[00:02:45] Joe Brown: There are two different put-collar ratios. One of them is for indexes, so on things like SPX, the actual index, and then there are other ones. It’s the equity put call. The index put call ratio is mostly professional traders, mostly used for hedging. So that number’s going to be higher most of the time because more puts are going to just, there’s a bias towards that institutionally for hedging when you have the equity put-call ratio, that is more going to be retail traders.

[00:03:12] Joe Brown: So the small investor, and we know that small money is typically dumb money, and so when that number peaks high, that means there’s a much larger number of puts being traded, which indicates the average retail investors very bearish. This is considered a contrarian indicator because by the time the masses have become the most bearish to where that number will get really high, most of the bad stuff is going to be baked into the cake already.

[00:03:37] Joe Brown: And so when we use this in light of everything else that’s happening right now, macro economically speaking, like what the Federal Reserve is doing, what the inflation numbers are doing. What the money supply is doing? When we put the put-call ratio in light of all of that, it looks like a pretty strong contrarian indicator that the bottom might already be in with the stock market.

[00:03:57] Trey Lockerbie: Very interesting. So, and I wasn’t actually even familiar with this one to begin with. This is all about purchasing these calls or puts, right, not selling.

[00:04:05] Joe Brown: It is both because every time one person purchases a put or a call, there also has to be somebody selling the put or the call. So it does just look at total volume and usually, market makers are not taking the other side of that trade directly.

[00:04:20] Joe Brown: Market makers are going to try and stay neutral, and so if you go out there and you buy a put, you’re going to be making that transaction with the market maker, but they’re simultaneously doing an opposite transaction with somebody else so that they have a net neutral. And so there is going to be a buyer and a seller for every transaction.

[00:04:35] Joe Brown: So it does just have to look at total volume. It’s still going to be looked at as puts being generally bullish because most individual retail traders out there are going to be purchasing them. They’re not going to be selling them for the most part.

[00:04:47] Trey Lockerbie: Now, does this have a, you know, similar to the bond yield curve inverting and how that’s been a consistent signal for a recession, does this have any historical correlation that you’ve looked at to say, Hey, this is every time this put call ratio gets to x, y seems to happen?

[00:05:02] Joe Brown: Yes. Okay. So the last time we were at the highest was a couple of days ago, probably on November 18th, I believe, is when the number. And it was at 1.46, I believe that was the ratio. The last time it was this high was in May of 2020. Could have been April, could have been May. Somewhere in there if I misremember my dates.

[00:05:24] Joe Brown: And that was the bottom of the market. And so typically what this suggests is that. You know, when the most amount of selling has taken place, then there’s no more, everybody who is going to sell has already sold. So the only thing that can happen from there is buying. And so that tends to be a reversal.

[00:05:38] Joe Brown: So that’s one of those reasons why this is under a contrarian indicator, is because that is the most amount of bearish activity that can really take place. And so the only thing that can happen from there is the closing out of those trades, and then the reversal of that consensus, that momentum.

[00:05:52] Trey Lockerbie: What other metrics or ratios are you looking at right now to inform your investing decisions?

[00:05:58] Joe Brown: In terms of the stock market. So we have to make the distinction there because there’s a stock market and what those prices are going to be doing. There’s the overall economy and how strong or weak the overall economy is going to be. And typically that’s looking at like household consumer strength. Other people are going to be having, you know, pain economically speaking.

[00:06:14] Joe Brown: And then there’s also other asset classes like real estate that I would consider have very different things to look at in terms of macroeconomics. I’m looking. At the Fed, looking at money supply, interest rates, the balance sheet, the reverse repo facility, and things like that. One of the things that we have to pay attention to for the overall economy is indicators of strength or weakness, like the FedEx indicator is one.

[00:06:36] Joe Brown: This is one. Like logistically speaking, we’re moving into the end of the year, the holiday season here, this is a time period when you would. You know, normally a lot of temporary hiring, like somebody like Amazon is normally hiring tons of temporary workers right now, filling up their warehouses, saying, Hey, you can work as many hours overtime as you want.

[00:06:54] Joe Brown: We got you a job until, you know, let’s say January. And we’re actually seeing the opposite of that right now. FedEx, during the busiest time of the year, they’re furloughing their employees. We’re seeing Amazon laying off, I think 10,000 employees right now. And so we’re seeing a lot of signals right now economically speaking, that we do have more pain ahead, but we know that asset prices tend to predict that, and so it looks like they’ve already priced in the pain of the overall economy.

[00:07:18] Joe Brown: Now the economy’s going to be experiencing kind of the depth of that as asset prices are starting to move through the other side already.

[00:07:25] Trey Lockerbie: Very interesting. You threw out something in there. You kind of just mentioned it briefly, which was the reverse repo as a potential metric that you look to, and this is something you’ve brought to my attention and I think it deserves a lot more attention.

[00:07:38] Trey Lockerbie: There’s currently over $2 trillion in reverse repo sitting on the Fed’s balance sheet right now, and as I understand it, this could give the fed a huge release valve if economic conditions continue to worsen without them having to lower interest. So this is really something I don’t think anyone’s really talking about, at least that I’m familiar with.

