What Will Trigger The Next Great Depression? | John Tamny
Summary
Inflation & Dollar: Guest argues inflation is currency devaluation, not growth-driven, and stresses the need for a strong/stable dollar to support investment and productivity.
Asset Implications: In weak-dollar regimes, capital shifts to stores of value (gold, oil, real assets), while stable currency periods favor equities and future wealth creation.
Free Trade: Strong pro–free trade stance with a call for zero tariffs, arguing tariffs and the 2020 shutdown raised prices and impaired global supply chains.
China: Bullish on China’s increasing capitalism; cites US corporates expanding rapidly there as evidence of market strength and positive long-term engagement.
Key Companies: Tech names exemplifying democratized access and rising living standards mentioned include AAPL, AMZN, GOOGL, and META; consumer expansion in China highlighted via MCD and SBUX.
Fed & Policy: Skeptical that the Fed can meaningfully stimulate; warns that government intervention (not market forces) causes crises, referencing 2008 policy actions.
Debt & Markets: Views high US debt as a market signal of confidence in future capacity, while warning that a weak dollar and protectionism, including immigration limits, are key risks to growth.
Transcript
The the idea that the Fed can do anything to stimulate the economy is just so at odds with the reality. President Trump has always wanted a weak dollar and markets are giving it to them. We'll continue growing. I think it's a fraction of what we could be growing. The only thing that could cause a great depression would be if the economy turns down uh the federal government trying to fight it and elongating it. That's what caused the 1930s. What worries me, if you were to ask me what worries me right now, it would be >> I'm joined today by John Tamney. He's the president of Park View Institute and the editor of Real Clear Markets. Uh this week marks the end of the government shutdown. We'll talk about uh what's next for economic growth, the uh labor market, and inflation and Fed policy. Great talk we have today with John. Welcome to the show. >> Thanks for having me. >> I want to start actually by talking about the $2,000 stimulus check. Well, it's not really called a stimulus check. It's a dividend that the Trump administration is proposing. Uh the story here just a little bit of background for the audience is that uh because the government has collected more revenues from tariffs uh and most people don't like tariffs, Trump has now proposed a plan to give at least $2,000 to most Americans uh based on this extra revenue that they've collected from tariffs. Now, should the government actually send $2,000 uh to Americans at this time, uh it would create inflationary pressures and make the Federal Reserve more hesitant to cut the federal funds rate even further, uh says some economists. Well, what do you think? >> Uh economists don't really grasp what inflation is. They associate higher prices with inflation, but there there's an ocean of difference between the two. And I would just say if the government government can only give us 2,000 each if it's already taken it from us. So that the idea that there's some other that the Fed can essentially or the the federal government can take money from Pluto, I guess, and hand it out to us and bring up demand is just laughable. Um all demand begins with supply. Uh to the extent that they can write checks to us, they have to uh take it from us first. >> Right. But you don't think it's going to have any impact on prices? >> No. Why would it? because if they didn't give it out, someone's going someone's going to have that money. Someone's going to demand something with it. Production is an expression of demand. And so, I don't like tariffs. I think that Trump should have negotiated in this way that said we're going to zero. Any country that doesn't follow us is going to fall further behind the United States. But to the extent that tariffs exist, they only exist in so far as that if there's revenues, it's from production that they they've stolen from production. And so someone would have spent the money. >> Okay. So overall then, what would drive inflation up going into 2026? >> A devaluation of the dollar. Inflation's one thing. It's just shrinkage of the currency. Economists want us to believe that inflation is caused by too much economic growth. uh that economies can overheat and prices can go up and that's just that's not a serious point of view. Economic growth by its very name is productivity. It's increases in productivity. So naturally economic growth occurs alongside falling prices for all sorts of things. Uh so what would drive up inflation is if the US Treasury continues uh along with President Trump. President get the dollar they want. that President Trump has always wanted a weak dollar and markets are giving it to him. >> So you said economic growth drives down inflation or prices. How does that how does that work? >> Of course it does. Well, what what is economic growth? Now again, economists would tell you that economic growth is consumption. But I don't even look at consumption. Consumption is what naturally happens after production. Consumption is an effect of economic growth. Uh and so what drives economic growth? It's investment. Well, what is investment all about? It's about uh matching people with capital so that they can produce more and more for lower and lower prices. And so if you look through growth periods, the shest sign that the economy is growing is that prices for everything are falling. Uh that's what Wall Street rewards over and over again is the people bringing prices down, not the opposite. But we typically associate deflation with a recession because typically in historically we've looked at deflationary periods as coinciding with recessionary events. So one would associate that with negative economic growth or contraction. What do you what do you what do you think about that? >> I reject it 100%. Uh what was the first thing that FDR did? One of the first things that he did when he got into office in 1933, he devalued the dollar uh from 120th of a gold ounce to 135th. That is inflation. It's not deflation. Economists again, they imagine that economic growth is they imagine something that's impossible that people can buy things without producing first. No, the more an economy is growing as in the more uh that means there's more production which means the production matches the demand matches what's been produced. They're they're a mirror of one another. And so this notion that recessions coincide with deflation. Uh ridiculous. Uh historically recessions have coincided with devaluations of the currency for one thing. And so the idea that prices fall is just not serious. What causes the devi? First of all, are you referring to the devaluation of the currency relative to other fiat currencies? Were you talking about devaluation versus assets? >> Uh, well, I would never use assets. Um, assets do best, at least uh equities do best when the currency is stable. Uh, to me, historically, there's a reason that gold was used as a measure of a currency stability, just because gold itself is so stable. And so, you look at use gold just because it doesn't move. uh what moves are the currencies in which it's measured. Uh some people will use foreign currencies as another example of devaluation. But that can be naturally that can be uh deceptive because uh currency the dollar could be falling rising versus the yen. But if they're both falling at the same time, there's there's no uh there's no deflation going on in the United States. And so I like I think a cleaner way to do it is just to measure the dollar versus gold. I realize that's kind of lost it its u luster in modern times. But I I still haven't found something better to measure the dollar against. >> Well, yes, against gold, the dollar has greatly devalued. But what does that mean for the practical in practical terms for the average American citizen consumer? Most people don't own a lot of gold though, John. And so how do we how do we feel that the dollar has devalued even if we don't own gold? Well, you feel it because if you look throughout history, look at the 1970s when the dollar fell, uh, gold rose 24 times against the dollar. Uh, that it was called the Malaise decade shouldn't be a surprise because when when currencies are in decline, investment or capital essentially goes into the proverbial coffee can. Uh and and for obvious reasons, if the currency is in decline, uh those with title to money are going to buy gold, oil, rare art, stamps, land, uh wealth that already exists to protect the value of their money. Conversely, during periods when the dollar is stable, uh that means there's not a tax being levied on investment. And so there's a greater willingness to buy stocks uh representing the creation of future wealth. And so if you look at the 1970s, it was a rough economic decade precisely because the dollar had lost so much value and so much investment flowed into syncs of wealth rather than than new wealth creation. And and we saw this again in the 2000s. The dollar fell substantially. And was it any surprise that after a decade in the 1990s defined by relentless IPOs and new companies being brought on board, that there were only two notable IPOs in the 2000s, 2000 to 2010, Google and Facebook. We we'll get to tech in just a bit because the data center proliferation and the construction of data centers and the growth of hyperscalers some say have been the biggest contributors to economic growth this year. But backing up a bit and just looking outside data centers, how would you evaluate economic growth right now? We have still positive real GDP prints. Uh but some argue that this is a K-shaped