Once In 50 Year Crisis Hits In 2026, Which Assets Will Survive? | Komal Sri-Kumar
Summary
Macro Outlook: The guest projects stagflation in 2026 with inflation above 3% alongside recessionary conditions, echoing dynamics last seen in the 1970s.
Trade War: Tariffs are a dominant 2026 theme, with average rates rising from ~2% to ~13–14%, squeezing margins and likely hitting both companies and consumers as pass-through intensifies.
Precious Metals: Bullish on gold and silver as safe havens amid higher inflation and currency debasement; gold is forecast to rise toward $5,000/oz by end-2026.
Short Term Treasuries: Favors T-bills maturing within a year for defensiveness and 4–4.5% yields, avoiding duration risk as long rates stay vulnerable.
Yield Curve Steepening: Long-term yields are rising despite Fed cuts due to inflation expectations, steepening the curve and pressuring mortgages and long-duration bonds.
Currency View: Expects a weak US dollar and flight from paper currencies; yen and yuan seen as poor alternatives, reinforcing the metals bid.
Credit Risks: Warns of rising stress in high yield credit and small/mid businesses, with debt-servicing strains and bankruptcies likely to increase into 2026.
Investment Stance: Emphasizes diversification beyond a 60/40 mix toward short-term Treasuries and precious metals, while being wary of long-duration bonds and equity exposure in a stagflationary setup.
Transcript
you are moving toward a recession in 2026. So you know what they call a combination of higher inflation and a recession that's known as stagflation. >> Yes. >> And we have not had that to a significant extent for more than 50 years. Why do you need official data only for that to be ignored? 2026 I expect the inflation rate to be anywhere 3 higher than 3%. I'm pleased to welcome back to the show Kamal Srikumar, president of Srikumar Global Strategies. He's going to give us his outlook for 2026. And uh spoiler alert, he thinks that what's about to happen in 2026 hasn't happened in 50 years and it's not great. So stay tuned for that forecast. This episode is brought to you by Koshi. It is a fully regulated platform that lets you trade on real world events from economic data to political outcomes. Traders can put money down on their favorite teams, events, elections, and more in all 50 states, including California and Texas and over 140 countries. Go to cashy and use the code lin l i n or click on the link in the description down below or scan the QR code here to get started. New users can get $10 off when they deposit $100 using my promo code lin. More on that later. Dr. Sri Kumar, welcome back to the show. Always good to see you. >> Good to be back on your program, David. and I always enjoy your questions and uh very good chatting with you this afternoon. >> Thank you. We always enjoy having you on and sharing again your thoughts. Now let's talk about today's CPI report. Uh this was uh released from the BLS. It says here the BLS did not collect survey data for October 2025 due to a lapse in appropriations. BLS was unable to retroactively collect these data for a few indexics uh indexes. BLS use uses non-s survey data sources instead of survey data. As you're aware, the headline CPI is 2.7% much lower than the 3% with 3.1% uh by consensus estimates. I'll just leave this on the screen here. Percent changes in CPI for all urban consumers. Uh this is a um summary of their breakdown. There are some critics and skeptics on social media I've seen on online today uh Sri that uh have voiced concerns about the authenticity of this data and whether or not the administration has purposely left out some things to make the 2.7% uh well number much lower than consensus meaning inflation looks great everything's working as well and the affordability issue is taking care of itself. Uh before we talk about your outlook for inflation, can you just address that concern? Is there any validity to that concern? >> Let me address that first, David. Um, you have a group of people at the US Bureau of Labor Statistics who are career officials and except for the one the director who was fired by uh Trump a few months ago because he did not like her employment number. The employees by and large are lifetime employees and they are not given in to uh doctoring the data or to do anything different. So unless we come up with evidence that Trump or his associates actively called these people or emailed them, texted them and tell them to change the numbers. I'm going to say that the numbers were honestly prepared. But that is different from saying that the numbers are reliable. I don't think the numbers are reliable at all because of the fact as you said at the beginning of the program numbers were missing for October. They made assumptions on a whole lot of different areas. Personally, I think they should not have published the November number at all. Just like there was no number for October, they should have said even our November number is very inaccurate. We are not going to do it. We are going to wait till December. So the number I would say this bottom line they are not reliable data but I don't think they are dishonest they are just badly prepared. >> Does the BLS ever retroactively change their prior uh CPI reports like they do with employment data revisions? >> They have yeah they have done that in the past and when they do that it is not for a single month or two months. It's often done for a longer period of time time like 12 or 24 months. It has been done before. Uh and it may happen again. We may find out 6 months from now that the November number is much higher than they put it out. But by then it'll be too too late for the markets because they would have acted on it. >> Well, the market is not buying the news that or the assumption I guess that the Fed is going to lower rates on this news on this data report. So the CPI being 2.7% we can discuss whether or not uh the data is reliable but right now the CME Fed watch tool is still pricing in a 73% chance of no cut in January. Uh Koshi which is a prediction market traders on Koshi are maintaining the exact same outcome 75% uh no cut by January. I would have thought sri that a lower CPI report even if it's not complete fully would have presented an opportunity for the markets to think the Fed will lower rates in January. I think the lower probability doesn't say much at all yet because the January meeting is still a few weeks away and you may recall that there was very little expectation of a cut in December but the December cut came about and after the October meeting Jerome Powell the chairman made a statement that another cut in December is not a done deal and at that time I wrote in my weekend report that doesn't make any sense to me. He will be pulled by the markets rather than he pulling the market and they would force him to cut the rate in December which is what happened. So January similarly we are going to appro we are going into a new year politically it is a year of very important midterm elections in the United States. President Trump is going to be on his back and on the backs of other governors to in order to make them cut interest rates again. So my expectation more rather than less. I'm going to expect one more cut in January to take place. >> So so basically this this prediction here is is you disagree with this? >> I disagree with the prediction and I think as the date gets closer the probability will increase. We have seen that happen before. Okay, >> these prediction numbers are highly volatile. >> I see you wrote a Substack piece about uh the Fed. Let's talk about how the Fed is operating and importantly how governors and the chairman alike are thinking, how are they thinking is I think important for investors and economists to understand. So in your piece you've discussed several things. I think you've discussed that uh Chairman Powell is now effectively ignoring official data. He's operating on a hunch that official employment data is overstated, which is why he cut by 25 basis points. Can you just comment on how the Federal Reserve is using official data versus their own forecast and their own models versus maybe uh current private data or just their hunch? >> Yeah, let us start out with what the Fed is supposed to be doing. It has a twin mandate. It needs to keep the unemployment rate low and it also needs to keep inflation low and stable. The problem David is these two objectives cannot both be achieved with one monetary tool namely interest rate. I have written that this is illogical. It makes no sense for you to control two targets with one variable. But that's the way the Fed operates. Let's take that for given. That being said, the chairman now is itching to cut interest rates. He was in the at the December meeting and he was not getting help from the employment numbers which continue to remain relatively healthy. And also the inflation numbers, they've not met the target for not even once in almost 6 years. What's the use of you having a target if you have no intention of reaching it? So with the inflation being higher than target and the employment picture relatively positive meaning that reasonable number of jobs are being created. He then said well I don't believe the unemployment numbers. I think we actually lost jobs of 20,000 per month since April rather than gain 40,000 per month as the official statistics show. So because of the fact that I think I the chairman and my staff, we all believe that it's not a reliable number, I'm going to go ahead and cut the