro happens because

well you you dig deeper like you go a

few layers deeper than most and try to

get to the root cause of things I find

which is very helpful so stepping back

on this week today's Friday August 9th

we're going to turn this around and

publish it you know within 24 hours so

we can talk about timely events what's

your take on uh the the major Market

correction on Monday um High perspective

George and then more importantly does

that change your outlook on the medium

term at all and if so how medium term

term meaning like the next six months

next next six months that's perfect yeah

I don't think it changes much it just

pretty much confirms uh what I've been

looking at in the treasury curve and for

me I always I always start there just

because I think it's the most powerful

economic indicator we have and uh the

curve uninverted the twos and tens on

Friday and usually when you see an

inversion or an uninversity

of like a kid sticking his toe in the in

the pool and he knows the water's kind

of cold but he really wants to get in

the pool so the first thing he does kind

of dip his toe in there and he retracts

oh my gosh that's cold that's cold but

then uh you know he his desire to get in

that pool just increases to the point

where he's like well I'm going to go

ahead and put my foot in there and then

he puts you know goes up to his waist

and then finally he goes and Dives in

that's usually how the Curve inverts and

un inverts and the reason I paid so much

attention to it is the the hard Landing

or recession or whatever you want to

call it it typically happens after the

curve is no longer inverted so you have

an inversion and that pre that has

preceded every single recession we've

had going back to the 1950s now we have

had an inversion where it didn't result

in a recession but it's extremely

extremely rare and so what you have to

do is you have to not only look at at

the curve but you've got to look at all

the other economic data that we that we

see you have to look at the unemployment

rate you have to look at the Som rule

you have to look at what Corporate

America is saying you have to look at

what's happening to the consumer you

have to look at what Disney is saying

what McDonald's is saying what Airbnb

and then you have to put all these

things together and try to come to a

conclusion as to what the probabilities

are that we will have a recession uh

hard Landing soft Landing no Landing

and uh going back to the cyclicality of

the

curve usually you see the curve un

invert then the stuff hit the fan and

usually it un inverts initially kind of

on its own but then you get a steep uh a

real steep unversioned curve due to a

bll steepener uh as a result of the FED

dropping rates and most people think

that the FED dropping rates is just

going to bail everyone out but they need

to be very careful what they wish for

because the Fed has never dropped rates

and prevented a recession they've only

dropped rates in response to a

recession and I just saw an article for

those people who are in the stock market

I just saw an article that was really

good on uh market watch and it was a

chart that showed it went back to I

believe

1984 maybe the mid1 1970s I just scanned

it briefly before we went live and it

was talking talking about how the Fed

rate cuts only help the market if we are

not headed for a recession and so I

don't know why they didn't just look at

the curve but another way to say that I

just tweeted this out is you can just

say the only time Fed rate Cuts result

in stocks going up is when the curve

isn't inverted and when it is inverted

you get the opposite uh after the FED

cuts the first time usually the stock

I think they were using the S&P 500 as a

proxy they usually go down by call it 15

20% usually see um a close to if not a

bare market after the FED drops for the

very first time and then you also

usually see the uh interest rates long

into The Curve go down further than they

already have uh in the process of

inverting to begin with so this is I'm a

real I'm a big Cycles guy you know if

something has happened

90% of the time since

1950 I'm going to go ahead and put my

money on it's it's likely going to play

out the exact same time I think

especially when you're looking at the

the treasury curve to say This Time It's

Different is even more dangerous than

that saying typically is so that's kind

of what I'm focused on right now and my

my point I guess to answer your question

specifically is what we saw happen in

Japan or what we've seen with noran

chukin bank in Japan you know that was

about a month ago uh what we're seeing

with the unwind of the carry trade I I

think the a lot of people in the

mainstream media like to Peg this

downturn that we've seen in the market

or the volatility increasing

specifically on the Yen carry trade but

if you go back

to the soft CPI report that we had about

three weeks ago I think that's really

when it started and when I mean it I'm

talking about the narrative change that

you usually see these type of Cycles

when bad news goes from being good news

because oh my gosh the fed's going to

cut great so that's great to Holy Cow

bad news is actually bad news and uh

going back to that uh soft CPI the

NASDAQ tanked and you would expect the

NASDAQ to do the opposite so that was

where I first kind of got the Spidey

senses and said wait a minute maybe this

we're at that point in the cycle when

you do see that narrative shift and then

pal came out um I think both think was

last Wednesday and he gave a very

doish uh press conference and again you

would expect the NASDAQ especially to

rip higher on that and once it started

to digest the information it goes

straight down goes down on Thursday goes

down on Friday and then you get the big

uh brewhaha with the Yen carry trade so

I I think it was more about the market

realizing that okay we've been too

myopic here and focusing on rate Cuts

good we need to zoom out and when we do

we we understand that all this soft

economic data that we're receiving is uh

likely uh bringing us to the point where

the fed's going to drop not because they

want to but because they actually have

to and if we look at history that's

usually negative for risk

assets yeah okay I want to back up for a

minute and ask you to elaborate on the

correlation between yield inversion and

a recession you said 90% of the time

since the 50s

an inverted yield curve precedes a

recession we can look at that

correlation but I'd love you to to

explain the why George why do those two

things correlate so closely yeah that's

a great question and this is what so

many people missed in fact a lot of

expert economists out there on Bloomberg

or fin twit I I see them making this

mistake and a lot of them even come to a

crazy conclusion that the yield curve

itself actually produces a recession

like hm okay I guess maybe they're

thinking because of uh you know the flat

curve is really bad for banks or

