Jim Rickards: Crash By Mid-Year Once Recession Is Obvious To All

then the

recession

is going to be worse than analysts expect and the bottom is going to be lower than analysts expect. It could easily go down 30 percent and I wouldn't be surprised if it went down 50 like you're seeing, you know? s p you know 2 000 2100 something like that welcome to richyon I'm rich founder Adam Taggart when unstable systems begin to fail, the pace at which they unravel accelerates, which is why today we bring James' records back to the show despite Last time around just a few months ago, much of what Jim predicted when he was around back then, such as accelerating disinflation, continued trade disruptions, and a Fed hell-bent on going higher for longer in terms of its aggressive interest rate policy, has only been building momentum since it was Last Here Now, given the accelerated pace of events, we thought it was to get an audible signal from Jim about where he thinks things are headed next, Jim, thank you so much for joining us today, thanks Adam, it's great to be with you, hello Jim, always a pleasure, uh.

Look, as always, a lot of questions for you, no, you have a lot of material for us, we will do our best to figure it all out, let's start with the high-level question that I would like to ask you at the beginning of each in one of these interviews, what is your current assessment of the global economy in financial markets? Well, that's a great question, Adam, because there are a couple of things, number one, they're two different things: the global economy is the big issue, that's what matters most to all of us, but the financial markets can come up with their own narratives and follow their own path at least for a while, so you have to do it.

They are not synchronized. They are. They will eventually be in sync, but not always right away. Many times the financial markets. the markets get ahead of themselves and then they wake up to reality and say, oh, collapse, you know, down, so there's a little bit of that happening in terms of the global economy. I think you are used to the word Global, it is very accurate. because it's often the case that if you look around the world, you know you have the United States or you know North America, if you want to include Canada, you have the EU, you have China, you have Japan.

They are all major economies, but they can be in different parts of the business cycle and it is not unusual for one part to be in

recession

, but another part of the world is doing better, so these are the phrases from the locomotive theory, you know . Locomo is going to get us all out of the ditch, you know, and we hit the ground running, so it's not unusual to have recessions in the United States or Europe or in particular countries in Europe or Japan. I mean, Japan said nine recessions since 1989, I mean nine, uh. I think a 30

year

long depression is a debate for another day, but that's how I would describe Japan, but generally, you know, one isn't doing as well and another part of the world is doing better, eh, that one isn't. is the case.

I see what is happening right now, but there is a lot of data to back it up and that is that we are entering or may already be in a global recession. That's weird, it's weird when, hey, China, Japan, the United States, Germany, are there. everyone in recession at the same time, but that's what's developing, that's a big problem, well, for

obvious

reasons, uh, uh, because you know it affects basically everyone, but there's no lifeline, there isn't, You know, you know, it's not like China is going to take us all out. get out of this with cheap exports or Japan, you know, will put the pedal to the metal in terms of, you know, fixing fixed asset investment, you know, etc., so it's a very bad sign, I mean, and just to be very specific.

We know we just saw that US GDP in the fourth quarter grew at an annualized rate of 2.9. People like, yeah, that's pretty good, and you know it's not good by post-1980 standards, it's not good at all by post-WWII standards, but after 2008, yeah, that's not So. Bad, but again, you have to disaggregate it and look at what grew: inventories contributed a lot and net exports contributed a lot and the consumer, I'm not sure about consumer durables, but, but, an investment In particular, there are a large number of aircraft orders for Boeing, which is notoriously irregular. You know they're going to have a big bang month and then nothing for a couple of months, not nothing, but you know something very low, so when you look at that.

Inventories are counted as part of GDP, of course, but it's not necessarily a good thing if inventories are building up, it means that retailers are not buying the products that arrive and this goes back to the whole supply chain breakdown of a

year

ago, that's what my book is about. was about to sell out, so go back to, say, spring 2022. The supply chain completely fell apart and if you're a purchasing manager and you were saying to yourself, okay, we're going out of work code we're going to start to grow, uh, but the supply chain is broken, so instead of ordering one container, you know, I'm going to order three containers because maybe one goes, you know, through the bottle next to it, I just want one.

But I'm going to order three and hope for the best. What happened was a lot of things eased up, not for a good reason, it's not really for logistical reasons, but because consumers slowed down a lot starting in June and partly in reaction to the FED starting to raise rates in March of 2022. And then here come the three bins, so at this exact moment when demand destruction is ramping up, your inventory is going to the rafters, so what do retailers do? or wholesalers, but at retail they cut prices, you know, two-for-one sales, you know, because inventories are a nightmare for retailers for

obvious

reasons, but you have to finance them so that they end up being working capital, it could be effective , but now. you know, you have a lot of stuff in the back office and then, but it just takes up space, I mean insurance costs and other costs like that, but the other thing that people underestimate is stock fashion because things go out of style. , You know?

Glass Springs styles are not the next spring Styles, you still have less spring stuff, good luck, you know we're getting close to spring, so you're getting rid of that stuff, you know, consumer electronics, you know you have an iPhone 13, well, everyone. wants an iPhone 14. You know, you get what I mean, so stockpiling inventories is a very unhealthy sign, it means the retail sector is running out. Demand instructions increase costs because you have to finance all these things and your profit margins are going down, so I'm not very reassured by that, but the other thing, Adam, is important, you know, quarters, three months, obviously, Yes, to the extent that you can disaggregate the monthly data and there is a lot of monthly data, yes. 2.9 annualized for the quarter, but it really slowed down in December, so it was kind of a waning thing, um, Christmas was a disaster, I mean, yeah, people bought things for Christmas, but way below expectations and again it accumulates again. inventory at the worst possible time, so it looks like the US will go into 2023, possibly the recession started in December, if not, we expected it to start soon, but now you are seeing the same thing in Europe.

Europe had a break with the weather, you know? Obviously we're going to continue, so that's a big factor, but you know, natural gas prices skyrocketed and oil prices skyrocketed again in mid-2022, they're down and people expected them and I'll include myself. to go. up again because the winner, but the winner turned out to be quite slight. I saw pictures of, you know, people like to kayak around Copenhagen, you know, it was like on t-shirts, you know, so, that was the break, you know, Act of God, but uh. but it works, um, so, so, they had a little break, but that doesn't mean that you know everything too or where they're out of the woods and there's other things that are going on.

China is the best. case, um, there's zero, you know, they went from zero covid, which you would know was bad public policy and bad health policy, but they did it anyway, maybe for political reasons because she was trying to pass Congress National Party in October, uh, uh. 2022 um, but he did it and he's Emperor for life, you know, the new Emperor Gum, so they turned around almost broken now there were riots starting November 24, 2022 uh, a pretty bad Wednesday, people rose up in the cities, they tore down all these test tents, they tore down barricades. The hunting banners and leaders in Beijing are looking at this 1989 thinking square.