interest rate. It it makes absolutely no sense. Then why do you need official data only for that to be ignored? And what and he has clearly said in his press conference what led him to do that was a hunch. And that is I think a real problem with the way in which the Federal Reserve operates. >> I want to get your reaction to uh what many are saying is a restart of QE. Take a listen to this and I'd like you to get uh uh would like to get your response and uh your your analysis on what this means for the economy. >> Accordingly, at today's meeting, the committee decided to initiate purchases of shorterterm Treasury securities, mainly Treasury bills, for the sole purpose of maintaining an ample supply of reserves over time. Such increases in our securities holdings ensure that the federal funds rate remains within its target range and are necessary because the growth of the economy leads to rising demand over time for our liabilities, including currency and reserves. As detailed in a statement released today by the Federal Reserve Bank of New York, reserve management purchases will amount to $40 billion in the first month and may remain elevated for a few months to alleviate expected near-term pressures in money markets. Thereafter, we expect the size of reser reserve management purchases to decline though the actual pace will depend on market conditions. >> He said that this is necessary for an economy that's growing. Do you agree with that statement? Let's start with that. >> I totally disagree. Let us go back to 2008 just before the Lehman Brothers failed in September that year. We are the Federal Reserve balance sheet as a ratio of gross domestic product was about six or 7%. And then it has grown and grown and grown uh with time. Ben Bernani the chairman of the Fed said at that time that he anticipates that this is a temporary measure. The Fed balance sheet would come back to its original shape. David, I would agree that the balance sheet has to grow with the economy. That is not in doubt. But what has happened today is that the balance sheet is about 21 22% of GDP more than three times as a ratio compared with 2008. Why has it just not grown with the economy but it has grown much much further more than the economy as a whole and the Fed is becoming a more and more dominant entity in the whole US economy. So what chairman Powell is doing is to say to make sure that his existence is permanent and he the it is going to have a permanent impact on uh the economy with the Federal Reserve becoming bigger and bigger in size with the passage of time relative to the economy. That is what I find unacceptable. Second, having grown to that extent, you would think that that would be sufficient to provide enough reserve level levels to the money market. He says even 21% of of Federal Reserve balance sheet as a ratio of GDP is not enough. He needs to grow it even more. I bet you that when he says this is all going to be temporary, it is going to grow both in dollar terms and it is grow as a ratio of GDP. So it it is not going to come down again. We are going to be moving from one situ one crisis situation to another. If this creates a cash squeeze like we had in September 2019 and this increase in the reserves that uh the chairman is affording them is not going to be the cure all. You're still going to have a problem. >> Is he correct or the Federal Reserve overall correct to assume that Treasury demand will increase though next year? I'm just trying to get to the bottom of why the Federal Reserve is even doing this right now. What they are afraid of is in the in the money market when they are trying to borrow treasuries for the in the over overnight market that that will become unavailable except at sub substantially higher money market interest rates. So in other words if it is available not for 2 and a.5% but suddenly overnight the rate goes up to 5 and a half or 6%. that is going to be detrimental to the financial institutions their solveny their ability to make meet obligations. He is trying to avoid that. The question is why is that happening? It is happening because of lack of sufficient regulatory control. It is happening because the banks are taking lot more risk and as a and that is the reason why uh the ratio is still not considered to be sufficient. What is this going to do to economic growth? What is this going to do for inflation? What is this going to do for the labor market? You think >> uh what it's going to the principal impact is going to be on inflation. Essentially, the increase in the Fed's balance sheet both in dollar terms as well as as a ratio of GDP is going to put more liquidity in the hands of the public. It is going to increase spending. It is going to keep inflation significantly higher. That's the first impact that I see. Second, if the Fed uh which will not be under the control of Jerome Powell after May, whoever the new chairman or chairwoman happens to be after that, he or she is probably going to have to deal with the higher inflation rate. If they compound the problem by cutting interest rates as Trump wants them to, they're going to worsen the inflation situation and then push us toward a crisis. That is the risk we run in terms of what this could lead to. >> So you've got reduction of Fed funds rate, you've got purchases of reserves uh from the FOMC and all these things could exacerbate inflation like you said. At the same time, the Trump administration wants to fight the affordability crisis that's been on their agenda since day one. So, what can we see from the fiscal side, if anything, that may offset inflationary pressures from the monetary side? >> Great question. I think from the fiscal side, they the fiscal position as I see it is not offsetting the impact of monetary policy. It is adding to it. It's supplementing it. We already have the fiscal deficit which is about 6 and a half% of GDP and with the big beautiful bill as the president calls it with a lot of tax concessions and also at the same time uh spending the reductions which don't match the tax cuts the deficit is expected to increase during the coming years. So what that means is that monetary policy is becoming easier and fiscal policy is not contractionary to offset it. Both of them are working toward keeping the inflation rate high which is a deadly combination of policies to have. Think about 2020 2021. That's what we did in the United States to fight CO the federal uh the the Joe Biden administration increase government spending quite substantially by about $2 trillion in a single year and at the same time Jerome Powell reduced the interest rate to zero and he doubled the balance sheet between 2020 and 2022. So again it's a very flammable uh combination of the two and that seems to be and we know we saw that it created very high inflationary pressures and we think seem to be repeating uh that experiment today. >> What ultimately that is your outlook for inflation and then we can talk about bond yields. I'm looking uh let's let's go step by step. 2026 I expect the inflation rate to be anywhere 3 higher than 3%. I couldn't tell you how high compared with that it is going to be but higher than 3% in 2026. So moving further away from the government's target Fed's target. Second, when that happens, not you would say what is happening to employment and economic growth. You have tariffs which are going to put uh pressure on employment, put pressure on the economy. And my expectation is you you are moving toward a recession in 2026. So you know what they call a combination of higher inflation and a recession that's known as stagflation. >> Yes. And we have not had that to a significant extent for more than 50 years. We haven't seen that since the 1970s. The reason we are repeating today is because stagflation requires a conscious mismanagement of policy for it to come into being. And all of the makings of stagflation are there today in a 2026 outlook. >> I think Ray Dallio from Bridgewwater called stagflation worse than recession. He said, uh, this is an outcome that is worse than just a recession because not only are you getting a contraction where no growth, you're also getting inflation. So, everybody's going to get hit. Uh, whether you're a saver or retiree or somebody in the workforce. Uh, but what why what I'd like to know, Sri, is why the 10-year yield continues to rise even if the Federal Reserve is cutting rates. >> Uh, the Federal Reserve is cutting interest rates, but it is only it can only act on the short side, the short term. The long-term in yield namely the 10-year and 30-year yield are dependent on inflationary expectations of the holders. As the Fed is cutting interest rates, the bond market is saying we are expecting higher and higher inflation rate and that is a phenomenon which is also reflected in the price of gold and silver which have gone up substantially because of inflation expectations being higher than they were before. So that's the reason why the long-term yields are higher even though the short rate is cut and I wrote as long ago as a year ago that we are going to have a steepening of the yield curve namely the shortterm rate whether it's federal funds rate or the 2-year yield compared with the 10-year yield is going to become steeper and what that means is you'll have to pay more for mortgages. It affects the economy more when the long-term interest rate rises even when the short-term interest rate is cut. >> You said that this hasn't happened in in 50 years. What happened in the last time we had stackflation