something like that but anyway getting

back to your point I think it's uh the

reason it's so powerful is because

insiders have information that we just

don't have Jay and it's it's not just uh

illegal Insider information it's just if

you're Jamie Diamond or you're a big

Bank all your customers are these huge

corporations

and Multinational uh corporations and

they know they have all this boots on

the ground Intel that you don't have and

uh CNBC doesn't have it we don't have it

and they can see these things way in

advance so when they start to see all

like the demand for loans going down

when they start to see their customers

at uh dinner with these multinational

corporations you know the CEOs when

they're out to dinner with Jamie Diamond

and they say you know what things aren't

looking good

uh we are really gung-ho we thought the

Fed was going to drop rates we were

going we thought we were going to have

this soft Landing but it turns out what

worsing you know is the consumers really

pulling back and the consumers tapped

out and most of that uh you know rebound

let's say from 2020 to uh 2024 was a

result of artificial things uh that the

government did during the the covid

period and now we're having to pay the

economic Fiddler if you will you know

the rubber has to meet the road at some

time and so I think what happens is the

Warren Buffett types the Stan drucken

Millers the the Jamie diamonds and uh

Paul tutor Jones You know guys like that

that really have connections with not

just uh Business Leaders but also

banking CEOs and banking insiders and

domestically and internationally they

see that we're starting to Tren Trend

toward risk and therefore once they see

that risk increasing they're going to go

ahead and they're going to buy

treasuries they're going to buy the long

end of the curve and that's what a lot

of these Global banks will do with their

balance sheet capacity so it's the banks

also and these financial institutions

and the Insiders looking at their

balance sheet capacity and saying okay

do we want to lend into the real economy

whether that's in the United States or

the global economy Japan you know pick

your place do we want to lend and take

that risk or do we want to just take

that balance sheet capacity and buy the

long end of the curve because we see

storm clouds brewing and we want to be

in the kind of quote unquote risk-free

the most liquid the safest type of asset

we can be in even if we're getting a

slightly lower return it's all about

risk and reward all about risk and

reward so when you see uh the curve

invert it's usually a result of two

things number one all of these financial

institutions and insiders that have

information we don't buying the long

into The Curve because these they see

the economic storm clouds brewing and

then while at the same time the FED is

usually increasing interest rates at the

front end of the curve which is why you

get that uh inversion you know with

short-term interest rates being higher

than long-term interest rates and then

that adds insult to injury that just

pours gas on the fire and then you

usually get the FED behind the curve

once again uh and then when they drop

the rates like I said earlier it's in

response to a recession it's never to

actually prevent a recession and uh

especially when the curve is inverted to

this degree so that's why you know covid

is always an example I use because the

curve inverted in August of

2019 so a lot of people think that was

just a fluke but I I I personally don't

now I have no in I have no uh way to

prove this this is all just kind of me

trying to connect the dots but again if

you're Paul tutor Jones and uh you get a

call from a banker in China that you

know and he says hey you really need to

pay attention to this Wuhan thing and

this you know goes back to August and

you say George why do you Peg August

well if you now read the reports they

say that if we did have this lab leak or

whatever it was they they take it back

to the summer of

2019 and so what's going to happen well

that guy at the Wuhan lab is going to

call his local politician the local

politicians going to call the local

Banker the local Banker is going to go

up the food chain and call the

politicians that call the uh the the the

banks in the euro dollar system and

they're going to get on the phone of

Jamie Diamond Jamie Diamond is going to

send a research assistant out to Wuhan

to get the boots on the ground Intel

himself from the scientist who probably

you know spilled the vial or whatever it

was right and then that that research

analyst gets on the phone with Paul

tutor Jones and says dude this is legit

like like this is legit like this might

not lead to a global pandemic but we're

at probably a 10% probability right now

right so then Paul tutor Jones thinks

about that and he's like okay even if

this is a 10% probability I need to

hedge my bets and I need to be in

treasuries immediately immediately and

that's why you could have seen uh the

curve invert along with the the other

things that we talked about but that's

just an example of something that could

have happened where it's not illegal but

these guys just flat out have

information and they're they're running

billions collectively trillions of

dollars and um you know if if they see a

problem like that if they see big risk

they're going to go into the most liquid

and the safest asset and uh whether we

like it or not that's treasuries right

okay and so yeah in some sense this is

The Whispers of the you know not the

smart money but the smartest money

hedging their bets early because you

know call it Insider information or just

call it you know the plethora of

resources that they have access to that

they will absolutely use to their

disposal in order to get ahead of things

um you're just following the hints yeah

and they get the real information too

because these CEOs or banksters will

come on CNBC and say one thing because

they don't want to freak out their

shareholders but after a couple you know

old Fashions at at the Stak house with

with Paul or with Soros or dren Miller

or whatever you know the truth comes out

and then these guys go ahead and trade

accordingly yeah okay so what do you

make of uh US economic data Today George

because there's you know there's two

conversations happening there's the

Perpetual hard Landing still coming

recession coming and there's various

degrees of Dramatics you know on that

front and then you have the opposite

side there's always a defense against

this like no no no earnings aren't as

bad as they look um actually earnings

are stronger than we expected them to be

and therefore trending back towards the

off Landing um you know uh jobs Market

data is polluted by immigration it's not

as bad as it looks there's always these

like counter points right okay so what's

your take what's your take well let's

start with uh immigration causing high

