Jim Rickards: Will Trump Save the Economy and Drain the Swamp?

[00:00:06] Oh my gosh, I always feel like my IQ goes up when I talk to Jim Rickards. He has so much knowledge about so many things, but particularly he's been there, done that when it comes to all things in the economy. Like some of his stories of what he's personally seen and done are some of the most famous events that have happened in the economy in the past 50 years.

[00:00:31] Anyway, he wrote a new book, Money GBT, which is about kind of the financial aspects of AI and how AI could affect the economy. But we started off, I just wanted to ask him in general what he thinks is going to happen in this economy. And we go really deep. So we divided this into two parts. One is everything you need to know about the current state of the US economy. And it's a real, it was a real education for me. And this is something I read quite a bit about. So I'm really excited to share this with you.

[00:01:01] And then the second part, which will be out later is going to be about AI and its effect on the economy. But here's my friend, Jim Rickards, and I'm sure you're going to enjoy this as much as I did. And look, if you have any comments, questions, let me know. And as usual, please subscribe to the podcast.

[00:01:23] This isn't your average business podcast, and he's not your average host. This is the James Altucher Show.

[00:01:39] Jim, before we started the call, I jumped on the call. I heard you talking with Jay, my producer, about the possibility of a recession. Even though your book is money.gbt, it's about AI, you are an economist. I want to talk about recession possibilities a little bit. You were harking back to when Reagan took over and you said there was a big recession from 1980 to 82.

[00:02:01] Right.

[00:02:01] And I'm just curious what you see happening in parallel right now.

[00:02:05] Yeah, I think there are some parallels. I thought Reagan was sworn in January 1981, but we had just come out of back-to-back recessions.

[00:02:14] They were so close together that economists will argue whether it was just one big recession.

[00:02:18] But 1980, clearly, it was Jimmy Carter's regulatory screw-up. They put a cap on credit card interest rates and the banks stopped lending. So that'll do it.

[00:02:27] And then 1981.

[00:02:30] And not to interrupt, when are people going to realize that any interference at all, in terms of whether it's price controls, interest rate controls, whatever, when are people going to finally realize it doesn't work?

[00:02:42] Maybe never. It's part of human nature that there's either denial or you blame somebody else or the experts, so-called experts, I should say, themselves don't understand it.

[00:02:51] But you're right.

[00:02:54] But that's what caused it.

[00:02:56] And then they very quickly repealed the interest rate cap and the economy came roaring back.

[00:03:00] But then it went into another recession that had to do with Volcker and inflation and a lot else.

[00:03:04] But my point being, that recession, 1981-82, beginning of the Reagan administration, was the worst recession since the Great Depression up until that time.

[00:03:15] Now, we've had worse recessions since then, obviously 2008.

[00:03:19] But that was the worst one at the time. It was pretty bad.

[00:03:21] But then in 1983 and 1986, the U.S. economy grew 16%.

[00:03:27] That's real growth.

[00:03:28] So compounded annual growth rate of about over 5% a year.

[00:03:33] That's not sustainable.

[00:03:34] But coming out of a recession, you can do that for some period of time.

[00:03:39] 16% real growth in three years.

[00:03:41] It was unbelievable.

[00:03:42] And, of course, Reagan had a landslide re-election.

[00:03:45] So my advice is recessions happen.

[00:03:48] If you're going to have one, get it over with early in your term and then kind of finish strong.

[00:03:52] So as that relates to Trump, I was saying that Harris didn't articulate all of her policies, but we kind of know what they would be.

[00:04:02] It would be more of the same, maybe worse.

[00:04:04] Trump has articulated his policies through a number of channels, both personally but also his top people, Peter Navarro, Robert Lighthizer.

[00:04:14] There are others who are going to take the lead on all this, and we've seen some of it before.

[00:04:19] But they couldn't be more different.

[00:04:21] So you had a choice.

[00:04:23] Vote who you like.

[00:04:24] Trump won.

[00:04:24] But there was a real big difference in terms of the economic policy.

[00:04:27] So my assessment is Trump's economic policies will be extremely good for the United States, stock markets, real wages, job growth, all the things that we care about.

[00:04:38] But we may have to get through a recession first.

[00:04:41] And this is the legacy of Biden.

[00:04:43] And, again, I'm not blaming it all on Biden.

[00:04:46] Like I said, recessions happen.

[00:04:47] They're cyclical.

[00:04:49] They're bigger than administrations.

[00:04:51] Administrations can help or hurt, but the business cycle tends to be bigger than any political program.

[00:04:57] So there are a lot of signs, and I'm happy to go through them, as to why we might be heading for a recession right now.

[00:05:03] That will have nothing to do with Trump, but it may land on his desk early in his term.

[00:05:08] And my advice would be get out of it.

[00:05:11] Get your program going.

[00:05:12] I think the Trump program, I know exactly what it is.

[00:05:15] It's easy to articulate.

[00:05:16] But it's the kind of thing that's going to produce benefits over two to four years.

[00:05:20] But we might have some difficulty for, let's say, six to nine months getting through what I expect will be a recession first.

[00:05:27] And I want to ask two things about that.

[00:05:29] One is, I sort of thought there would be a recession by late 2023, 2024 at the latest, just because of the interest rate hikes being so intense.

[00:05:39] Now, maybe the money printing was so big that it kind of warded off.

[00:05:44] We didn't truly stop inflation.

[00:05:46] It's just from the interest rate hikes, the real inflation was still pretty big.

[00:05:52] But now the Fed has ammo to cut rates, just like in Reagan in 1982.

[00:05:58] There was ammo to start cutting rates in a massive way, which kind of led to at least part of the boom from 83 to 86.

[00:06:05] Could it be that we avoid a recession because there's so much ammo in the tank?

[00:06:09] Because interest rates are so high relative to where they were the past 20 years.

[00:06:13] Right.

[00:06:14] I don't think so, James.

[00:06:15] And the reason is, I think – I mean, you're right about the Fed.

[00:06:19] They were raising rates before.

[00:06:20] They're cutting rates now.

[00:06:21] I think you give the Fed too much credit.

[00:06:24] I'm not saying it's unimportant.

[00:06:25] Certainly, they can affect the short end of the market.

[00:06:27] That's clear.

[00:06:28] A three-month bill is going to be some kind of reflection of what Fed funds target rate.

[00:06:34] Although, just to drop a footnote, there hasn't been a Fed funds market since 2007.

[00:06:39] They say we're targeting the Fed funds rate.

[00:06:41] There isn't one.

[00:06:41] There is no Fed funds market.

[00:06:43] All the liquidity is in excess reserves.

[00:06:45] So it's really interest on excess reserves.

[00:06:47] That is what they're targeting.

[00:06:49] But fine.

[00:06:49] Call it Fed funds if you want.

[00:06:50] But it doesn't really affect the economy that much.

[00:06:54] First of all, the idea that it's stimulus is false.

[00:06:57] Now, the Fed would have you believe it's stimulus.

[00:07:00] Wall Street calls it stimulus.

[00:07:01] They always think for reasons to bid up the price of stocks.

[00:07:04] But periods of low interest rates have been associated with depressions and recessions and slow growth.

[00:07:11] We had extremely low interest rates during the Great Depression, for one thing.

[00:07:14] But look at the period from 2009 to 2019.

[00:07:18] Ten years.

[00:07:19] That was the longest economic expansion in U.S. history.

[00:07:22] But the average annual growth rate was 2%.

[00:07:25] It was just 2%.

[00:07:26] Interest rates were zero almost the whole time.

[00:07:28] Actually, they were.

[00:07:29] Until 2015, they finally raised it.

[00:07:33] But most of that period, they were zero.

[00:07:35] And they were never over about 2.25%, even at the end.

[00:07:40] But that was unbelievably slow growth.

[00:07:43] Now, it was growth.

[00:07:44] Okay, so you can't call it a recession.

[00:07:46] But I called it a depression.

[00:07:48] And it has to do with the definition of depression.

[00:07:51] Most people don't understand it.

[00:07:53] We all kind of know the rule of thumb.

[00:07:55] A recession is two consecutive quarters of declining GDP.

[00:07:59] There's a little more to it, but that's basically the heuristic, the rule of thumb.

[00:08:03] So people say, well, gee, if a recession is two quarters of declining GDP, a depression is worse.

[00:08:09] That must be 10 quarters of declining GDP.

[00:08:11] That's not the definition of a depression.

[00:08:13] I go with John Maynard Keynes.

[00:08:15] It was, that's good enough for me.

[00:08:17] He described a depression as a prolonged period of below-trend growth with neither a tendency to get back to trend nor collapse.

[00:08:26] Meaning long, slow growth.

[00:08:28] Kind of like the long depression of the 1870s.

[00:08:30] So if your potential is three, three and a half, in my view, the U.S. has that kind of potential.

[00:08:38] And your actual is two.

[00:08:40] That delta between two and three and a half, in my example, that's depressed growth.

[00:08:45] So you have growth, but it's depressed growth relative to potential.

[00:08:49] And that's the depression.

[00:08:50] The problem is, if you think, if you do it over time and think of that delta, here's the potential and here's the actual.

[00:08:57] That delta is in the multiple trillions.

[00:09:00] Now, I haven't calculated it lately, but last time I looked, it was about $6 trillion of lost wealth that could have been generated if we had been closer to three, three and a half percent.

[00:09:12] But my point, James, is that interest rates were close to zero the whole time.