in the early '7s? Specifically, what happened to uh economic growth and the labor force. Ultimately, people just want to know if their purchasing power of their currency can be maintained and whether or not they can keep their job or even ask for a raise. Uh what happened in the 1970s? You had one commodity called oil which was in short supply and the price of it tripled during 1973 and increased further during the decade and there was no alternative to crude oil. Therefore the inflation spread to the overall economy and the economy if you that was all there was there would have been a recession and we would have got out of it. Think about how the Nixon administration with the support of Arthur Burns, the Fed chairman, dealt with it. They dealt with it by cutting interest rates to help the president with his 1972 presidential elections. And the and the Fed continued to remain a political entity bullied by the president at that time. That's what I call the mismanagement portion of it. So you had a combination of a substantial jump in the price of oil com combined with mismanaged economic policy which led to the stagflation. What's happening today? You have more substitutes for crude oil. You can use electric energy. You can use solar energy. They are substitutes which did not exist during the 1970s. However, the whole basket of commodities and services that you purchase are being affected by tariffs. >> Yes, >> it is as if that whole one commodity is going up in price due to presidential action and at the same time the president is pushing the Fed to cut interest rates rather than raise it to to fight inflation. This is what this was p pursued the policy was pursued in Turkey during the last 10 years to disastrous consequences. Cutting interest rates does not improve the standard of living. Cutting interest rate does not bring down the inflation rate. It actually in goes the other way in both uh with respect to both objectives. >> My debt costs go down though if the interest rate is down and arguably I have more spending power. So that's one way I can improve my standard of living. No. >> Uh you can try and initially yes indeed you will be able to get a loan for a lower interest rate. But what the banks will find out lending institutions will find out is that when they lend to you at a lower interest rate they are losing out because they lose out because they don't make enough money relative to the expected inflation. So after a shortterm burst when you the borrower get to enjoy a lower interest rate sub subsequently the interest rates are going to shoot up that again is the lesson from the 1970s and early 1980s the mortgage rate by about 1981 David was about 18% in the United States nobody could afford a mortgage >> so they did not come down they just shot up sky sky Hi. >> Let's move on to talk about uh how businesses are feeling about the economy and what can be done about the labor force. So, here we have from the Richmond Fed a survey uh of CFOs CFO outlook for 2026 tariffs hiring practices and AI impact. When asked between November 11th and December 1st to rate optimism about the overall US economy on a scale of 0 to 100, the average rating from CFOs was 60.2, slight dip from 62.9 in the prior quarter. Most pressing concerns from CFOs, trade policy and tariffs remained top uh for the fourth consecutive quarter. Concerns about demand, sales and revenue came in close second. Labor quality and availability also remained a top concern. So I have a few questions for this. The first is that do you agree with the notion that now employees are facing what's called a permanent layoff? Meaning if they lose their jobs, it's very difficult for them to find another job soon. I think that is a reality. The employees when they lose a job and let's say they lose it because of the prevalence of AI, artificial intelligence, it takes over your job. It is not as if uh when the economic cycle changes, you'll be called back to work. That was a situation when we started work. When I started work in the 1970s, we knew that if the demand for labor slackened for a year or so, the following year was going to be a much better one. We do not have any expectation of that kind of a change taking place because the changes with respect to employment are structural. They are not cyclical. That means that the job that I was doing that I was able to get to do is now being done by a a robot. It is done by a computer that is again prepared to take up my job and I'm not going to get my job back. So I think the workers sense of pessimism especially for young workers who are entering the labor force is very much a reality today. the issue of policy uh trade policy and tariffs still top of mind for companies and this is at what point will this start to become an actual problem for the businesses themselves? They've survived this far one year into it um and the stock market hasn't collapsed but at a certain point either businesses move on from this issue completely or it becomes an even bigger problem. Which direction do you think it'll go? And this goes back to our earlier discussion about what Trump may do with trade policy overall. >> In during this year, calendar year 2025, even though the tariffs were increased significantly on so-called liberation day, beginning of April, uh many of them were cancelled subsequently. The quickest measure is that the average tariff rate of goods entering the United States was about 2% before April. And today it is about 13 or 14%. It went even higher but many countries were given exemptions, goods were given exemptions. So it came down also. But that kind of an increase in the tariff rate is only going to percolate into prices gradually because it's not going to happen immediately. 2026 I think they will go much more into the the price side because so far many of the companies have been taking the hit in terms of their profits. Now you asked the question things haven't fallen out of bed and the companies are still acting. How do I explain that? The answer to that is that the companies today some of them have taken a hit in terms of their own profit margins and therefore they are able to survive. But going into 2026, that's going to be even more difficult for them to do because the margin to reduce the price or take the hit themselves rather than pass it on to the consumer, that ability gets to be less. >> And in 2026, if the consumer is under pressure for other reasons, he or she is not going to be willing to pay the higher price they have to due to tariffs. So that also says to me that 2026 is going to be a crunch period for companies and consumers. Um, which in a way the 2025 was not. >> I want to pull this article up and I want to ask you if we're going to see more headlines like this into 2026. Mom and pop businesses bankruptcies hit a record as debts pile up. This is just off of what you were saying. people. Eventually, businesses are unable to keep raising prices. Creditors are just breathing down their necks, says Carol Fox, a court approved trustee who oversees more than two dozen cases. Year-to date through November. Sub subchapter 5 cases increased more than 8% to 2,200 compared to the same period last year. Chapter 11 petitions are up about 1% to a little more than 6,000. Um, yeah, this is a concerning trend. What do you what's your response to the story I just read and whether or not this trend can continue? >> Uh the the trend I think will worsen because of what I told you before in terms of what is going on with the economy. I think the bankruptcies are going to go up. Let me extend your question beyond the mom and pop small companies to the midsized companies. uh you find increasingly there is pressure on the high yield companies. >> High yield spreads have been very narrow and it led to the belief that the everything is uh in good shape because even non-investment grade companies were able to borrow at not much higher spread compared with investment grade companies. What that means is that it leads to an increase in the debt that they have acquired be to take advantage of the low interest rates similar to what you spoke about that you can get a more of a loan at a lower rate uh if the Fed cut rates. That is what has been happening and the mom and pop companies have also benefited from it. But they are not going to benefit indefinitely and come 2026 it is going to go the other way because the debt is still there. Uh but the economic the inflation expectations are greater and they they find increasing difficulty to service their obligations. >> Right? So what does this mean for investors watching the program? We have here on the one hand the yield curve steepening. Uh we have here on the one hand inflation concerns remaining elevated potentially the economy weakening into a recession like you said which assets will perform poorly which assets will perform well in this kind of environment stagflationary environment something we haven't seen since the 70s >> um what will do well uh I this is I have stuck to my uh forecast for quite some time namely that the small and medium term uh US treasury ary obligations are among the places to go hide. Meaning if you buy treasury bills which mature in one year or less they do not have a duration risk. At the same time they are giving you a decent rate of return say four 4 and a.5% if you lend to the uncle Sam for 6 months that is one place to go. uh gold and silver. I was a big forecaster at the beginning of 2025 expecting a surge in the price of gold and that has