🔴Thanksgiving: How Capitalism Saved America From Socialism - Ep 754

Summary

In this episode of his podcast, Peter Schiff discusses the historical significance of Thanksgiving, tying in the economic lessons learned from the early settlers' experiment with communism, which eventually led them to adopt capitalism. He critiques modern economic policies, particularly the misconceptions around inflation, energy production, and cryptocurrency. He emphasizes that the free market system brought prosperity where socialism failed and touches on the ongoing debates about the economic impact of government decisions and the craze over cryptocurrencies like Bitcoin.

Highlights

• Thanksgiving is a testament to capitalism's superiority over socialism. 🌟
• Peter Schiff critiques modern economic policies, emphasizing the pitfalls of inflation and energy controls. 💹
• The Bitcoin craze is scrutinized, pointing out the speculative nature of cryptocurrencies. 🪙
• Schiff emphasizes the importance of economic education through historical examples, particularly Thanksgiving. 🎓
• He argues for a re-evaluation of current economic understandings and traditions in light of past lessons. 📈

Key Takeaways

• Thanksgiving's origins illustrate a critical economic lesson: Capitalism saved the Pilgrims after early communal living failed. 🌽
• Pilgrim's attempt at a socialist structure resulted in scarcity; abandoning it for capitalism brought abundance. 🦃
• Energy policies and inflation tips: government interventions often contradict and inflate costs. ⚡
• Bitcoin debates highlight misconceptions about cryptocurrency as a 'safe' investment or inflation hedge. 💸
• Historical analysis of Thanksgiving can be a lesson on the failures of socialism and the benefits of capitalism. 📜

Overview

In this episode, Peter Schiff dives into the history of Thanksgiving and its connection to economic principles. He explains how the Pilgrims' initial socialist venture nearly led to their demise and how the embrace of capitalism facilitated their survival and prosperity. This historical pivot is used to draw parallels with current economic discussions and policies.

Schiff discusses how modern economic policies, especially those concerning inflation and energy production, often contradict themselves and result in what he views as unnecessary cost increases. He argues that politicians fail to acknowledge the real culprits behind rising prices, which he attributes in part to inflationary pressures exacerbated by government actions.

The episode also features Schiff's insights into the world of cryptocurrency, specifically Bitcoin. He argues that Bitcoin is often viewed as a gamble rather than a genuine investment, criticizing the way it is marketed to the public as a hedge against inflation or a reliable asset. Through these discussions, Schiff underscores the importance of learning from historical economic lessons and applying them to today's challenges.

Chapters

• 00:00 - 00:30: Sponsorship Introduction The chapter introduces 'Netsuite' as the sponsor of the podcast. Netsuite is described as a business management software that operates on an easy-to-use cloud platform, managing all aspects of a business. The transcript highlights that over 27,000 businesses currently use Netsuite. Furthermore, a limited-time financing program is being offered to those interested in upgrading to Netsuite at the provided web address.
• 00:30 - 05:00: Thanksgiving and Inflation The chapter discusses Thanksgiving and its economic implications, focusing on consumer spending and market trends during the holiday season.
• 05:00 - 15:00: Biden and Oil Production The chapter titled 'Biden and Oil Production' primarily discusses the impact of rising costs on the Thanksgiving holiday for Americans. It mentions that the holiday will be particularly expensive this year, with meal prices increasing by five percent compared to the previous year. The narrative highlights the economic strain faced by Americans as a result of these rising costs.
• 15:00 - 30:00: Thanksgiving History and Marxism officially the most expensive thanksgiving dinner ever
• 30:00 - 40:00: Bitcoin and Cryptocurrency Debate In this chapter, the speaker discusses the current state of inflation, referencing alternative statistics such as those provided by 'shadow stats.' They argue that the consumer price index (CPI) used in the 1980s provides a more accurate reflection of today's economic realities, particularly citing a significant 14% year-over-year increase in consumer prices. This higher inflation rate seems more consistent with what is being observed in the market.
• 40:00 - 60:00: Federal Reserve and Inflation This chapter explores the impact of inflation on import and export prices, with a specific focus on the rising cost of Thanksgiving dinner. It touches upon the political nuances of addressing these issues, noting that politicians, including Joe Biden, might shy away from blaming farmers for increased costs due to their popularity among voters.