[00:09:16] So there's nothing about interest rates that says stimulus to me.

[00:09:21] Yeah, I mean, you would think with low interest rates, people would be more eager to borrow money because money is a little bit closer to quote-unquote free.

[00:09:29] That's why interest rate cuts are usually associated with a stimulus.

[00:09:32] Why do you think it didn't occur here?

[00:09:34] Well, first of all, I kind of disagree with the premise.

[00:09:38] As I say, interest rates are associated with the Great Depression and the long, well, we call it a depression, the second Great Depression of the 2010s.

[00:09:48] But I should confess to the viewers that I started my career as a senior officer of Citibank before I got into hedge funds and other funding games.

[00:09:57] But actually, interest rates, in a booming economy, interest rates go up, but for a good reason.

[00:10:05] I mean, it's a competition for funds.

[00:10:06] You have an idea.

[00:10:07] I have an idea.

[00:10:08] We want to start a business.

[00:10:09] Somebody wants to expand a business, et cetera.

[00:10:12] And we borrow money, and there's a healthy market.

[00:10:15] And interest rates go up because there's demand for money.

[00:10:19] That's something that's associated with a strong economy.

[00:10:22] I'm not talking about 20% interest rates, Volcker, and fighting inflation.

[00:10:25] I'm talking about a healthy market, 5%, 6%, 7%, 8% interest rates.

[00:10:29] That's something you associate with an expanding economy.

[00:10:32] If the economy is growing 3% a year and you're borrowing at 5% a year but using leverage, so we've got to factor in leverage, that's a healthy market.

[00:10:45] 0% interest rate says there's nothing to invest in.

[00:10:48] There's nothing that's going to make any money and nobody wants to borrow.

[00:10:51] Well, there's two kinds of competition, though, for money, right?

[00:10:54] There's the borrower, but there's also the lender.

[00:10:57] So there's so much money in private equity that sometimes the private equity firms are competing to get the good deal, to get any deal, so they're willing to keep interest rates low for borrowers.

[00:11:08] Well, yeah, but you're right.

[00:11:10] But they have a different business model.

[00:11:11] They're not borrowing that much unless it's like an LBO-type situation.

[00:11:16] But that's equity.

[00:11:18] I mean, they're using investment.

[00:11:21] And they're trying to find startups.

[00:11:24] They probably think a little bit more of the venture capital model, but they're trying to find startups that are going to pay off 20 times or whatever.

[00:11:32] You can make a lot of money doing that, but that's not normal business.

[00:11:36] That's not five million dry cleaners and pizza parlors and hairdressers that can expand the business, which, by the way, half of jobs come from small businesses.

[00:11:44] So I wouldn't disparage.

[00:11:48] I'm not saying you have, but I wouldn't disparage that side of the economy.

[00:11:51] But getting back to banking, I talked to Ben Bernanke about this because before he got to be a central banker, and I think he was a pretty bad one, he was nice to me, but a little bit arrogant.

[00:12:06] But he made his academic chops as the greatest scholar of the Great Depression since Milton Friedman and Anna Schwartz.

[00:12:14] So in the 80s, he published a lot of research on the Great Depression, and I read it, and I read his book on it.

[00:12:23] And it was kind of interesting because the conventional wisdom is, oh, the Great Depression was caused by the gold standard because we were on a gold standard, and we couldn't expand the money supply, and we couldn't do what we needed to do to stimulate the economy.

[00:12:35] All the things that you and I have been talking about right now.

[00:12:38] And what Bernanke showed, and it was actually brilliant research that he really had to dig.

[00:12:43] At the time, and I'm talking about the late 1920s, early 1930s, at the time, the law said that base money, what the Fed calls M0, could not be more than 250% of the value of gold held by the government, well, at the time it was held by the Federal Reserve, later the Treasury.

[00:13:01] So take the amount of gold, and it was $20.67 an ounce, compute that number, and M0 could be two and a half times that number.

[00:13:10] So there was a ceiling in M0, but in fact, the number went over 100%.

[00:13:18] So I said, yeah, Mr. Chairman, I read your research, and it looked to me like gold was never a constraint on the money supply.

[00:13:26] The money supply was about 100% of what the law allowed.

[00:13:29] It could have more than doubled and still have been within bounds.

[00:13:33] I said, do I understand that correctly?

[00:13:34] And he said, yes, you do.

[00:13:35] So here's Bernanke telling me that gold was not a problem in the Great Depression.

[00:13:40] What was the problem?

[00:13:42] It's exactly what you said, James.

[00:13:43] Nobody wanted to borrow and nobody wanted to lend.

[00:13:46] Borrowers didn't want to borrow because business conditions were terrible and unemployment was high and businesses were failing, et cetera.

[00:13:54] And bankers didn't want to lend because businesses were failing and the credit risk was too high.

[00:14:00] So neither side, and you're right, there are two sides, borrower and lender through bank intermediation.

[00:14:06] You're exactly right.

[00:14:07] But if neither side wants to dance, then nobody's dancing.

[00:14:11] So what changed that?

[00:14:13] Well, what changed it was there were dual narratives in the course of the Great Depression.

[00:14:18] If you had money, I mean, yeah, unemployment was 25%.

[00:14:21] At worst, thousands of banks fell.

[00:14:24] The stock market fell 83% from October 1929.

[00:14:29] The bottom was June 1933.

[00:14:32] Over that period of time, it did fall.

[00:14:35] Sorry, 1932 was the bottom, and it fell 83%.

[00:14:40] But some people still had a lot of money.

[00:14:42] Not everybody was broke.

[00:14:43] But they didn't want to spend it.

[00:14:45] Ostentation was bad.

[00:14:48] Even if you had money, you didn't want to be the guy.

[00:14:50] You didn't want to be the big spender with a new car and all that stuff.

[00:14:54] It was almost like it was an embarrassment and you didn't do it.

[00:14:57] But 1933, FDR turned that around.

[00:15:01] Happy days are here again.

[00:15:03] Devaluing gold, devaluing the dollar against gold.

[00:15:06] That was a 75% devaluation of the dollar, if you think of it that way.

[00:15:10] The gold went from $20 an ounce to $35 an ounce.

[00:15:13] That's a 75% increase in the price of gold, which means the dollar devaluation was the inverse of that.

[00:15:20] The stock market took off.

[00:15:21] 1933, 34 were very good years.

[00:15:25] I think 1933 was a 100% move up.

[00:15:27] Correct.

[00:15:28] But that's the point.

[00:15:29] But the psychology changed.

[00:15:30] All of a sudden, it was okay to spend money and have a big party and hire people, and the economy got going.

[00:15:36] So one should not underestimate that psychological effect.

[00:15:42] The narrative changed, as outlined in the book I'm referring to, what's called narrative economics.

[00:15:47] So we could have something similar could happen today.

[00:15:50] But the Fed has surprisingly little to do with it.

[00:15:55] Commercial banks are the driver.

[00:15:57] You talk about money creation.

[00:15:58] How does the Fed create money?

[00:16:00] Well, they buy U.S. government security.

[00:16:03] So they call Goldman Sachs or cities, say, offer me 10-year notes, offer me 5-year notes.

[00:16:07] They offer them, okay, done.

[00:16:09] Goldman sends the securities to the Fed, and the Fed pays for it with money that comes out of thin air.

[00:16:16] I mean, that's not an overstatement.

[00:16:18] That money does come out of thin air, and they send the money to Goldman Sachs.

[00:16:21] But the question is, what does Goldman do with the money?

[00:16:24] They give it back to the Fed in the form of excess reserves.

[00:16:27] So all that's happening is that both sides of the balance sheet are expanding.

[00:16:30] The asset side, you're piling up treasuries.

[00:16:33] And the liability side, you're piling up excess reserves.

[00:16:36] But the money doesn't go anywhere.

[00:16:37] There's no velocity.

[00:16:39] That's not being lent and spent.

[00:16:41] It's not stimulating the economy.

[00:16:43] So the question is, where does the money come from that does potentially stimulate the economy?

[00:16:48] The answer is M1 and M2.

[00:16:50] It's commercial banks who also create money out of thin air, but they do it by giving you and me a loan and crediting our checking accounts, not by buying government securities.

[00:17:02] But do they take the money from the Fed and finally start lending it, or that's not part of the equation?

[00:17:07] They don't care about the Fed.

[00:17:09] It doesn't matter.

[00:17:10] I mean, there are reserve requirements, but as the name excess reserves implies, we got reserves to the moon.

[00:17:18] Reserves are not a constraint.

[00:17:20] Capital is not a constraint.

[00:17:21] Not now.

[00:17:22] I mean, it could be theoretically, but not now.

[00:17:25] So commercial banks and euro dollar banks in particular, the big banks, in other words, operating through the euro dollar market, can create all the money they want.

[00:17:36] The question is, are they?

[00:17:38] And the answer is no.

[00:17:39] They're actually reducing balance sheets, restricting M2 and M1, kind of in a way that resembles the Great Depression because they're very wary of borrowers.

[00:17:50] They're very wary of credit risk.

[00:17:52] And on the other side, borrowers don't want to borrow because they're concerned about leverage in a world that might be going into a recession.

[00:17:58] So we're seeing a replay of that.

[00:18:01] And just to get back to Trump for a second, we may have to weather a six to nine month recession before we get to maybe two to four years of high growth.

[00:18:12] In that respect, it does resemble the Reagan administration potentially.

[00:18:22] Take a quick break.