So they just turned on a dime and said, "Okay, let me tear up the deposit letter", okay, let everyone get infected and we'll do the best we can, and um, but uh, but one of the ways to overcome it is by letting the Europeans develop what's called herd immunity, unless you've worked in North America and Europe, um and uh, like that that China decided to let it blow up, but when you look at the numbers, you think: Okay, you have one point, uh, two, sorry, 1.4 billion people, so you take a modest infection rate, which means you know like the 30 per cent.

Let's say you're talking about, you know, a round number of 450 million infections and if you assume a modest mortality rate, a quarter of one. percent, that's what the data points to that you're seeing, about 2 million debts, um, now based on conservative assumptions if you increase the infection rate to closer to 50 percent, the death rate by half one percent now. you're looking at five million dead, again, round numbers, but the other difference between China, Europe and the United States is that they don't have a health care system to deal with our health care system, which is quite good and was under pressure .

In Europe, China has nothing close to the ICU and the ICU units, the oxygen, the treatments, the professionals, the nurses and the doctors, don't even come close when you get to the village level, which is where he still lives most people. Believe it or not, they often have nothing, and it's actually an interesting twist in the supply chain because the Chinese were more or less told that you have to self-medicate, we don't have hospital beds for you, so I went out and bought the strip the shelves of ibuprofen Tamiflu uh you know Motrin uh Club whatever they could get um and uh they in Beijing actually said you know go back to uh TCM like what is TCM is it a traditional Chinese medicine the herbs and teas and stuff So, well, I'm not ruling it out by the way, some of those things are quite healthy, but they're at a Primitive level, they're at like a Bronze Age level, um, but uh, but that.

It is damaging the economy as much as code zero. They didn't have good exits. I'm not saying one is better than the other. They're both horrible, but there's still a lot that isn't covered. The real estate collapse. excessive debt, demographic decline, um, just the impact of top-down management when you can't do everything right, you know, and the decoupling of the US and the US, cutting off, um , you know, high-tech exports to China, including exports from your country. where they depend on licenses or equipment from the USA, so China is in a deep hole, probably in our session, Japan did the same, so the global economy is in bad shape, it is entering a recession, now many people has he said that, um, yes, yes.

They're going to have a recession like it's no big deal, but they're expecting a mild recession. I see a much more severe recession based on many factors, something we talked about now. The other half of your question, which one are you? What is important for listeners is what this means for the financial markets and that is why I have been able to explain it. Imagine you're in an Irish pub and you have three Irish narrators and I'm part Iris, so I can talk. about the Irish, you know, and uh um, but they're telling three different stories and you have to listen to each one of them, so there's the FED story, the market story and then there's something called reality, what's really happening , so the story of the FED goes something like this: the FED, you know, forecasting what the Fed is going to do is the easiest thing I do, because it's not because I have a crystal ball or I'm smarter than nobody.

The FED actually tells you that all you have to do is listen and believe. now a lot of people don't listen to them or they listen to them like all the feds will never do that they will actually mean it and Jay dude is probably sick he's given six speeches either after the meeting press conferences the FMC or like the Brookings Institution speech at the end of November Jackson Hole August 26th continues to say the same thing, it says that inflation is work, in a period we are not really worried about anything other than inflation and we are not going to rest until we get it down to two percent, um. they uh and he said we're going to have a recession, he didn't use the r word, but you know you don't have to be, you don't need a decoder ring to realize it, he saidUnemployment is going to increase. um and he in the Jackson Hole speech used the word uh pain like five times in one paragraph.

I've been doing this for 45 years. I had never heard of the Fed chairman. I used the word pain. He said there will be a lot of pain. You're going to feel the pain, but the point is that he meant it and they've been going down that road, so what are they trying to do? They're trying to come up with something called a target rate and you say, Hey Jim, what's up? the target rate well, I don't know what the number is, but neither does Jerry Libra, no one knows what the number is, but the theory is that the target rate is the rate at which rates are high enough for inflation to go down on its own.without further rate increases, that's the definition, so what is that number?

And I, the FED thinks it's five and a quarter, the market somehow thinks it's like four and three quarters, which we just got to or maybe five, but more likely it's possibly five and a quarter. higher, but I'll settle for five and a quarter, um, the Fed's not there yet, they're going to have to raise another 25 basis points in March, on March 22, that's the next CM higher and again in early May, those two additional rates of 25 basis points. The walks in addition to what we just saw will take you to five and a quarter um and then from there you go to the pause and I use the word pause and friends like that it could last a year and maybe early to mid 2024.

We are looking at cuts of rates, but we have, yes, we have to control inflation and it is not. I mean, inflation has come down a lot, you know, if it just started dropping like a stone, I'm sorry. Julio um, now I'm not talking about the CPI that the FED uses, you know, it can't be that simple with the FED, there is a core of personal consumption spending, which means throwing away food and fuel, most people like That's what I spend most of my money on. but anyway the Fed that's how the FED does it. I always say you have to do it if you want to understand the Fed.

You can't use your way. You have to put yourself in their minds or you'll just be wrong, so PC. The core comes out monthly but they do a year-over-year comparison, that's what they want to earn two percent, but just using the CPI, which is better known, it comes from round numbers again nine 8.7 8.2 7.5 7, 1 and now it's down. you know, about six or high six, um, that's a lot, that's a lot, but you're still pretty far from two. Very good work so far, but you are not where you want to be and the FED said they are not going to rest. until they get there um now here are the feds I had to use the word enigma but sometimes it applies here is the enigma of the fed their interest rates and inflation is going down that is clear, but what they don't know is if the rates Interest rates are going down because rates are going up or they have already reached the terminal rate and it is going down on its own and they just don't know it and that is a big problem because if they are at the terminal rate and they just don't know it and they keep pushing what they They're going to do it, they probably already have done it and this is going to be part of what throws the economy into a severe recession, so that's what the Fed is doing and how they think about it now.

Let's go to our next Irish narrator, this is the market and in particular, although here we probably assumed that between the stock market and the bond market the bond market is much smarter, but the stock market says, uh, yeah , the Fed is raising rates, inflation is going down, but we think they're already at the terminal rate, but not only do we think they'll get the memo that the FED will realize that before they hit five and a quarter before to raise rates in May, perhaps even in March. you know, maybe they're done um and because of a recession the FED will get the wake up call um pivot the famous word pivot which means rate cut and that will bring the economy in for an assault Landing so this is the Cinderella soft landing or so sorry Goldilocks is wrong, it's wrong, huh, fairy tale, this is a soft landing Goldilocks scenario where the market is right, the Fed is wrong, but the federal government realizes that the market he's actually right and lowers rates, you know, and if you're going to lower rates, buy stocks, that's like Wall Street always.