🔴Thanksgiving: How Capitalism Saved America From Socialism - Ep 754 Transcription

• 00:00 - 00:30 [Music] today's podcast is sponsored by netsuite the business management software that handles every aspect of your business in an easy to use cloud platform over 27 000 businesses already use netsuite and right now through the end of the year netsuite is offering a one-of-a-kind financing program to those ready to upgrade at netsuite.com
• 00:30 - 01:00 today's podcast is also sponsored by shopify shopify is a platform designed for anyone to sell anywhere giving entrepreneurs like myself the resources once reserved exclusively for big business for a free 14-day trial and full access to shopify's entire suite of features go to shopify.com gold i want to wish all of my listeners a happy thanksgiving as we begin the holiday season u.s stock market is of
• 01:00 - 01:30 course closed today to allow americans to observe the thanksgiving holiday which unfortunately for many americans is going to be the most expensive thanksgiving ever forget about how much it costs to get to your thanksgiving dinner if you have to travel but just if you look at the cost of the meal alone even the government admits that prices are up five percent over the past year making this
• 01:30 - 02:00 officially the most expensive thanksgiving dinner ever but if you take a look at the data from the american farm bureau federation which is probably far more accurate because this is a private company that represents the farming industry so i would imagine that they have a better feel for what's going on on the farms but according to the american farm bureau the price of thanksgiving dinner is 14 higher than it was a year ago and that
• 02:00 - 02:30 to me makes a lot more sense with the type of inflation that i think we actually have right now because if you look at you know the shadow stats numbers where they measure consumer prices not using the cpi that we use today but using the same cpi they used back in 1980 they get a year-over-year increase in consumer prices of 14 which makes sense and is more in line with what we're seeing
• 02:30 - 03:00 on import export prices and the estimate that we're getting on the increase of the cost of thanksgiving dinner now you know if the farmers weren't so politically popular because no politician wants to beat up on the farmers right everybody wants to be the farmer's friend and get the vote of the farmers if people didn't like farmers i'm sure that joe biden would have made a speech and he would have blamed the rising cost of thanksgiving dinner
• 03:00 - 03:30 on the farmers he basically would have said these damn farmers these lazy farmers they're just not growing enough food that is the problem we have all this demand americans are hungry they want to have thanksgiving and those pesky farmers they're just won't get off their butts they're just lying on the couch and they're not working hard enough and that's why thanksgiving dinner is so expensive because these farmers are just not doing their job and i'm not making this up
• 03:30 - 04:00 because that's exactly what biden said about gas prices and oil companies joe biden blamed rising gas prices on oil companies failure to ramp up production he said in a speech that it's the fault of the oil companies that they simply fail to ramp up production fast enough to meet growing demand now first of all there's so many things wrong with that statement i mean number one
• 04:00 - 04:30 joe biden claims that he doesn't want more oil production he wants green energy there's all sorts of political pressure on oil companies not to produce more oil isn't that the whole premise of the green new deal we don't want all these fossil fuels now you have joe biden complaining that we're not getting enough production of fossil fuels that these oil companies are not polluting the environment more by creating more oil gas that we don't want
• 04:30 - 05:00 no all of a sudden oil prices are up and now biden is upset that oil companies aren't producing more oil well that is always going to be the consequence of the green new deal the whole idea that we can move away from fossil fuels towards greener sources of energy that automatically comes with a price tag if you are going to advocate for a green new deal type program then you need to level with the american public and tell them that that means energy prices are
• 05:00 - 05:30 going to be much more expensive because if green energy was more efficient than fossil fuels we would already be using it i mean companies are not dumb they want to maximize their profits and if they can produce energy cheaper using solar or wind or whatever that's what they would be doing the reason that we're using fossil fuels is because the consumer wants cheap energy and that's the cheapest way to provide it so if biden and his green new deal buddies if
• 05:30 - 06:00 they really want the american public to accept this agenda in order to save the planet from climate change then they need to level with the public about what it's going to cost meaning energy is going to be a lot more expensive but the politicians know if they try to put a price tag on the green new deal voters won't buy it that's why whenever they present this type of legislation supposedly it's going to make us all richer we're all going to benefit but
• 06:00 - 06:30 there is no gain without pain there has to be some sacrifice if we're going to save the planet then we have to give something up in return and what we have to give up is cheap energy but you know what americans don't want to give up cheap energy especially for something like saving the planet from climate change when the scientific evidence with respect to climate change and man's role in potentially creating it is so dubious and up for debate so there isn't a
• 06:30 - 07:00 political consensus out there in support of this regulation that's why they always try to sugarcoat it with false claims of how we're all going to benefit immediately from this booming economy that will be ushered in by this green revolution but the minute we get a small taste of what would happen rising prices all of a sudden no no no we want oil companies to open up the spigots but of course the other problem with what biden is saying is that it's just not true i
• 07:00 - 07:30 mean forget about the hypocrisy of him wanting demanding oil companies to produce more when of course everything the biden administration would be doing would undermine the ability and the incentive of oil companies to produce more in fact i mentioned in my last podcast biden is going to sell oil out of the strategic petroleum reserve doing that automatically discourages more domestic production if you're trying to artificially keep the price down well
• 07:30 - 08:00 then you're going to discourage the type of investment that would be required to get production up but everything that the byte administration is doing would discourage the oil and gas industry from making the type of investments that would be necessary to really ramp up production but of course it can't be ramped up overnight it takes time to ramp up production and so the higher prices we're seeing now are not the result of a failure to crank up production over the last few
• 08:00 - 08:30 months the problems that we're seeing now is because the federal reserve has been cranking up the printing presses and maybe this hasn't occurred to president biden but oil companies just can't pump oil as fast as the fed can print money in fact they don't even have to use a printer anymore they just create the dollars out of thin air on a computer program and we just can't produce real oil as fast as the fed can
• 08:30 - 09:00 conjure fake money into existence when he talked about the rising demand what biden failed to acknowledge was the source of that rising demand why is it that so many people have all this money to buy oil well it's because the federal reserve and other central banks have created it that is the problem so we have more money to bid up the supply of oil and gas and so that's why the prices are rising it's not because the oil companies haven't produced enough it's