[00:18:23] If you like this episode, I'd really, really appreciate it.

[00:18:27] It means so much to me.

[00:18:28] Please share it with your friends and subscribe to the podcast.

[00:18:31] Email me at Alcatra at gmail.com and tell me why you subscribed.

[00:18:35] Thanks.

[00:18:46] Well, let me ask, like in 1933, 34, when the market's going up 100%, why didn't that change in narrative give enough optimism so banks would start lending?

[00:18:56] Because the Fed screwed it up again in 1936.

[00:18:59] We had back – you can think of the Great Depression.

[00:19:02] If you wanted to bracket it, say 1929 to 1940, and I think that's a good way to describe it.

[00:19:07] It wasn't one long 12-year recession.

[00:19:12] It was two distinct recessions.

[00:19:15] 1929 and 1933, severe.

[00:19:19] 1933, 1936.

[00:19:20] Happy days are here again.

[00:19:21] The economy boomed.

[00:19:22] The stock market went way up.

[00:19:23] You're exactly right.

[00:19:24] But 1936, we hit a wall again.

[00:19:28] It had a second very severe recession that we didn't get out of until 1938.

[00:19:33] And then the war spending, lend-lease and all that stuff kicked in.

[00:19:37] So there were two distinct recessions.

[00:19:39] Maybe another way to frame the question is, hey, we got out of the Great Depression – we got out of the first recession of the Great Depression in 1933.

[00:19:49] Why didn't we keep going?

[00:19:50] Why did we hit a wall again in 1936?

[00:19:53] The answer is that the government was – the Fed screwed up again.

[00:19:56] I mean, the Fed never has a success, but they have a long string of failures.

[00:20:00] And they – Roosevelt and the Fed together, the Fed tightened money supply.

[00:20:05] Roosevelt tried to trim fiscal policy and threw us into a second recession, also severe.

[00:20:13] And then it was only World War II that got us out of that.

[00:20:16] Then, you know, as I say, the rest is history.

[00:20:19] And what was the Fed's reasoning for tightening in 1936?

[00:20:23] They worried about inflation.

[00:20:25] You know, it's the same thing, which brings us to the subject of inflation.

[00:20:32] Why was the Fed tightening – raising rates, in other words, starting in 2015?

[00:20:38] I mean, the 2015 rate hike, January – sorry, December 2015, when Yellen raised rates for the first time since, I believe it was 2006 or earlier.

[00:20:48] Because they cut rates and kept them at zero, but they had been cutting before that.

[00:20:52] So that was like nine years.

[00:20:55] She didn't even want to do it then, but they felt – they sort of said the year before that they would do it.

[00:20:59] So it was almost like an embarrassment.

[00:21:01] Gee, we got all the way to December.

[00:21:03] We haven't raised rates.

[00:21:04] So raise them, you know, a quarter point just to show something.

[00:21:07] But the second hike in that series – the series went on until 2019.

[00:21:13] But the second hike in that series was December 2016.

[00:21:17] They went a full year without a second rate hike.

[00:21:21] And then they – yeah, then they got on a path after 2016 and kind of took it up from there.

[00:21:25] But we were still in a severe – well, technically it was not a recession, but it was a borderline recession.

[00:21:31] But what it really was was a depression.

[00:21:34] It was low growth, exactly what we're talking about.

[00:21:38] So then Powell started raising rates.

[00:21:41] Well, Yellen started.

[00:21:42] Powell continued it through 2017, 2018, tiny increments.

[00:21:48] But then you had a repo freakout, a car crash, you know, whatever, in 2019 and then COVID.

[00:21:59] And then when COVID hit, back down to zero.

[00:22:01] So we were back where we started 10 years earlier or 11 years earlier at that point.

[00:22:07] And then now we're – well, now we're in a cutting cycle.

[00:22:10] But then it was – they didn't raise – after hitting the bottom in, I believe, March 2020,

[00:22:16] the stock market fell 30% in one month.

[00:22:19] Powell kept rates at zero again.

[00:22:22] And then they started hiking.

[00:22:24] Not sure – oh, March 2022 was the beginning of the next tightening cycle, which ended in June 2023.

[00:22:33] Then they were in pause.

[00:22:34] Now they're cutting again.

[00:22:36] But they're too late.

[00:22:37] I mean, if we're in a recession or close to a recession, we can talk about that, cutting rates is not going to help.

[00:22:45] I mean, the Fed is almost irrelevant.

[00:22:47] They put on a good show, smoke and mirrors.

[00:22:50] We will have a press conference, you know, now with this November meeting.

[00:22:55] But it doesn't really matter.

[00:22:57] What matters is our commercial banks, investor psychology, consumer psychology, and whether the banks have an appetite for credit risk.

[00:23:05] But when borrowers and lenders both walk away from the table, that's what causes a recession, not the Fed.

[00:23:12] And what are usually the catalysts of – like 2009, 2010, I kind of think the –

[00:23:19] you know, they experimented a little bit with mark-to-market instead of mark-to-value.

[00:23:24] And it seems like when they ended the mark-to-market in March of 2009, that kind of – the stock market took off and people got excited again.

[00:23:34] You know, we got out of the Great Recession.

[00:23:37] You know, and as you say, there was low growth after that.

[00:23:40] But still, we were – the stock market went up and we weren't in the same – banks stopped failing.

[00:23:45] People stopped, you know, losing their homes.

[00:23:47] That Great Recession seemed to be bracketed completely by changing the way banks mark assets on their balance sheet.

[00:23:54] And when they got rid of the mark-to-market requirement, things took off.

[00:24:00] What would be a catalyst now that would get people lending?

[00:24:04] Well, first of all, you're exactly right about mark-to-market.

[00:24:07] It was March 8th or 9th.

[00:24:09] I forget the exact day, but it's called March 9th, give or take a day, 2009.

[00:24:16] Yeah, March 9th, exactly.

[00:24:17] You could set your watch by it.

[00:24:19] In other words, when it was FASB, Financial Accounting Standards.

[00:24:22] It's the bottom of the market.

[00:24:23] When FASB got rid of the mark-to-market rule, the stock market took off that day.

[00:24:28] And to his credit, Mark Haynes, who passed away, but he was the anchor on CNBC Squawk Box at the time or whatever the show was, called it.

[00:24:38] And, you know, Aaron Burnett, who used to be a good journalist, gave him credit.

[00:24:42] They called it the Hanes Bottom.

[00:24:44] But the bottom line was the market turned on a dime.

[00:24:47] But that was the reason.

[00:24:49] Quick aside, a good friend of mine was a board member of FASB at the time.

[00:24:53] And he was the hawk on mark-to-market.

[00:24:57] He insisted on mark-to-market.

[00:24:59] He said, you know, if you don't do that, the books are cooked.

[00:25:02] You don't really know what's going on, et cetera, et cetera.

[00:25:04] But he was basically run off the road and then later resigned from the board.

[00:25:09] But that was the reason, which was the board said, no, we've got to go back to, you know, our phony baloney accounting, historic cost accounting.

[00:25:18] Which meant that you didn't have to – you could have real mark-to-market losses, but you didn't have to run it through the income statement.

[00:25:26] You might have to run it through the balance sheet, but not the income statement.

[00:25:29] And you make the point in the book, actually, that they – in a weird way, I'm going to make the link with, you know, SVP, Silicon Valley Bank, and Silvergate by the Fed saying, hey, your bonds are good.

[00:25:44] Right.

[00:25:45] Even if they're 30% down in value, don't worry.

[00:25:49] Just we'll take care of you.

[00:25:50] Like even if you need the money, just give us your bonds.

[00:25:54] We'll assume they're all good.

[00:25:55] Correct.

[00:25:56] And we'll give you the money.

[00:25:57] They kind of like made it reality that mark-to-model becomes mark-to-market.

[00:26:02] That is exactly right.

[00:26:04] Those – obviously, interest rates in the years prior to that had gone from, you know, zero, but, you know, say 1%, 2% up to 4%.

[00:26:12] But, you know, as you know, the volatility of treasury bonds is inverse to the maturity.

[00:26:18] So 10-year notes were down 70%.

[00:26:20] You bought them at auction for, you know, for par, 100 cents on the dollar.

[00:26:25] They were worth 70, you know, 70, 75 maybe.

[00:26:28] And there were billions of dollars, scores of billions of dollars in mark-to-market losses on the books of the banks that they didn't have to take.

[00:26:36] But the problem was there's – not to get too in the weeds, but there are two kinds of accounting for bonds.

[00:26:43] We're talking about treasury securities on the books of a bank.

[00:26:46] You can have HTM, hold to maturity.

[00:26:49] So I bought them, but it's a 10-year note.

[00:26:51] I'm going to hold it for 10 years.

[00:26:52] And then you have available for sale, which means you can trade them by himself.

[00:26:56] The available for sale always had to be mark-to-market, but the hold to maturity did not.

[00:27:02] Unless you sold them.

[00:27:02] And the problem is if there's a run on the bank.

[00:27:04] If there's a run on the banks, now you have to sell the hold to maturity account to have the cash to pay the depositors.

[00:27:11] And once you do that, the whole thing gets mark-to-market.

[00:27:14] So it's just a pyramid that implodes.

[00:27:16] So you had a lot of phony accounting to begin with, but you're exactly right.

[00:27:20] In a liquidity crisis, you don't have the luxury of sitting on the hold to maturity account.

[00:27:25] You have to sell it to get cash to pay the depositors.