recovery. The positive economic growth, like I just mentioned, mostly comes from data centers and the wealthy propping up spending while the rest of the population isn't growing at all. How would you evaluate growth right now? >> Um, I wouldn't put it that way. If the rich are getting richer, by definition, living standards are rising for everyone else because how you generally get rich in the United States is by democratizing access to things that were formerly out of reach for the average person. And that hasn't changed in modern times. If you look at the list of the richest people, many of them got there because they created access that that very cheaply for everyone, for the masses. What is Amazon but that? What is Facebook but that? What is what is Google? What is Apple? Apple literally puts a supercomput in everyone's pockets. I will add that where where do where do poor people go? Uh they don't go to Flint. They don't go to Pueblo, Colorado. They don't go to Milwaukee uh when they're looking for opportunity. They go to where the richest people are because that's where the opportunity is. And so I don't buy Kshape. I don't buy the GDP measure. Also, uh GDP rises the more government spends, but government only has money to spend in so far as we have less. And so, yet that actually brings up GDP. Um it also brings up GDP if we're importing fewer things. Well, if we're importing fewer things, by definition, that means we're growing quite a bit less. And so, I don't look as at GDP as very valuable. I do think there's there's reasonable questions about the economy, but I I wouldn't ever use GDP as my measure to question the economy. >> I want to come back to your statement about how the rich if the rich get richer, everybody else gets marginally richer. Can you just explain how you think that works? >> Well, because how do the how do the rich get that way? They they do so by democratizing access to goods. It's as old as mankind. But let's just look at it in modern times. Henry Ford created cars for the great multitude. That was thus the source of his fortune. Uh in the 1960s, IBM created the first mainframe computer. It was it cost over a million dollars. Uh no wonder they thought in the 1970s that a personal computer would never be in the home. Well, people like Michael Dell became billionaires by mass-producing computers. Uh, if you look at the first wireless phone, it was a Motorola Startac in 1983. Bricksized, half hour of battery life, terrible reception. If you want to make a call is going to cost you a fortune, but it also cost you a fortune to own the phone. $3,95. Uh, Apple and has created all sorts of billionaires precisely because it put a not just a phone, but a supercomput in our pockets. And so time after time after time, the rich get that way by essentially turning former bobbles of the rich into common goods. And we'll see it again with private jets. Give it a couple of decades, everyone will be flying private and someone will become probably a trillionaire for putting everyone in private jets. Let's talk about then this uh development from New York. because you know um I'm Dani who was elected mayor of New York but now we have on his transition team the uh former FTC chair Lina Khan she's exploring ways to quote unquote maximize the New York mayor city uh start New York City mayor elect Mandani's executive authority through little used laws already in place um coming from the CFTC she said I'm going to be especially focused on things like how do we make sure that we have full counting of all the laws and authorities that the mayor can unilaterally deploy she said in an interview. Um it may be difficult to implement. Uh the governor has already the governor of New York has already cast doubt on the viability of free buses, the revenues of which are partly used to pay the uh MTA $17 billion uh fair. Uh we we have estimates that should his plans be actually put into practice, it would cost roughly $10 billion additional for the city of New York annually. And uh now obviously there are funding issues, but just let's just generally evaluate some of his socialist policies here and whether or not uh or how it fits into your thesis of if the rich get richer, everyone else gets richer. >> Well, for one, I would say that if if New York City weren't the richest, most enterprising city on earth, we would never have heard of Zoran Mumami. To some degree, it's got to be remembered that wealth creation beggets those who demagogue it. And so, probably if I were running mayor of New York, because I'd make things exponentially freer than they are now if I could, but I probably couldn't, uh, there'd be many more mom Donnies and it'd actually be a bullish signal. I don't think that mom Donnie is going to do a fraction of what he wants to do. It's kind of like when Barack Obama got into the White House. He said later on, "I didn't realize all the limits to what I desired." Uh, I think that M Donnie is going to run into the same thing in New York City. Uh, thank goodness. Um, his ideas are abhorrent. Uh, but furthermore, I think they misread the electorate. I I I don't think that people who love themselves enough to get to New York are going there because they want government uh government uh grocery stores. They're going there because they're revealing an ambition about themselves in the first place. And so I think the vote probably was less for more for mom Donnie, a personality thing, than it was for his policies. I just I don't see New Yorkers having lived there. I I don't see them suddenly becoming collectivists and living off of others. And I would add that if he tried to do that, I think the people of New York City, enterprising as they are, would run rough shot over them. I just don't think this is going to be the big story that people think it will be. Well, you wrote an article about this on cleararkets, realcleararkets.com. I encourage people to check out realcleararkets.com, link down below. But, uh, John, I I've seen videos of street interviews of people who have the electorate who have voted for Mamani. They literally want free buses and free grocery stores. It's not, oh, we want to vote him just because he's a charming guy. No doubt that he is. We want free stuff. This is a sentiment shared by a lot of the voters um that were interviewed on social media. Just can you just evaluate the free buses and free grocery stores? If we were to make that work, let's say you were mayor of New York and somebody says to you, "You have to make this work." How would you make that work? It's going to be hard to make it work simply because as you alluded, he's going to have to get a lot of this through Albany. And to some degree, Albany is going to block some of it. Um, as far as those they the man on the street there, invariably there's going to be people in New York City who want free stuff. But it's kind of like that old story about Cal Berkeley in the late 1960s. Uh, everyone thought and thinks to this day that it was just this flower bed of rampant campus left-wingery, but in reality, that's just who the media noticed. um Berkeley was probably 5% these super left-wing radicals, but that's the those were the people that got on TV and gave the impression that was really at odds with what the school the school's campus was like and and I I think you'd find the same here. Uh depending on the people you interview in New York City, you'd get very different viewpoints. >> Is the um sentiment towards governance in New York City today echoed in other parts of the country? In other words, do you think America overall is leaning more towards collectivism and democratic socialist ideals? No. Uh because if if it were true, I think you'd see it in the stock market. Stock markets look ahead and they would recognize that that the most enterprising capitalist, whatever you want to call it, nation in the world's history is moving away from it. And it strikes me they would price that down negatively as a reflection of where things are going. More realistically, what I think is once again wealth creation and and Americans produce it like no one else begets a lot of demagogues and people trying to demagogue it. I don't think that Zoran Mami will be nearly have nearly the impact on policy that people that some want him to have or some think he will have. And so and this is true for people on the right. They're just assuming that he's going to ruin New York City. I think they insult New York City in the way that I thought people insulted the United States when they emailed me in 2016 and they said either Hillary Clinton or Donald Trump was going to make the United States Venezuela. And I would always tell them, stop insulting the US that way. The idea that one person could wreck something so spectacular uh means that it couldn't be that spectacular in the first place. I think the US is amazing and I think New York City is. Uh, this guy's not going to take it down. >> So, how do we engineer more growth, John? I hate to use that word engineer, but let's just put that, you know, I don't mean it in a Soviet command economy style engineering, but let's just how do we how do we get more growth in the economy, John? How do we lift living standards for the middle class, not just the rich? >> Oh, well, again, I would say that if the rich are getting richer, everyone's getting richer almost by definition. But how do you do it? uh for for one you try to attract rich people to your city where where enterprising people go and they're not necessarily rich time where the enterprising go prosperity follows uh Seattle was a really decrepit rundown place until Bill Gates returned there and transformed it and so it just takes a few really enterprising people to turn a a a city state a country around um how do you do it in terms of policy