[00:07:57] Trey Lockerbie: So can you walk us through first maybe what repos are in general then how the repo tool came about and why we are now looking at the reverse repo?

[00:08:07] Joe Brown: Yeah, absolutely. So the repo market repo stands for repurchase, not a repossession, like a car and a bank. And so the repo market is one where the banks would go to each other very basically simply, oh, I’m oversimplifying it here overnight.

[00:08:22] Joe Brown: The banks would go to each other and they’d say, Hey, I’ve got a bunch of extra cash. Does anybody need some cash? And then the other bank would say, Hey, I’ve got collateral, but I need some cash. And so they’d go to each other and they’d say, here, I’m going to sell you my collateral, and you’ll gimme some cash for that because I need the cash.

[00:08:36] Joe Brown: And I promise, at some point in the future, whether it’s tomorrow or a later date, I will repurchase that collateral from you. So if we go back to like 2005, 2006, a lot of this collateral was mortgage back securities that were. Bought and sold to each other for overnight cash needs between banks. Well, at a certain point, all the banks decided at once this collateral is not actually good anymore, and so I’m not going to buy it from anybody.

[00:08:58] Joe Brown: So a lot of banks were strapped for cash and this is actually what caused. Lean into collapse is because they couldn’t access any overnight cash. They were bankrupt overnight, and so this is why the repo market was central to the potential of the financial system collapsing and why the Federal Reserve and the Treasury stepped in there because of the way that the banking system operates.

[00:09:17] Joe Brown: Well, when we fast forward to September of 2019, the rates. For that cash, that overnight cash spiked again in September of 2019. Many people were scared that there was rot in the system again, and that there was a bunch of bad collateral on the bank’s balance sheets. Well, it ended up not being the case.

[00:09:32] Joe Brown: Really what was happening was everybody had just bought so many treasuries that there was no cash left in the system, and so government has a high. Appetite for borrowing. They borrow mainly from financial institutions. Financial institutions create those loans and loan that money to the government. So financial institutions like banks have a ton of US treasuries on their books and they realized, Hey, we need some cash.

[00:09:51] Joe Brown: But nobody had cash to lend. So they rates skyrocketed. And again, banks were at risk of collapsing if they couldn’t access that overnight. Cash. So the Federal Reserves stepped in and they just said, we’re going to operate directly in the repo market, and we are going to be creating cash to lend into the repo market at this point so that any banks who need that overnight cash can access it directly from us, the money printer.

[00:10:11] Joe Brown: So those rates don’t skyrocket. Now, a lot of people said, Hey, this is, you know, this is a way for, you know indirect, roundabout money printing. But just a few months later, everything with covid happened and that blew up. And so that gave them the opportunity to kind of switch and get. Operating in the repo market because it wasn’t necessary anymore given the amount of new money that was created through trillions of dollars that were printed and then spent by the government.

[00:10:34] Joe Brown: So what you had at that point was the government borrowed, you know, a couple trillion dollars and started spending that all into the economy. So you had this huge influx of cash into the system. So suddenly now banks have this overabundance of cash, well cash deposits for banks. because when the government spends that, That money goes into somebody’s bank account.

[00:10:53] Joe Brown: Like that’s what happens when they spend money. It goes into a business or an organization’s, or a politician’s bank account, an individual’s bank account, and then that person then spends that money to somebody else’s bank account. And for banks, deposits our liabilities because they owe that. And so there’s a certain amount of collateral banks are required to own to offset their liabilities.

[00:11:10] Joe Brown: And so they’d have to go out there and. Like T-bills and treasuries to offset their liabilities. Well, at the time, interest rates were so low that this could have pushed interest rates negative. The Fed didn’t want that, so they opened up the reverse repo facility so that banks could access collateral directly from the Federal Reserve instead of going out and buying it on the open market and pushing rates.

[00:11:35] Joe Brown: They wanted to soak up a bunch of this excess capital so they increased the rate they were paying in this reverse repo facility. So basically telling all of the banks, Hey, if you need collateral, come park your cash with us. We’ll give you the collateral and we’ll pay you an interest rate on that cash.

[00:11:49] Joe Brown: So that’s a great deal. It’s literally the only risk-free. We talk about treasuries being risky. Free, but you still have the risk of the price of the bond fluctuating if you have to sell it beforehand and you risk the government defaulting if  for some reason they can’t fix the debt ceiling issue or whatever, and they default on the debt.

[00:12:04] Joe Brown: But with the Federal Reserve, they’re the ones with the monopoly on printing money. So it literally is the place where you can go to get risk-free returns. So banks park that cash with the Fed, and get that interest rate paid to them. And it’s great. The problem is it’s soaked up about 2 trillion worth of cash from the system, and that’s all still in there.

[00:12:19] Joe Brown: And so what your question was alluding to in the beginning was what are they doing with this and what’s the, you know, potential next step here. At some point, that money will leave the reverse FPA facility. And so when we look at interest rates right now, how they’re rising and borrowing costs for the government are going.