[00:27:27] Silicon Valley Bank, 97% of their assets were not FDIC insured.

[00:27:35] They were beyond the limits.

[00:27:37] The insurance limit was $250,000 per account.

[00:27:41] I'm sorry.

[00:27:41] Cisco had, I think, $3 billion.

[00:27:44] There were crypto exchanges.

[00:27:45] I'm not digging crypto.

[00:27:46] But there were crypto exchanges.

[00:27:47] They get dollars.

[00:27:48] They were on deposits at Silicon Valley Bank.

[00:27:50] And fives and tens of billions.

[00:27:52] There were also who knows how many startups.

[00:27:56] And they might have a $5 million account where they had done like an A round or a venture round or whatever.

[00:28:02] And I called it crybaby weekend, that weekend between March 9th and March 11th, 2023.

[00:28:12] But here's what happened.

[00:28:15] There was a run on the bank.

[00:28:18] As I say, almost all the deposits were uninsured.

[00:28:22] And Goldman Sachs came up with a salvage plan.

[00:28:25] Basically, they said, okay, we're going to take the hit.

[00:28:29] Take the hit on the books.

[00:28:30] But we're going to issue an equivalent amount of new stock.

[00:28:33] You know, it'll be an attractive price.

[00:28:34] That'll fill the hole in the balance sheet.

[00:28:36] We'll stabilize this whole thing.

[00:28:38] We'll move forward.

[00:28:39] The problem was, I mean, there's always enough stupidity to go around.

[00:28:42] But Silicon Valley Bank never, they were slow to sign the NDAs for the potential investors that Goldman had lined up.

[00:28:50] So the investors, banks and others, General Atlantic was, you know them, they were in the lead.

[00:28:55] They said, we can't do the due diligence.

[00:28:58] And they backed away.

[00:28:59] The stock price crashed.

[00:29:00] And then Goldman walked away from the deal, rightly so, because the whole thing had imploded.

[00:29:05] But the government did two things.

[00:29:06] One of them was exactly what you described, James, which is the, sorry, just to set the frame.

[00:29:12] Friday night, when that bank was shut down by the FDIC, they issued a press release.

[00:29:17] And what they said, and this is fascinating, this goes back to the G20 meeting in Brisbane, Australia in 2014.

[00:29:26] So what was going on in Brisbane?

[00:29:27] So we were coming out of the global financial crisis, 2008, 2009.

[00:29:32] Growth was slow, but it was back.

[00:29:34] But there was enormous popular unrest.

[00:29:36] People like, hey, you know, Jamie Dimon, all these guys, they kept their jobs.

[00:29:40] They got their bonuses.

[00:29:41] They're making billions.

[00:29:43] There was no punishment, no accountability.

[00:29:45] But meanwhile, we lost our business and we're unemployed, et cetera, et cetera.

[00:29:48] And the political leaders took note and they said, okay, from now on, no more bailouts.

[00:29:54] The new policy is going to be bail-in.

[00:29:56] And what does bail-in mean?

[00:29:58] It means that when an institution fails, you identify the hole in the balance sheet.

[00:30:04] Like, okay, you're insolvent.

[00:30:05] You have negative net worth.

[00:30:07] How do we fill that hole?

[00:30:08] First hit is equity.

[00:30:10] Equity goes to zero.

[00:30:11] You're done.

[00:30:12] Next hit are depositors.

[00:30:17] Next hit are creditors, lenders, which can be secured or not secured.

[00:30:22] That makes a difference.

[00:30:24] But you're going to take a haircut.

[00:30:26] Is it 20%, 30%?

[00:30:28] Don't know.

[00:30:29] But you're going to take a haircut on your bonds.

[00:30:30] And then we'll convert you to equity, which is a typical restructuring.

[00:30:34] And the third category were depositors.

[00:30:37] They said, we're going to guarantee the deposit, $250,000 in the FDIC.

[00:30:42] It's 100,000 euros in the eurozone.

[00:30:45] But that's it.

[00:30:46] And if you have a deposit over and above that, you're getting a due bill.

[00:30:50] You're getting a certificate.

[00:30:51] And it might be worth something, but we'll get back to you.

[00:30:54] So equity gets wiped out.

[00:30:56] Bondholders take a haircut.

[00:30:58] And depositors get the insured amount, but not more.

[00:31:01] And they get a chit for the difference.

[00:31:03] And we'll get back to you.

[00:31:04] And that's what the FDIC did in 2023.

[00:31:08] They actually lived up to the bail-in rules of Brisbane from 2014.

[00:31:12] It was the first time that there had been a real-world case of that agreement.

[00:31:17] It lasted 24 hours.

[00:31:19] Then you had what I call crybaby weekend, where Bill Ackman and all these guys,

[00:31:24] they're running to the White House.

[00:31:25] And they're saying, oh, you don't understand.

[00:31:28] All these startups, they're losing their working capital.

[00:31:31] They're not going to be able to pay the rent.

[00:31:32] They're going to have to lay everybody off.

[00:31:33] There's going to be a recession in Silicon Valley, et cetera.

[00:31:37] Leave aside the fact that 90% of those firms fail anyway.

[00:31:41] I mean, they were kind of ignoring that.

[00:31:42] But they were like, yeah, we've got to save.

[00:31:44] And the White House heard them.

[00:31:46] And then so Sunday night at 6 o'clock, before the markets open the next day,

[00:31:51] of course, in exactly 48 hours after the first thing, they said, just kidding.

[00:31:56] Deposits are insured.

[00:31:58] Every deposit is insured.

[00:31:59] It doesn't matter.

[00:32:00] $3 billion, Cisco.

[00:32:01] Boom, you're covered.

[00:32:02] And to your point, every bank in the system, every member bank of the Federal Reserve System

[00:32:07] was given a facility.

[00:32:09] You could deliver your bonds, your treasury bonds, to the Fed, basically.

[00:32:16] And you would get back cash equal to the par value of the bonds, even if they were underwater.

[00:32:22] So the bonds were 70, but you're getting 100.

[00:32:24] It's a one-year loan, practically zero interest.

[00:32:28] But with a wink and a nod, it was like, hey, if the year's up, we'll extend it another year.

[00:32:33] That didn't actually happen because things had calmed down by then.

[00:32:37] And I looked at that.

[00:32:38] I understood all.

[00:32:38] I followed the meeting in Brisbane, for that matter.

[00:32:41] But I thought, okay, they just guaranteed every deposit in the system, regardless of insurance limits.

[00:32:48] And they just guaranteed every bond in the system at par, no matter how underwater it was.

[00:32:55] I thought, at the time, I had a 15-year-old car with 225,000 miles on it.

[00:32:59] And I thought, will you give me the market value, what I pay for my car?

[00:33:04] I'll drop off the keys.

[00:33:05] Just give me the original value.

[00:33:23] But I kind of agreed a little bit with what they do because it's not like the U.S. is going to default on these T-bills, for instance, the bonds that the banks held.

[00:33:32] Yes, in the market, they were 70% down as a loss.

[00:33:37] But you know the trust in the U.S. is there.

[00:33:41] So the bonds are going to pay off in the long run.

[00:33:43] And this was just like a panic, a run on the banks that forced them to mark tomorrow.

[00:33:48] That forced them to sell these bonds.

[00:33:50] And given what the Fed did, the damage was contained.

[00:33:55] I did know a lot of startups that were viable startups, but they simply just had their money in the bank there.

[00:34:00] It felt like it was an okay solution.

[00:34:03] Well, first of all, it worked.

[00:34:05] I mean, you're right about that.

[00:34:06] And you're right that no one who was questioning the credit of the United States Treasury may come to that.

[00:34:11] But not at the time.

[00:34:13] And, yeah, if the Fed can hold those bonds indefinitely, they'll pay off at maturity, 100 cents on the dollar.

[00:34:18] And, you know, the Fed can hold them for 10 years.

[00:34:21] Didn't have to, but they could.

[00:34:22] So you're right about that.

[00:34:24] But my thought was three distinct thoughts.

[00:34:28] Number one is you just guaranteed every bond in the system at par.

[00:34:33] And you just guaranteed every deposit in the system regardless of the insurance amount.

[00:34:38] What else you got?

[00:34:40] Meaning when the next panic hits, having already done that, the two policies we just talked about, they're still in place.

[00:34:48] There's been no walk back or rescission or termination of any of those loans were repaid, by the way.

[00:34:55] But that facility is still in place.

[00:34:58] And the removal of the ceiling on the deposit insurance is still in place.

[00:35:03] What are you going to do the next time?

[00:35:05] What else are you going to do?

[00:35:06] Well, the only thing you can do in that world is nationalize the banks.

[00:35:09] Well, I was just going to say, like, and that's an ugly word, nationalize.

[00:35:12] It makes you think, oh, this is like a banana republic, which I know we potentially could, you in particular could potentially say what we are.

[00:35:20] But it did, again, seem like a solution that worked.

[00:35:26] And if the Federal Reserve had, for instance, taken over Silicon Valley Bank instead of saying, okay, you're zero, which, okay, equity holders are zero.

[00:35:34] Maybe the lenders are close to zero.

[00:35:36] But at least for the depositors, hey, we've got the money to pay you back.

[00:35:41] Your deposits are good.

[00:35:42] So there isn't quite the same moral hazard, like let's say Greenspan cutting rates in 1997.

[00:35:47] There isn't the same kind of like moral hazard risk that happens when you're just trying to boost the stock market.