uh to me well taxes are a price uh limit limit taxes as much as possible. You don't want to penalize work. Um, regulation is the process whereby we empower people who couldn't get jobs in certain industries to oversee those who could get rid of it. Market's a much better regulator than regulators are. Uh, trade is basic. Uh, we produce in order to import from across the street from around the world. Remove all barriers to import so that people can can divide up work as efficiently as possible with the rest of the world. And then my and then after that I think the other one is is is money. The money ideally will have a stable measure that people can predict over time. It's always going going to be the same price. If so, there's going to be a lot more investment as a consequent consequence of all this growth and and that's really all you need. Uh people do the rest. Let's talk about then uh the fear that the US may slip into a recession where something even worse possibly stagflation which is recession plus higher inflation or a return to the great depression. How how far or close are we to a return to the 1930 style great depression? I'm taking the extreme case and right now given where we are I guess that could be our baseline case. So how far is baseline to the extreme case? Well, it's one of these things that if you could predict it, you would be a billionaire. But I always think it's interesting that I just read Andrew Ross Sorcin's book and I just can't believe people are saying that it's so brilliant. Um, implied in his book is that he doesn't understand why the 1930s happened in the first place. The 1930s were not an effect of a stock market crash. They are an effect of a downturn that occurred, which is normal in economy, and government getting in the way of it, trying to protect Americans from uh the the near-term effects of a slowdown. And so there was a massive increase in taxes and spending, a devaluation of the dollar, um a 74% tax undistributed profits, so that businesses retaining earnings um with future expansion in mind had to give it back to the government. all sorts of regulatory impositions on businesses. Uh the 1930s were an effect of government intervention trying to fight a recession. And so the only thing that could cause a great depression would be if the economy turns down uh the federal government trying to fight it and elongating it. That's what caused the 1930s. And so I'd like to think that would be more difficult to pull off now. Um, what worries me, if you were to ask me what worries me right now, it would be the dollar. Uh, it's it's very weak. Has it declined as much as it did in in in total amounts in the in the 1970s and 2000s? No. But it's just it's very concerning to see uh the world's currency in such decline. >> Well, it's also concerning for a lot of uh people whom I talked to, and that's the deficit level and the rising debt levels in the United States. Let's talk about your book now. This is called deficit delusion. Why everyone left, right, and supply side tells you about the national debt is wrong. What are the biggest misconceptions about the national debt that you aim to address in your book? Oh, there's so many, but arguably the biggest one is people will say, well, we have all the debt because we spend too much. And and what's funny about that is so many free market right-wing types say that and I think wow you really think markets are stupid. So all it takes if you just want to spend more you just borrow. Well so why doesn't Haiti have a lot of debt? Why does Russia only have 300 billion worth of debt? Is that because Vladimir Putin is secretly like me a classical thinker and recognizes that government spending is a huge tax on growth? No. Russia doesn't have any debt because the markets don't trust its present and future and they won't lend to it. Uh the US has lots of debt, not because it's economically in trouble. Quite the opposite, it has lots of debt because markets think its future is so bright that they can lend 38 trillion to it. To be very clear, I don't like the borrowing and I don't like the government spending. I think they're a huge imposition on growth. But it does tell you just how amazingly enterprising the Americans are is that despite all this extraction of wealth from the private sector by the federal government, Americans still prosper. And so I'm merely saying that the debt is a is a comment from the markets that America that the revenue we're taking in now is a pale imitation of what we'll take in in the future. uh as evidenced by all the debt, no one lends to anyone on the assumption they won't be paid back and they certainly don't lend 38 trillion. >> So you're saying that higher debt levels is a reflection of a stronger economy because if you don't have the ability to pay it back, you wouldn't have the ability to accumulate the debt in the first place. So actually it's kind of a good sign, John. >> Yes. Yes. Yes. But hear me that in no way am I saying the debt is driving the economy higher. What I'm saying is the debt is an effect of a booming economy. Uh Canada could not borrow anywhere close to this. Neither could Italy. Neither could Japan. Uh China will eventually be able to. I wish there were no debt and I wish I wish government spending were so were highly limited and I wish revenues into the federal government were so low that we couldn't borrow this much. But I'm saying if you look at if if you were to ask someone, okay, which country's got the most debt in the world? Um, and you were told, you'd say, "Oh, that must be the richest country in the world." Because only a rich country could borrow like this. >> Yeah, there does seem to be this notion that the word debt is this big bad word, the dword all of a sudden. Um, but when you think about it, our entire society runs on an IOU system. Credit cards, line of credits, mortgages, right? without no one can own a home. Most most people can't. Developers can't build without access to credit. Companies can't expand. But do we have a debt crisis? Do we have a bubble in which case uh it becomes a problem? Let me just share with you uh this post by Ray Dallio. I believe he made this uh not too long ago and maybe I'll summarize it for you and then you can just evaluate some of his his findings. He posted on X stimulating into a bubble. Um he warns that if the Fed expands its balance sheet significantly through QE, well he's talking about the end of QT, which we can discuss right now. The end of QT should be the 1st of December or early December. Um and then possibly the Fed can add will start to add reserves after they stop tapering. After that shift happens, we have potentially an expansion of the balance sheet uh while also cutting interest rates and the government runs into a large fiscal deficit. That's on the fiscal side. Uh this combination is historically associated with what he calls latestage debt cycles where the central bank effectively prints money to finance government borrowing which is a problem. Can you just evaluate that? >> Oh yeah. It'd be a problem if it were true. If the if the if the US were relying on the Fed as in the if Congress were relying on what it created to fund its expenditures, then we would have no debt. I mean, the shest sign there's no debt crisis is the 38 trillion in debt. To assume otherwise is to once again assume not just market stupidity, but gargantuan amounts of market stupidity that those with title to money would aggressively lend to an entity that has no ability to pay it back other than with a printing press. Dallio is a great investor, but he's a reminder that good investors don't always know really much of anything about economics because to presume as he does presumes that the most owned in income streams in the world, which are US treasuries, uh that that there's no knowledge in them that people are just blightly buying what they they'll get a fraction of the value back from. Not a chance. >> Well, he does make one important observation, which is that this QE would be a little bit different from before. Typically in the past we've seen QES, quantitative easing cycles happen after some sort of economic um um shock, pandemic, the financial crisis of 2008. And so markets have been depressed when QE was first announced in past cycles. Um inflation was lower, economic growth was weaker and credit stress was higher. This time the government is directly or would be directly into implementing QE into a record high in the stock market. Uh the economy like you mentioned is strong. Inflation is already above target and liquidity is already abundant. This he argues could have some implications. What would be the consequences of QE into our current environment? John? >> Oh gosh. I I my deeply held view is that in a few decades people will look back and they'll say, "Why did we ever follow what the Fed does?" I We're talking about a global economy. The idea that the Fed working through banks can somehow increase liquidity is just so insulting to reason. The Fed cannot do what people think it can do. It just can't. The Fed isn't some other that can borrow resources from Pluto and kind of stick them into the economy. It can only fiddle with credit in so far as there's credit in the first place. And we know that credit is produced. It's produced simply because you don't borrow money so that you can look stare lovingly at the money and say, "Wow, look at all these dollars." You borrow money for what it can be exchanged for, goods, services, labor. And so the the idea that the Fed can do anything to stimulate the economy is just so at odds with reality. And I it just it shows you the bankrupt nature of the economics profession that they take so seriously an entity that that its impact has always been overstated from the day it opened its