End each analysis with buying the stock, yes, the bond. Mark is selling a completely different story, by the way, and this is a little more esoteric, uh, but uh, if you look at the yokers, look at the Treasury yield curve. euro dollar. Futures yield curve. German buns. Fuel curve. uh and then I mean there are a million yield curves that choose your maturity but um even uh there is one that you can see the spread between the three month treasury bill rates and the expected three month treasury bill rate. months in 18 months, I mean, that's a little esoteric, but you can, you can mention it, they're all invested, they're all invested now, reversals happen, which means the long-term rate is lower than the long-term rate. short term, now this is in the treasury yield curve, they have been inverted for a month. at 20 years it's not like you know that people talk about twos and fives and cakes and verb tenses a month a one-month bill yields more than a 20-year bill okay, that's invested in all the yogurt um the future euro -dollar the same investment activates it does not come into action immediately because the FED controls very short-term rates and they are increasing them, but the Kink comes into action, like in March, March 2023, which is not that far away, and buns have never been avoided, yes.

Now, even reversals that have happened in the past, which are rare, haven't reversed as sharply as they do now, we're seeing something global that we've never seen before and it's the single best indicator of a recession last time. We saw something like this in 2007, just before the financial catastrophe of 2008, so the stock market says everything is fine. Goldilocks, soft landing, the Fed will get the memo that they are going to cut rates, pivot and buy stocks, the bond market is Saying no, this is bad and it's going to get worse and it's actually too much Too late for the FED to do something about it.

Look when these investments begin. Sometimes they go a year in advance. Hey, look at the yield curve on Euro-dollar futures, but for now, man, that thing is inverted, but what happens is that as you get closer to what you're really worried about, the inversion gets closer and closer. plus, now it's literally a month or less away, so that's like that. you know, a big red flashing siren, whatever you want to call it, okay now let's go to our third story, tell me four bigger ones on this thing, but okay, real quick before we move on to the next Narrator, can you comment real quick what um?

Credit spreads have narrowed surprisingly given the gravity of the investments. Can you just comment on that for a while? I'm sure credit spreads are somewhat tagged along with the stock market. I mean, if the stock is doing well, that is, us. I've had a spike, you know, there's no spike in January and he said you have your own opinions, but you can't have your own data. Stocks are a pretty good month, well, corporate bonds, what's the way credit spreads are calculated. With that, stocks are doing better and companies can refinance and borrow etc, so there's no reason why corporate bonds shouldn't rally, so I think spreads would increase, but it's vulnerable to same reversal I will do.

Describe in a minute about the stock, okay, but I guess my question is, would you expect credit velocity to start slowing down when things are a key sign that it's starting to get real here? Yes, yes, in two ways. one, um, whatever your baseline is, it's probably the treasures that you know, your grades or Fiber notes or whatever, they're going to go down a lot, not right away, this may still be a month or two away, but they will go down a lot and then corporate. yields will go up a lot because of the recession because impairment will increase bankruptcies will reduce income, you know, etc., etc., and then those spreads will disappear and it's important to remember, um, uh, I'm going to go back to my uh uh my training. entry level credit. at Citibank in the late 1970s, but they actually made us learn things, interest rates are a lagging indicator, everyone likes, well, what could interest rates be like, you know, going up if we're In a recession, the answer is, as you get closer. recession, who notices first, well, the FED notices less, they are usually the last to find out.

Wall Street is second to last to know the people who realize it first are real business people, entrepreneurs, restaurant owners, dry cleaners, taxi drivers, um or even mid-sized companies, they say it, you know, if you're in the transportation business by road, it's in real time, you know, if inventories are through the roof and new orders are being cut, no, you're not moving anything by truck. uh so there are certain businesses that are concurrent so the yield curves that I was talking about are very good future indicators that tell you what's going to happen next, a lot of entrepreneurs live in the real world in real time, they know that.

What's happening now and the stock market tends to realize it later, but when it comes to banking and credit, what happens is if you're a business person and you see business going down, You meet fewer clients, whatever it is, you go out and borrow. you can say, hey, there's a really bad recession coming. Better if I have a lot of credit. I'm going to spend them now. I don't want my bank to change the terms. I don't want material average close close average The change clause is coming into effect. I'm going to borrow as much as I can and that creates a demand for funds and interest rates go up and then the recession hits and the bankers leave, aha, what's happening?

Credit losses start going up and then they just turn off the speakers and raise the standards, stop making laws and then interest rates will start going down, but interest rates peak after the recession has already started, so That's not the case, interest rates may not have peaked yet, I mean, even you. I even know the treasury market, so that's not unusual, um, so the stock market tells us. The Goldilocks brand tells us, you know, here comes, you know, Hurricane Mitch or whatever, um and then, uh, there's what I call reality, uh, and I guess I'm the narrator here, but I What I see is a kind of hybrid, the Fed is doing what they are doing right or wrong, okay, they are doing what they are doing, the market has its own interpretation.

I agree with the market, certainly. bond market that the FED is probably too restrictive, they are probably at the so-called terminal, right, they just don't know it, they are going to continue for the reasons I explained to them, that means they are going to make things worse. We're going to make the recession even worse, and they may pivot to say there could be a rate cut, it won't be in April, but you know, a rate cut in August, maybe I wouldn't rule it out, but for a while really In other words, it's a bad reason. If the Fed rate cuts (which may be the pivot) can be real, it's not because they engineered a soft landing and Goldilocks and all that, oh that's perfect, it's because they screwed up as usual, like they've been doing since 1913. too tight, they didn't look at the leading indicators that I described and they found out too late and then they had to hit the brakes if that would take their foot off the brake in terms of rate hikes and then pivot and we've seen this movie before, this is exactly what happened in 2018.

I mean, no, I don't know, attention spans seem to be short these days, but it wasn't that long ago, go back and look at a graph. any stock index chart from October 1, 2018 to December 24, 2018. In less than three months, the stock market fell 20, I mean, it's like 19.9 or something on the Dow, so maybe it's not technically a bear market, but yeah, what's the difference that it fell 20 and ended? The Christmas Eve massacre on December 24, 2018 when boarding the NASDAQ fell like three percent in one day. Here's the point at which the Fed was adjusting to that collapse. The FED tightened on December 16, 2018 just like eight days before the Christmas Eve massacre and after most of the '20

crash

had already happened, they tightened it one last time, so what it shows is that when the Fed Federal has a mission, they don't really care about the stock market all this time, you know, Bernanke put in and Greenspan put in and all that, they don't. works, uh, they don't care much about the level of the stock market, this is what they do care about, they care about messy markets and that's the key word, it's not whether stocks are going down, but it's a little bit, you know , half a percent a day. one percent a day trenddown lower highs lower lows outward trend the FED doesn't care that they're not going to bail out the stock market they do care if it's disorderly when was it disorderly?