happened and my expectation is that it'll go up even further with the 1 ounce uh trading. Now we are at more than 4,300 an ounce. I expect before the end of 2026 we'll be at 5,000. So that is another area to go into. Third, do not be in just a 6040 portfolio. If you are in equities, you could get hit. If you're in long-term bonds, you can get hit because the yield goes up. So, where do you go and hide? Some of your portfolio should be in alternative assets, perhaps real estate, distress debt. When there is blood on the street, you go and put some money into it. So, those are all the ways to diversify your portfolio. The fact that gold and silver have risen to current levels, what is that signaling to you right now? Not even talking about the future. Why has it gone up the way that it has? >> It has gone up. And again, this is what uh led me to forecast it. In January or February of 2025, I said gold is going to go to about 3,700 by July of 2025. Actually, we hit 3,800. I was just off by $100. The big move that I expected did happen. Why did that happen? Right now, you cannot go away and hide. If you don't like the yen, if you don't like the euro or the pound sterling, >> you previously you could go and say, "Hey, let me buy go let me buy dollars. Let me go and uh hide in US dollar denominated assets." But that's not going to work because the US dollar is being consciously debased by this administration which wants a weaker do US dollar. So when you have that kind of a situation there are very few other assets that you can go into to hide and both gold and silver serve as a very good safe haven during a time when you're going out of the US dollar. what I so the situation today David is what I call flight from paper currencies you don't want to hold any paper currency you think you see a risk in every kind of paper currency including the US dollar and that's why gold and silver are benefiting so much >> what if I just want to buy another fiat currency that or park my money in another country that is not tied to the US or pegged to the dollar in any way and I don't really want to get into gold and silver suppose that were the case is an economy or country in the world that you don't see inflation being a big big problem in which we have relatively more stability and trust in their fiat system and we can look at their currency as an alternative. >> You have uh mentioned several qualities fiat currency you need to have uh confidence in them and they are not correlated with the United States. When you put them all together, I would say to you there isn't any currency which meets your specifications. But let's just talk about currencies which do not depend on the US dollar and then see if you can hide there with a suff relatively sufficient degree of size of the economy and also of having performed well in the past. I'm going to mention two of them. One is the Japanese yen and the second is the Chinese renman ban. Let's take the yen first. Uh yes, the yen has often been a place to go into. But look at where the Japanese have been investing their stock, their money. They've gone mostly into US dollar denominated assets historically. They are the first or second largest creditor to the United States. And now the risk is that they are going to be taking that cash back. But the Japanese economy is not big enough to be able to accommodate all of the global investors if they are fleeing the US dollar to be able to go to the yen. And if everybody rushes to buy yen, it's going to push the yen sky high in terms of appreci appreciated value. and the Bank of Japan is going to once again step in, cut the interest rate and you're going to have a volatile, unsustainable global monetary situation. That's so much for the Japanese yen. The Chinese remmen yan about 10 years ago we thought was an effective substitute for the US dollar. We don't think about it that way anymore. And the reason it is not thought about as a substitute is that you have a government which clearly is saying that the government is much more important than the free market. If push comes to shove, the government is going to determine what you do rather than leave it to the markets. So and they still have sub substantial amount of capital controls controls on the current account of the balance of payments. It's not as if you can buy a yuan denominated security and then move back. So the short answer to your question is there isn't another currency which fits the bill which is why precious metals take the mantle in terms of where you want to go and be in. I want to close off on looking uh at uh crossber relations between the US and some of its trading partners. Uh particularly starting with where I live currently, Canada. Uh two of the largest trading partners anywhere in the world. Uh the federal government of Canada, Mark Carney's government recently announced a byanadian policy for government procurement uh and large infrastructure orders. Uh, I won't play for you the full clip, but uh, I'll just show you a little bit here. >> Prime Minister Mark Carney says the welfare of these workers is top of mind for him and his captain. >> The Northstar that we follow is building lasting economic strength for Canadian workers and their families. >> Carne unveiled plans to reskill or retrain 50,000 workers. Canada's employment insurance program will change to automatically connect those without work to a retraining program. It it sounds like on the surface he's doing exactly what uh Trump wants to do or has done. Uh America first policy for Canada. Uh we'll see how that goes. Uh but this is the current state of relations between two of the largest trading partners on any trading block on the planet. Uh what is next? Um well I this is inexplicable in terms of how the fight was started between the United States and Canada David and to me it makes no sense at all. It is not as if the Canadian uh products are stealing jobs from the United States so that the US president should respond to it and some of those boycotss that are going on. You mentioned something about uh the areas where they are present. But in addition to that, you have the Canadians who do not want to buy US liquor for example. So much so that any US liquor that is sold on the Canadian side is what was done before uh the restrictions were put into effect. And who gains from it? I don't nobody gains from it at all. It is just a gamesmanship I think taking place on the Trump side. And Mark Carney, let's face it, uh I have a lot of regard for him. I have followed him closely uh when he was the governor of the Bank of England and what he did for the UK and it was a he is a very impressive statesman and individual. However, when it comes to the relative sizes of the economies, Canada cannot put up a fight with the United States and the United States should have no reason at all to fight with it either. So that is again uh one of the trade relationships uh that is again inexplicably worsening. Second, the United States and Mexico. Mexico is another very large trading partner. On the other hand, uh we are we are in a constant struggle with the Mexicans regarding where what the tariffs should be and how they should take care of it. And that again is another deterioration. If you did not have these fights going on, then the presidency would be in much sounder shape. the inflation would be lower without having this fight and the tariffs and economic growth and employment in the United States would be better. Uh so I think we are giving up a whole lot of different objectives in order to keep up the trade fight. >> So bottom line then for 2026 will trade war still be the dominant theme of the year or can we shift to something else to focus on? The dominant theme for 2026 >> dominant theme will remain uh the trade war. We he may put a Trump may pull back on some countries increase it on the others but you're never sure which country is a friend and which country is a foe from Trump's point of view because they'll constantly change. Take the case of Brazil for instance. Brazil got into a tussle with President Trump because they were prosecuting a former president for perpetrating a coup. It had nothing to do with trade relationship at all. But then that caused the eye the anger of Trump. So you can and that uncertainty is also affecting investment and employment because you never know how you can plan your company in for 2026. We'll follow up in 2026 and see how the economy progresses. Uh thank you very much. Sri, where can we follow you for now? >> Uh I you can follow me on Twitter. I have a Twitter page. I also do the Saturday morning reports on Substack and you your uh viewers can simply put their email into it. There is no payw wall and they can continue to receive those reports every Saturday morning. >> I started uh the interview with one of your reports, Fed rushes to cut. So great substack it's called Sri Economics. We'll put the links down below so you can follow uh Dr. Sri Kumar there. I appreciate your thoughts as always. Uh have a wonderful holiday season and happy new year to you. >> Thank you. Wish you happy holidays as well and all the best for 2026 David. Pleasure talking to you >> and happy holidays to the viewers. You thank you for watching. Don't forget to follow Siri in the links down below. And don't forget to use my promo code lin l i n when you sign up to koshi. Go to koshi in the link down below or scan the QR code here and you'll get $10 off on your first $100 deposit. Take care for now. We'll see you next time.