doors. >> Okay. So if the Fed is powerless or not really that relevant as you suggest, then why do markets still follow central bank policies? Because markets follow what governments do. That's why, you know, why do people even refer to as the Fed? The Fed is an outsourced creation of Congress. Can our federal government intervene in the economy and and and cause great harm? Of course it can. And governments have done that for centuries. Uh why is China suddenly so full of skyscrapers whereas several decades ago it was a barren landscape? Well, governments can can restrain freedom and cause enormous amounts of economic suffering. And so bec people watch what the Fed does not because the Fed has unique powers, but the federal government has power. You referred to a financial crisis in 2008. I I reject that there was no financial crisis. There is a crisis of intervention and there's always a crisis anytime governments substitute their narrow incredibly microscopic knowledge for that in the marketplace. And so Ben Bernani with George W. Bush's approval and with everyone in the Bush administration's approval, Ben Bernanki said unless we intervene and muzzle the market's message, there's going to be a crisis. So that self-fulfilling prophecy, they created one that otherwise wouldn't have taken place in the first place. So, so you think TARP and the bailouts were unnecessary? >> It's not just they were unnecessary. They were the financial crisis. If if there's no intervention in the first place, markets do what they always do. They just correct the mistakes and we move on. And so, governments can do all sorts of bad things. But let's not pretend that the Fed for being the Fed somehow has some sort of enormous it can stimulate the economy or shrink it. Laughable. The the only closed economy is the world economy. and the the idea that the Fed can keep credit out of the United States or it can bring it in misunderstands what credit is. >> So let's close off on your outlook for growth then into 2026 Q1 and Q2. What do you expect? >> Well, I think the only constant with the American people is to is to produce. Uh that's all we know is progress. And so to me the economy is always growing. uh to look at the economy as some living breathing blob that um is going up or down seems to me a bit a bit problematic. Um at present uh Aaron Rogers is doing pretty well um and so is Sam Darnold but there are a few quarterbacks that are in recession right now you know and that's true of businesses too. So, I think the US will progress. Um, I worry about things like the dollar and yes, I very much worry about uh the efforts by the Trump administration to not just deport people back into Mexico and beyond. Uh, but to also limit their arrival. Uh, human beings are capital always and everywhere. And so at present we're hitting the economy twice with m with government spending a devalued dollar act so call three times and an effort to bring to push human capital out of the economy. I don't think that's great. I think we'll continue growing. I think it's a fraction of what we could be growing. >> Okay. Excellent. Uh how do we then grow to our full potential? Um, it's it's trit and ridiculous, but we look around the world again. In 1978, there were 15 tall buildings in Shanghai. As of 2006, there are 6,780. Um, in 2025, I'm sure that number is well over 10,000, if not more. Uh, where people are free, they grow. When they're not free, they don't grow. There's really no mystery to this. And, uh, there there was economic growth long before there were economists. And and so I would argue that probably the quickest way to grow is to decredial all economists and make them do something else. Try astrology or something where they can do less damage. >> So So you think economists are to blame for for slower productivity and growth. >> No, no, but I think some of their theories uh that they feed >> there's this running joke. >> Yeah. There's this running joke that perhaps China is becoming more like the US and the US is becoming more like China. When you look at interventionist policies like you've mentioned, when you look at um the Treasury directly wanting to control the dollar and wanting to have a weaker dollar, that's direct market intervention. And so, one would argue that the economy is becoming less free here in the US, whereas China has become more capitalist in nature, hence the higher growth. I I don't know to what extent that would be true, but what do you think? >> Look, I think there's an argument for it. I mean, I come from the right in the United States. And so, isn't it interesting that the right are have been saying for years that Tik Tok, one of the most popular social media sites in the world, is controlled by the Communist Party? Have you ever heard anything more ridiculous? When in the history of the world have thriving, successful businesses been run by governments? And you know, they said this before about Huawei. Huawei is in 170 countries around the world. And what's important about that is Coca-Cola is in 196 yet Huawei was being controlled by the CCP. I mean, the rights become ridiculous in the United States. They're now saying that China's strong because the CCP runs a lot of their corporations and and and also, oh, by the way, they're subsidized by the CCP. These are things that we used to believe were ridiculous. And now we're saying it's the source of China's strength. But what you're saying is correct that China is increasingly capitalist. And how we know this is US companies. McDonald's doesn't think China's in decline. McDonald's has 5,500 stores there, but has plans for 10,000 within 3 years. If you look up the number of Starbucks in China by the week, every week it's hundreds more. It's it's amazing. And so, US businesses see the truth. Watch what they do, not what our politicians do. They continue to expand there. and they're expanding there because the Chinese people are brilliant at wealth creation. They're increasingly free to create it. And because they are, it's a great market for the US. And and I would add because of this, we are setting the stage for peaceful relations despite what our idiot politicians in the United States are doing by trying to make China the enemy and trying to beat the war drums all the time. And what we see happening in China, this exchange between productive Americans and Chinese is the greatest thing for po foreign policy that mankind's ever conceived. And I hope they overcome the shocking stupidity of the US political class that always wants to be at war with someone. >> So the Trump administration should drop tariffs altogether. >> Absolutely. Yesterday it should drop them and say any country, we are not going to injure our people so that we can copy what you are doing. And if you want to fall further behind the United States, continue injuring your people with tariffs. We will go to zero and we'll be the winners precisely because we're at zero. How would you rank the foreign policy um so far or evaluate the foreign policy so far of the Trump administration? One argument for implementing tariffs in the first place is just to get deals done. He doesn't Trump doesn't actually want tariffs. You see this time and time again over the past year and in his first term. He just takes them off after deals reached. So he's not The tariffs are just negotiating leverage tool. His end goal is to get some deals done. So what do you think? >> Well, isn't that interesting when they're promising $2,000 rebates based on all the revenues they claim to have have collected based on it. Uh look, I don't like it. Um I don't I don't want to empower presidents one way or the other. I think it's unconstitutional, which is kind of a statement of the obvious. Uh, I'm I'm a freedom person and I think the the some of the basics of freedom are is that as the American people, we're free to trade with whomever we want. Um, it's it's it's not just a freedom thing, but it lifts us when we're dividing up work with the rest of the world. We have the greatest odds right here of doing the work most associated with our unique skills and intelligence. Trade loves the American worker, yes, the little guy, more than any other concept. mankind has ever come up with simply because when the world is working together, when there are more hands and machines around the world producing things, everything becomes cheaper. Uh the fact that things are more expensive today is a function not just of tariffs, but Trump in his infinite wisdom in 2020 decided to shut down the US economy, which is effectively shutting down the global economy. When you do that, you can't rebuild what took decades to build in the first place. the sophisticated interlocking of productive people around the world. You can't rebuild it overnight. And so we're still suffering the higher prices of this thoroughly mindless decision back in 2020 to fight a virus with economic contraction and we're still suffering it today. >> Great. Well, John, I appreciate your cander and uh appreciate your insights. We'll uh we'll get you on again uh to talk more. Thank you very much. Uh where can we follow you in the meantime? >> Oh, thanks so much, David, for having me on. Um, I editor as you alluded to at Real Clear Markets. I put out at least one column every day. Uh, my books that everyone's free to buy multiple copies of, they're on Amazon. I can be found on Twitter. Uh, but I really appreciate the the opportunity to come on and give a frequently counter view, counter to conventional wisdom view of the economy and how things work. >> Let's uh let's send it here. We'll put the links down below. Follow Real Clear Markets and uh and uh we'll we'll talk soon. Thank you, John. Thanks, David. >> Thank you. And uh don't forget to like, subscribe, and share this video.