unemployment I actually did some

research there and I don't think many

people have so what's let's back up then

so what is let's outline the situation

that you're about to jump into here uh

immigration making employment look worse

than it is that's it's it's it's that

This Time It's Different argument okay

which we see every single time in the

cycle but one thing that they really

highlight or the rebuttal to what I've

just said is well George you can't look

at unemployment because immigration is

skewing the number and if it wasn't for

immigration then unemployment wouldn't

have spiked and we wouldn't have

triggered the Som rule uh the other

argument that you get the curve is well

if the treasury was

issuing uh you know debt at the long end

of the curve then the curve would be

nice and Steep and we wouldn't have we

would not have had an inversion to begin

with right those those are the two

arguments that you always hear and

therefore you know we have to completely

invalidate all of these metrics that

have been so spoton in the past well

we'll start with the uh unemployment

rate and this is just simply the

household survey and they take the

household survey and they compare that

with labor force participation and I

don't know the exact formula they use

but that's how they get the headline Q3

unemployment data and what's interesting

is they it it's a it's a survey of

60,000 participants right and then what

they have to do is they have to take

whatever the responses are and they have

to plug that into an overall population

number but the overall population number

that they've been using or that they

still use is Census Data from

2022 okay

prior to the uh immigration explosion

exactly and they and they're G to and

they're going to change that up Jay but

they change that up in January of 2025

and then they just move to 2023 Census

Data okay so if you want to argue it

it's actually the O opposite argument

that if you did include immigration uh

the immigration we've had since 2022 the

unemployment rate would be much higher

than it is because we're not including

it yeah so it's so to to look at the S

rule this time and look at it back in

the you know GFC or '90s or whatever it

is definitely an Apples to Apples

comparison that that that's just anyone

who says that really hasn't done the

homework and then let's look at the the

yield curve so what the claim there is

that Janet yon isn't issuing anything at

the long end and therefore Supply is so

tight uh ironically with deficits

exploding and the debt being at 35

trillion it's kind of weird argument

right uh that uh you know that's what's

bringing down those rates but this to me

is kind of a similar argument because if

you look at the actual uh amount of debt

outstanding at each point in the curve

it's much higher today than it was in

like

2019 much higher so uh sure the

percentage might be slightly different

uh on the edges but um it's it's really

not impacting if you think about why

people buy the curve or why people buy

treasuries or what the treasury market

really tells you what interest rates

tell you there is really about future

growth and inflation

expectations and there it it doesn't

have much to do with Supply and although

that's weird I know it's

counterintuitive to say that but if you

just look at history that's kind of the

way it plays out that rates at the long

end usually are you know there's

thousands of variables of course but the

the main uh contributing factor is just

what future growth and inflation

expectations are because you're always

going to get paid back your principal

plus interest so that's one reason uh so

um but going back to this also I I read

a study the other day uh from uh a group

of economists I know rabini was in there

neuro neural rabini and they were

talking about this uh exact same concept

but they are looking at it through the

lens of their being stimulus for the

economy that we otherwise wouldn't have

and that stimulus is being controlled by

Janet y because you know by not issuing

at the long end of the curve or issuing

a lot less then uh she has brought down

interest rates and therefore mortgage

rates etc etc etc and that just trickles

through the whole economy but even with

their study uh Jay it obviously they

they took the math on what the

percentages usually are and then they

calculated the actual deficit so the new

issuance and said okay well if we had

the normal percentages this is how many

10-year treasury uh bonds or notes or U

whatever they're called This is how many

10 years we would have and uh they came

to the conclusion that if they

normalized everything the 10-year

treasury yield would be a whopping 25

basis points higher than it is

today so even if you want to use that

argument you're still at like a a you

know we're we're still 100 basis points

in

converted so those two don't hold up uh

much weight under scrutiny in my view

okay okay I I knew you were focused on

both of those points so I wanted to

bring them up I want to Pivot a bit

George if we can uh one of the biggest

topics on my show is the trajectory of

dollarization and you can get Super

Hyper hyperbolic with those forecasts or

you can temper Your Enthusiasm and say

these are transactions occurring on the

mark and not really a big deal depending

on who you listen to um maybe I'll start

there what's your take on the

dollarization conversation well it's a

fantastic uh topic and it's it's

fascinating for sure but what where you

have to start and where I think most

people get

confused is you have to start by

understanding that the vast majority of

dollars that exist were lent into

existence they weren't printed and this

makes all the difference in the world so

what happens when uh currency is Lent

into existence is it actually creates

demand for that currency in the

future and then what happens if demand

goes down then the debt that created

those currency units to begin with is

extinguished because you pay off your

loan and when the loan is paid off the

supply actually goes down whereas if you

have printed dollars let's say like

printed green pieces of paper and let's

say that you lend me $100 Jay and when

you just lent me that $100 from that

$100 bill that was in your back pocket

you did not increase the money

supply therefore when I pay you back

next week I didn't decrease the money

supply but if you're a bank you would

have lent me that money not by pulling

it out of your back pocket but you would

have created a loan and that process

creates $100 that did not exist before

it did not exist it's just money out of

thin air there's no federal reserve

involved there's no green pieces of

paper it's just simply they create a

deposit we call it a commercial bank

deposit liability and then the

offsetting asset is just simply the loan

that was just created and so if I pay

that loan back then it decreases the

money supply

alls being equal by the amount of the