Once In 50 Year Crisis Hits In 2026, Which Assets Will Survive? | Komal Sri-Kumar
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you are moving toward a recession in 2026. So you know what they call a combination of higher inflation and a recession that's known as stagflation. >> Yes. >> And we have not had that to a significant extent for more than 50 years. Why do you need official data only for that to be ignored? 2026 I expect the inflation rate to be anywhere 3 higher than 3%. I'm pleased to welcome back to the show Kamal Srikumar, president of Srikumar Global Strategies. He's going to give us his outlook for 2026. And uh spoiler alert, he thinks that what's about to happen in 2026 hasn't happened in 50 years and it's not great. So stay tuned for that forecast. This episode is brought to you by Koshi. It is a fully regulated platform that lets you trade on real world events from economic data to political outcomes. Traders can put money down on their favorite teams, events, elections, and more in all 50 states, including California and Texas and over 140 countries. Go to cashy and use the code lin l i n or click on the link in the description down below or scan the QR code here to get started. New users can get $10 off when they deposit $100 using my promo code lin. More on that later. Dr. Sri Kumar, welcome back to the show. Always good to see you. >> Good to be back on your program, David. and I always enjoy your questions and uh very good chatting with you this afternoon. >> Thank you. We always enjoy having you on and sharing again your thoughts. Now let's talk about today's CPI report. Uh this was uh released from the BLS. It says here the BLS did not collect survey data for October 2025 due to a lapse in appropriations. BLS was unable to retroactively collect these data for a few indexics uh indexes. BLS use uses non-s survey data sources instead of survey data. As you're aware, the headline CPI is 2.7% much lower than the 3% with 3.1% uh by consensus estimates. I'll just leave this on the screen here. Percent changes in CPI for all urban consumers. Uh this is a um summary of their breakdown. There are some critics and skeptics on social media I've seen on online today uh Sri that uh have voiced concerns about the authenticity of this data and whether or not the administration has purposely left out some things to make the 2.7% uh well number much lower than consensus meaning inflation looks great everything's working as well and the affordability issue is taking care of itself. Uh before we talk about your outlook for inflation, can you just address that concern? Is there any validity to that concern? >> Let me address that first, David. Um, you have a group of people at the US Bureau of Labor Statistics who are career officials and except for the one the director who was fired by uh Trump a few months ago because he did not like her employment number. The employees by and large are lifetime employees and they are not given in to uh doctoring the data or to do anything different. So unless we come up with evidence that Trump or his associates actively called these people or emailed them, texted them and tell them to change the numbers. I'm going to say that the numbers were honestly prepared. But that is different from saying that the numbers are reliable. I don't think the numbers are reliable at all because of the fact as you said at the beginning of the program numbers were missing for October. They made assumptions on a whole lot of different areas. Personally, I think they should not have published the November number at all. Just like there was no number for October, they should have said even our November number is very inaccurate. We are not going to do it. We are going to wait till December. So the number I would say this bottom line they are not reliable data but I don't think they are dishonest they are just badly prepared. >> Does the BLS ever retroactively change their prior uh CPI reports like they do with employment data revisions? >> They have yeah they have done that in the past and when they do that it is not for a single month or two months. It's often done for a longer period of time time like 12 or 24 months. It has been done before. Uh and it may happen again. We may find out 6 months from now that the November number is much higher than they put it out. But by then it'll be too too late for the markets because they would have acted on it. >> Well, the market is not buying the news that or the assumption I guess that the Fed is going to lower rates on this news on this data report. So the CPI being 2.7% we can discuss whether or not uh the data is reliable but right now the CME Fed watch tool is still pricing in a 73% chance of no cut in January. Uh Koshi which is a prediction market traders on Koshi are maintaining the exact same outcome 75% uh no cut by January. I would have thought sri that a lower CPI report even if it's not complete fully would have presented an opportunity for the markets to think the Fed will lower rates in January. I think the lower probability doesn't say much at all yet because the January meeting is still a few weeks away and you may recall that there was very little expectation of a cut in December but the December cut came about and after the October meeting Jerome Powell the chairman made a statement that another cut in December is not a done deal and at that time I wrote in my weekend report that doesn't make any sense to me. He will be pulled by the markets rather than he pulling the market and they would force him to cut the rate in December which is what happened. So January similarly we are going to appro we are going into a new year politically it is a year of very important midterm elections in the United States. President Trump is going to be on his back and on the backs of other governors to in order to make them cut interest rates again. So my expectation more rather than less. I'm going to expect one more cut in January to take place. >> So so basically this this prediction here is is you disagree with this? >> I disagree with the prediction and I think as the date gets closer the probability will increase. We have seen that happen before. Okay, >> these prediction numbers are highly volatile. >> I see you wrote a Substack piece about uh the Fed. Let's talk about how the Fed is operating and importantly how governors and the chairman alike are thinking, how are they thinking is I think important for investors and economists to understand. So in your piece you've discussed several things. I think you've discussed that uh Chairman Powell is now effectively ignoring official data. He's operating on a hunch that official employment data is overstated, which is why he cut by 25 basis points. Can you just comment on how the Federal Reserve is using official data versus their own forecast and their own models versus maybe uh current private data or just their hunch? >> Yeah, let us start out with what the Fed is supposed to be doing. It has a twin mandate. It needs to keep the unemployment rate low and it also needs to keep inflation low and stable. The problem David is these two objectives cannot both be achieved with one monetary tool namely interest rate. I have written that this is illogical. It makes no sense for you to control two targets with one variable. But that's the way the Fed operates. Let's take that for given. That being said, the chairman now is itching to cut interest rates. He was in the at the December meeting and he was not getting help from the employment numbers which continue to remain relatively healthy. And also the inflation numbers, they've not met the target for not even once in almost 6 years. What's the use of you having a target if you have no intention of reaching it? So with the inflation being higher than target and the employment picture relatively positive meaning that reasonable number of jobs are being created. He then said well I don't believe the unemployment numbers. I think we actually lost jobs of 20,000 per month since April rather than gain 40,000 per month as the official statistics show. So because of the fact that I think I the chairman and my staff, we all believe that it's not a reliable number, I'm going to go ahead and cut the interest rate. It it makes absolutely no sense. Then why do you need official data only for that to be ignored? And what and he has clearly said in his press conference what led him to do that was a hunch. And that is I think a real problem with the way in which the Federal Reserve operates. >> I want to get your reaction to uh what many are saying is a restart of QE. Take a listen to this and I'd like you to get uh uh would like to get your response and uh your your analysis on what this means for the economy. >> Accordingly, at today's meeting, the committee decided to initiate purchases of shorterterm Treasury securities, mainly Treasury bills, for the sole purpose of maintaining an ample supply of reserves over time. Such increases in our securities holdings ensure that the federal funds rate remains within its target range and are necessary because the growth of the economy leads to rising demand over time for our liabilities, including currency and