Well, March 2020 had the worst part of the pandemic it dropped like 30 percent in about two or three weeks, in the fall of 2008, I mean, it was like someone opened a trapdoor. The FED does care about that because that kind of disorderly behavior can feed on itself and end up in a 1929 type of scenario so the FED gets the memo like I said uh stop raising rates and start cutting when the markets are messy, but not just because they're going down, so now they're going down, but well, I mean, we had a recent rally, but you know, this is the third one, we had a rally in July and in early August we had another rally in October, but they both corrected the August rally corrected in September in the October rally corrected in November and December and this January rally is going to correct It may also be difficult, but um uh, but the FED again, that's not enough for the FED acts, but the so-called disorderly collapse, well that is what can happen, in fact I hope it happens, but we are not there yet. uh so there may be a pivot, you know, at the end of August, but or you know July is the best, but not because of Goldilocks, but because it's not a soft landing, it's a hard landing, so I agree I agree with the market that we are going to get a pivot, but I completely disagree with my fairy tale, uh, you know, the wolf eats Little Red Riding Hood, okay, look, Jim, that was a phenomenal job telling stories, both.

With that fairy tale right there, but also with the progression from the Fed's worldview to the Market's worldview to what you think is going to happen, okay, so it sounds like it What you're saying is, um We should listen to Pell, which means there's a good chance there's more pain ahead of us here to be eliminated. You didn't use this word, but I'm going to put it in your mouth and you can correct me. But I think. It would seem that the fund has not yet bottomed for the bear market that began last year. I agree with that yeah okay so just expanding not only I agree with that but I think the bottom could be so much lower that even people say the recession is a small correction I think it's going to be worse, okay, um, and I'm sorry, worse session, you're playing correction, uh.

Market correction responding to both so the recession is going to be worse than analysts expect and the bottom is going to be lower than what analysts expect we may see from current levels note we are down significantly from on January 1, 2022, in the case of the NASDAQ, the change actually began in November 2021. So, we are below those levels. We know that maybe we've hit a moving average, you know, but no, we're nowhere near the old highs, but it could easily go down, down 30 percent and I wouldn't be surprised. if it was 50 that you're looking at, you know, p, you know, 2000 2100 something like that, okay, okay, and that would be a pain that would qualify as payment, okay, um, Jim, this has been great so far and what? what is it?

You're wonderful, you've ignored a lot of my questions, which is, you're the best thing that can happen to an interviewer like me, because you just do my job for me, which is wonderful, let's see here. So obviously I want to get to, “Okay,” so you know what are some ways that people should position themselves for what you're talking about. You gave us a view of the last time you were on the canal, so I just want to revisit it. that, but before we do that, there are a couple of other macro issues. um I want to pick your brain um largely because these are things that you write about a lot um uh but real quick I guess let's stick with the recession just for a second because there's the Well you know we thought the profits could compress by an amount x or you know that stocks go down to whatever, but then there is the human cost, right?

Bad recessions usually come. along with a lot of job losses, so there's a lot of economic infinity or financial and economic people, a pain that people take on because their stock portfolios go down or their home prices are right and the U.S. housing market. U.S. certainly seems to be you know, now you're committed to fixing it, but then there's the real human cost of people you know losing their jobs and basically just having a loss of damage to their future prospects, right, yeah you look at the employment day or the unemployment data and the payroll data, uh, to me, it feels almost like a fairy tale right now, uh, the actual statistics that the FED seems to be navigating in terms of, oh, the job market still seems super strong, you know, there's a lot of people.

You've talked about the fact that some of these numbers just don't seem to match up with a lot of other data sets that you know in reality at a lot of companies and I'd love to hear your thoughts on that. but what I'm trying to do with this is, you see, since this recession could be worse than most expect right now, there are, you know, large-scale layoffs of the kind that we've seen and some of the worst. previous bad recessions like 08 Lyco the answer is yes, first of all, we are already saying it, just so you know, I don't agree with the company on the exact number, but the layoffs are in the magnitude of 10,000 to 20,000 employees laid off at Google Amazon. uh Facebook um you know other tech names uh wait other sectors too, but Tech in particular has been involved in a series of layoffs um and then people wait a second, how come that hasn't shown up in the unemployment figures? because the unemployment rate is around 3.5 3.6 and an exact number is right in that neighborhood three five three six we haven't seen unemployment that low since the 1960s this is not a good year or good debt, you know , this is the lowest since the 1960s, um, and the FED is absolutely analyzing that you're right about that, Adam, and they're saying, and of course, they believe in the movie curve, which is junk science, but The Phillips curve for those unfamiliar says that there is an inverse relationship between unemployment and inflation, so if unemployment is high, inflation is low and if unemployment goes down, inflation goes up, so if you want to lower inflation you have to expect unemployment to rise that's what the FED thinks what I just said is nonsense it's not true if you think about a matrix of unemployment and uh inflation what did we have to late 1970s?

We had high unemployment and high inflation, if between 2009 and 2019 we had low unemployment and Low inflation, what do we have now? Low unemployment and high inflation. So you can fill every box in the metrics, which means there is no correlation. I mean, you can describe it, you can calculate it and put it on a graph, but in the end there is no correlation. The time I looked at the Phillips curve it was flat, at least where I went to school, the curves were curved, so it's garbage, but the FED believes it again, no matter what I think matters, what the FED says, you must put it yourself. in their minds to figure it out, as far as they're c

once

rned, those kind of lowest unemployment numbers since the 1960s, that's inflationary, they have to raise those numbers now, this is what the FED is missing or maybe to all. missing when you hear these layoff announcements that people like, well, if they're laying off, why aren't they?

Why is the unemployment rate not increasing well? The answer is that they have to announce the layoffs. There are all kinds of statutes, you know, SEC Warren active. Yes, exactly, so if I'm going to fire 10,000 people, I have to tell the world to 510,000 people, that doesn't mean I fired them that day. I could lay them off, you know, on a rolling basis for the next 30 days and it doesn't mean they walk out the door empty-handed and head to the unemployment office. I could give them three months, seven months, six months, severance pay, etc., and then when do they actually show up at the unemployment office and say, you know, give me a check?

It won't be until this spring, so the layoff announcements are there, but the unemployment rate hasn't moved because there's a three-month lag, but that's why I said interest rates like the economic cycle and Unemployment likes unemployment in the business sector. It's a lagging indicator when you're an entrepreneur employer and you're under some kind of stress, you know, there's not that many customers coming through the door, you're going to do everything you can to keep people from leaving, you know they're going to be late. the rent, you dim the lights, you know, you know, you find a cheaper laundromat, whatever the cost, and then when you get to lay people off, you're out of options, like I've done everything I can, now my business it's on Jeopardy I have to fire some people for that and then combine that with what I just said about severance and you know, continued layoffs, etc., it's a lagging indicator, but we know enough right now here, you know , early, you know, late January.