[00:35:53] Well, my frame of reference for what we're talking about, and I lived through a more up-to-date version of this in 1998 with the bailout of long-term capital.

[00:36:03] Now, I don't want to spend a lot of time on that.

[00:36:05] There are books written on that, but I was their chief lawyer.

[00:36:09] I negotiated the bailout.

[00:36:11] It came within hours of closing every market in the world.

[00:36:16] But we got the $4 billion in the door, and the press release went out, and things stabilized, and all that good stuff.

[00:36:21] You know what I'm saying?

[00:36:22] You get a plane, you get four engines in flames, and you're from the runway, and somehow it lands on the belly and doesn't crash.

[00:36:27] But that's about how hairy it was.

[00:36:29] But when this first came out, we called the Fed.

[00:36:34] We at Long-Term Capital Management called the Fed, the New York Fed, to tell them what was going on.

[00:36:38] We were just being good citizens.

[00:36:40] We were not asking for a bailout.

[00:36:42] We did not expect a bailout.

[00:36:44] We're like, nobody's going to bail out a hedge fund.

[00:36:45] We're just too bad for us.

[00:36:47] But we just thought we'd be good citizens and call them.

[00:36:49] But they ended up with a rescue.

[00:36:52] Now, Wall Street took it over, a separate issue, took a year to unwind, a separate issue.

[00:36:58] But that's what happened.

[00:36:59] But we were as surprised as anyone that they sent us a term sheet.

[00:37:03] We went ahead and did the deal.

[00:37:04] But our model, and I was the lead, but there were hundreds of lawyers about.

[00:37:09] Our model was the panic of 1907 because we were not a bank.

[00:37:14] I mean, I talked to David Mullins later.

[00:37:16] David passed away, sadly, but he was Assistant Secretary of the Treasury for Federal Finance,

[00:37:23] led the Brady Commission on figuring out the fiasco in 1987, and later Vice Chairman of the Fed.

[00:37:30] He was a good friend, very dry sense of humor.

[00:37:33] But he said to me one time during the unwind, he said, Jim, we only made one mistake.

[00:37:36] I said, what was that, David?

[00:37:37] He goes, we should have been a bank because we couldn't actually bail out a hedge fund.

[00:37:42] You just kind of finesse it.

[00:37:44] But our model was the panic of 1907.

[00:37:46] Now, what happened there?

[00:37:48] 1906, you have the San Francisco earthquake.

[00:37:50] We all know how bad that was.

[00:37:52] Things happened a little more slowly at the time.

[00:37:53] But the insurance companies had to sell stocks and bonds to get cash to pay the claims.

[00:38:00] And that showed up on the East Coast.

[00:38:02] So San Francisco earthquake with the financial echo was in New York, where they were dumping

[00:38:06] stocks and bonds, as I say, to raise cash.

[00:38:09] And there was some chicanery going on.

[00:38:10] There were some crooks and all that.

[00:38:11] There always are.

[00:38:13] But there was the Knickerbocker Trust.

[00:38:15] And a run on the banks started.

[00:38:17] And it got worse and it got worse.

[00:38:19] And people were lined up.

[00:38:20] And it looked like a sequential collapse of the banks.

[00:38:22] There was no Fed, by the way.

[00:38:24] Of course, the Fed came along in 1913.

[00:38:26] So what happened?

[00:38:29] Pierpont Morgan, the J.P. Morgan, but they call him Pierpont.

[00:38:33] Pierpont Morgan convened a meeting at his townhouse at Mary Hill with all the top bankers in the

[00:38:40] city.

[00:38:41] And he sent Benjamin Strong, who later became president of the New York Fed and others.

[00:38:46] He said, go look at the books of all these banks.

[00:38:48] And it was a finite list.

[00:38:50] And they could look at them pretty quickly.

[00:38:52] And they basically did triage.

[00:38:55] You know, triage on a battlefield is you come and wound it like some are like, OK, you're

[00:38:59] wounded too bad, but you're going to be fine.

[00:39:01] Some are, sorry, lost cause.

[00:39:04] You're going to die.

[00:39:05] And there's a middle case where you're pretty badly wounded, but you will respond to treatment.

[00:39:10] And that's where they devote all the resources.

[00:39:12] So the lightly wounded, you're on your own.

[00:39:15] The dying, sorry.

[00:39:16] But the middle case is where they devote the resources.

[00:39:20] Pierpont did the same thing.

[00:39:22] The banks were put in three categories.

[00:39:24] Some of them was like, OK, we're all in trouble here.

[00:39:26] But you're solvent.

[00:39:27] You're liquid.

[00:39:28] You have the resources.

[00:39:29] You're going to be fine.

[00:39:30] There was another case where you're insolvent.

[00:39:33] You're illiquid.

[00:39:34] We're going to let you die.

[00:39:36] But there was a middle case where they were solvent on a market-to-market basis, but illiquid.

[00:39:42] They needed cash.

[00:39:43] And so what Pierpont said is the guys who are healthy lend to the guys who need the cash

[00:39:48] and the rest of you fail.

[00:39:50] That was financial triage.

[00:39:53] And just a quick footnote, he took the bankers and locked.

[00:39:56] He had his butler lock them in the library.

[00:39:58] And so I'm not letting you out.

[00:39:59] This all reminds me of Hank Paulson locking the banks in in 2008 and forcing them to take $20 billion each from the government.

[00:40:08] Well, right.

[00:40:09] But we all have the same model, which was the panic of 1907.

[00:40:12] I mean, you're exactly right.

[00:40:13] But I'm sure Paulson knows about 1907.

[00:40:16] And we certainly did.

[00:40:17] But the point – and by the way, that's what happened at LTCM at the Fed.

[00:40:23] We don't have time for all the vignettes, but Bear Stearns was the outlier there.

[00:40:30] And Lehman as well, right?

[00:40:31] Yeah.

[00:40:32] Well, Lehman was always the weak link.

[00:40:34] But he couldn't put up the $250 million.

[00:40:38] The deal was 16 banks, $250 million each, $4 billion, all cash, done.

[00:40:44] No due diligence, by the way.

[00:40:45] This was all done in 72 hours.

[00:40:47] Lehman said, we can't do $250 million.

[00:40:49] We'll do $100 million.

[00:40:50] And okay.

[00:40:52] I mean, Lehman was always the weak link.

[00:40:53] Always the weak link.

[00:40:54] It was no surprise what happened in 2008.

[00:40:56] But – and then Bear Stearns said, no, we're not in.

[00:41:02] And then so Goldman City and Solomon – sorry, Solomon was City at the time.

[00:41:09] And then Morgan Stanley stepped up.

[00:41:12] They put more than their share.

[00:41:14] We got to $3.6 billion, and we got the deal done.

[00:41:17] But yeah, you're right.

[00:41:18] Lehman was a weak link.

[00:41:20] I can tell you that when Bear Stearns failed in 2009 – sorry, 2008, no tears were shed.

[00:41:26] Because everyone remembered how they stabbed Wall Street in the back in 1998.

[00:41:31] But just to kind of finish up with 1907, so he had his butler, locked him in the library,

[00:41:38] said, I'm not letting you out until you have a plan.

[00:41:39] They stayed up all night.

[00:41:40] They did.

[00:41:40] They came out.

[00:41:41] They implemented the plan.

[00:41:42] It was on exactly the lines I described.

[00:41:45] And that was the origin of the Fed.

[00:41:47] Because the other bankers looked at each other and said, okay, that was a close call.

[00:41:50] But Pierpont's not going to live forever.

[00:41:53] And who's going to do it the next time?

[00:41:55] We have no idea.

[00:41:56] So we need a lender of last resort, in effect, backed by the U.S. government.

[00:42:02] And it took six years until 1913.

[00:42:05] But they got it done.

[00:42:08] The last rank was Woodrow Wilson got elected.

[00:42:10] They were counting on Taft to sign the legislation.

[00:42:12] But Wilson went along.

[00:42:14] I love Wilson.

[00:42:15] He gave us the income tax, the Federal Reserve, and World War I.

[00:42:18] And he was a proto-fascist.

[00:42:21] I mean, Mussolini, who was – he sort of ridiculed as a buffoon, but he was actually a very good writer and a pretty good left-wing intellectual.

[00:42:29] He said that Wilson was our prototype.

[00:42:32] And we were launching fascism in Italy in the early 1920s.

[00:42:36] We looked at Woodrow Wilson and the War Protection Board.

[00:42:39] He nationalized all the industries and the railroads.

[00:42:42] Fascism is not totalitarianism.

[00:42:46] It's a partnership of the government and the big corporations.

[00:42:49] They're working together.

[00:42:50] That's what fascism really is.

[00:42:53] And what does that mean?

[00:42:56] Separate that from socialism because they're closely related, I feel.

[00:43:00] People don't understand how close fascism and socialism are in terms of definition.

[00:43:04] Well, socialism is a euphemism for communism, but socialism, trending towards communism, means there is no private sector.

[00:43:12] Everything's nationalized.

[00:43:13] Everything's a state sector, and so it's top-down.

[00:43:16] Fascism is different.

[00:43:17] Fascism, you can have a corporation.

[00:43:19] You can have private ownership.

[00:43:21] But you're going to be under the thumb of the government, and the CEOs and the government ministers are going to work together to implement the plan.

[00:43:29] Now, behind that, I guess, is the threat that if you're not with the program, maybe something bad will happen to you.