What Will Trigger The Next Great Depression? | John Tamny
Summary
Transcript
The the idea that the Fed can do anything to stimulate the economy is just so at odds with the reality. President Trump has always wanted a weak dollar and markets are giving it to them. We'll continue growing. I think it's a fraction of what we could be growing. The only thing that could cause a great depression would be if the economy turns down uh the federal government trying to fight it and elongating it. That's what caused the 1930s. What worries me, if you were to ask me what worries me right now, it would be >> I'm joined today by John Tamney. He's the president of Park View Institute and the editor of Real Clear Markets. Uh this week marks the end of the government shutdown. We'll talk about uh what's next for economic growth, the uh labor market, and inflation and Fed policy. Great talk we have today with John. Welcome to the show. >> Thanks for having me. >> I want to start actually by talking about the $2,000 stimulus check. Well, it's not really called a stimulus check. It's a dividend that the Trump administration is proposing. Uh the story here just a little bit of background for the audience is that uh because the government has collected more revenues from tariffs uh and most people don't like tariffs, Trump has now proposed a plan to give at least $2,000 to most Americans uh based on this extra revenue that they've collected from tariffs. Now, should the government actually send $2,000 uh to Americans at this time, uh it would create inflationary pressures and make the Federal Reserve more hesitant to cut the federal funds rate even further, uh says some economists. Well, what do you think? >> Uh economists don't really grasp what inflation is. They associate higher prices with inflation, but there there's an ocean of difference between the two. And I would just say if the government government can only give us 2,000 each if it's already taken it from us. So that the idea that there's some other that the Fed can essentially or the the federal government can take money from Pluto, I guess, and hand it out to us and bring up demand is just laughable. Um all demand begins with supply. Uh to the extent that they can write checks to us, they have to uh take it from us first. >> Right. But you don't think it's going to have any impact on prices? >> No. Why would it? because if they didn't give it out, someone's going someone's going to have that money. Someone's going to demand something with it. Production is an expression of demand. And so, I don't like tariffs. I think that Trump should have negotiated in this way that said we're going to zero. Any country that doesn't follow us is going to fall further behind the United States. But to the extent that tariffs exist, they only exist in so far as that if there's revenues, it's from production that they they've stolen from production. And so someone would have spent the money. >> Okay. So overall then, what would drive inflation up going into 2026? >> A devaluation of the dollar. Inflation's one thing. It's just shrinkage of the currency. Economists want us to believe that inflation is caused by too much economic growth. uh that economies can overheat and prices can go up and that's just that's not a serious point of view. Economic growth by its very name is productivity. It's increases in productivity. So naturally economic growth occurs alongside falling prices for all sorts of things. Uh so what would drive up inflation is if the US Treasury continues uh along with President Trump. President get the dollar they want. that President Trump has always wanted a weak dollar and markets are giving it to him. >> So you said economic growth drives down inflation or prices. How does that how does that work? >> Of course it does. Well, what what is economic growth? Now again, economists would tell you that economic growth is consumption. But I don't even look at consumption. Consumption is what naturally happens after production. Consumption is an effect of economic growth. Uh and so what drives economic growth? It's investment. Well, what is investment all about? It's about uh matching people with capital so that they can produce more and more for lower and lower prices. And so if you look through growth periods, the shest sign that the economy is growing is that prices for everything are falling. Uh that's what Wall Street rewards over and over again is the people bringing prices down, not the opposite. But we typically associate deflation with a recession because typically in historically we've looked at deflationary periods as coinciding with recessionary events. So one would associate that with negative economic growth or contraction. What do you what do you what do you think about that? >> I reject it 100%. Uh what was the first thing that FDR did? One of the first things that he did when he got into office in 1933, he devalued the dollar uh from 120th of a gold ounce to 135th. That is inflation. It's not deflation. Economists again, they imagine that economic growth is they imagine something that's impossible that people can buy things without producing first. No, the more an economy is growing as in the more uh that means there's more production which means the production matches the demand matches what's been produced. They're they're a mirror of one another. And so this notion that recessions coincide with deflation. Uh ridiculous. Uh historically recessions have coincided with devaluations of the currency for one thing. And so the idea that prices fall is just not serious. What causes the devi? First of all, are you referring to the devaluation of the currency relative to other fiat currencies? Were you talking about devaluation versus assets? >> Uh, well, I would never use assets. Um, assets do best, at least uh equities do best when the currency is stable. Uh, to me, historically, there's a reason that gold was used as a measure of a currency stability, just because gold itself is so stable. And so, you look at use gold just because it doesn't move. uh what moves are the currencies in which it's measured. Uh some people will use foreign currencies as another example of devaluation. But that can be naturally that can be uh deceptive because uh currency the dollar could be falling rising versus the yen. But if they're both falling at the same time, there's there's no uh there's no deflation going on in the United States. And so I like I think a cleaner way to do it is just to measure the dollar versus gold. I realize that's kind of lost it its u luster in modern times. But I I still haven't found something better to measure the dollar against. >> Well, yes, against gold, the dollar has greatly devalued. But what does that mean for the practical in practical terms for the average American citizen consumer? Most people don't own a lot of gold though, John. And so how do we how do we feel that the dollar has devalued even if we don't own gold? Well, you feel it because if you look throughout history, look at the 1970s when the dollar fell, uh, gold rose 24 times against the dollar. Uh, that it was called the Malaise decade shouldn't be a surprise because when when currencies are in decline, investment or capital essentially goes into the proverbial coffee can. Uh and and for obvious reasons, if the currency is in decline, uh those with title to money are going to buy gold, oil, rare art, stamps, land, uh wealth that already exists to protect the value of their money. Conversely, during periods when the dollar is stable, uh that means there's not a tax being levied on investment. And so there's a greater willingness to buy stocks uh representing the creation of future wealth. And so if you look at the 1970s, it was a rough economic decade precisely because the dollar had lost so much value and so much investment flowed into syncs of wealth rather than than new wealth creation. And and we saw this again in the 2000s. The dollar fell substantially. And was it any surprise that after a decade in the 1990s defined by relentless IPOs and new companies being brought on board, that there were only two notable IPOs in the 2000s, 2000 to 2010, Google and Facebook. We we'll get to tech in just a bit because the data center proliferation and the construction of data centers and the growth of hyperscalers some say have been the biggest contributors to economic growth this year. But backing up a bit and just looking outside data centers, how would you evaluate economic growth right now? We have still positive real GDP prints. Uh but some argue that this is a K-shaped recovery. The positive economic growth, like I just mentioned, mostly comes from data centers and the wealthy propping up spending while the rest of the population isn't growing at all. How would you evaluate growth right now? >> Um, I wouldn't put it that way. If the rich are getting richer, by definition, living standards are rising for everyone else because how you generally get rich in the United States is by democratizing access to things that were formerly out of reach for the average person. And that hasn't changed in modern times. If you look at the list of the richest people, many of them got there because they created access that that very cheaply for everyone, for the masses. What is Amazon but that? What is Facebook but that? What is what is Google? What is Apple? Apple literally puts a supercomput in everyone's pockets. I will add that where where do where do poor people go? Uh they don't go