principle I just paid so if people kind

of get their head around that then you

have to ask

yourself okay if we have a pie chart of

the total dollars that exist on Earth

you know cash dollars on balance sheets

right now we we there's no way of

knowing

this uh definitively not not even close

but we can kind of assume that if we got

a $110 trillion global GDP probably 70

80 trillion of of dollars on balance

sheets now maybe M2 I forgot what it was

maybe 20 trillion something like that so

you got to figure there's at least 50 or

60 trillion of dollars outside of the

United States on balance sheets and

almost 100% of those J were lent into

existence so let's just assume for a

moment that the Saudis changed the Petro

dollar or everyone starts using the

bricks currency or something like that

okay that's fine but let's just think

that one through uh if that happens

outside of the United States then you

got all these Saudi Arabian folks that

don't want these

dollars fine but you still have the

dollar debt so what do they do with

those dollars they pay off their debt

and what is that due to the supply of

dollars drops it that's right so when

you have a currency where the vast

majority of currency units were lent

into existence you get into

this kind of

bizarre um scenario where the demand for

the currency actually controls

Supply and especially if that debt is

super short term so if we had like uh

let's say all the debt that created the

50 trillion outside the United States

was 30-year mortgages well then velocity

would play a role there because you

wouldn't need to pay out that debt right

away uh those currency units could

circulate all around the economy and

create inflation or create the dollar

tanking or whatever it is um you know

because you got 30 years before you have

to pay that back but what happens is the

majority of debt that created those $50

trillion do outside the United States is

extremely short term jay uh on from

expert I've talked to on average maybe

two

weeks month matur okay

yes yeah so then the other argument you

know alongside this is well uh let's say

they don't have debt then they're going

to dump all these dollars and they're

going to come flooding into the United

States and that's going to create

Consumer Price inflation here

hyperinflation and uh maybe I mean that

I would I would agree with that a little

bit more than the other stuff or I could

see the probability of that being higher

uh than the dollar absolutely crashing

which I think is almost zero relative to

other currencies but you could see that

uh create Consumer Price inflation or

higher uh Consumer Price inflation in

the United States but then what you're

doing is you're taking all those

currency units that are needed for that

debt that's due in two weeks and you're

bringing them into the United States so

how the hell do they get

out the answer is they don't and what's

going to happen to the value of the

dollar outside the United States it is

going to Skyrocket I mean if let's just

assume that there's 50 trillion and you

had 10 trillion come in because the

Saudis no longer want those dollars

let's just say they don't have any of

that dollar denominated debt well

somebody outside the United States does

Jay yeah somebody does and if those

dollars are now trapped in the United

States and they're not

circulating you you you got a you got

you basically have a dollar short

squeeze how are the holders of the

existing debt going to service that debt

when the flow of US dollars is going one

going One Direction right that's right

and or the same thing can happen if

velocity of the currency units outside

the United States decreases as a result

of let's just say a global recession

because those banks are riskof like we

talked about earlier you're seeing that

play out in the yield curve that's what

it's telling you and then the financial

institutions so they're a lot less

willing to lend and if they're a lot

less willing to lend then what you have

is not the amount of currency units on

net balance going down because more

loans are being paid off than are being

created but you also see the velocity of

those dollars slow down which means it's

even harder for those entities that have

that dollar debt to get the dollars they

need to service it and then you say well

George what happens if they just don't

pay off the banks that that's another

argument you get all the time well if

they just don't pay off the banks or if

they don't pay off the loans then the

dollars still exist

okay well let's think that one through

Jay because what is what at the end of

the day what's a dollar it's just simply

a commercial bank deposit liability

especially outside the United States

where there are very few uh green pieces

of paper uh and very few Bank Reserves

right that that's really a domestic

thing on the fed's balance sheet and it

is true they have access to those

reserves through correspondent banking

relationships but most of what happens

in the euro dollar system it's

really doesn't really settle uh let's

say on the fed's balance sheet right so

uh you've got these people that are or

these entities really that are trying to

get those dollars that they need to pay

off the debt uh they can't so they

default then what happens to the bank

well the bank that lent them the money

it blows a hole in their balance sheet

and they go bust okay but all the

dollars that were in existence were a

liability mhm

of that bank on that Now default bank or

that now that just went bust so what

happens to the dollars they disappear

they're gone because all that dollar was

was just a a liability of that bank

that's no longer here right that would

be even more deflationary it it would be

and so either way whether the debts are

money good or

not the dollars still disappear at the

conclusion of the loan either through

yes debt repayment or Bank insolvency

because of because all dollars are with

the exception of the green pieces of

paper all dollars are are just uh

they're just a liability on a network of

global bank balance sheets that's it

right do you do you see anything right

right now George that may trigger that

kind of activity that would

reduce the velocity of dollars outside

the United States to the extent that

this could become pretty real for a

handful of these countries that are

holding US dollar debt yeah and I think

that's why when you look at the Japanese

Banks going back to what has happened

more recently Jay you'll and I haven't

followed it uh last couple days but um

on Monday of course we had that huge

huge huge drop in the N I think it was

down maybe 10 or 12% and the next day we

had that just rebound right back to

almost where it was uh the day prior

but you'll notice that that was the Nik

if you look at the index that just

represents the banks I forgot exactly

what they call it the topics I think the

topics there you go thank you you'll