• 09:00 - 09:30 because the fed and other central banks have printed too much but i want to talk a little bit not just about the cost of thanksgiving but the history of thanksgiving because most americans have no idea what the thanksgiving holiday even represents and i think it's a very important lesson that has been lost on so many people and one of the reasons i'm even thinking about talking about it today is i just did another one of these
• 09:30 - 10:00 debates on rt russia television and i was up against professor richard wolff and i've appeared with this guy many times on rt this guy is an economics professor he's currently affiliated with the university of massachusetts amherst but he's taught at a lot of other colleges and universities including yale right but the guy is a self-professed marxist now number one nobody who is a marxist
• 10:00 - 10:30 should be teaching economics to american students but i have experience with this first hand i mean i remember my freshman year at university of california berkeley i went to econ 101 and it was an enormous class it was in a huge theater there was at least a thousand students maybe more sitting in this gigantic theater for econ 101 and the teacher started talking and i really
• 10:30 - 11:00 couldn't believe the nonsense that she was saying i mean it so infuriated me that i actually showed up at her office later that day to kind of confront her based on the idiocy of what i heard her say remember she is speaking to a freshman class at berkeley right fresh out of high school really don't know that much about economics and this is their first experience with a college level course
• 11:00 - 11:30 and they're about to learn economics right and so i went to her office hours and i introduced myself hi i'm peter schiff you know i'm in your freshman econ 101 class i just want to ask you a question i said are you a communist i mean that was the first thing i said because everything she said in econ 101 to me revealed the fact that she was a communist and her answer really surprised me she said i'm not a communist i'm a marxist
• 11:30 - 12:00 right as if there's even a difference between communism and marxism but a lot of the people that claim to be marxists and not communists the reason they want to say they're marxists is because there's a lot of examples of the failures of communism like the soviet union and all the millions and millions of people who have been murdered by communists and so somehow it cleans it up a little bit if you claim that you are a marxist and not a communist even though karl marx is the father of
• 12:00 - 12:30 communism and he wrote the book on communism the communist manifesto i mean he had help from his buddy charles ingalls but he wrote that book back in 1848 and that's basically the communist bible i mean so if you say you are a marxist you are a communist and so it's not surprising to me that richard wolff a marxist is teaching economics at a u.s university when i myself was taught economics by a marxist at a u.s
• 12:30 - 13:00 university now of course i wasn't actually taught because after i had my office hours with this self-professed marxist i dropped the class i never showed up again and i didn't take another econ course at berkeley until i was in the business school and there were some required econ courses but you know i was lucky right i knew enough to understand that this professor was a marxist but most of the other freshmen
• 13:00 - 13:30 at cal had no idea and this is why americans are so screwed up this is why understanding of economics is so bad because so many young americans are getting their first introduction to economics filtered through the prism of a marxist so it's no wonder so many people are so ignorant when it comes to economics when they're learning economics from a marxist this is it the putt to win the tournament if you think
• 13:30 - 14:00 it the championship is yours but on your backswing your hat falls over your eyes is this how you're running your business poor visibility because you're still relying on spreadsheets and outdated financial software to see the full picture you need to upgrade to netsuite by oracle netsuite is the number one cloud financial system to power your growth with visibility and control of your financials inventory hr planning budgeting and more netsuite is everything you need to grow and it's all
• 14:00 - 14:30 in one place with netsuite you can automate your process and close your books in no time while staying well ahead of your competition 93 of survey businesses increase their visibility and control after upgrading to netsuite in fact over 27 000 businesses already used netsuite and right now through the end of the year netsuite is offering a one-of-a-kind financing program to those ready to upgrade at netsuite.com
• 14:30 - 15:00 gold so head to netsuite.com right now for a special end of year financing on the number one financial system for growing businesses that's netsuite.com gold now i mentioned karl marx wrote that book the communist manifesto in 1848 but what marx didn't realize when he wrote his book is that the very premise of his book had already been proven not
• 15:00 - 15:30 to work it had already been tried and failed about 200 years before he was born 400 years ago at the plymouth colony in massachusetts because when the pilgrims first came to the united states on the mayflower they landed in what is now plymouth massachusetts and plymouth colony they named it after the port plymouth port in england that's where
• 15:30 - 16:00 the mayflower set sail and so they named the colony after the port that they set sail from but when they sailed over here their initial intent was to create the equivalent of a communist society it was going to be a communal settlement the basic tenet was going to be from each according to his ability to each according to his needs precisely the tenant upon which karl marx based his entire thesis only
• 16:00 - 16:30 they came up with the idea 200 years before marx was born their theory was that everybody was going to work collectively that all of the colonists were going to work on this communal farm everything was going to be owned by the community no private property right so everybody was going to come out and farm as best they could right from each according to his ability so all of the settlers were going to go out and work as hard as they each could
• 16:30 - 17:00 and then they were going to contribute everything that they produced right maybe just give it to the equivalent of the settlement government or whoever was in charge right they were going to put everything in this one pool and then it would all be distributed out equally to all the settlers so no matter how much food you produced no matter how hard you worked you would get the exact same portion as people who didn't do any work
• 17:00 - 17:30 at all of course everybody was expected to do work but in reality nobody did because socialism destroys the initiative of people to work because if you're not going to bear if you're not going to reap the rewards of your work why bother if you're not going to get any more food than the people who slack off why not slack off yourself i mean all the initiative all the motivation gets destroyed and that's exactly what
• 17:30 - 18:00 happened a lot of the settlers just refused to work now of course they came up with excuses i'm not feeling well you know i'm sick i'm tired and of course those who did work didn't work that hard because why bother everybody knew that no matter how hard they worked they wouldn't get any more and people resented other people for not working and so they didn't want to be the sucker who does all the work and so there was all these incentives i talk