February February we know enough now to know that that number will increase this spring, but that is not inconsistent with the fact that we are already in a recession, it is exactly what you would expect, that unemployment is a lagging indicator, having said that What else does the Federal Reserve do? missing, well, by the way, Adam, you mentioned salaries or their salaries. I just checked my head. Everyone says, well, you know, the real wage, not real, not real, that's the point, wages have gone up five percent or nine dollars base 5.2 percent and I know it's basically like yeah and inflation is seven percent or six percent, so your actual salary just went down one or two points because when the Bureau of Labor Statistics reports those salary figures, those are nominal figures, I'm not saying they're false, but you have to know that They are nominal and you have to subtract inflation to know what is happening to real wages and the answer is that real wages have been going down for a couple of years because it is around five percent annualized or Taste sounds like, hey, an increase five percent, what do you want?

Well, yes, but with inflation at eight, nine percent, or even six percent, your real wage is going down, so it's not a solid number at all, fueled by the way the federal government wants to earn. The worst thing, if I agree, is that those wage increases are too high, but what I mean is that, in real terms, they are actually going down, but the FED wants them to go down more. That would be one way of saying it, although you know if you lower inflation and wages are constant and the real wage goes up in relation to where it was before, but if you are unemployed you have no salary, then that is another problem now, which missing the FED and it's a long list, but, there is something called the labor force participation rate, now the labor force participation rate, you simply take the number of people working divided by the total working age population , so that's all you do, it's not fancy, um, and that number today is around 61.7 61 61 61.2 or so.

Take a percentage, but as recently as 2000, that number was over 70 percent and it's been down since then and it's dropping like a stone during 2020, during the pandemic lockdown, it came back a little bit, but not much, and it's you. know the reason why you got first of all it's never 100, it shouldn't be, there are legitimate reasons to be a working age population that doesn't work your um your housewife you're a student uh you're an early retiree uh you're in the military , yeah, you're in the, yeah, there are a lot of perfectly good reasons, 100 isn't even close, but 70 is pretty high and 60 is pretty low, uh, and the trend has been down, so that leaves a uh relative to sort of a normalized number that leaves between eight and ten million people between the ages of 25 and 54 who are not in the labor force, again, even if you take into account legitimate reasons, for many of them there is a huge pool of untapped labor, there are a lot of people you're sitting at home watching the football playoffs and not going to the unemployment office, that's yes, what you have to do is go to the unemployment office online or whatever, you at least have to look for a job to be counted as unemployed if you're not.

By looking you are not counted as unemployed but you are still a person who is still capable of working, you are just not looking, which is a very negative sign by the way, but if you take that group and throw it into the unemployment figures of the way the Bureau of Labor Statistics calculated that unemployment would be around nine percent and that's the depression level of unemployment yeah so I'm really glad you went there so I interviewed a guy named Nicholas Eberstadt last month who has been calling for this. Warning Bell about that cohort you're talking about, but like 10 million have lost people of prime working age, right?, and he says he calls it an asylum epidemic, but he says it's justtoxic, eh, for the culture. and the productivity of a nation you seem to feel the same way not only but I read Nick Everstadt's research and he is cited in my out of print book so that was one of the sources I used to offer my own explanation of inflation and deflation. and the impact of the supply chain, so yeah, it's great, well, guys, yeah, look if you want to go deeper into that topic, guys, I'll put a link here to the interview with Nick Eberstadt, people can go check it out.

Really great, in terms of his discussion of the importance, it's very yes, he wrote a book about that. I'm pretty shameless about promoting my own books, but I don't mind mentioning other people's books, but he's done a very good job. About that, yeah, okay, cool, okay, uh, and Jim, when you were talking, I put up a graph that shows that real wages I think have declined for the last 21 months straight and uninterrupted. A chain here is really important, it's kind of everyone's joke. This is that people should prepare for a difficult year ahead, right, that's what you're really trying to figure out is something that people need to do.

What I hear you say quite clearly is that the average person should take the shock position because there could be a threat to your income, you know, if you work for an employer, it could be a threat to your wallet and we really haven't There's been a lot of talk about it yet, but if you're a homeowner, there's a threat to your home price. which for many people is the biggest asset they own, right, but do it now, don't wait until the FED finds out about this because they will be the last to know about it Adam seriously in May or June.

I hope everyone I'll be preparing for what we're talking about now, but what I'm trying to say is that predictive analytics input would have led you to that conclusion today, actually would have led you to that conclusion last fall, um and uh, but prepare absolutely now. because when it comes it will be too late and it will be gone, the stock is down 30 like oh I think I'll sell oh no, about you now, yeah, and you know when you were talking about how the companies you know like the wave of layoffs is coming, it's brings up the real wave of layoffs, in which you said that companies do everything they can to avoid having to lay off people.

They put all that investment into finding the people who hire them. First, hiring is frozen, benefits are cut, and then hours. You drop the contractors, uh, but then

once

you realize The Jig is ready, you know you start, it's like you're dropping everything you can out of the balloon at that point, so it seems to me like a tree, right? where they hit it with the axe, they hit it with the axe, they hit it with the axe, the tree is still pretty vertical, but then once you get to that critical point, it happens very quickly, the actual falling of the tree, right, yeah, okay, okay, so um.

I have to talk about this all day with you, Jim, but I have to move on, so I've had several questions from people for you and I know you've been working hard, you know, writing about this with your newsletter recently, um, but what? what do you see ahead? I mean, I'm going to group several topics into one, but they're all related to money, um, what do you think the outlook will be for the dollar this year, people are very interested in what do you think about CBDC? And I know you've written about that recently, so what do you see in the future when it comes to the future of money?

Sure, the dollar, of course, you know in a tear in 2021. of 2022 reached levels, maybe technically not higher than 2000. I was on vacation with family and friends and we were in the French Alps in 2000 and the euro was 80 cents and we are with both families. we couldn't spend a hundred dollars if we drove, I mean, order wine for dinner, we couldn't spend 100, it was wonderful, but yes, the euro bounced to 1.60 in the early 2000s, but then the dollar was that strong and you really have to go back to 1985. To find a dollar that strong and what happened in 1985, James Baker can be at The Plaza Court.

Basically, it wasn't strictly the G7, but you know five major economies. Japan Germany some others too um to weaken the weaken the dollar intentionally the dollar was too strong and they did it and then the Louvre chord in 1987 was fine we did it now let's stabilize but that whole period from the 80s to the mid 80s uh 85 in particular, that was the last time the dollar was this strong now the dollars weaken a little bit starting in October, if you look at the Bloomberg index, the Wall Street Journal has uh um dxy, you know the FED has made indexes when I use broad trade weighting, but um I think that's coming to the end of its tightening um and the dollar will strengthen again and the reason I say that is it's consistent with everything else we're talking about if we talk about the type of recession that I have described and to observe the type of things that occur and then another question is okay apart from the fact that it is a reliable warning of a recession, what is it, what is behind the curtain, what are the real reasons why that the yield curve is sending a very bad signal, we interpret the signal, but why is it happening?