reserves. As detailed in a statement released today by the Federal Reserve Bank of New York, reserve management purchases will amount to $40 billion in the first month and may remain elevated for a few months to alleviate expected near-term pressures in money markets. Thereafter, we expect the size of reser reserve management purchases to decline though the actual pace will depend on market conditions. >> He said that this is necessary for an economy that's growing. Do you agree with that statement? Let's start with that. >> I totally disagree. Let us go back to 2008 just before the Lehman Brothers failed in September that year. We are the Federal Reserve balance sheet as a ratio of gross domestic product was about six or 7%. And then it has grown and grown and grown uh with time. Ben Bernani the chairman of the Fed said at that time that he anticipates that this is a temporary measure. The Fed balance sheet would come back to its original shape. David, I would agree that the balance sheet has to grow with the economy. That is not in doubt. But what has happened today is that the balance sheet is about 21 22% of GDP more than three times as a ratio compared with 2008. Why has it just not grown with the economy but it has grown much much further more than the economy as a whole and the Fed is becoming a more and more dominant entity in the whole US economy. So what chairman Powell is doing is to say to make sure that his existence is permanent and he the it is going to have a permanent impact on uh the economy with the Federal Reserve becoming bigger and bigger in size with the passage of time relative to the economy. That is what I find unacceptable. Second, having grown to that extent, you would think that that would be sufficient to provide enough reserve level levels to the money market. He says even 21% of of Federal Reserve balance sheet as a ratio of GDP is not enough. He needs to grow it even more. I bet you that when he says this is all going to be temporary, it is going to grow both in dollar terms and it is grow as a ratio of GDP. So it it is not going to come down again. We are going to be moving from one situ one crisis situation to another. If this creates a cash squeeze like we had in September 2019 and this increase in the reserves that uh the chairman is affording them is not going to be the cure all. You're still going to have a problem. >> Is he correct or the Federal Reserve overall correct to assume that Treasury demand will increase though next year? I'm just trying to get to the bottom of why the Federal Reserve is even doing this right now. What they are afraid of is in the in the money market when they are trying to borrow treasuries for the in the over overnight market that that will become unavailable except at sub substantially higher money market interest rates. So in other words if it is available not for 2 and a.5% but suddenly overnight the rate goes up to 5 and a half or 6%. that is going to be detrimental to the financial institutions their solveny their ability to make meet obligations. He is trying to avoid that. The question is why is that happening? It is happening because of lack of sufficient regulatory control. It is happening because the banks are taking lot more risk and as a and that is the reason why uh the ratio is still not considered to be sufficient. What is this going to do to economic growth? What is this going to do for inflation? What is this going to do for the labor market? You think >> uh what it's going to the principal impact is going to be on inflation. Essentially, the increase in the Fed's balance sheet both in dollar terms as well as as a ratio of GDP is going to put more liquidity in the hands of the public. It is going to increase spending. It is going to keep inflation significantly higher. That's the first impact that I see. Second, if the Fed uh which will not be under the control of Jerome Powell after May, whoever the new chairman or chairwoman happens to be after that, he or she is probably going to have to deal with the higher inflation rate. If they compound the problem by cutting interest rates as Trump wants them to, they're going to worsen the inflation situation and then push us toward a crisis. That is the risk we run in terms of what this could lead to. >> So you've got reduction of Fed funds rate, you've got purchases of reserves uh from the FOMC and all these things could exacerbate inflation like you said. At the same time, the Trump administration wants to fight the affordability crisis that's been on their agenda since day one. So, what can we see from the fiscal side, if anything, that may offset inflationary pressures from the monetary side? >> Great question. I think from the fiscal side, they the fiscal position as I see it is not offsetting the impact of monetary policy. It is adding to it. It's supplementing it. We already have the fiscal deficit which is about 6 and a half% of GDP and with the big beautiful bill as the president calls it with a lot of tax concessions and also at the same time uh spending the reductions which don't match the tax cuts the deficit is expected to increase during the coming years. So what that means is that monetary policy is becoming easier and fiscal policy is not contractionary to offset it. Both of them are working toward keeping the inflation rate high which is a deadly combination of policies to have. Think about 2020 2021. That's what we did in the United States to fight CO the federal uh the the Joe Biden administration increase government spending quite substantially by about $2 trillion in a single year and at the same time Jerome Powell reduced the interest rate to zero and he doubled the balance sheet between 2020 and 2022. So again it's a very flammable uh combination of the two and that seems to be and we know we saw that it created very high inflationary pressures and we think seem to be repeating uh that experiment today. >> What ultimately that is your outlook for inflation and then we can talk about bond yields. I'm looking uh let's let's go step by step. 2026 I expect the inflation rate to be anywhere 3 higher than 3%. I couldn't tell you how high compared with that it is going to be but higher than 3% in 2026. So moving further away from the government's target Fed's target. Second, when that happens, not you would say what is happening to employment and economic growth. You have tariffs which are going to put uh pressure on employment, put pressure on the economy. And my expectation is you you are moving toward a recession in 2026. So you know what they call a combination of higher inflation and a recession that's known as stagflation. >> Yes. And we have not had that to a significant extent for more than 50 years. We haven't seen that since the 1970s. The reason we are repeating today is because stagflation requires a conscious mismanagement of policy for it to come into being. And all of the makings of stagflation are there today in a 2026 outlook. >> I think Ray Dallio from Bridgewwater called stagflation worse than recession. He said, uh, this is an outcome that is worse than just a recession because not only are you getting a contraction where no growth, you're also getting inflation. So, everybody's going to get hit. Uh, whether you're a saver or retiree or somebody in the workforce. Uh, but what why what I'd like to know, Sri, is why the 10-year yield continues to rise even if the Federal Reserve is cutting rates. >> Uh, the Federal Reserve is cutting interest rates, but it is only it can only act on the short side, the short term. The long-term in yield namely the 10-year and 30-year yield are dependent on inflationary expectations of the holders. As the Fed is cutting interest rates, the bond market is saying we are expecting higher and higher inflation rate and that is a phenomenon which is also reflected in the price of gold and silver which have gone up substantially because of inflation expectations being higher than they were before. So that's the reason why the long-term yields are higher even though the short rate is cut and I wrote as long ago as a year ago that we are going to have a steepening of the yield curve namely the shortterm rate whether it's federal funds rate or the 2-year yield compared with the 10-year yield is going to become steeper and what that means is you'll have to pay more for mortgages. It affects the economy more when the long-term interest rate rises even when the short-term interest rate is cut. >> You said that this hasn't happened in in 50 years. What happened in the last time we had stackflation in the early '7s? Specifically, what happened to uh economic growth and the labor force. Ultimately, people just want to know if their purchasing power of their currency can be maintained and whether or not they can keep their job or even ask for a raise. Uh what happened in the 1970s? You had one commodity called oil which was in short supply and the price of it tripled during 1973 and increased further during the decade and there was no alternative to crude oil. Therefore the inflation spread to the overall economy and the economy if you that was all there was there would have been a recession and we would have got out of it. Think