[00:43:33] I'm not saying it's all sweetness and light, but it is a corporate government combination, consortium, whatever you want to call it, at least in the economic front.

[00:43:46] The political aspects, there's not too much free speech, and it gets worse.

[00:43:51] But in the economic sense, fascism is best understood as corporations and government working hand in hand, not too different from what we have in the United States today.

[00:44:02] Right.

[00:44:02] Right.

[00:44:03] What's an example that tells you, oh, this is a fascist arrangement?

[00:44:07] Facebook, Google, look what happened in 2020 during COVID.

[00:44:13] Now, I wrote a book on the pandemic.

[00:44:17] It was an economic book.

[00:44:19] That's my lane.

[00:44:20] It was called The New Great Depression, but half of that book was about the pandemic.

[00:44:24] Now, here's the thing, James.

[00:44:26] That book was published in January 2021.

[00:44:30] But there were all kinds of bottlenecks in the, believe it or not, in the publishing business.

[00:44:34] They couldn't get ink, paper, you know, boxes.

[00:44:38] You know, that literally there were delays in 2020.

[00:44:40] It was an election year, so my book was not an election book, so I got bumped a little bit.

[00:44:44] But that book was written.

[00:44:45] And I was done writing in the summer of 2020.

[00:44:49] And I talked about D.A. Henderson, not a household name, but D.A. Henderson is a single individual credited with eradicating smallpox on the planet Earth.

[00:44:59] Of course, it was a team and, you know, lots of agencies.

[00:45:03] But he's the guy, greatest immunologist since Louis Pasteur.

[00:45:07] He won the Presidential Medal of Freedom.

[00:45:10] He was later dean of the Bloomberg Johns Hopkins School of Public Health.

[00:45:16] So, again, no finer immunologist.

[00:45:19] He wrote a paper in 2006 because, if you recall, there was an avian flu going around in 2005.

[00:45:26] And George W. Bush was very concerned about it.

[00:45:28] So he kind of mobilized academic and medical resources.

[00:45:32] He said, what are we going to do about this avian flu?

[00:45:34] Again, it was small beer compared to COVID.

[00:45:37] But Henderson wrote a paper published in 2006 with some colleagues.

[00:45:43] And he said categorically, lockdowns do not work.

[00:45:47] They don't work.

[00:45:48] And here's why.

[00:45:49] And he kind of went on to explain it both in terms of epidemiology and sociology and human behavior.

[00:45:55] You can't basically keep people, you know, locked in their rooms for long.

[00:45:59] My point is, in 2020, Fauci, who I hope they keep a cell warm for him because that's where he belongs in my view.

[00:46:10] Fauci locked down the U.S. economy.

[00:46:11] And I fault Trump for letting him do it.

[00:46:13] I mean, I'm not holding Trump to the standard of D.A. Henderson.

[00:46:16] But I would have fired Fauci after the first meeting.

[00:46:19] But Fauci locked down the economy.

[00:46:22] Now, here's my point.

[00:46:24] We had research from the number one guy in 2006 that said lockdowns don't work.

[00:46:30] Why did we lock down the economy in 2020?

[00:46:33] Well, the answer is, and I've been to Wuhan.

[00:46:36] That virus came out of the Wuhan Institute of Virology.

[00:46:39] It was a bioweapons program by the Chinese.

[00:46:42] And it was financed by the United States.

[00:46:44] Fauci put up the money through Peter Danzig and the Echo Health Alliance.

[00:46:48] And that money went to Xi Lin-ji, better known as the Batwoman of Wuhan.

[00:46:52] And that's what they were doing.

[00:46:53] The idea that the Wuhan Institute of Virology happened to be a block from where the outbreak started.

[00:47:00] But one had nothing to do with the other.

[00:47:03] It was a wet market in the pangolin.

[00:47:04] I mean, give me a break.

[00:47:05] That was another CIA kind of promoted narrative.

[00:47:10] But my point being, in the book, I said, you know, the vaccines won't work.

[00:47:16] By the way, I was quoting Jay Bhattacharya, who, you know, he was the Stanford.

[00:47:21] He's an MD and a PhD.

[00:47:24] He's on the faculty of Stanford and the medical school.

[00:47:27] He's not a nobody.

[00:47:28] But he was saying the same thing.

[00:47:29] And he said, you know, SARS-CoV-2, which was, you know, the COVID virus, was the fifth coronavirus.

[00:47:38] The first one being the cold, by the way.

[00:47:41] Do you have a cure for the cold?

[00:47:42] I don't.

[00:47:43] Well, we get them and they're annoying, but they're just endemic.

[00:47:48] And he said, it's extremely unlikely we'll ever have a vaccine for this because we failed in all the other coronaviruses.

[00:47:56] And I quoted that in the book.

[00:47:58] I said there won't be a vaccine.

[00:47:59] And then, of course, Jared Kushner, you know, and the McKinsey gang, you know, keep those guys away from power.

[00:48:06] But Kushner and his McKinsey cronies and Pfizer and Moderna, which had never had a successful product prior to this, came out with a vaccine.

[00:48:16] And so I got a certain amount of ridicule.

[00:48:19] It's, you know, authors of occupational hazard that say, Jim, you said there would never be a vaccine.

[00:48:22] Here's a vaccine.

[00:48:23] No, it's not a vaccine.

[00:48:26] It's an experimental gene modification therapy.

[00:48:30] It appears to mitigate extreme symptoms in people over 60 with comorbidities, including obesity, diabetes, asthma, COPD, et cetera.

[00:48:43] We're, okay, you know, say a couple of aspirin help with the hangover.

[00:48:46] But it was not a vaccine.

[00:48:48] It didn't stop the spread.

[00:48:50] By the way, in the only thousands of interviews, the only time I ever had my mic pulled on live air, I was doing an interview, kind of like we're doing right now.

[00:48:59] It was a radio announcer on a popular talk radio show in Seattle.

[00:49:03] Of course, Seattle, right?

[00:49:04] And I wasn't even talking about the pandemic.

[00:49:08] We were talking about my last book, Sold Out.

[00:49:13] But somehow we got on this topic.

[00:49:15] And I said something like, you know, of course, the vaccines don't work.

[00:49:18] Wait a second.

[00:49:20] Did you just say the vaccines don't work?

[00:49:22] I said, yeah.

[00:49:23] I said, what's your source for that?

[00:49:25] I said, the Johns Hopkins University dashboard shows that 5 million Americans who were double vaxxed and boosted got COVID in December 2022.

[00:49:38] Well, what about just common sense?

[00:49:40] It's like after the vaccine came out, everyone still kept getting COVID.

[00:49:43] Well, that's my point.

[00:49:45] Vaccines are not supposed to work like that.

[00:49:46] Well, that's my point.

[00:49:46] But even just personal anecdotes, like my kids, I never got vaccinated.

[00:49:51] And by the way, the problem with calling it a vaccine is that everybody who didn't want to get vaccinated was suddenly considered anti-vax.

[00:49:58] I am strongly pro-vax, but I was anti the COVID vaccine because people kept saying, oh, you still might get it.

[00:50:07] It's just I didn't really understand what people were saying.

[00:50:10] I got a polio vaccination when I was five years old.

[00:50:13] I still got the little circular scar on my shoulder.

[00:50:16] Yeah.

[00:50:17] Same thing.

[00:50:17] It's not a vaccine.

[00:50:19] That's really the point.

[00:50:19] But you're right, James.

[00:50:21] There's tons of anecdotal evidence, tons of research since.

[00:50:24] But I was getting called out on live air.

[00:50:26] And I said, five million Americans, double vax boosted, got COVID in December 2022.

[00:50:31] Tell me that vaccine works.

[00:50:32] And the host goes, pull the mic.

[00:50:34] Pull the mic.

[00:50:34] And they did.

[00:50:35] They pulled the mic and kicked me off the air.

[00:50:38] It's always something.

[00:50:39] But that's Seattle for you.

[00:50:41] No, but is this an example of fascism in the sense that they were told by the government, hey, we got to keep this message consistent or else.

[00:50:50] Correct.

[00:50:51] And that's right.

[00:50:53] And take it a step further.

[00:50:54] So what happens if you are Jay Bhattacharya or I was just trying to plug a book or whatever or anybody, people with a lot more credentials than I have were talking about this on Facebook or Twitter at the time.

[00:51:06] Now, X, of course, or Google or any of those other channels.

[00:51:11] You got deplatformed.

[00:51:12] You got canceled.

[00:51:15] At best, you got deranked.

[00:51:17] So, you know, good luck.

[00:51:18] You got to scroll through 20 pages of Google search results to find your paper if it was even there.

[00:51:24] And you were accused of disinformation, disinformation, et cetera.

[00:51:28] Well, guess what?

[00:51:28] I mean, yeah, that's all bad enough.

[00:51:30] We kind of know that.

[00:51:30] But the White House and Google and the White House and Facebook were talking on a daily basis and Twitter was worse with Jack Dorsey.

[00:51:40] They had former government officials inside.

[00:51:43] I believe the general counsel of the FBI had become general counsel of, I believe it was Facebook.

[00:51:50] But the point being.

[00:51:51] I think Twitter.

[00:51:52] I think Twitter had its own like weekly meetings of their FBI employees just to discuss stuff.

[00:51:58] Absolutely right.

[00:51:59] And it's all documented.

[00:52:00] This is not conspiracy theory.

[00:52:01] That's the other thing.