• 18:00 - 18:30 about moral hazard all the time and there is no more moral hazard than you get with the philosophy from each according to his ability to each according to his need it doesn't work unfortunately professor wolf doesn't understand that even though the pilgrims proved it didn't work 400 years ago karl marx didn't understand it even though the pilgrims had proved it did work 200 years before he was born
• 18:30 - 19:00 now as a result of this i think over the first couple of years half of the pilgrims starved to death and the rest of them would have starved to the whole colony would have died out there never would have been a united states of america if the pilgrims hadn't done something that almost no socialist does and that's learn from and admit their mistakes because before the other half of the pilgrims dropped dead from starvation
• 19:00 - 19:30 they realized that socialism doesn't work that marxism does not work that from each according to his ability to each according to his need doesn't work what does work free market capitalism and the pilgrims themselves proved it because what they ended up doing is then they divvied up all the land and so each individual settler got their own piece of land to farm and then each settler got to own
• 19:30 - 20:00 whatever he produced he didn't have to share it with everybody else it was their own private property and what do you know as soon as everybody began working for themselves and their own family versus everybody else they all started to work all the people that were too tired and sick to work suddenly had lots of energy and they worked and they had a boom in their economy they had bountiful harvests they had so much not only could they trade with each
• 20:00 - 20:30 other but they started trading with the natives with the indians right you had this economic boom you had all kinds of prosperity you had a bountiful harvest all this food and that resulted in the first thanksgiving and what were the pilgrims thankful for they were thankful because they were smart enough to abandon a failed economic system that didn't work socialism and embrace one that did capitalism before we had
• 20:30 - 21:00 capitalism there were shortages once we adopted capitalism we had massive surpluses and that's what i've been talking about when you see the politicians trying to blame the problems in the economy on shortages strong economies don't produce shortages they produce abundance the plymouth colony had a big shortage and they had shortages because there was no production and they had no production because they had no private property
• 21:00 - 21:30 they had no incentives they had a marxist society and as a result there were shortages of everything and the pilgrims were starving when they abandoned marxism and embraced capitalism all of a sudden there was lots of food to eat and so not only weren't the pilgrims starving they had more than enough and they could have this big thanksgiving celebration and what i would encourage everybody to do this thanksgiving you know there's an old tradition uh jewish tradition in
• 21:30 - 22:00 passover you know we tell the story of the exodus where moses led the people out of bondage in egypt that's part of the tradition of the passover meal we should have a similar tradition in america for the thanksgiving meal every american i think has a duty to explain to his children the story of thanksgiving which is the story of the failure of socialism and the success of
• 22:00 - 22:30 capitalism from an early age people need to understand that socialism doesn't work and i don't care how you want to brand it marxism you can't put lipstick on a pig it is still a pig and remember communism marxism is a form of socialism like i explained on my last podcast you have several forms of socialism one of them being fascism and for some reason a lot of the socialists hate fascism even
• 22:30 - 23:00 though fascism is just a different brand of what they believe in and in fact as i said on my last podcast communism is actually worse than fascism they're both bad it's just that communism is even worse and communism is marxism it's just that some of these communists are too embarrassed to admit they're communists so they try to dress it up like my professor at berkeley and say they're marxists but marxism and communism are basically the same thing
• 23:00 - 23:30 and the pilgrims proved that however you describe it it doesn't work we know it doesn't work we have all sorts of examples that's why i said at least the pilgrims are unique they were marxists that learn from their mistakes most marxists never learn from mistakes they just repeat them endlessly and expect a different result the classic definition of insanity because marxism is the most insane political philosophy shopify is more
• 23:30 - 24:00 than just the store it allows you to connect with your customers helps you drive sales and manage your day-to-day business supercharge your knowledge your sales and your success for a free 14-day trial go to shopify.com gold all lowercase shopify is a platform designed for anyone to sell anywhere giving you the resources once reserved just for big business it's all customized for you with a great looking online store that brings your idea to
• 24:00 - 24:30 life and tools to manage and drive sales in fact i love how shopify makes it easy for anyone to successfully run a small business shopify powers over 1.7 million entrepreneurs from their first sale to full scale and every 28 seconds a small business owner makes their first sale on shopify so get started now by building and customizing your online store with no coding or design experience required access powerful tools to help you find
• 24:30 - 25:00 customers drive sales and manage your day-to-day gain knowledge and confidence with resources to help you succeed plus with 24 7 support you're never alone more than just the store shopify grows with you this is possibility and is powered by shopify go to shopify.com gold all lowercase for a free 14-day trial and get full access to shopify's entire suite of features start selling on shopify today go to shopify.com
• 25:00 - 25:30 gold right now but as long as i'm talking about insanity and crazy ideas i want to switch gears slightly and talk a little bit about bitcoin i mean first of all there is now a new thanksgiving tradition where bitcoiners get together with their family members and try to convert them into the bitcoin cult they're trying to look for new converts and they entice them into crypto with
• 25:30 - 26:00 their tales of how much money they've made personally by owning it and since bitcoin has had a very good year bitcoin has appreciated rather substantially since thanksgiving 2020 that means all the bitcoiners are gonna have all sorts of stories to tell their friends and relatives as they gather around their thanksgiving meal about how much wealthier they are thanks to bitcoin and it's those tales of wealth that might entice or sucker other people into
• 26:00 - 26:30 making the same bet but i also want to talk about a recent bitcoin debate that i had this one was hosted by kikko and i was debating a guy named alex mashinsky who happens to be a very bright guy unfortunately a lot of bright people have gravitated into crypto just like there's you know probably a lot of bright people who have gravitated to marxism it's amazing the foolish things that smart people will sometimes believe
• 26:30 - 27:00 but the reason i wanted to talk about this debate i did with mashinsky was some of the completely insane things that this guy was saying to justify bitcoin and not just really to justify bitcoin but to encourage people to go out and borrow as much money as possible to buy even more bitcoin than they can afford and he was trying to sell this as a ticket to wealth right and to me this
• 27:00 - 27:30 highlights the big problem in bitcoin the way this stuff is sold to the public and the reason it's so popular is because so many people think it's their take at the easy street it's a lottery ticket that's guaranteed to win and that people are going to get rich if they buy it and it's not just bitcoin but all cryptocurrencies that is basically the use case it's not because it's a more efficient medium of exchange or unit of account or store of value none of that is true the sole reason that people are