to Flint. They don't go to Pueblo, Colorado. They don't go to Milwaukee uh when they're looking for opportunity. They go to where the richest people are because that's where the opportunity is. And so I don't buy Kshape. I don't buy the GDP measure. Also, uh GDP rises the more government spends, but government only has money to spend in so far as we have less. And so, yet that actually brings up GDP. Um it also brings up GDP if we're importing fewer things. Well, if we're importing fewer things, by definition, that means we're growing quite a bit less. And so, I don't look as at GDP as very valuable. I do think there's there's reasonable questions about the economy, but I I wouldn't ever use GDP as my measure to question the economy. >> I want to come back to your statement about how the rich if the rich get richer, everybody else gets marginally richer. Can you just explain how you think that works? >> Well, because how do the how do the rich get that way? They they do so by democratizing access to goods. It's as old as mankind. But let's just look at it in modern times. Henry Ford created cars for the great multitude. That was thus the source of his fortune. Uh in the 1960s, IBM created the first mainframe computer. It was it cost over a million dollars. Uh no wonder they thought in the 1970s that a personal computer would never be in the home. Well, people like Michael Dell became billionaires by mass-producing computers. Uh, if you look at the first wireless phone, it was a Motorola Startac in 1983. Bricksized, half hour of battery life, terrible reception. If you want to make a call is going to cost you a fortune, but it also cost you a fortune to own the phone. $3,95. Uh, Apple and has created all sorts of billionaires precisely because it put a not just a phone, but a supercomput in our pockets. And so time after time after time, the rich get that way by essentially turning former bobbles of the rich into common goods. And we'll see it again with private jets. Give it a couple of decades, everyone will be flying private and someone will become probably a trillionaire for putting everyone in private jets. Let's talk about then this uh development from New York. because you know um I'm Dani who was elected mayor of New York but now we have on his transition team the uh former FTC chair Lina Khan she's exploring ways to quote unquote maximize the New York mayor city uh start New York City mayor elect Mandani's executive authority through little used laws already in place um coming from the CFTC she said I'm going to be especially focused on things like how do we make sure that we have full counting of all the laws and authorities that the mayor can unilaterally deploy she said in an interview. Um it may be difficult to implement. Uh the governor has already the governor of New York has already cast doubt on the viability of free buses, the revenues of which are partly used to pay the uh MTA $17 billion uh fair. Uh we we have estimates that should his plans be actually put into practice, it would cost roughly $10 billion additional for the city of New York annually. And uh now obviously there are funding issues, but just let's just generally evaluate some of his socialist policies here and whether or not uh or how it fits into your thesis of if the rich get richer, everyone else gets richer. >> Well, for one, I would say that if if New York City weren't the richest, most enterprising city on earth, we would never have heard of Zoran Mumami. To some degree, it's got to be remembered that wealth creation beggets those who demagogue it. And so, probably if I were running mayor of New York, because I'd make things exponentially freer than they are now if I could, but I probably couldn't, uh, there'd be many more mom Donnies and it'd actually be a bullish signal. I don't think that mom Donnie is going to do a fraction of what he wants to do. It's kind of like when Barack Obama got into the White House. He said later on, "I didn't realize all the limits to what I desired." Uh, I think that M Donnie is going to run into the same thing in New York City. Uh, thank goodness. Um, his ideas are abhorrent. Uh, but furthermore, I think they misread the electorate. I I I don't think that people who love themselves enough to get to New York are going there because they want government uh government uh grocery stores. They're going there because they're revealing an ambition about themselves in the first place. And so I think the vote probably was less for more for mom Donnie, a personality thing, than it was for his policies. I just I don't see New Yorkers having lived there. I I don't see them suddenly becoming collectivists and living off of others. And I would add that if he tried to do that, I think the people of New York City, enterprising as they are, would run rough shot over them. I just don't think this is going to be the big story that people think it will be. Well, you wrote an article about this on cleararkets, realcleararkets.com. I encourage people to check out realcleararkets.com, link down below. But, uh, John, I I've seen videos of street interviews of people who have the electorate who have voted for Mamani. They literally want free buses and free grocery stores. It's not, oh, we want to vote him just because he's a charming guy. No doubt that he is. We want free stuff. This is a sentiment shared by a lot of the voters um that were interviewed on social media. Just can you just evaluate the free buses and free grocery stores? If we were to make that work, let's say you were mayor of New York and somebody says to you, "You have to make this work." How would you make that work? It's going to be hard to make it work simply because as you alluded, he's going to have to get a lot of this through Albany. And to some degree, Albany is going to block some of it. Um, as far as those they the man on the street there, invariably there's going to be people in New York City who want free stuff. But it's kind of like that old story about Cal Berkeley in the late 1960s. Uh, everyone thought and thinks to this day that it was just this flower bed of rampant campus left-wingery, but in reality, that's just who the media noticed. um Berkeley was probably 5% these super left-wing radicals, but that's the those were the people that got on TV and gave the impression that was really at odds with what the school the school's campus was like and and I I think you'd find the same here. Uh depending on the people you interview in New York City, you'd get very different viewpoints. >> Is the um sentiment towards governance in New York City today echoed in other parts of the country? In other words, do you think America overall is leaning more towards collectivism and democratic socialist ideals? No. Uh because if if it were true, I think you'd see it in the stock market. Stock markets look ahead and they would recognize that that the most enterprising capitalist, whatever you want to call it, nation in the world's history is moving away from it. And it strikes me they would price that down negatively as a reflection of where things are going. More realistically, what I think is once again wealth creation and and Americans produce it like no one else begets a lot of demagogues and people trying to demagogue it. I don't think that Zoran Mami will be nearly have nearly the impact on policy that people that some want him to have or some think he will have. And so and this is true for people on the right. They're just assuming that he's going to ruin New York City. I think they insult New York City in the way that I thought people insulted the United States when they emailed me in 2016 and they said either Hillary Clinton or Donald Trump was going to make the United States Venezuela. And I would always tell them, stop insulting the US that way. The idea that one person could wreck something so spectacular uh means that it couldn't be that spectacular in the first place. I think the US is amazing and I think New York City is. Uh, this guy's not going to take it down. >> So, how do we engineer more growth, John? I hate to use that word engineer, but let's just put that, you know, I don't mean it in a Soviet command economy style engineering, but let's just how do we how do we get more growth in the economy, John? How do we lift living standards for the middle class, not just the rich? >> Oh, well, again, I would say that if the rich are getting richer, everyone's getting richer almost by definition. But how do you do it? uh for for one you try to attract rich people to your city where where enterprising people go and they're not necessarily rich time where the enterprising go prosperity follows uh Seattle was a really decrepit rundown place until Bill Gates returned there and transformed it and so it just takes a few really enterprising people to turn a a a city state a country around um how do you do it in terms of policy uh to me well taxes are a price uh limit limit taxes as much as possible. You don't want to penalize work. Um, regulation is the process whereby we empower people who couldn't get jobs in certain industries to oversee those who could get rid of it. Market's a much better regulator than regulators are. Uh, trade is basic. Uh, we produce in order to import from across the street from around the world. Remove all barriers to import so that people can can divide up work as efficiently as possible with the rest of the world. And then my and then after that I think the other one is is is money. The money ideally