[00:52:02] You get accused of conspiracy theories.

[00:52:03] No, they're facts.

[00:52:05] Look it up.

[00:52:05] But so the White House was calling the shots.

[00:52:08] And there were times when Facebook might not deplatform you as fast as you want.

[00:52:14] And there were people in the government, White House, you know, Health and Human Services, National Institutes for Health, calling Facebook.

[00:52:22] Hey, get on it.

[00:52:24] Come on.

[00:52:24] You didn't deplatform this guy.

[00:52:26] That's fascism.

[00:52:27] I mean, quite apart from the pandemic, First Amendment, a lot of other issues.

[00:52:31] That's fascism.

[00:52:33] It's corporate and government holding hands.

[00:52:36] Do you think fascism has gotten – like we notice it more now because of basically consumer-facing things like Facebook and Twitter.

[00:52:44] But you look back to like the 50s and 60s where CIA employees were regularly also executives at – quote-unquote executives at RCA or – you know, there was various companies that were kind of linked to the CIA.

[00:52:56] So you could send employees abroad and do things without being an official employee of the CIA.

[00:53:02] Absolutely.

[00:53:02] I mean, the CIA had a name for it.

[00:53:04] They call it the Muddy Wurlitzer.

[00:53:06] And if you know what a Wurlitzer is, it's in Oregon.

[00:53:09] But there's a big organ at Radio City Music Hall.

[00:53:12] I haven't been there lately.

[00:53:13] I guess it's still there.

[00:53:15] But Frank Wisner, who was the Director of Operations this year – he was not the head of the CIA.

[00:53:21] It was Alan Dulles at the time.

[00:53:22] But he was the Director of Operations.

[00:53:24] So anything – overthrowing governments, you know, manipulating public opinion, whatever it was.

[00:53:29] He called it the Mighty Wurlitzer.

[00:53:32] He said, we play the tune and you dance to our tune.

[00:53:35] What they needed to do was control the means of communication.

[00:53:38] And there were far fewer at the time.

[00:53:40] So it was easier to do, whether it was, you know, Radio Free Europe, but also the networks.

[00:53:49] And, you know, all kinds of – they call them PSYOPs.

[00:53:51] It's short for psychological operations.

[00:53:54] There was a guy, Cord Meyer.

[00:53:57] Brilliant guy.

[00:53:58] That was his job.

[00:53:59] I mean, there were other guys, you know, Des Fitzgerald and Tracy Barnes.

[00:54:03] They were, like, blowing things up and taking over Laos.

[00:54:06] And, you know, they were in Saigon and fighting communists in Poland.

[00:54:11] There were a lot of operations.

[00:54:13] Overthrowing the government in Guatemala and Iran.

[00:54:15] That was Kermit Roosevelt.

[00:54:16] Yeah, that was all going on.

[00:54:17] But there was a major effort to control communication, control discourse.

[00:54:23] It was a group of people called the Georgetown Set.

[00:54:26] Who were they?

[00:54:27] Well, it was people we just mentioned, the top CIA people.

[00:54:30] But also, you know, it was Stuart and Joseph Alsop, who was, you know, compromised in a,

[00:54:36] I don't know, I'll just say a male honey trap in Russia.

[00:54:42] The KGB had that on tape, et cetera.

[00:54:45] But, and then, of course, there were real communists, Alger Hiss and others.

[00:54:51] Harry Dexter White.

[00:54:52] Harry Dexter White was the chief U.S. delegate at Bretton Woods.

[00:54:57] It was 1944.

[00:54:58] A little earlier.

[00:54:59] The CIA didn't come along until 1946.

[00:55:01] A little earlier than the period we're talking about.

[00:55:04] But John Maynard Keynes represented the U.K.

[00:55:07] Harry Dexter White represented the U.S.

[00:55:10] Morgenthau was the, Henry Morgenthau was secretary of the treasury at the time.

[00:55:14] 44 countries, you know, et cetera.

[00:55:15] But it really came down to White and Keynes.

[00:55:18] Because the U.S. and U.K. were going to call the shots.

[00:55:20] Harry Dexter White was a Stalinist agent.

[00:55:23] He was working for Stalin.

[00:55:25] And this was documented by Ben Steele in his book, The Battle of Bretton Woods.

[00:55:29] But it all came out with the Venona cables that were released by the KGB in the 1990s.

[00:55:35] This was not widely known.

[00:55:37] Some people knew it at the time, but it wasn't widely known.

[00:55:38] But by the 90s, the research had been done.

[00:55:41] Ben Steele did a great job on that book.

[00:55:45] But so the chief negotiator for the U.S. at Bretton Woods was a Stalinist agent.

[00:55:50] And his mission was to destroy the British Empire.

[00:55:54] Mission accomplished.

[00:55:55] I mean, he did it.

[00:55:56] You know, decolonization took off.

[00:55:58] Sterling was unimportant.

[00:56:01] The U.K. didn't have enough gold to redeem its obligations and gold, et cetera.

[00:56:07] And we did, in effect, dismantle the British Empire through decolonization and financial warfare.

[00:56:12] But you're right.

[00:56:14] I mean, I was, you know, without getting into too much detail, I was asked by the CIA once,

[00:56:20] could you, you know, could you figure out a way to destabilize a particular government?

[00:56:25] I won't mention the name.

[00:56:27] And, but, you know, financially not, you know, we're not going to bomb them or anything like that.

[00:56:31] So I took some time.

[00:56:32] It was relatively easy.

[00:56:34] And I wrote up a plan.

[00:56:36] I gave it back to them.

[00:56:36] But it's often a one-way street.

[00:56:38] You tell them stuff and they don't tell you anything.

[00:56:41] But six months later, I ran into one of my points of contact.

[00:56:44] I said, what happened to that plan?

[00:56:47] I gave him just curious.

[00:56:49] And he said, oh, they never did it.

[00:56:50] And I said, why?

[00:56:51] And he said, they thought it might work.

[00:56:53] And I said, oh, so you're just kind of messing with them.

[00:56:56] You didn't really want to overthrow the government.

[00:56:58] You were just kind of trying to give them a hard time.

[00:57:00] But my point is, yeah, it goes on all the time.

[00:57:03] You know, circling it back to today's day and age, we have now a new political regime

[00:57:08] that was just elected, obviously, with Trump winning.

[00:57:12] And can he really clean things up?

[00:57:15] It seems like this time, as opposed to 2017, he has a lot more experience, a lot more knowledge.

[00:57:20] Can he sort of, quote unquote, drain the swamp?

[00:57:23] Can Elon Musk go in, Ron Paul go in, Donald Trump go in?

[00:57:26] And can they say, OK, this department's no longer useful.

[00:57:30] These bureaucrats are just, you know, idiots.

[00:57:34] We're just going to clean house and make everybody, you know, non-fascist again.

[00:57:39] The answer is potentially yes.

[00:57:41] And I'm mildly encouraged, but I'm also extremely wary.

[00:57:44] And I'll be specific about that.

[00:57:47] In 2000, Trump was elected in 2016.

[00:57:49] It goes in in 2017.

[00:57:51] Trump never drained the swamp because Trump couldn't find the swamp.

[00:57:55] He didn't know what the swamp was, number one, where to find it.

[00:57:58] He does now, but I can talk more about that.

[00:58:03] But also, he came in.

[00:58:05] And we knew he was a businessman, a celebrity, and a TV guy, and all this stuff, a real estate

[00:58:09] developer, didn't have political experience.

[00:58:11] OK, that's OK.

[00:58:12] I mean, you can get it if you get the right people.

[00:58:15] And he started out with a good crew.

[00:58:17] We had Steve Bannon, Katie McFarlane, and a few others.

[00:58:21] They were all gone within six months.

[00:58:23] General Flynn, others, they were all gone.

[00:58:25] Who replaced them?

[00:58:26] A bunch of backstabbers.

[00:58:28] You know, Rex Tillerson, H.R.

[00:58:29] McMaster, John Bolton, James Mattis.

[00:58:33] And there was this theme at the time.

[00:58:36] John Kelly, who was the chief of staff.

[00:58:39] There was a theme at the time that this was the adult supervision.

[00:58:43] Trump was like a big, overgrown child, like a baby in a crib throwing rattles.

[00:58:47] He happened to be the president.

[00:58:49] But we were going to encase him.

[00:58:50] We were going to surround him with the adult supervision.

[00:58:52] It was all the people I just mentioned.

[00:58:54] And they were going to keep the train running on time.

[00:58:57] It turned out that they were just part of the unit party, part of the elite, part of the

[00:59:03] fat, precious or near-fascist structure we just discussed.

[00:59:08] Didn't matter if they were Democrats or Republicans.

[00:59:10] Happened to be Republicans.

[00:59:12] But they were among the warmongers.

[00:59:15] And then Trump made a lot of big mistakes himself.

[00:59:19] First of all, he picked all those people, right?

[00:59:20] So let's not give Trump a pass.

[00:59:22] He hired John Kelly.

[00:59:25] Trump hired Christopher Wray.

[00:59:27] I think Christopher Wray is a neo-fascist, corrupt director of the FBI.

[00:59:34] And, you know, breaking down doors from Mar-a-Lago to Roger Stone to, you know, Peter Navarro

[00:59:40] is a 73-year-old Harvard PhD economist.

[00:59:44] Strong views, but, you know, well-behaved, mild-mannered.

[00:59:47] He was arrested in broad daylight in National Airport.