notice that that didn't go up as much

and a lot of these Banks uh these big

banks in Japan have lost like 25% of

their value just in the last week or so

and 25% of their market cap just

completely wiped out so they got

hammered a lot more more than the rest

of the corporations in the index and I

think the reason why is because the

market is waking up to the fact that a

lot of them have the same issues that

noren chukin bank had uh a month or two

ago and that's where they borrowed all

of these dollars back in 2020 and 2021

to buy treasuries so they're borrowing

dollars at let's say 1% and they're

they're buying assets that are yielding

3% so they're pocketing the 2% spread

it's a you know good business so they're

but the problem there Jay is all those

dollars that they borrow in 2020 2021

it's not like their 30-year fixed rate

loans right these are these are just

loans again that they have to roll over

every two weeks or they have to roll

over every month or so so they don't

have to forell those assets that they

bought with the loans to begin with so

that makes them very sensitive to

interest rates so when the Federal

Reserve is raising rates from zero up to

5 5.25% now of a sudden we call them

your dollar funding costs these Banks

dollar funding costs are at 5% instead

of 1% and they have a negative carry

because they're having to borrow at 5%

but those assets that they bought are

only yielding 3% yeah and so that puts

them in a very compromising position

obviously they can't have that negative

carry indefinitely into the future so

they have to liquidate those treasuries

at a huge loss and noren chukin took a I

think it a $12 billion hit on that but

what's more important is what they have

to do next so what they have to do next

is somehow replace those 3% yielding

treasuries with an asset that's going to

yield more it's going to yield more than

the 5% that they're having to pay for

those dollars to begin with and I'm just

using round numbers here just for the

sake of the example Guys these aren't

exact numbers so what do they do well

what nor and chukin did and I imagine

most of these other Japanese Banks did

the exact same thing is they started

buying

Clos derivatives in the United States

okay well what's the underlying asset

there well it's junk corporate debt and

it's things like United States

commercial real

estate so let's connect these dots we

see the commercial real estate market

completely blowing up we see credit

spreads starting to blow out on junk

debt which means that these assets that

in the form of a clo that these Japanese

Banks were forced to buy are starting to

decrease in value and this puts them

into a position where they really have

no other choice but to hold on to them

or just take a massive hit or just go

completely bust and when you think about

the global monetary system just being a

network of these global bank balance

sheets if you have some big banks in

Japan go bust that's going to increase

the amount of risk which to your earlier

point is going to decrease the velocity

which is going to decrease the dollar

liquidity because that dollar liquidity

is not coming from the FED that that's

the the banks create the majority of the

dollar liquidity outside of the United

States so then that put you into a

position that we were just EXP Laing

before where there's not enough Dollar

Cash Flow although there might be enough

dollars to service the debt and then you

start seeing defaults and then that

makes the problem even worse because

that blows a hole in the balance sheet

of the banks that are there to provide

the liquidity to begin with and it kind

of put you in this Doom

Loop yeah okay and so does the like I I

I don't know if there's any way to

measure this properly but uh I've read

that the Japanese carry trade may be

approximately 50% Unwound at this point

if you were to hear something like that

or maybe you've seen you know a headline

like that would that lead you to believe

that half the damage has been done and

there's still more Carnage to come from

this direct example right here uh well

maybe from the Yen carry trade but you

have to ask yourself you know how much

of what we have seen as a result of the

carry trade and it it's obviously not

zero but it's definitely not 100 yeah so

I I would Peg it at maybe you know 15%

and it definitely exacerbated the

problem that was there but the real

underlying issue here or one of the

underlying issues is the fact that these

Japanese Banks were forced to go out the

risk curve and they're holding a lot of

these Clos on their balance these

derivatives these clo derivatives on

their balance sheet um and these Clos

the underlying asset are assets that

we're starting to see have big big

problems in the United states such as

commercial real estate yeah so that we

we think that commercial real estate as

an example is just isolated to the guy

that owns that office building in

Downtown Phoenix right but what we don't

understand is that office building is

connected to a regional bank and the

Regional Bank is connected to risk which

which filters through the entire Global

monetary system or or that office

building in pH

could be part of a clo

trunch that was sold to a Japanese bank

because they had to go out that risk

curve and they had to find a 7% yield

just hypothetically here because their

dollar funding costs are 5% so when we

see these Office Buildings start to blow

up or take a 50% haircut or whatever we

have to understand that it not only

impacts that it's going to also have a

significant impact on the global

monetary system and then the question

just becomes where's that Line in the

Sand where we go from okay everything's

fine to oh crap we've got a big problem

you know one of the visuals I like to

use on my Channel all the

time is that whack-a-mole game and you

know the one I'm talking about Jay where

you're know like Chuck-E-Cheese or

something like that and it's got the

little and you start off the game at

level one and the mol's heads are

popping up pretty slow like once every

five seconds or something so you can get

them easy you can get them easy but what

happens is as you progress the mol's

heads start to pop up faster and faster

and faster and faster and faster and

faster and even if you're at a point

where you're Bam Bam hitting them down

if you don't realize you're playing a

whack-a-mole game you would stand back

and say oh well the economy is fine

Jay I don't I don't see a problem I

don't see a recession what what are you

talking about

but what you don't realize is if you

look beneath the hood you see the the

probabilities of a hard Landing

increasing exponentially because you're

seeing all these problems pop up at a

faster and faster and faster rate and

then it's just a a question of how you

know at what point is it going to get so

fast to where that guy is going to miss

one of those moles and it leads to the

type of systemic risk that uh would