The answer is that there is a mad scramble for dollars, there is a serious shortage of dollars, and people roll their eyes and say, "Wait a second, you know, China is getting rid of Treasuries." The country of Brazilian Treasury dumping, you know, people hate the dollar. China is talking to Saudi Arabia about paying for oil whenever it wants. What do you mean there is a shortage of dollars? Well, there is a shortage of dollars because and we can see it, but there is a reason for it. You know, you know, I'm telling people what I call the cure, which is a quadrillion, a quadrillion, it's a thousand trillion, which is approximately the notional value of all the off-balance sheet derivatives of all the banks and mutual funds. coverage of the world, it's about one. trillions, we're talking about options, futures swaps, swap options, you know, currency forwards, you know it all, but they're all off balance sheet, so they don't appear in conventional ratios, you have to read the footnotes of page and not I'm not telling you much, um, okay, there's a lot of stuff and derivatives that back that up, how do you get a billion dollar position?

The answer is warranty, but not that much, it's a small chip, it's kind of like one. percent collateral under quadrillion, okay, so in a credit crunch you're going into a recession, what's where we are, what do banks say to each other and what do banks say to hedge fund clients, etc. ., in terms of quality of collateral they say I don't want your mortgages I don't want your corporations I don't even want 10 year treasury nurse I don't want five year treasury notes I want treasury bills that are the best less volatile more The credit more liquid is an instrument worthy of the world and in a world where rebounds are contracting.

Credit fears are increasing. The economy is going down. Everyone is worried about this. You and I was head of general counsel. Credit director. One of the largest government securities traders for 10 years and I know you walk around the room and you know the guys at the repo desk or whatever they are trading with their counterparties every morning, they are harping on treasury bills. Well, if you are Deutsche Bank or Barclays or HSBC or unitary credit or Bongo Santander you have a central bank that does not print dollars. The ECB can print all the euros you want, it doesn't print dollars, so where are you going to get the dollars if you want to buy dollar-denominated Treasury bonds. bills you have to get dollars to be able to pay for them well that and that is what is driving this that is what will make the dollar go up to start to finish let me underline this for the people who did not fully understand the meaning of this We are saying that in a crisis everyone wants UST notes, the only way to buy a UST note is with US dollars, you can't buy it with euros, you can't buy it with any other fiat currency you actually have to.

First convert everything you have into dollars to then buy it so the demand for dollars is the most important thing you are highlighting here that is exactly right and then now you can do currency exchanges which are other ways to get dollars but all they involve risks, they all involve more imbalance, just, you know, postpone the problem a little bit because at some point you have to untangle the Swap and you're basically short of dollars because you had to get them and um. If the dollar strengthens, you just lost more money, but you put it off for a few months.

Now people look at the TIC reports, that's the Treasury report of what foreign central banks and sovereign wealth funds own, the US Treasury market that's what it is and you'll see that the security balances of the China's treasury are going down, India, Switzerland, and you say that means they hate the dollar, the answer is no, they love the dollar, but they are desperate, they have it, they have it. to get dollars to prop up their own banks, if you're the People's Bank in China, you have to prop up the Chinese banking system, if you're the Swiss National Bank, you have to prop up Swiss credit, you know, etc. um, so if you can't print dollars, you can sell dollar securities, get the dollars, and then lend them to your own banks, who can then go out and buy treasury bills.

Another investment, this one, is not too esoteric. the fed will actually give you all the treasury bills you want, all you have to do is do a reverse repository with the fed, you deposit your cash to the fed and they sell you, they send you treasury bills and it's like you can be overnight, a week or so. At some point you unroll it, but what you usually do is just roll it over so that one phone call to the Federal Reserve will get you all the Treasury bills you want. Why doesn't that solve the problem? Because if you look at Treasury auction auctions.

By the way, everything we're talking about now is ruined by this debt ceiling debate because the Fed, the Treasury, they can't sell new bills, they can't, they can renew them, but they can't increase the issuance of bills because we're in the debt ceiling until the ceiling is lifted, yes, right, um, then, um, but until the ceiling is reached, then, when, um, but it's like they are renewed when the banks and primary dealers bid In treasury bond auctions, they get a certain rate. You know, the more I pay, the lower the yield, but I can call the Fed and they'll send me some Treasury bills.

The rate at which the Federal Reserve will give you bills in the form of a reverse repo is higher than the rate. that brokers get when they bid at auction, so why would you do that? Why would you bid at an auction to get a lower return than the Fed will give you for a phone call? The answer is that Federal Reserve notes cannot be remortgaged. They can't be used the way the traders want, they can't send them to you, to Deutsche Bank, but if I own them, if I buy the bills at auction, I can do that, so there is a liquidity preference to buy bills from the Treasure at auction because I can pledge them. to someone else and that's what they do, but if I do the opposite, I have to hold on to them because the FED won't let me remortgage and that's why the yield to maturity at the auction is lower than what the FED will do.

I'm giving it to you basically for free, but it's another one of those weird, quirky little investments, but it tells you something, it tells you exactly what I'm saying, which is that there's a shortage of dollars, um and then, and that's going to get worse as we get into a recession and credit losses pile up and banks get stressed and balance sheets shrink and traders say they're treasury bills and I only want one-year bills, give me a three-week bill, give me a four-week bill, you know, that will push the dollar up basically against the Euro okay so just to underline that if you didn't like the pain of a dollar rise in 2022 you probably won't enjoy 2023 at all unless you are long the dollar and we'll get to Some of the ways you could play this, but you know, obviously, Treasury yields should go down with demand, so if you're long the long bond, you could do well.

I would expect the entire Treasury yield curve to go down a lot. but it's not like you know yet, yeah, St. Augustine, you know, make me Chase, but not yet, okay, cool, well, we'll get to that in just a second, we'll get to know what to do with all this, real quick, although it is so strong. Strengthening the dollar for this year on the CBD side, what is most on your radar? Because I know you've been writing a lot about it recently. Yes, the Bank's Essential Digital Currency is not a new currency, so the Bank's Essential Digital Dollar is an essential dollar.

The digital euro is a silver euro yen, so it is not a new currency, it is a new ledger and it is anew payment channel, that's what's changed, uh, and it's not a cryptocurrency, this is not a blockchain. You know, the ledger, you know, they're still working out whether the ledger is maintained by the Treasury or the Federal Reserve. You know that the FED could be the Fiscal Agent of the Treasury. Yes, those are important details, but you know they're still figuring those things out, but basically it's a ledger-based system with 100 encrypted digital messages. traffic and it's a dollar, so what's not to like?