will have a stable measure that people can predict over time. It's always going going to be the same price. If so, there's going to be a lot more investment as a consequent consequence of all this growth and and that's really all you need. Uh people do the rest. Let's talk about then uh the fear that the US may slip into a recession where something even worse possibly stagflation which is recession plus higher inflation or a return to the great depression. How how far or close are we to a return to the 1930 style great depression? I'm taking the extreme case and right now given where we are I guess that could be our baseline case. So how far is baseline to the extreme case? Well, it's one of these things that if you could predict it, you would be a billionaire. But I always think it's interesting that I just read Andrew Ross Sorcin's book and I just can't believe people are saying that it's so brilliant. Um, implied in his book is that he doesn't understand why the 1930s happened in the first place. The 1930s were not an effect of a stock market crash. They are an effect of a downturn that occurred, which is normal in economy, and government getting in the way of it, trying to protect Americans from uh the the near-term effects of a slowdown. And so there was a massive increase in taxes and spending, a devaluation of the dollar, um a 74% tax undistributed profits, so that businesses retaining earnings um with future expansion in mind had to give it back to the government. all sorts of regulatory impositions on businesses. Uh the 1930s were an effect of government intervention trying to fight a recession. And so the only thing that could cause a great depression would be if the economy turns down uh the federal government trying to fight it and elongating it. That's what caused the 1930s. And so I'd like to think that would be more difficult to pull off now. Um, what worries me, if you were to ask me what worries me right now, it would be the dollar. Uh, it's it's very weak. Has it declined as much as it did in in in total amounts in the in the 1970s and 2000s? No. But it's just it's very concerning to see uh the world's currency in such decline. >> Well, it's also concerning for a lot of uh people whom I talked to, and that's the deficit level and the rising debt levels in the United States. Let's talk about your book now. This is called deficit delusion. Why everyone left, right, and supply side tells you about the national debt is wrong. What are the biggest misconceptions about the national debt that you aim to address in your book? Oh, there's so many, but arguably the biggest one is people will say, well, we have all the debt because we spend too much. And and what's funny about that is so many free market right-wing types say that and I think wow you really think markets are stupid. So all it takes if you just want to spend more you just borrow. Well so why doesn't Haiti have a lot of debt? Why does Russia only have 300 billion worth of debt? Is that because Vladimir Putin is secretly like me a classical thinker and recognizes that government spending is a huge tax on growth? No. Russia doesn't have any debt because the markets don't trust its present and future and they won't lend to it. Uh the US has lots of debt, not because it's economically in trouble. Quite the opposite, it has lots of debt because markets think its future is so bright that they can lend 38 trillion to it. To be very clear, I don't like the borrowing and I don't like the government spending. I think they're a huge imposition on growth. But it does tell you just how amazingly enterprising the Americans are is that despite all this extraction of wealth from the private sector by the federal government, Americans still prosper. And so I'm merely saying that the debt is a is a comment from the markets that America that the revenue we're taking in now is a pale imitation of what we'll take in in the future. uh as evidenced by all the debt, no one lends to anyone on the assumption they won't be paid back and they certainly don't lend 38 trillion. >> So you're saying that higher debt levels is a reflection of a stronger economy because if you don't have the ability to pay it back, you wouldn't have the ability to accumulate the debt in the first place. So actually it's kind of a good sign, John. >> Yes. Yes. Yes. But hear me that in no way am I saying the debt is driving the economy higher. What I'm saying is the debt is an effect of a booming economy. Uh Canada could not borrow anywhere close to this. Neither could Italy. Neither could Japan. Uh China will eventually be able to. I wish there were no debt and I wish I wish government spending were so were highly limited and I wish revenues into the federal government were so low that we couldn't borrow this much. But I'm saying if you look at if if you were to ask someone, okay, which country's got the most debt in the world? Um, and you were told, you'd say, "Oh, that must be the richest country in the world." Because only a rich country could borrow like this. >> Yeah, there does seem to be this notion that the word debt is this big bad word, the dword all of a sudden. Um, but when you think about it, our entire society runs on an IOU system. Credit cards, line of credits, mortgages, right? without no one can own a home. Most most people can't. Developers can't build without access to credit. Companies can't expand. But do we have a debt crisis? Do we have a bubble in which case uh it becomes a problem? Let me just share with you uh this post by Ray Dallio. I believe he made this uh not too long ago and maybe I'll summarize it for you and then you can just evaluate some of his his findings. He posted on X stimulating into a bubble. Um he warns that if the Fed expands its balance sheet significantly through QE, well he's talking about the end of QT, which we can discuss right now. The end of QT should be the 1st of December or early December. Um and then possibly the Fed can add will start to add reserves after they stop tapering. After that shift happens, we have potentially an expansion of the balance sheet uh while also cutting interest rates and the government runs into a large fiscal deficit. That's on the fiscal side. Uh this combination is historically associated with what he calls latestage debt cycles where the central bank effectively prints money to finance government borrowing which is a problem. Can you just evaluate that? >> Oh yeah. It'd be a problem if it were true. If the if the if the US were relying on the Fed as in the if Congress were relying on what it created to fund its expenditures, then we would have no debt. I mean, the shest sign there's no debt crisis is the 38 trillion in debt. To assume otherwise is to once again assume not just market stupidity, but gargantuan amounts of market stupidity that those with title to money would aggressively lend to an entity that has no ability to pay it back other than with a printing press. Dallio is a great investor, but he's a reminder that good investors don't always know really much of anything about economics because to presume as he does presumes that the most owned in income streams in the world, which are US treasuries, uh that that there's no knowledge in them that people are just blightly buying what they they'll get a fraction of the value back from. Not a chance. >> Well, he does make one important observation, which is that this QE would be a little bit different from before. Typically in the past we've seen QES, quantitative easing cycles happen after some sort of economic um um shock, pandemic, the financial crisis of 2008. And so markets have been depressed when QE was first announced in past cycles. Um inflation was lower, economic growth was weaker and credit stress was higher. This time the government is directly or would be directly into implementing QE into a record high in the stock market. Uh the economy like you mentioned is strong. Inflation is already above target and liquidity is already abundant. This he argues could have some implications. What would be the consequences of QE into our current environment? John? >> Oh gosh. I I my deeply held view is that in a few decades people will look back and they'll say, "Why did we ever follow what the Fed does?" I We're talking about a global economy. The idea that the Fed working through banks can somehow increase liquidity is just so insulting to reason. The Fed cannot do what people think it can do. It just can't. The Fed isn't some other that can borrow resources from Pluto and kind of stick them into the economy. It can only fiddle with credit in so far as there's credit in the first place. And we know that credit is produced. It's produced simply because you don't borrow money so that you can look stare lovingly at the money and say, "Wow, look at all these dollars." You borrow money for what it can be exchanged for, goods, services, labor. And so the the idea that the Fed can do anything to stimulate the economy is just so at odds with reality. And I it just it shows you the bankrupt nature of the economics profession that they take so seriously an entity that that its impact has always been overstated from the day it opened its doors. >> Okay. So if the Fed is powerless or not really that relevant as you suggest, then why do markets still follow central bank policies? Because markets follow what governments do. That's why, you know, why do people even refer to as the Fed? The Fed is an outsourced creation of Congress. Can our