create a downturn or or potentially

something

worse what is that something worse or

what is that downturn from your

perspective you know you can hear folks

like Jim Rogers say he expects the next

recession to be the worst of his

lifetime going back to a 1930s type

scenario um do you have any Outlook or

perspective on that

George um how deep and and what what are

your thoughts on on the up if we were to

enter recession in the next 18 months 24

months 12 months I don't know if you

have a if you attach a timeline to it

but you know what does that look like

now I don't attach a timeline to it

because it's it just all I say is that

this time it is not different from the

standpoint of how the cycle usually

plays out meaning inversion first

uninversity

your question two different ways number

one if we're going to use the thought

experiment of the government not doing

anything okay if the government doesn't

do anything and I I think even if the

FED wants to come out and buy you know

do QE I I don't think that's really

going to do anything either and when

they drop rates again they don't drop

rates to fix something they drop rates

in response to something that's already

happened um now maybe if they came out

and started buying stocks like the boj

that that may change my mind but let's

just assume for a moment that the FED

just comes out with their standard okay

we're going to start doing QE again and

the government doesn't do anything in

the form of fiscal or

bailouts then you then I completely

agree with Jim Rogers uh my again no

certainties no certainties here only

probabilities and I and by the way I've

heard I just spoke to my good buddy

Patrick cesna from uh macro voices in

the market huddle and uh his base case

is the.com bust as far as that recession

and he made a very good argument as to

why what we're seeing play out right now

with all the markets is uh maybe not

exactly but definitely rhymes with the

dot bust where we just had kind of like

a garden variety recession so that's

definitely on the table definitely on

the table but it probably wouldn't be my

base case my base case would be we see

like a probably like a GFC type of thing

um and but maybe even more deflationary

if the central planners steep back and

didn't do anything but if if the or

maybe when is probably better said when

the central planners do respond to it

because I fully expect that they will uh

you would probably

see I I would honestly I I'd probably

just assume it's more of the same

meaning that when we get theom bust okay

they respond to that with just interest

rate drops okay fine uh then we get the

GFC and they respond to that by dropping

interest rates and doing QE and doing

all these bailouts so my point there is

you'll notice they each time we have a

crisis they do more and more more they

take more and more of the medicine and

they get diminishing returns and then we

fast forward to covid and then it's like

it it made the GFC or the response to

the GFC look like

play you we came out with trillions and

trillions I don't know what the car's

Act was like four or five trillion

something like that and so I would

expect that they'd probably do the same

that instead of a cares act we do like a

car's act 2.0 and instead of four

trillion it's like eight trillion or

something like that and so assuming they

do that I would expect

a I don't want to call it a v-shaped

recovery because that implies that

growth goes back to Trend and I don't

think it will I think that growth will

kind of Notch down and that will be a

new trend line and uh but I do think we

will see a repeat of the wealth Gap

getting much bigger Y where it's going

to benefit people with assets because

the central planners realize that to

keep this game of D Jenga going uh

they've got to to prop up asset prices

even if it creates all the homeless that

we've seen even if it creates the drug

problem even if it lowers the standard

of living even if it decreases the

purchasing power for the average Joe and

Jane they they realize that if the the

stock market goes down by 50% this time

it's going to be a much much different

story than uh 20 even 2008 2009 because

the US economy is so much more dependent

now on asset prices than it was even

back then you mentioned earlier Jay how

I'm I live in Median Columbia that's

true and I always use this as a thought

experiment to take it to an extreme if

the stock market went down here by 50%

no one would even know and I I I I

literally don't even think it would make

the like the Daily News because no one

owns stocks no one even cares about it

it's not even really a thing so but the

stock market goes down by 50% One Day in

the United States and you're going to

have a a a not just a US meltdown but

You' probably have a global meltdown and

that just shows you the fragility I

think and the central planners know that

so I think that'll be their their focus

and

unfortunately you know look at the

difference that we have seen in society

and the standard of living just since

2019 I mean you guys might not see it a

lot because you're in the I don't know

if you're in the US but if you are you

know it's kind of like looking at

yourself in the mirror every day where

you really don't notice SE changes but

nowadays I only go back to the United

States when I have to speak at a

conference or something like that so it

might be let's just say four times a

year right and even in those four times

a year Jay I notice huge huge changes

every single time I go back and when you

compare it to 2019 I think it's night

and day difference I mean just it's just

people are walking around like zombies

and you have the homeless problem and

the all these drugs and and it's obvious

that especially for the average Joe and

Jane their purchasing power has gone

down significantly even though their

nominal wages have gone up because they

haven't kept up with the rate of

consumer price inflation and when they

finally get a break on that inflation

well what happens the unemployment goes

up the unemployment rate and aggregate

demand goes down because the only reason

prices are going down is because the

economy is in contraction so you get

this cycle where the price is always

paid unfortunately by the poor in middle

class so I would expect that to continue

so assuming you're right and absolutely

I noticed that too and I I think there

is definitely some cities have been hit

a lot harder you know the US is like

some cities you just I used to host an

annual conference every year in San

Francisco and so I I watched that City

really closely from like 2014 when I

started working there until you know I

haven't been there recently but uh you

know I've seen what's happened there and

it's been very dramatic and that

occurred like 2016 17 18 I was already

seeing that city of to be honest

with you and then it really accelerated

in the last few years um Portland Oregon