[00:59:51] They put leg irons, shackles on him, handcuffs and leg irons, frog-marched him out of National

[00:59:58] Airport in public view with reporters standing by.

[01:00:01] Again, 73-year-old.

[01:00:02] Well, why did they do that?

[01:00:03] I don't even know that.

[01:00:05] That's what they did.

[01:00:06] Now, by the way, as a lawyer, without mentioning names, I've been in situations where, you know,

[01:00:10] this guy, O.S. Spitzer, called up once and said, yeah, we're arresting, you know, we're

[01:00:17] arresting three or four of your guys tomorrow.

[01:00:19] Do you want to, do you want us to just grab them or do you want to come down and surrender?

[01:00:23] And we said, hold on, we'll be right there.

[01:00:25] And I got my super lawyer litigated.

[01:00:27] We went down and worked it out.

[01:00:29] No arrests were ever made.

[01:00:31] But in a civilized world, even if you're facing criminal charges, you're, unless you're

[01:00:36] flight risk or something, you know, P. Diddy or whatever, you can come in and surrender.

[01:00:40] They don't handcuff you and frog march you out of national airport.

[01:00:44] They did it on purpose to humiliate them.

[01:00:47] And as they say, in France, you know, as an example to the rest.

[01:00:52] But why-

[01:00:53] What did he do?

[01:00:55] He defied a subpoena from the January 6th Committee on Grounds of Executive Privilege.

[01:01:00] And Steve Bannon did the same thing.

[01:01:02] Steve Bannon, they got these, the J6 Committee, this is a Liz Cheney show trial.

[01:01:06] Well, they, they were subpoenaed, but they had worked in the, in the, in the White House.

[01:01:12] Narao was there the whole first term.

[01:01:13] Bannon was there at the beginning.

[01:01:15] He got kind of pushed out by, by Kelly or whatever.

[01:01:19] But they had executive privilege, which is a well-established judicial principle.

[01:01:25] You know, it was a big issue in, in the Nixon case.

[01:01:28] And they asserted executive privilege.

[01:01:30] But instead of litigating that, I mean, it isn't litigation, but, you know, it takes a

[01:01:34] while to get to the Supreme Court.

[01:01:35] But they were tried, convicted, and they both served four months in prison.

[01:01:41] Navarro got out in, around June, if I'm not mistaken.

[01:01:45] Steve Bannon went in in June.

[01:01:46] He was released at the end of October.

[01:01:48] He's back, you know, back in, you know, an activist and kind of leader of the MAGA movement,

[01:01:53] has his own podcast, Steve Bannon's War Room.

[01:01:56] Very, very successful.

[01:01:57] But the point is, Eric Holder did the same thing.

[01:02:00] Eric Holder, Attorney General under Obama, defied a congressional subpoena.

[01:02:03] He was held in contempt of Congress.

[01:02:06] And a criminal referral was made.

[01:02:08] But nothing happened.

[01:02:11] So Eric Holder does it.

[01:02:12] Nothing happens.

[01:02:13] But Trump associates do it.

[01:02:16] And they end up in jail.

[01:02:17] And by the way, if you get a four-month sentence, you know, beginning around the end of two months,

[01:02:22] your lawyers can go and say, you know, good behavior, whatever, won't happen again,

[01:02:27] whatever the deal is.

[01:02:28] And they'll let you out.

[01:02:29] They're giving early release.

[01:02:30] They did not give either one of those guys an early release.

[01:02:34] Because they wanted to shut Bannon down.

[01:02:35] They didn't.

[01:02:36] But they wanted to shut him down during the heart of the campaign.

[01:02:39] And he was off the air for those four months.

[01:02:40] He's back on now.

[01:02:41] But my point being, these are all examples of fascism and running over the rule of law.

[01:02:51] And so now with this experience, do you think Trump or whoever he brings in, and people forget,

[01:02:57] it's not just that you elect Trump.

[01:02:58] You elect the 5,000 people he's going to appoint.

[01:03:01] And you're electing a new government.

[01:03:02] And will he now know enough where the skeletons are buried, so to speak, to really start cleaning things up?

[01:03:10] I think he does.

[01:03:12] I think he does.

[01:03:13] And I'm in touch with, you know, I'm not in any official capacity whatsoever, just to make that clear.

[01:03:18] But I'm in touch with enough people around him to know what they're doing.

[01:03:22] There's something, I'm sure you've heard of it.

[01:03:23] It's called the Plum Book.

[01:03:25] And it's a government publication.

[01:03:27] You can get it from the government printing office.

[01:03:28] And it comes out every four years, right after a presidential election.

[01:03:33] So the new Plum Book will come out in days.

[01:03:35] But, you know, the old one's still around, the one from four years ago.

[01:03:40] It's basically the Yellow Pages.

[01:03:42] It lists 8,000 government jobs.

[01:03:45] Title, office, location, phone number, you know, pay scale, et cetera.

[01:03:49] All government jobs.

[01:03:51] But what's special about it is these are the 8,000 jobs where the president can pick anybody he wants.

[01:03:56] They're not protected by civil service.

[01:03:58] There might be some Senate confirmations required for some.

[01:04:01] There are.

[01:04:02] But this is the list that the president can go down.

[01:04:06] Now, when Obama came in, and really Valerie Jarrett was the brains of the operation, they had all of them filled in.

[01:04:13] Maybe not all 8,000, but they had thousands of names vetted, seasoned, ready to go.

[01:04:19] And when they got in power, they said, okay, everyone focused on the cabinet.

[01:04:23] Yeah, cabinet's a big deal.

[01:04:24] But say you're secretary of the treasury.

[01:04:26] Okay, that's nice.

[01:04:27] There are two deputy secretaries, one for international, one for domestic.

[01:04:31] There are numerous assistant secretaries.

[01:04:34] My friend, you know, Dave Mullins was assistant secretary for federal finance.

[01:04:38] There are deputy assistant secretaries, so-called DAS.

[01:04:41] They all have assistants, and the assistants have assistants.

[01:04:44] And not just the treasury, but the state department, defense department, on and on and on.

[01:04:48] The agencies, the CIA, the FBI, the SEC, CFTC, Federal Trade Commission, on and on.

[01:04:56] You get it.

[01:04:57] So, and that's where these 8,000 jobs come from.

[01:05:00] Trump didn't even know about the Plum Book.

[01:05:03] And they would, Trump picked Chris Christie as the head of his transition.

[01:05:06] Chris Christie, as a prosecutor, put Jared Kushner's father in jail.

[01:05:11] Now, and he's married to your daughter, right?

[01:05:14] So, Jared Kushner's married to Ivanka Trump.

[01:05:17] Christie's the head of transition.

[01:05:19] But Christie put Jared's father in jail.

[01:05:22] How's that going to work out?

[01:05:23] You know, this is what I'm saying, that Trump was completely-

[01:05:26] I wonder why Ivanka didn't-

[01:05:27] How come Ivanka didn't protest that in 2016?

[01:05:30] I don't know.

[01:05:31] I met her once very nicely, very smart, working grad.

[01:05:35] She's very nice to me, but I don't have a good answer for that.

[01:05:39] But I do know this, that the transition today is much more rigorous.

[01:05:44] There's a whole transition team.

[01:05:45] They've been working on it.

[01:05:46] Shoot, you probably know Howard Lutnick, Linda McMahon.

[01:05:49] I have some funny stories about her.

[01:05:51] But Howard and Linda are the co-heads of the transition team.

[01:05:55] But Tulsi Gabbard and RFK Jr. are on that team.

[01:05:59] They're in those meetings.

[01:06:01] They've been working on this for months.

[01:06:03] They've solicited resumes, either through the Heritage Foundation or, I believe, America First.

[01:06:09] I've met a number of them.

[01:06:11] I was at a dinner in Washington at CPAC, and our host, a very gregarious guy, just went around the room.

[01:06:19] He pointed at Mike Adams and said, there's our next attorney general.

[01:06:25] He pointed at Monica Crowley and said, there's our next secretary of the treasury.

[01:06:29] Carrie Lake was sitting across from me.

[01:06:31] He goes, there's our next vice president.

[01:06:33] She ran for senator.

[01:06:35] Those people may or may not get those offices.

[01:06:37] And some of them are, well, I would say all of them are great.

[01:06:41] But my point is, they're ready.

[01:06:43] And they have the plumb book, and they've been working on it.

[01:06:45] So I do expect they'll drain the swamp now.

[01:06:49] General Flynn made a point, and I think it's a good one.

[01:06:53] He said, you've got to fire these people on day one.

[01:06:56] You've got 48 hours to fire them.

[01:06:58] You basically fire them.

[01:07:00] Pull their security clearance.

[01:07:02] Take their badges.

[01:07:03] Tell them, go home.

[01:07:05] We'll mail you your stuff.

[01:07:06] Don't bother coming into the office.

[01:07:07] We changed the locks, and you're out.

[01:07:09] Thank you for your service.

[01:07:12] That's what you have to do.

[01:07:13] If you let any of these people continue, I mean, the resistance is real.

[01:07:17] They're going to sabotage you from day one.

[01:07:19] That is what they did in 2016.

[01:07:20] They're trying to prevent it now.

[01:07:22] We'll see how they do.

[01:07:23] But I am encouraged that, A, they're aware of the problem.

[01:07:26] B, they have the resources to deal with it.

[01:07:28] Whether they follow through on that, we'll find out in the next 60 days.