about how the Nixon administration with the support of Arthur Burns, the Fed chairman, dealt with it. They dealt with it by cutting interest rates to help the president with his 1972 presidential elections. And the and the Fed continued to remain a political entity bullied by the president at that time. That's what I call the mismanagement portion of it. So you had a combination of a substantial jump in the price of oil com combined with mismanaged economic policy which led to the stagflation. What's happening today? You have more substitutes for crude oil. You can use electric energy. You can use solar energy. They are substitutes which did not exist during the 1970s. However, the whole basket of commodities and services that you purchase are being affected by tariffs. >> Yes, >> it is as if that whole one commodity is going up in price due to presidential action and at the same time the president is pushing the Fed to cut interest rates rather than raise it to to fight inflation. This is what this was p pursued the policy was pursued in Turkey during the last 10 years to disastrous consequences. Cutting interest rates does not improve the standard of living. Cutting interest rate does not bring down the inflation rate. It actually in goes the other way in both uh with respect to both objectives. >> My debt costs go down though if the interest rate is down and arguably I have more spending power. So that's one way I can improve my standard of living. No. >> Uh you can try and initially yes indeed you will be able to get a loan for a lower interest rate. But what the banks will find out lending institutions will find out is that when they lend to you at a lower interest rate they are losing out because they lose out because they don't make enough money relative to the expected inflation. So after a shortterm burst when you the borrower get to enjoy a lower interest rate sub subsequently the interest rates are going to shoot up that again is the lesson from the 1970s and early 1980s the mortgage rate by about 1981 David was about 18% in the United States nobody could afford a mortgage >> so they did not come down they just shot up sky sky Hi. >> Let's move on to talk about uh how businesses are feeling about the economy and what can be done about the labor force. So, here we have from the Richmond Fed a survey uh of CFOs CFO outlook for 2026 tariffs hiring practices and AI impact. When asked between November 11th and December 1st to rate optimism about the overall US economy on a scale of 0 to 100, the average rating from CFOs was 60.2, slight dip from 62.9 in the prior quarter. Most pressing concerns from CFOs, trade policy and tariffs remained top uh for the fourth consecutive quarter. Concerns about demand, sales and revenue came in close second. Labor quality and availability also remained a top concern. So I have a few questions for this. The first is that do you agree with the notion that now employees are facing what's called a permanent layoff? Meaning if they lose their jobs, it's very difficult for them to find another job soon. I think that is a reality. The employees when they lose a job and let's say they lose it because of the prevalence of AI, artificial intelligence, it takes over your job. It is not as if uh when the economic cycle changes, you'll be called back to work. That was a situation when we started work. When I started work in the 1970s, we knew that if the demand for labor slackened for a year or so, the following year was going to be a much better one. We do not have any expectation of that kind of a change taking place because the changes with respect to employment are structural. They are not cyclical. That means that the job that I was doing that I was able to get to do is now being done by a a robot. It is done by a computer that is again prepared to take up my job and I'm not going to get my job back. So I think the workers sense of pessimism especially for young workers who are entering the labor force is very much a reality today. the issue of policy uh trade policy and tariffs still top of mind for companies and this is at what point will this start to become an actual problem for the businesses themselves? They've survived this far one year into it um and the stock market hasn't collapsed but at a certain point either businesses move on from this issue completely or it becomes an even bigger problem. Which direction do you think it'll go? And this goes back to our earlier discussion about what Trump may do with trade policy overall. >> In during this year, calendar year 2025, even though the tariffs were increased significantly on so-called liberation day, beginning of April, uh many of them were cancelled subsequently. The quickest measure is that the average tariff rate of goods entering the United States was about 2% before April. And today it is about 13 or 14%. It went even higher but many countries were given exemptions, goods were given exemptions. So it came down also. But that kind of an increase in the tariff rate is only going to percolate into prices gradually because it's not going to happen immediately. 2026 I think they will go much more into the the price side because so far many of the companies have been taking the hit in terms of their profits. Now you asked the question things haven't fallen out of bed and the companies are still acting. How do I explain that? The answer to that is that the companies today some of them have taken a hit in terms of their own profit margins and therefore they are able to survive. But going into 2026, that's going to be even more difficult for them to do because the margin to reduce the price or take the hit themselves rather than pass it on to the consumer, that ability gets to be less. >> And in 2026, if the consumer is under pressure for other reasons, he or she is not going to be willing to pay the higher price they have to due to tariffs. So that also says to me that 2026 is going to be a crunch period for companies and consumers. Um, which in a way the 2025 was not. >> I want to pull this article up and I want to ask you if we're going to see more headlines like this into 2026. Mom and pop businesses bankruptcies hit a record as debts pile up. This is just off of what you were saying. people. Eventually, businesses are unable to keep raising prices. Creditors are just breathing down their necks, says Carol Fox, a court approved trustee who oversees more than two dozen cases. Year-to date through November. Sub subchapter 5 cases increased more than 8% to 2,200 compared to the same period last year. Chapter 11 petitions are up about 1% to a little more than 6,000. Um, yeah, this is a concerning trend. What do you what's your response to the story I just read and whether or not this trend can continue? >> Uh the the trend I think will worsen because of what I told you before in terms of what is going on with the economy. I think the bankruptcies are going to go up. Let me extend your question beyond the mom and pop small companies to the midsized companies. uh you find increasingly there is pressure on the high yield companies. >> High yield spreads have been very narrow and it led to the belief that the everything is uh in good shape because even non-investment grade companies were able to borrow at not much higher spread compared with investment grade companies. What that means is that it leads to an increase in the debt that they have acquired be to take advantage of the low interest rates similar to what you spoke about that you can get a more of a loan at a lower rate uh if the Fed cut rates. That is what has been happening and the mom and pop companies have also benefited from it. But they are not going to benefit indefinitely and come 2026 it is going to go the other way because the debt is still there. Uh but the economic the inflation expectations are greater and they they find increasing difficulty to service their obligations. >> Right? So what does this mean for investors watching the program? We have here on the one hand the yield curve steepening. Uh we have here on the one hand inflation concerns remaining elevated potentially the economy weakening into a recession like you said which assets will perform poorly which assets will perform well in this kind of environment stagflationary environment something we haven't seen since the 70s >> um what will do well uh I this is I have stuck to my uh forecast for quite some time namely that the small and medium term uh US treasury ary obligations are among the places to go hide. Meaning if you buy treasury bills which mature in one year or less they do not have a duration risk. At the same time they are giving you a decent rate of return say four 4 and a.5% if you lend to the uncle Sam for 6 months that is one place to go. uh gold and silver. I was a big forecaster at the beginning of 2025 expecting a surge in the price of gold and that has happened and my expectation is that it'll go up even further with the 1 ounce uh trading. Now we are at more than 4,300 an ounce. I expect before the end of 2026 we'll be at 5,000. So that is another area to go into. Third, do not be in just a 6040 portfolio. If you are in equities, you could get hit. If you're in long-term