• 27:30 - 28:00 buying bitcoin is because they hear stuff like what alex mashinsky was saying and they buy into it in fact a lot of people in america today are in desperate economic circumstances and basically they're willing to gamble on a hail mary they're willing to take a shot that the solution to their problems lies in buying bitcoin because they really have no other viable way out and so they're believing in anything but in
• 28:00 - 28:30 addition to saying that gold had no value in fact during this debate mashinsky said that gold is worthless first he said well you can make jewelry out of it you can conduct electricity out of it but other than that it's worthless well i mean once you've acknowledged that you can make jewelry out of it or that you can conduct electricity out of it you've admitted that it's not worthless because is jewelry worthless no jewelry is very valuable so if there's a element that you can use to make jewelry then by definition that particular element has
• 28:30 - 29:00 value and there's certainly a lot of value to the ability to conduct electricity especially in the manner that gold is able to do it but again all these proponents that want to tout bitcoin always need to diminish gold and since bitcoin has no intrinsic value the way to legitimize it is to say well gold has no intrinsic value either now the us dollar doesn't have any intrinsic value that's another way they try to justify bitcoin by saying well the
• 29:00 - 29:30 dollar's got no value so what's the problem with bitcoin and again that's the economic theory that two wrongs make a right but if there actually ever was hyperinflation if the dollar ever did collapse why would that somehow validate bitcoin because it would prove that bitcoin could collapse too because the dollar has value now only because people believe it has value well that's the same value proposition as bitcoin and bitcoin says well bitcoin can work
• 29:30 - 30:00 because the dollar works well if the dollar fails what does that say about bitcoin right if the dollar can fail if people can stop believing in the dollar after believing in it for how many decades they believed in it we went off the gold standard in 1970 so we have 50 years of people believing in a fiat dollar well if people can lose confidence in that we only have a 10-year history of people believing in bitcoin so if people can stop believing in the dollar then why can't they stop
• 30:00 - 30:30 believing in bitcoin you know in fact i was watching on cnbc which by the way last night they had an entire hour the title of the show was crypto night in america or something like that and they just spent the entire hour dedicated to shilling bitcoin and trying to cram more bitcoin and other cryptocurrencies down the throats of their audience i mean obviously making their advertisers very happy but they have swallowed this thing hook line and sinker but i wanted to talk about this interview with kathy
• 30:30 - 31:00 wood she was on earlier in the day talking about why she loves these disruptive innovative tech stocks and why she also loves bitcoin and one of the reasons that she loves these tech stocks and is not worried about the high multiples is because according to her we are on the verge of a historic deflation she doesn't believe any of the hype about inflation about a crashing dollar she thinks the dollar is going to gain
• 31:00 - 31:30 value she thinks innovation is going to drive prices lower so she's not worried about these high multiple stocks being hurt by inflation because she doesn't think there's any inflation on the horizon in fact she thinks there's deflation and so that's how she justifies her bullishness on these stocks but at the same time she's a bull on bitcoin and has all kinds of pie in the sky forecast for how high it's gonna go but the whole basis for the bitcoin story is that it's a store of value it's
• 31:30 - 32:00 digital gold and the reason you need to own it is to protect yourself from inflation well if she doesn't believe there's any inflation if she believes there's deflation then why bitcoin what is the point of having a hedge against inflation if you think there's no inflation a hedge you see that logical inconsistency doesn't bother her but she didn't acknowledge it but then she dismissed it by saying that bitcoin is going to succeed anyway that it doesn't even matter if the very premise upon which
• 32:00 - 32:30 it's based is wrong right there's no reason to own real gold let alone digital gold she still thinks it's going to go up because it's so disruptive well what is it disrupting gambling that's it it's a better way to gamble maybe than other forms of gambling but it's certainly not disrupting payments it's not disrupting money it's not disrupting anything ultimately other than the lives of the people who have been foolish enough to buy it because they're listening to guys
• 32:30 - 33:00 like mashinsky but one of the things he was trying to claim and here i think he was really talking his book with respect to a company that he's working with which specializes in lending on crypto but he was encouraging people to go out and borrow money to buy bitcoin and if they own bitcoin to borrow against it and and spend it right don't sell your bitcoin just let it go up in value and just borrow against it because it's tax
• 33:00 - 33:30 efficient and it's how the rich get rich and he was comparing borrowing money against bitcoin to borrowing money against a house or borrowing money against stocks and the difference is dramatic and mushkinski did not acknowledge this difference first of all yes a lot of people borrow money to buy a house but that's very different than borrowing money to buy bitcoin because when you go out and take out a mortgage against your house
• 33:30 - 34:00 it doesn't matter what happens to the value of that house once you take on the mortgage right the bank that loans you the money they're not going to appraise your house every day and if the price falls below a certain level they're not going to ask you to cough up more money you're not going to have to pay down your mortgage debt because your house lost value as long as you make your payments you're fine the bank can't do anything they can't foreclose they can't go after other assets doesn't
• 34:00 - 34:30 matter what the collateral is worth you make your payments you're fine that's not true with bitcoin when you borrow against bitcoin the collateral is marked to market every day and if the value of your bitcoin falls by a certain amount you need to come up with more money and if you don't come up with more money they sell your bitcoin into the market and you no longer own it given the
• 34:30 - 35:00 volatile nature of bitcoin i mean even if you are a bitcoin proponent you have to acknowledge the volatility bitcoin can drop 50 60 70 80 at any moment so how can an asset that can fall that much and has repeatedly fallen that much and everybody will acknowledge that it can fall that much how can that be the basis for a loan you can't total your bitcoin if you're on margin because the next time there's a big sell-off you're
• 35:00 - 35:30 going to get force liquidated i mean the whole idea is by the dip right that's what they say buy the dip well if you're on margin you're going to be forced to sell the dip what idiot is going to margin their bitcoin well apparently there's a lot of them people are being encouraged to do that and i think one of the reasons that so many people are being encouraged to margin their bitcoin is because the whales don't want people