So the speech for essentially my digital cards I will refer to the dollar, but it is the same all over the world. The speech is hey, you know, I'm in an airport. I want to buy a bar of chocolate and go up and buy the bar of chocolate and pay for it with a credit card. What is the retailer? How do they pay you well? They take my right to collect and sell them to someone called. a merchant acquirer Merchant acquirers go out and just collect, you know, hundreds of millions of dollars in credit card receivables and they pay the merchant, so I get the chocolate bar that the chorus of merchants paid them, it was the acquired merchant who delivered them to Mastercard or VISA and Mexico to Visa pays them like okay, I received it and then I make a spread eh, what does MasterCard do?

Do they send them to all the banks that issue MasterCards and do the banks pay them and what does my back do? an invoice and I pay the bank, okay, so everything is fine, but we have five parties to buy a chocolate bar, we get the retailer, the acquiring merchant MasterCard and the issuing bank, five counterparties, five different exchanges of value , differentials along the way, is clumsy and expensive. You know, etc. and the FED says Hello, with the Central Bank's digital currency. Jim will have an account at the Fed. You probably know my bank, but same thing, a little boom of the QR code and the payment goes directly from A to B.

It's like Venmo. with a few more zeros, then it is better, faster, cheaper. The Fed is not going to disintermediate the banks because they exist to prop up the banks, but true, but it will be better, faster, cheaper. I think that's conclusive. Now something else has to happen. at the same time, you have to get rid of cash because if people don't like Central Bank digital currencies, I'll give you 20 reasons not to like them in a minute, but if that's your opinion, it's a sell, I'll pay . cash I'll give the person you know a five dollar bill give me some change uh so you have to get rid of cash and Ken Rogue out of his profession others have been working on it for a long time but getting rid of the cash and withdraw the money.

The Central Bank digital currency goes hand in hand, so I always say that if you want to slaughter pigs, you have to put them on a hunt, line them up and take them to the slaughterhouse so you can't let them run because Run away if you want to slaughter Sabers, uh, you have They have to do it. Get them into this digital shoot in the digital slaughterhouse, but they're working on it, so now where are we? We are in a world where there is no more cash, maybe you have a credit card, but all payment channels are through the Central Bank. digital currency what's the difference the difference is feeding the federal treasury again probably the FBI can see what you're doing now the other thing is the digital currency the cbdc is programmable so what comes next is okay we're on the cbdc Dollar World right, they say, well, you know what you've been buying too much gas, Jim looks like you've been driving up and down the east coast, we're going to limit, we're not going to allow your card, your cbdc card to work at a gas pump, you know, the next 10 days because you're using too much gas, um, oh, your heating bill is a little high, oh, you need to lower the thermostat, you know, lower it to 64 or whatever.

My wife really likes that, but I don't, so you know, turn down the thermostat so we don't let you pay your heating bill. Notice they can control how you spend your money, what you spend it on, uh, it's a totalitarian system, but that's the government, um by uh, by allowing you, we're not going to let you use it now, stimulus, you know, Larry Summers, bring them to the ACT, um, okay, Jim, you just got ten thousand dollars in your bank account, whatever. um, we're going to deduct one percent a month, um, until it's all gone, so you better spend it or maybe we'll deduct five percent a month, it's like, uh, you know, a debit card prepaid or these gift cards, you know. people buy gift cards on Amazon they have expiration dates a subway card the New York subway has an expiration date if you buy a $50 Metro Car and you don't use it it's gone well, this will happen to your bank account So, between total surveillance and forced stimulus because if you don't spend it, we will take it away from you.

Negative income tax. I'm sorry. Negative interest rates. The same. Uh oh, tax payments. Well, what if you have a regular job and how? Do you pay your taxes well? Your employer retains them. They send them. If I'm not Form 941, at the end of the year you get a W-2. He says you made this match and we took him out, but you filed your taxes. please return attached your W-2 and reconcile with your IRS, that's not true for lawyers, doctors, accountants, consultants, professionals, uh, and it's not true for many people, it's not people, not you, for people with LLCs that have their own businesses, they don't.

They have withholdings, they have to pay their taxes. I'm not saying don't pay your taxes, I'm just saying the government could decide, hey, you know Lawyer Jim or Dr. Joe, whatever we do, we'll basically put W. -2 Style withholding on your bank account, just We're going to withhold 20 from each income and you know, do your taxes, we'll send you the equivalent of a W-2, reconcile your taxes, that's all good, but come on. to get it out of your bank account, we're not going to depend on you to pay your own taxes, right, let me comment on this because this is the big problem.

I know a lot of people are worried about CBDCs like this is what you know right now, the government, you know, you can get a letter from the IRS saying, hey, we reviewed your taxes, we think you owe more, you owe USX, right Yes, but in the future you are talking about what they can tell us. We looked at your taxes, we think you owed us, you owe us why, so we took it well, they can do that, yes, absolutely, but I was suggesting something even more nefarious, which is, um, it's not even about reconciling the return. of taxes from last year or two. years ago tax filing is real time, it's like we're just going to take 20 out of your account every month because you know you should be in a group of 40, you got some deductions, whatever, we'll figure it out at filing time. tax return, but we're just going to put it out every month, so if they're forcing you to make estimated tax payments and you really have no say in what they decide, they think you owe the right thing, this is actually thought control. um and you say, well, don't you have a little bit?

The answer is no, because MasterCard might know what I'm buying, but the government doesn't know that they received a subpoena. MasterCard, they have to have the Fourth Amendment clause that you have. to go to a judge you have to say well, this guy is a terrorist or whatever, but they're calling everyone a terrorist, so you have total control, you have totalitarian thinking, um, uh, it means basically suppressing ancestry, you know, rest people you don't like, um. uh, forced tax withholdings forced tax assessments negative interest rates um you know, stimulus in the form of if you don't spend it, we're going to take it away from you uh, this is, I mean, governments love this stuff and so you say Well, no, I don't like any of that.

I'm just going to go to cash, which is easier said than done. People say I'm going to go cash. Try going to your bank and withdrawing a hundred thousand dollars in cash. Let me know how it works. right, I mean, I know what they'll do, they'll say come back next week make an appointment, bring your birth certificate and your social security card and five forms of photo ID and your passport and um, yeah, you can do that, but will file a Money Transaction Reporter CTR with the Financial Crimes Enforcement Network Vincent By the way, look at where crimes are committed Financial Crimes Enforcement Network You didn't do anything wrong, it's your money, but it's going to a file right below a Osama Bin Laden, I mean, I've been there, he's doing this work with the government.

I've been with Vincent, I know how it all works and, that is, if you want your cash, but they'll get rid of the cash and you'll be forced to go digital saying, "Well, then what can I do?", and by the way, the American people and maybe people around the world, but you'll talk about America, they are extremely adaptable and extremely inventive when it comes to new ways. of money, if they really don't like the money there is, they will come up with new forms of money. I remember in the late '50s growing up like I was a 9 year old, a 10 year old kid, there's always some great uncle that you know or a cousin of Justin's that was you know, an adult would say, hey, hey, kid, don't take coins. of wooden nickel, what is a wooden nickel? um, but in the 1930s they had wooden nickels, it was real, they, the Federal Reserve screwed up, there wasn't enough money, we're in the middle of During the Great Depression, cities and communities got someone to make records of wood with circles and they stamped them with, you know, five dollars or probably five cents in those days, wood and nickel, but as long as people are willing to take it, it's good money.