federal government intervene in the economy and and and cause great harm? Of course it can. And governments have done that for centuries. Uh why is China suddenly so full of skyscrapers whereas several decades ago it was a barren landscape? Well, governments can can restrain freedom and cause enormous amounts of economic suffering. And so bec people watch what the Fed does not because the Fed has unique powers, but the federal government has power. You referred to a financial crisis in 2008. I I reject that there was no financial crisis. There is a crisis of intervention and there's always a crisis anytime governments substitute their narrow incredibly microscopic knowledge for that in the marketplace. And so Ben Bernani with George W. Bush's approval and with everyone in the Bush administration's approval, Ben Bernanki said unless we intervene and muzzle the market's message, there's going to be a crisis. So that self-fulfilling prophecy, they created one that otherwise wouldn't have taken place in the first place. So, so you think TARP and the bailouts were unnecessary? >> It's not just they were unnecessary. They were the financial crisis. If if there's no intervention in the first place, markets do what they always do. They just correct the mistakes and we move on. And so, governments can do all sorts of bad things. But let's not pretend that the Fed for being the Fed somehow has some sort of enormous it can stimulate the economy or shrink it. Laughable. The the only closed economy is the world economy. and the the idea that the Fed can keep credit out of the United States or it can bring it in misunderstands what credit is. >> So let's close off on your outlook for growth then into 2026 Q1 and Q2. What do you expect? >> Well, I think the only constant with the American people is to is to produce. Uh that's all we know is progress. And so to me the economy is always growing. uh to look at the economy as some living breathing blob that um is going up or down seems to me a bit a bit problematic. Um at present uh Aaron Rogers is doing pretty well um and so is Sam Darnold but there are a few quarterbacks that are in recession right now you know and that's true of businesses too. So, I think the US will progress. Um, I worry about things like the dollar and yes, I very much worry about uh the efforts by the Trump administration to not just deport people back into Mexico and beyond. Uh, but to also limit their arrival. Uh, human beings are capital always and everywhere. And so at present we're hitting the economy twice with m with government spending a devalued dollar act so call three times and an effort to bring to push human capital out of the economy. I don't think that's great. I think we'll continue growing. I think it's a fraction of what we could be growing. >> Okay. Excellent. Uh how do we then grow to our full potential? Um, it's it's trit and ridiculous, but we look around the world again. In 1978, there were 15 tall buildings in Shanghai. As of 2006, there are 6,780. Um, in 2025, I'm sure that number is well over 10,000, if not more. Uh, where people are free, they grow. When they're not free, they don't grow. There's really no mystery to this. And, uh, there there was economic growth long before there were economists. And and so I would argue that probably the quickest way to grow is to decredial all economists and make them do something else. Try astrology or something where they can do less damage. >> So So you think economists are to blame for for slower productivity and growth. >> No, no, but I think some of their theories uh that they feed >> there's this running joke. >> Yeah. There's this running joke that perhaps China is becoming more like the US and the US is becoming more like China. When you look at interventionist policies like you've mentioned, when you look at um the Treasury directly wanting to control the dollar and wanting to have a weaker dollar, that's direct market intervention. And so, one would argue that the economy is becoming less free here in the US, whereas China has become more capitalist in nature, hence the higher growth. I I don't know to what extent that would be true, but what do you think? >> Look, I think there's an argument for it. I mean, I come from the right in the United States. And so, isn't it interesting that the right are have been saying for years that Tik Tok, one of the most popular social media sites in the world, is controlled by the Communist Party? Have you ever heard anything more ridiculous? When in the history of the world have thriving, successful businesses been run by governments? And you know, they said this before about Huawei. Huawei is in 170 countries around the world. And what's important about that is Coca-Cola is in 196 yet Huawei was being controlled by the CCP. I mean, the rights become ridiculous in the United States. They're now saying that China's strong because the CCP runs a lot of their corporations and and and also, oh, by the way, they're subsidized by the CCP. These are things that we used to believe were ridiculous. And now we're saying it's the source of China's strength. But what you're saying is correct that China is increasingly capitalist. And how we know this is US companies. McDonald's doesn't think China's in decline. McDonald's has 5,500 stores there, but has plans for 10,000 within 3 years. If you look up the number of Starbucks in China by the week, every week it's hundreds more. It's it's amazing. And so, US businesses see the truth. Watch what they do, not what our politicians do. They continue to expand there. and they're expanding there because the Chinese people are brilliant at wealth creation. They're increasingly free to create it. And because they are, it's a great market for the US. And and I would add because of this, we are setting the stage for peaceful relations despite what our idiot politicians in the United States are doing by trying to make China the enemy and trying to beat the war drums all the time. And what we see happening in China, this exchange between productive Americans and Chinese is the greatest thing for po foreign policy that mankind's ever conceived. And I hope they overcome the shocking stupidity of the US political class that always wants to be at war with someone. >> So the Trump administration should drop tariffs altogether. >> Absolutely. Yesterday it should drop them and say any country, we are not going to injure our people so that we can copy what you are doing. And if you want to fall further behind the United States, continue injuring your people with tariffs. We will go to zero and we'll be the winners precisely because we're at zero. How would you rank the foreign policy um so far or evaluate the foreign policy so far of the Trump administration? One argument for implementing tariffs in the first place is just to get deals done. He doesn't Trump doesn't actually want tariffs. You see this time and time again over the past year and in his first term. He just takes them off after deals reached. So he's not The tariffs are just negotiating leverage tool. His end goal is to get some deals done. So what do you think? >> Well, isn't that interesting when they're promising $2,000 rebates based on all the revenues they claim to have have collected based on it. Uh look, I don't like it. Um I don't I don't want to empower presidents one way or the other. I think it's unconstitutional, which is kind of a statement of the obvious. Uh, I'm I'm a freedom person and I think the the some of the basics of freedom are is that as the American people, we're free to trade with whomever we want. Um, it's it's it's not just a freedom thing, but it lifts us when we're dividing up work with the rest of the world. We have the greatest odds right here of doing the work most associated with our unique skills and intelligence. Trade loves the American worker, yes, the little guy, more than any other concept. mankind has ever come up with simply because when the world is working together, when there are more hands and machines around the world producing things, everything becomes cheaper. Uh the fact that things are more expensive today is a function not just of tariffs, but Trump in his infinite wisdom in 2020 decided to shut down the US economy, which is effectively shutting down the global economy. When you do that, you can't rebuild what took decades to build in the first place. the sophisticated interlocking of productive people around the world. You can't rebuild it overnight. And so we're still suffering the higher prices of this thoroughly mindless decision back in 2020 to fight a virus with economic contraction and we're still suffering it today. >> Great. Well, John, I appreciate your cander and uh appreciate your insights. We'll uh we'll get you on again uh to talk more. Thank you very much. Uh where can we follow you in the meantime? >> Oh, thanks so much, David, for having me on. Um, I editor as you alluded to at Real Clear Markets. I put out at least one column every day. Uh, my books that everyone's free to buy multiple copies of, they're on Amazon. I can be found on Twitter. Uh, but I really appreciate the the opportunity to come on and give a frequently counter view, counter to conventional wisdom view of the economy and how things work. >> Let's uh let's send it here. We'll put the links down below. Follow Real Clear Markets and uh and uh we'll we'll talk soon. Thank you, John. Thanks, David. >> Thank you. And uh don't forget to like, subscribe, and share this video.