my wife's from Portland Oregon another

city that we would just never go to

anymore used to be lovely I I love Port

that's where I grew up man that's where

I grew up interesting yeah

okay sad but we have to realize that

those what you're seeing there is not

just

random it's not just a result of oh

people are idiots so they're doing drugs

now this is a result of government

creating economic

distortions that that that's that's

that's how this plays out and so you

know the response or the quote unquote

solution to any problem we ever have is

more government intervention more

government bigger government and what

that does is that increases the amount

of government spending as a percentage

of GDP and if government spending goes

from 50 to 60 to 70 all the way up to

let's just take to an extreme 100% well

you would expect the economy to be far

far less efficient if the economy is far

less efficient then we're producing

fewer goods and and services and that is

going to decrease the standard of living

it's just there's no way to get around

it unfortunately other than to do the

opposite which is less government and

and get the government out of the

equation

and bring back uh free market capitalism

but in doing so you also have to bring

back bankruptcy you have to let people

fail and that's just what we're well we

as a society or the politicians and

authoritarians refuse to do with

election Cycles every two years it's

hard to imagine those hard decisions

being made it wouldn't be in any

politician's best interest when you put

yourself in their shoes and how they're

thinking about you know their career

trajectory which is not aligned with the

well-being of the the public Ty and then

that goes back to the dollarization

argument because then the gold bugs and

the bitcoiners are going to come in and

say well we just need sound money and I

I think that is

um uh it it would definitely help but I

don't think that solves the problem

because at the end of the day people are

still going to vote for their free stuff

yeah and uh if people are voting that

way then it's still you know the

government spending is is still going to

be there and uh because whether we like

it or not the United States will even if

let's say the US was on a Bitcoin

standard okay well that probably make

more demand for their debt so you know

if they've got more demand for their

debt than they already have then okay

well that just allows them to spend much

more and to produce more free stuff

without having to tax it you know so um

unfortunately you know when going back

to kind of the mechanics behind how the

the dollar system is is created and why

the probability of the the the dollar

crashing is very low and therefore it

decreases also the probability of the

dollar losing Reserve currency status

anytime soon right um it also brings you

to the sobering conclusion that there is

no Panacea Jay there's no Panacea uh the

only way that we can improve things is

if we get people if we convince people

that it is in their best interest to

vote and to try to

promote smaller government and and like

we said earlier that involves taking a

little bit of pain yeah it's man I I I

hope you're I hope that's possible

George I don't know man it's the only

way other than just a complete and

outright collapse yeah and that that

could be you know I hate to go there but

that if you look at the fourth turning

as an example uh I remember I

interviewed Neil how this was maybe a

couple years ago and I was really trying

to press him

on what the probability is you know how

the four how the fourth turnings usually

play out and you know as as you know

he's been saying that we're right at the

tail end of this fourth turning we

likely see it conclude at the end of the

2020s going into the 2030s yeah and I

kept trying to to find like the glass

half full or the light at the end of the

tunnel sure yeah and he kind of got

Snappy with me and he's like George look

you don't understand every single time

in the past this has ended in war right

right right that's the bottom line so

that's the best way that I can answer

your question I I I I don't you know is

that the glass half full I I don't know

it's it's not inevitable but we just

have to look at

probabilities way that's the only way

out Jay I don't know I hope not

obviously I hope not too but I what I

appreciate about his take is that he's

stepping back from his emotional

response or what he wants the outcome to

be and just like you said at the front

end you're a Cycles guy well let's just

look at maybe how this movie's played

out the previous four or five times or

six or seven times and you know another

uh Doo's written a bunch on the similar

subject of like cycles of Empire looking

at the Portuguese the Spanish the Dutch

the British taking those blueprints

laying them over America today and

saying okay guys what inning based off

of the movie we've just watched five

times what might be what inning might we

be in today and it doesn't give you an

optimistic Outlook it you know so where

I come to with this is like all right

well what I can do is control my own

personal sovereignty and make sure that

whatever occurs myself and my family are

set up right to be durable and and

prosper and all this so and plan B and

have a plan B because there are some

bright spots in the world today that's

for I look at

Argentina I mean they're they're they're

kind of been down in the dumps for quite

a while and obviously the standard

living in Argentina is not what the

United States is but they're on the

right trajectory they're going in the

right direction who knows how long it'll

last I don't know but uh I was just

there a couple months ago and it's it's

a fantastic country beautiful people

speak English I think from a cultural

standpoint and just the way it looks uh

many Americans would not have an issue

being there for a long period of time

because it just kind of fits right in

with what they're used to seeing

especially the middle of Argentina looks

just like the Midwest in the United

States almost identical and a lot of

people speak English but my point there

is yeah see what you can do uh don't

bury your head in the sand like an

ostrich I always say it's a very poor

investment strategy um you know this is

nothing to lose sleep over nothing to

lose sleepover it's just something to be

aware of and to prepare for so if in

case things get a little worse then

you've got that plan and um and you

might even be able to take advantage of

opportunities that are created by a

recession and when we talk about things

sliding down with the with the exception

of War of course when we talk about

things going into a recession it doesn't

mean that we're just like Rickard says

it doesn't mean that we're living in

caves eating canned goods it just means

that we have a a difficult period of

time ahead just like the GFC was very

difficult yes you know although we had a