• 35:30 - 36:00 selling their bitcoin because you have a lot of people now a lot of young people who have all this wealth and bitcoin yet maybe they still live with their parents and you know they're driving a beat up old car and maybe they want to move out and get their own place and buy a new car but we don't want them selling their bitcoin because the price will fall so let's try to create a way that they don't have to sell their bitcoin they can have their cake and eat it too well they'll borrow we'll let them borrow money against their bitcoin and that way they don't have to sell but this is an
• 36:00 - 36:30 accident waiting to happen because not only are the borrowers gonna lose a lot of money but ultimately the lenders too because when bitcoin crashes i think that they're not going to be able to liquidate bitcoin for enough cash because once you hit these margin calls in a very thin market who knows what's going to happen the bids may not be there the exchange is shut down and by the time these forced sells are
• 36:30 - 37:00 liquidated i don't think enough money will be recovered to repay the margin debt and so the lenders are going to take a loss now maybe the lenders are smart enough to be short bitcoin maybe that's what's going on maybe they don't care if the value of the collateral crashes because they've gotten short i don't know but to me it would make no sense to actually lend on such shaky collateral now i know people will say well what about stocks people borrow against their stocks and they can have
• 37:00 - 37:30 margin calls that's true but stocks are not nearly as volatile as bitcoin especially if you have a diversified portfolio i mean it's possible for one individual stock to drop by 50 although usually a drop of that magnitude may take many weeks or many months you know whereas with bitcoin it can happen in in hours so you might have more time to liquidate or get out but if you have a diversified portfolio where you're long many stocks and then you're on margin
• 37:30 - 38:00 the odds of the entire portfolio making a 50 drop are pretty slim and of course if you happen to be long dividend paying stocks the dividends are going to help you cover the cost of the money you borrowed against those stocks but you're not getting interest on your bitcoin although apparently you are that was another issue that mashinsky brought up he said that now people that have bitcoin
• 38:00 - 38:30 you can get paid interest i don't know what five or ten percent interest on your bitcoin which to me sounds a lot like something bernie madoff would be doing because how are you going to pay interest on bitcoin when the bitcoin itself doesn't generate any income out of which to pay the interest well obviously what's happening is that you are getting paid interest on your bitcoin because you are loaning your bitcoin out and the interest that you're earning is basically the cost of
• 38:30 - 39:00 borrowing the bitcoin so somebody is borrowing that bitcoin well what are they doing with the borrowed bitcoin in order to pay you interest well they're obviously trading it many of them may be trading it from the short side but what happens if they end up losing the bitcoin right they all trades aren't guaranteed to be successful what happens if the bitcoin that you loaned out don't get repaid and also if a lot of people are paying high interest to borrow bitcoin maybe they're doing it to fund the short position it could be that
• 39:00 - 39:30 there's a pretty big short position being built up in bitcoin and you know when these shorts are going to cover when all the leverage longs all the people who have borrowed money against their bitcoin when they're force liquidated during the next collapse that may be when the people who are borrowing your bitcoin and paying you interest are going to be covering their shorts and by the way this guy mashinsky had the nerve to state that there was no more leverage in bitcoin that the decline from what 68
• 39:30 - 40:00 69 000 down to 62 or 63 000 whatever the bottom was of the recent decline according to machinski that shook out all the leverage that all the retailers all their individual holders who had borrowed that all that margin debt is now gone because we've had this tiny correction in the price of bitcoin which i did not believe for a minute there's no way that the margin has been purged from the system with such a small
• 40:00 - 40:30 decline but that is the type of stuff that you have to say to shield bitcoin so if you want to see this debate it's up on the internet peter ship alex mashinsky and you know this is the first time in one of these bitcoin debates i actually lost my temper i mean i actually lost my cool and really started yelling a little bit at machinski and at the moderator i mean it gets very frustrating to me to hear all this nonsense people just making stuff up and spouting it out even more
• 40:30 - 41:00 so than when i have to listen to richard wolff i mean i actually think richard wolff was a nice guy you know he's just misinformed and he and i actually agree on a lot of the problems which is the same thing with the bitcoiners a lot of people who i end up debating bitcoin we agree on a lot of the problems it's just that with the bitcoin people we disagree on the solution because their solution is always bitcoin and i just think that makes the problem worse but with a guy like professor wolf we disagree on the
• 41:00 - 41:30 cost as well as the solution with the big corners at least we all seem to agree the problem is government but professor wolf thinks all the problems are capitalism he thinks everything that we're seeing is created by capitalism in fact he claimed in my most recent interview that joe biden was a great capitalist because i said he was a socialist and wolf said no no no he's a capitalist he believes in capitalism no he doesn't everything that he's trying
• 41:30 - 42:00 to do is socialist if biden believed in capitalism he would be advocating for less government not more government he wouldn't want more government spending and more government programs he would want less the fact that he is trying to infuse more socialist programs into what used to be a capitalist economy doesn't make him a capitalist in fact when i was criticizing the federal reserve richard wolff was like well that's capitalism the federal reserve is a capitalist institution no it's not it is a
• 42:00 - 42:30 socialist institution just because it was adopted in a capitalist country doesn't mean it's capitalist this is how socialism works it infects capitalism it creeps its way in gradually and screws it up it's like a parasite gradually killing the host and then what happens is all of the problems that this parasite causes get blamed on the host there is nothing capitalist about central government planning when it
• 42:30 - 43:00 comes to money in a capitalist society we have free market money we have gold and silver we have real money we don't have a central bank in a capitalist society interest rates are discovered by the market they're not set by the equivalent of a pilot bureau which is what we have at the federal reserve there's nothing that resembles a free market when you have a government organization fixing a price deciding this is the price of money this is the quantity of money how does
• 43:00 - 43:30 professor wolf think that there's anything free market oriented capitalist oriented regarding that system it is socialist and its failures reflect the failure of socialism not capitalism but for some reason professor wolf can never make those connections anyway though i want to get into some of the economic data that came out on wednesday because we got a lot of it kind of a mixed bag but one thing in particular that we got
• 43:30 - 44:00 late in the afternoon was the release of the federal open market committee's minutes and these minutes basically revealed that the fed is more worried about inflation than they've ever appeared to be in fact they admitted i think for the first time that their growth forecasts that the risk to that forecast is on the downside meaning that growth may not be as strong as they think on the flip side