I know if nobody wants it, that's different, but I feel like we're going to take back our own money supply because the government is letting us down and they did, and the nickels were real, but you know, back then you could probably buy a good meal for a nickel um, what are people going to do today? Silver and gold um and in gold, you know, I've always talked about the American Gold Eagles, one ounce, you know, one ounce of pure gold, it's 22 carats, but I need a little bit of copper alloy just to keep it so it doesn't wear off. , which is nice, yeah, but lately I've become a big fan of the quarter-ounce American Gold Eagle, about eight grams, basically, which is based on the British Sovereign that's what the British Sovereign was. the British sovereign was not a one ounce coin, it weighed like 7.9 grams, so the quarter ounce American Gold Eagle weighs eight grams, um and uh, and also silver dollars when I was a kid, you know when you know , on your 10th birthday, someone would give you 10 silver dollars, you know, which was a lot of money at the time, um, but, but silver dollars, I mean, silver dollars were American dollars from 1790 until, ya You know, they stopped making them, I think. in the late 1960s, 68, you know, somewhere in Vietnam they still exist.

I mean, today's silver dollar is trash because it contains a lot of silver, but um, but the old silver dollars, I mean, if you had one today, it was worth 30 dollars. then it was a dollar, but it is nothing more than the silver dollar that is worth, I guess, about thirty dollars or the eight gram gold coin that is worth about 500 in the market, that will spend money and other people will accept it, there is all the American civilian. the population can go underground and get out of the digital slaughterhouse and get out of totalitarian thought control with gold and silver coins of a certain denomination through precious metals, which is super cool, two things, so a quick question I had to be to Jim um and I want.

I'm going to continue down this rabbit hole real quick and then we're going to have to start getting closer to the final topic of this um because it could keep you here forever um but uh how much of the current American economy is done in cash? That's basically dark for the government right now. Do you have an estimate? Yes, it is an estimate. It's a little more than people might expect. It's not small. It's quite big. yeah, it's like yeah, 20. I don't have an exact number, but okay, let's say it's, let's say it's a fifth of Trade, right, yeah, this is one of the reasons why a cbdc is like a dream wet fantasy for the authorities. because, suddenly, now they have in theory visibility, taxation and control of 100 of the transactions, right, if you give, if you give, you have to get rid of, you have to do both: take out the cbdc and get rid of the cash and get rid of money in cash, so, and if they do, you're saying, hey, look, people are super adaptable, you know, you look at wartime economies or you know, in prisons or whatever people always make up with their things, you talked about precious metals, one of them.

One of the reasons people like junk silver is because, well, these are small denominations, you could actually use this stuff for smaller purchases. The problem with gold is that you know that an ounce of gold, especially in the environment you're talking about, is not. practical for something that's really small, um, but you know, precious metals, I think that could really be the solution that you're talking about here. If onlyI want to mention one thing and I'll let you run, that you've probably seen. of these, yes, yes, this is what is called valorem and I just put it as an example of what could happen so that you know that there are technologies that allow you to take precious metals in the fractional format of grams and create them.

Basically it comes out coin where you know the coin is the metal itself, and this could be used to buy a loaf of bread, it's a tenth of a gram of gold, so you would probably buy several bars with it, but you know it's . an example of what you're talking about where people can just be adaptable and all kinds of ways that most people aren't imagining right now, yeah, a tenth of a gram, yeah, this is like five dollars, ya You know, yes, but people don't. You realize you see those things, there's actually real gold in them, now you know it's crushed, one of the wonderful things about gold, the reason it's always been reported that money isn't just because it's shiny and nice, it's very malleable, it's very practical and you can crush ultra thin gold and that's what it is.

I think you just showed that it is a very thin layer of gold, you say tenth per gram and then there is a lamination, so again it is not confirmed, so you put it. until the end, but it's real gold, yes, super cool, okay, people see if there is interest in hearing more about new technologies like these. I know the guy who runs Velor would be happy to put you on this channel for an interview if there's enough interest, let me know in the comments section below. I'm going to go to your Market Outlook. Sorry, your investment perspective in just a second, Jim, but real quick, I know you're on your newsletter.

I've been writing a lot. on the cbdc topic here so I just want to give people the url. I'll reiterate it at the end of the interview here, but folks, if you want to get Jim's newsletter, particularly his recent writings focused on the topic we've just delved into here, go to richyon.com logs and it'll take you right to signing up. to receive Jim's newsletter. Okay Jim, yes, if you subscribe you will of course get future issues, but you will have access to the archive. It may go back years and I've certainly been working on this for several years, but what we've been discussing is amazing, great, thank you, thank you for clearing that up, okay, so of course the people who watch this channel, Jim , meet the big The question that you know they would like to ask okay, great, if this is what the future will bring and you know, like I said, you're predicting a pretty difficult future for 2023.

So you know what I should do, um yes We can just talk about some practical steps, um, from people you know who are looking to protect their investments. I guess I'd say probably the number one part is just don't become roadkill and what happens from now on if there's an opportunity to do that. Benefit from some of these trends. Great, let's talk about that, but since I met you, you have always been very wise and a big fan of diversification. Hey, no one knows exactly what's going to happen, so use the power and math of diversification. your edge um and then recently you said um, you know you have a significantly higher, significantly higher than usual cash percentage right now just because it gives you a ton of options, right?

I'll let you comment on this, but you know you've said in terms of stocks in the past that you liked, you know, commodities plays, you know? You were a big fan of major oil stocks when we last spoke, but that's because oil was in the process of making a breakthrough. Why don't I stop there and then we get into bonds, gold and whatever else, but what do you think is a rational allocation right now for someone who, first and foremost, is trying not to get destroyed this year? Yes, and be clear that I am not giving our interview with Jim, which will continue in the second part, which will be published on this channel tomorrow as soon as we finish editing it so you can be notified when it comes out, subscribe to this channel if you haven't already by clicking the Subscribe button below as well as the little bell icon right next to it and be sure to hit the Like button too while you're there and if you're interested in subscribing to Jim's excellent newsletter, head over to the signups richyon.com and finally, if the challenging macro outlook that Jim details in this interview makes you feel a little vulnerable about the prospects for your wealth, then consider scheduling a free, no-strings-attached portfolio review from a financial advisor who can help you manage your wealth taking into account the trends, risks and opportunities that Jim has mentioned here.

Just visit richyon.com and we'll let you know. I'll help you set one up for yourself. See you in the second part of our interview with Jim Rickards.