bonds, you can get hit because the yield goes up. So, where do you go and hide? Some of your portfolio should be in alternative assets, perhaps real estate, distress debt. When there is blood on the street, you go and put some money into it. So, those are all the ways to diversify your portfolio. The fact that gold and silver have risen to current levels, what is that signaling to you right now? Not even talking about the future. Why has it gone up the way that it has? >> It has gone up. And again, this is what uh led me to forecast it. In January or February of 2025, I said gold is going to go to about 3,700 by July of 2025. Actually, we hit 3,800. I was just off by $100. The big move that I expected did happen. Why did that happen? Right now, you cannot go away and hide. If you don't like the yen, if you don't like the euro or the pound sterling, >> you previously you could go and say, "Hey, let me buy go let me buy dollars. Let me go and uh hide in US dollar denominated assets." But that's not going to work because the US dollar is being consciously debased by this administration which wants a weaker do US dollar. So when you have that kind of a situation there are very few other assets that you can go into to hide and both gold and silver serve as a very good safe haven during a time when you're going out of the US dollar. what I so the situation today David is what I call flight from paper currencies you don't want to hold any paper currency you think you see a risk in every kind of paper currency including the US dollar and that's why gold and silver are benefiting so much >> what if I just want to buy another fiat currency that or park my money in another country that is not tied to the US or pegged to the dollar in any way and I don't really want to get into gold and silver suppose that were the case is an economy or country in the world that you don't see inflation being a big big problem in which we have relatively more stability and trust in their fiat system and we can look at their currency as an alternative. >> You have uh mentioned several qualities fiat currency you need to have uh confidence in them and they are not correlated with the United States. When you put them all together, I would say to you there isn't any currency which meets your specifications. But let's just talk about currencies which do not depend on the US dollar and then see if you can hide there with a suff relatively sufficient degree of size of the economy and also of having performed well in the past. I'm going to mention two of them. One is the Japanese yen and the second is the Chinese renman ban. Let's take the yen first. Uh yes, the yen has often been a place to go into. But look at where the Japanese have been investing their stock, their money. They've gone mostly into US dollar denominated assets historically. They are the first or second largest creditor to the United States. And now the risk is that they are going to be taking that cash back. But the Japanese economy is not big enough to be able to accommodate all of the global investors if they are fleeing the US dollar to be able to go to the yen. And if everybody rushes to buy yen, it's going to push the yen sky high in terms of appreci appreciated value. and the Bank of Japan is going to once again step in, cut the interest rate and you're going to have a volatile, unsustainable global monetary situation. That's so much for the Japanese yen. The Chinese remmen yan about 10 years ago we thought was an effective substitute for the US dollar. We don't think about it that way anymore. And the reason it is not thought about as a substitute is that you have a government which clearly is saying that the government is much more important than the free market. If push comes to shove, the government is going to determine what you do rather than leave it to the markets. So and they still have sub substantial amount of capital controls controls on the current account of the balance of payments. It's not as if you can buy a yuan denominated security and then move back. So the short answer to your question is there isn't another currency which fits the bill which is why precious metals take the mantle in terms of where you want to go and be in. I want to close off on looking uh at uh crossber relations between the US and some of its trading partners. Uh particularly starting with where I live currently, Canada. Uh two of the largest trading partners anywhere in the world. Uh the federal government of Canada, Mark Carney's government recently announced a byanadian policy for government procurement uh and large infrastructure orders. Uh, I won't play for you the full clip, but uh, I'll just show you a little bit here. >> Prime Minister Mark Carney says the welfare of these workers is top of mind for him and his captain. >> The Northstar that we follow is building lasting economic strength for Canadian workers and their families. >> Carne unveiled plans to reskill or retrain 50,000 workers. Canada's employment insurance program will change to automatically connect those without work to a retraining program. It it sounds like on the surface he's doing exactly what uh Trump wants to do or has done. Uh America first policy for Canada. Uh we'll see how that goes. Uh but this is the current state of relations between two of the largest trading partners on any trading block on the planet. Uh what is next? Um well I this is inexplicable in terms of how the fight was started between the United States and Canada David and to me it makes no sense at all. It is not as if the Canadian uh products are stealing jobs from the United States so that the US president should respond to it and some of those boycotss that are going on. You mentioned something about uh the areas where they are present. But in addition to that, you have the Canadians who do not want to buy US liquor for example. So much so that any US liquor that is sold on the Canadian side is what was done before uh the restrictions were put into effect. And who gains from it? I don't nobody gains from it at all. It is just a gamesmanship I think taking place on the Trump side. And Mark Carney, let's face it, uh I have a lot of regard for him. I have followed him closely uh when he was the governor of the Bank of England and what he did for the UK and it was a he is a very impressive statesman and individual. However, when it comes to the relative sizes of the economies, Canada cannot put up a fight with the United States and the United States should have no reason at all to fight with it either. So that is again uh one of the trade relationships uh that is again inexplicably worsening. Second, the United States and Mexico. Mexico is another very large trading partner. On the other hand, uh we are we are in a constant struggle with the Mexicans regarding where what the tariffs should be and how they should take care of it. And that again is another deterioration. If you did not have these fights going on, then the presidency would be in much sounder shape. the inflation would be lower without having this fight and the tariffs and economic growth and employment in the United States would be better. Uh so I think we are giving up a whole lot of different objectives in order to keep up the trade fight. >> So bottom line then for 2026 will trade war still be the dominant theme of the year or can we shift to something else to focus on? The dominant theme for 2026 >> dominant theme will remain uh the trade war. We he may put a Trump may pull back on some countries increase it on the others but you're never sure which country is a friend and which country is a foe from Trump's point of view because they'll constantly change. Take the case of Brazil for instance. Brazil got into a tussle with President Trump because they were prosecuting a former president for perpetrating a coup. It had nothing to do with trade relationship at all. But then that caused the eye the anger of Trump. So you can and that uncertainty is also affecting investment and employment because you never know how you can plan your company in for 2026. We'll follow up in 2026 and see how the economy progresses. Uh thank you very much. Sri, where can we follow you for now? >> Uh I you can follow me on Twitter. I have a Twitter page. I also do the Saturday morning reports on Substack and you your uh viewers can simply put their email into it. There is no payw wall and they can continue to receive those reports every Saturday morning. >> I started uh the interview with one of your reports, Fed rushes to cut. So great substack it's called Sri Economics. We'll put the links down below so you can follow uh Dr. Sri Kumar there. I appreciate your thoughts as always. Uh have a wonderful holiday season and happy new year to you. >> Thank you. Wish you happy holidays as well and all the best for 2026 David. Pleasure talking to you >> and happy holidays to the viewers. You thank you for watching. Don't forget to follow Siri in the links down below. And don't forget to use my promo code lin l i n when you sign up to koshi. Go to koshi in the link down below or scan the QR code here and you'll get $10 off on your first $100 deposit. Take care for now. We'll see you next time.