rebound in the stock market I remember

the housing market didn't bought them

out until 2012 I remember that vividly

because that's when I retired and

started buying uh houses and I remember

back then Jay I would put up an ad in

Craigslist for just basic workers you

know Tile Guys electricians uh plumbers

and whatnot handymen to help me remodel

all of these houses that I was buying

back then yeah I remember the very first

ad I placed it was like for 12 bucks an

hour something like that but this was

2012 and within an hour Jay I had

probably 150 rums right 150 rums right

now I went back because I I started

selling my I didn't start selling my

rental properties until

2018 so I went back in

2016 and uh I had to you know do some

touch-up work on some of the properties

So I placed the exact same ad word for

word the only thing I did is I just

Ratched it up you know it was maybe 15

bucks an hour or something that was

appropriate back in

2016 and I sat there I ran the ad and I

waited and I waited and I

waited and after about three days I

might have had one or two resumes right

so that that's what I'm talking about

I'm not talking about living in caves

eating canned goods I'm talking about

2012

2012 which which which sucks which sucks

for a lot of people but it's uh not the

end of the world and just like real

estate was an opportunity back then we

will see uh probably just as good if not

better opportunities in moving into 2025

or 2026 assuming that yield curve is

correct again yeah okay look I love that

man um if you have time George one more

question for you sure um what's the

portfolio look like what's the life

blueprint look like if we're moving into

into this uncertain territory you know

how you structuring yourself your wealth

to uh weather the storm yeah well I'm

sure you say this all the time but not

investing in Vice this is just what I'm

doing with my own personal portfolio and

uh i' I've got a service with Lynn Alden

and uh Chris McIntosh called Rebel

capitals Pro so I've got a couple model

portfolios in there so the the main

model portfolio what I've done is uh I

set this up

about call it uh six months ago

something like that and I always start

with gold always so regardless of what

my strategy is for the specific

portfolio I start with gold just that's

my insurance policy and so I do 10% gold

and then my second priority is just make

sure I don't lose money and that should

that should be priority number one two

and three so uh that that's and for some

people that might not work they might

want to take a little more risk it's

just my personal preference

so what I did is I went out and I bought

uh T bills one-year t- bills and then

what I did is I took the interest that I

was going to be paid when these t- bills

mature and I bought call options and

that's what gives the portfolio a bit of

juice okay while I'm waiting for things

to get cheap such as commodity prices I

know we haven't talked about that but

I'm a firm believer that we are in the

proc process or in the beginning Innings

of a long-term commodity super cycle and

these commodity super Cycles like

everything else the prices never go up

in a straight line it's always kind of a

roller coaster ride just like inflation

is as well always a roller coaster ride

so we could be in a downturn here uh for

the next six months it probably likely

see lower prices if we have a recession

but I think that's really going to be

your opportunity to hold on to maybe

some of these producers that are paying

a great dividend over the the the long

term

so I want to have all this liquidity

that's going back to the the t- bills

there but I want to have some upside uh

above and beyond just your 5% interest

rate in the interim while you're waiting

for this curve to play out so what I did

uh back in April is I bought call

options on the NASDAQ because I was

under the belief that you know while the

curve is still inverted and while bad

news was still uh good news at the time

that You' probably have a blow off top

or you would have you know something hit

the fan it's kind of like a binary

outcome I thought flat was kind of the

probability wasn't too high so I bought

call options on the NASDAQ back in April

and when that started working well I

doubled down and then but when we got

that soft CPI report that completely

invalidated my

thesis because that's when I think that

that that bad news became bad news so I

immediately sold immediately sold and uh

for you know fortunate we did quite well

on that but what I've done more recently

is uh on Thursday of last week I bought

uh calls on the

TLT interesting with that with that

money and but to to be clear uh I sold

half the position

on Monday and I sold half the position

because the liquidity I'm still by no

means an expert yeah I want to make that

clear I'm just an amateur uh probably

more of an amateur than than a lot of

your your listeners and viewers but um I

I didn't realize that the call options I

bought were very illiquid because I was

going about a year out and I was going

way out of the money to get as much pop

as I could and so I'm like nah I don't

like the lack of liquidity here at all

so I went ahead and sold half the

position on Monday the other half I'll

I'll keep it just to see how it plays

out but what I'm doing now is I'm

waiting for the Fed to drop rates the

first time and when they do I'll

probably allocate that Capital to more

options uh to try to take advantage of

the the way the cycle has played out in

the past and that's usually once the FED

drops to State this again uh that's when

we see the the biggest decline in the

stock market and the biggest decline in

yields okay I appreciate you going there

and so for anybody who wants to go

deeper replic capitalist Pro is the the

tool to do it yeah you just go to Georg

gam.com

proo George gam.com

slpro you'll find George and two other

familiar faces being Lynn Alden and

Chris Macintosh who have both been on

this show a couple of times look George

they're a hell lot smarter than I am as

you know Jay they're both great man so

are you though it's a it's a power Trio

you guys got going on you launched Rebel

capitals Pro like three years ago

something like this

yeah it was in 2020 okay yeah four years

ago yeah right on it was right after I

interviewed Lynn for the very first time

I didn't back then she only had about

10,000 followers on Twitter you you are

how I found Lyn Alden back in the day

yeah yeah yeah she was man the first

time I interviewed her I was just

completely blown

away like this G's a rock star in fact I

think I text her that right after we got

done and uh about two weeks after that

uh I I got IR on Rebel capitalist Pro

and kind of the rest of his his history

amazing amazing okay well look dude I

appreciate you I appreciate your time

thanks for coming on George it's great

chatting with you thanks for having me

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