• 44:00 - 44:30 their inflation forecast the risk is to the upside so growth may end up being weaker than they think and inflation may end up being stronger than they think in other words stagflation this is a very significant risk and represents a real serious problem for the fed because what does the fed do if both of these risks come true and
• 44:30 - 45:00 growth ends up faltering as inflation accelerates what are they going to do now apparently the markets think the fed is going to fight inflation i don't know why they think that what is it about the fed's track record what is it about the philosophies that they profess that leads anybody to conclude that if the economy weakens and inflation strengthens that they're going to sacrifice the economy and go and fight inflation everything that they have done in the past suggests that
• 45:00 - 45:30 that's not going to happen what the markets should have reacted to as a result of these minutes is they should have sold the dollar and bought gold instead they bought the dollar and sold gold gold continued to drift lower and the dollar higher based on what was perceived to be these hawkish minutes because the fed is now acknowledging the risk of inflation and that inflation may pick up and you've just had powell
• 45:30 - 46:00 and brainerd and biden all talk about how important it is to bring inflation under control and the markets now actually believe that that is something the fed is going to do there's no way the fed is going to do that yes biden has to talk about bringing inflation under control because inflation is now a problem for the democrats it's going to be a problem at the midterms the republicans have hung inflation around their necks like an albatross and look i'm happy to have
• 46:00 - 46:30 republicans blaming the democrats for inflation i mean i think it's a good campaign strategy but again it frustrates me because in many cases it's pure hypocrisy because a lot of the republicans who are blaming the inflation on the biden deficits and abide in spending supported the same type of deficit spending under trump and they've supported it under bush as well the republicans
• 46:30 - 47:00 really have no right to criticize the democrats for deficit spending when they've done the same thing themselves and the republicans had a great opportunity to do something about it when donald trump was president and the republicans had both the house and the senate but not only did they squander that opportunity they took advantage of their control of government to increase spending even more they voted for more welfare spending they voted for more
• 47:00 - 47:30 warfare spending and then they reduced taxes and so they made even bigger deficits and trump himself bashed the federal reserve into monetizing it all the minute the fed tried to raise interest rates trump was all over powell for being public enemy number one and demanding negative rates and more qe where were the republicans back then who are criticizing the inflationary
• 47:30 - 48:00 policies of the biden administration why were they not criticizing the inflationary policies of the trump administration in fact many of them voted for those policies supported those policies so this is the problem with politics and and hypocrisy and you really don't have much of a foundation to stand on you're claiming that these biden deficits are the reason we have inflation yet you had nothing negative to say about the trump deficits or their
• 48:00 - 48:30 impact on inflation and in fact i think that most of what we're seeing now isn't even the result of the biden deficits it's more the result of the trump deficits because inflation operates with a lag so you print all the money the impact on prices may not happen for several years so i think ultimately we're going to get the impact of the biden inflation on consumer prices it's just that we haven't felt it yet it's
• 48:30 - 49:00 coming now yes what we are experiencing now has been exacerbated by covid and i warned as much i was one of the only people when the economy was locking down and everybody was talking about deflation and how coveted was deflationary i was one of the only people saying no this is massive inflation people are staying at home we're not producing goods and the governments are showering the world with money had the government's done the
• 49:00 - 49:30 right thing yes it would have been deflationary had governments cut spending and shrunk the money supply which was what i was advocating then we wouldn't be experiencing this but of course they didn't do that they created massive inflation and i was one of the few people that was warning about it but again this is not some one-off transitory event we are witnessing the tip of an inflation iceberg there's a lot more beneath the surface and the contributions that the byte administration is making
• 49:30 - 50:00 to worsen this are yet to come and of course a lot of the new spending programs haven't even been passed yet i mean the ink is barely dry on the infrastructure bill so it's hard to blame the inflation we have now on this infrastructure bill we can blame the inflation that we're going to have later on that bill and it's going to be much worse than the inflation we have now but what we're experiencing now is the delayed consequences of inflation that was created under
• 50:00 - 50:30 trump and under obama and under bush you know yes nobody had a problem with all this inflation when it was mainly showing up in the stock market but now that it's showing up in the supermarket people have a lot of problems but the fact that it's in the supermarket was inevitable because that's where all inflations ultimately end up doesn't matter where they start they can start in financial assets but they always end up in consumer goods but i want to go to the other economic data that came out
• 50:30 - 51:00 earlier in the day on wednesday first we got the durable goods order numbers for october the estimate was for a gain of 0.3 and that would have followed a minus 0.4 in september instead we end up with another negative print minus 0.5 so a pretty big miss there although x transportation we were up 0.5 that was in line and they upwardly revised the
• 51:00 - 51:30 prior month from up 0.4 to 0.7 and core capital goods came out again in line up 0.6 and we upwardly revised the prior month from up 0.8 to up 1.3 so kind of a mixed bag on durable goods the trade deficit for a change this is in goods was not a new all-time record although the all-time record high from the prior month is now even higher than we were originally told the september deficit
• 51:30 - 52:00 which was a record was 96.3 billion that was upperly revised to 97 billion so that's the new record i'm sure we will break it it won't be long before we print a 100 billion dollar number but the october number actually dropped all the way down to 82.9 and that was well below the low end of the estimate in fact the consensus for the deficit was 94.6
• 52:00 - 52:30 billion so way below and the reason that we were so far below was a surge in exports exports which were down 4.7 in the prior month actually surged by 10.7 in october not really sure how we were able to export so much stuff in october but somehow we did and that's what narrowed the gap imports were only up a half a percent month over month so that also helped to narrow the gap because we
• 52:30 - 53:00 had this huge surge in our exports and not that big a gain in our imports we'll see if this number ends up being revised upward meaning a bigger deficit because maybe there's something wrong because we don't normally have that big a jump in exports but maybe for some reason a lot of our exports got crammed into that one month one of the big shockers though was the jobless claims number the weekly unemployment numbers we get these every thursday but because the market is closed today for thanksgiving we got
• 53:00 - 53:30 these numbers on wednesday instead and the prior week was 268 000 was revised up to 270. the consensus for the current week was for 264 000 new claims instead new claims crashed all the way down to 199 000. that's the lowest we've been in a long time that's 71 000 fewer than the week before the four-week moving average now all the way down to
• 53:30 - 54:00 252.25 that is the lowest we've been certainly postcovid and it does make it harder for the fed to justify its emergency zero percent interest rate policy and continuing quantitative easing i mean how do you even argue for a taper we need to go cold turkey we need to start raising rates right now it's amazing to me that the fed can continue to follow this dovish script this
• 54:00 - 54:30 inflation is transitory yet the markets are somehow believing that the fed is fighting inflation in fact the reappointment of jerome powell the markets are treating that as if the fed is actually tightened policy right somehow this is the equivalent of a rate hike reappointing the exact same guy who's been there the whole time and who hasn't changed his tune one note suddenly you know we've got this inflation fighter and the markets are now starting to price that in although
• 54:30 - 55:00 if we really were going to get a fed fighting inflation the stock market should be tanking it shouldn't just be some of these high multiple tech stocks yeah they should be going down the most but the entire market should be going down because every stock even those that are value stocks are overpriced in this market because everything is priced off as zero percent interest rates so all stock prices are artificially high they're a reflection of these artificially low interest rates well the
• 55:00 - 55:30 minute the fed starts to raise rates it's going to bring down stock prices and so if you really believe what the currency traders seem to believe or the gold traders seem to believe then stocks need to go down the fact that they're not is more a reflection of the insanity that's going on in the current market but while the weekly jobless claims were assigned i guess of strength because not as many americans are losing their jobs the new home sales numbers were
• 55:30 - 56:00 definitely a sign of weakness and this is another reason why the fed doesn't want to raise rates doesn't want to stop quantitative easing is because the fed wants to keep the home market propped up for a number of reasons one there are a lot of jobs associated with housing but housing provides a wealth effect when homeowners think their house is very valuable they're more likely to spend money in fact the house is better
• 56:00 - 56:30 collateral for a loan people can then borrow money against their homes and spend it the fed is very cognizant of the fact that a lot of the spending in the economy is a function of debt but in order to have debt you need collateral and that collateral is the housing stock and so these new home sale numbers don't bode well for housing prices because new home sales collapsed in october in fact there was a big downwardly revision to the
• 56:30 - 57:00 september number that was originally reported at 800 000 and that was revised down to 742 000 the consensus forecast for october was 790 000 that came in at 745 000. so two week numbers at least much weaker than had been expected and what is the reason why are new home sales falling because consumers can't afford to pay the higher prices and if they
• 57:00 - 57:30 can't afford to pay the higher prices now given record low mortgage rates or near record low i think they've come up slightly but if people can't afford to buy homes today how are they going to afford to buy them tomorrow if the fed starts raising rates the only way they'll be able to afford it is if we get a big drop in home prices but that opens up a whole new can of worms that the fed would rather keep closed because we already know what happens when real estate prices drop
• 57:30 - 58:00 people who borrowed money stop paying and then the banks that loan the money now they're in trouble and now there's a bailout well you can't fight inflation and bail out the housing market at the same time you got to pick your poison and it's obvious to me which poison the fed is going to pick the question is when are the foreign exchange traders when are the gold traders going to figure that out also we got the personal income and spending numbers these numbers were actually stronger than expected last month there was a one
• 58:00 - 58:30 percent drop in personal income and the consensus was for a point two percent rise instead we had a point five percent so more than double the estimates also personal consumption rose more than forecast that was supposed to go up by one percent it went up by one point three percent but if incomes went up by 0.5 but spending went up by 1.3 where'd the money come from obviously debt and
• 58:30 - 59:00 depletion of savings so the money that everybody was holding on to all that stimulus money is rapidly being spent as americans are depleting their savings and borrowing more money in order to keep on spending also there were some inflation numbers embedded in the release look at the pce these are the numbers the fed really claims to like personal consumption expenditure index more so than the cpi so this was up 0.6
• 59:00 - 59:30 on the month and that followed an upwardly revised 0.4 for september so the year-over-year increase in the pce is now 5 that's much bigger than the 4.4 year-over-year increase the prior month five percent the fed is telling us that this is the measure that it likes to look at and it's up five percent more than double it's two percent target we're not just slightly above two
• 59:30 - 60:00 percent we are miles above two percent now if you look at the core pce which apparently the fed likes even more because it excludes food and energy that was up point four percent on the month uh that followed the point two percent gain but look at the year-over-year core pce right it doesn't get any better than this according to the fed this is the number that the fed claims carries the most weight and of course it's the one that generally makes inflation look
• 60:00 - 60:30 the lowest that's why the fed likes it they like whatever measure sugarcoats inflation the most but there's no way to sugarcoat this because the year-over-year increase in core cpi is 4.1 it was 3.6 last month which they revised up to 3.7 4.1 how can you justify current monetary policy zero percent interest rates continuing to do quantitative easing when your favorite
• 60:30 - 61:00 measure of inflation year over year core pce is at 4.1 double your official target and how can you claim that consumers expect inflation to go back down to two percent when all of the surveys show that they don't we got the consumer sentiment numbers again out yesterday final revision to november sentiment they actually ticked up a little bit from 66.8
• 61:00 - 61:30 to 67.4 so not quite as gloomy as we were told last time but still pretty gloomy and the reason that consumers are in such a bad mood is because inflation is so high not only inflation today but the inflation that they expect in the future and yet the fed is completely ignoring these expectations even though it once said that expectations were the most important factor and that they were watching them like a hawk because they didn't want to repeat what they claimed
• 61:30 - 62:00 were the mistakes of the 1970s and if consumer expectations were ever unanchored if they ever drifted above two percent well the fed would take action well anchors away they're way above two percent they're way above four percent and all the fed does is talk yet for some reason the markets still believe what they're saying anyway that's it for today's podcast again i want to wish everybody a happy thanksgiving and don't forget what i said earlier in today's
• 62:00 - 62:30 podcast tell the true story of thanksgiving so we all can be thankful for capitalism and thankful that the early american settlers unlike modern marxist were smart enough to recognize their mistakes and the failures of socialism and quickly abandoned them to the benefit of themselves and their posterity [Music]