[00:12:36] Joe Brown: My opinion is that at some point when that gets too tight for the government, not for households, not for corporations, but for the government, the Federal Reserve will drop the amount they’re paying in that reverse repo facility. Suddenly then you don’t have that risk-free return. Banks have to take that cash and go out to the open market and buy bills and treasuries.

[00:12:55] Joe Brown: And so when they do that will be a nice little boost in funding for the government. When it’s not coming from the Federal Reserve, it’ll come outta the repo market, and that’ll be about a 2 trillion buffer that ends up hitting the government’s purchasing power. There won’t, it won’t be a permanent solution, but a 2 trillion bandaid is a pretty big band.

[00:13:15] Trey Lockerbie: Now, would you consider that move to be a fed pivot? You know, everyone’s talking about this fed pivot that could potentially happen. I think everyone’s thinking they’re going to just lower interest rates, but you, are you thinking that instead of doing that, or in lieu of doing that, they would actually just add liquidity through this reverse repo system?

[00:13:31] Joe Brown: I do think this will be first. Absolutely. So they’ll be able to maintain face and save credibility by saying, Hey, we’re still raising interest rates, we’re still selling assets off of our balance sheet. But because they stop paying, you know, that risk-free rate onto into the reverse repo facility, all that money has to go somewhere.

[00:13:49] Joe Brown: And that’s all cash that’s in the system. That right now is kind. Held outside. And so if they do that and shut off the free money flow into the reverse repo facility, all that money comes out, buys t-bills, buys treasuries, and suddenly then that makes borrowing costs a little bit lower, makes borrowing a little bit easier for the government.

[00:14:09] Joe Brown: So, If there is some sort of issue where the government cannot fund itself, cannot access, maybe the rates get too high for when they try and do their auctions. Maybe they go no bid or whatever. Well, now you have $2 trillion of funding for the government that they can use to continue to spend. And so I think that will be kind of an undercover first phase.

[00:14:26] Joe Brown: Of the pivot, most people will not know what’s going on there. Most people won’t understand the mechanics of it, and so it’ll just be like, you know, hey, the Fed is still tightening, just like they said they were, and there’s this, you know, other things out there that’s making it a little bit easier for everybody and people will kind of shrug their shoulders.

[00:14:41] Joe Brown: But I do think this will be kind of the first phase of the pivot. Before they’ll do that, before they change, you know, their interest rate policy, lower interest rates or start increasing their balance sheet.

[00:14:51] Trey Lockerbie: So when we talk about using this as an indicator because you kinda listed it earlier, are you looking for the $2 trillion start going down as far as the Fed’s balance sheet holding less and less of that repo money.

[00:15:03] Joe Brown: Yes, and this will happen a little bit naturally anyway because as conditions get tighter and tighter, well, interest rates are going to continue going up. And so the amount that’s being paid to the repo facility right now is just about as much day-to-day. It changes as the 10-year treasury. And so as interest rates continue to go up, that gets more and more attractive where lenders might be willing to say, Hey, I’m willing to take on some.

[00:15:27] Joe Brown: By putting it into, you know, bills or treasuries or other forms of debt instead of keeping it with the Fed because there’s a much higher return. So we might see that reverse repo facility start to dwindle down. The problem is the Fed keeps on raising the rate that they pay into that facility every time they raise rates.

[00:15:44] Joe Brown: And so when we see that change, And when we see a difference in how much they pay versus the federal funds rate, that’s when I think we’ll see the big draining start to happen. And that’s when we’ll see probably a sizable impact on asset prices

[00:15:59] Trey Lockerbie: and a bullish impact. If I’m under seeing. Correct.

[00:16:01] Trey Lockerbie: Yeah. Correct. So how does this? Repo market compared to September 2019 because back then you were hearing all about the repo market seizing up, right? So did they just not have this fed backstop at that moment in time or, because I think a lot of people were also anticipating with these rate hikes that repo market was going to seize up again, but it hasn’t?

[00:16:20] Trey Lockerbie: Is this the reason why?

[00:16:23] Joe Brown: Well, I mean partly, so these are going to be opposite tools. So the reverse repo facility is to give banks collateral. When they need collateral, they’ve got too much cash. Here’s how we give ’em collateral. The repo market is how the fed repo facility is how they give banks cash when banks need cash but have too much collateral.

[00:16:41] Joe Brown: And one of the interesting things that the Federal Reserve did, I think it was, don’t quote me on this, I believe it was April of 2021. One of the things that they changed about their policy was they opened up access to the Federal Reserve’s regular repo facility to basically anybody because prior to that, very few institutions had access to them for repo transactions.

[00:17:02] Joe Brown: And that looks to me, Like foresight saying, Hey, I know right now there’s a lot of cash in the system. There’s too much cash. So the reverse repo is what the system needs right now. Cause everybody has too much cash. But eventually, that cash will be used up. Eventually, it’ll drain out the reverse repo facility.

[00:17:17] Joe Brown: Eventually it’ll all be spent. Eventually, prices will go up. Eventually, we’ll get into another situation where there’s a cash crunch. And if we get into that situation, we want to be ready to go and offer any financial institution access to cash from the federal. Without having to touch our balance sheet.

[00:17:32] Joe Brown: And so that looks to me like foresight. They’re not using their repo facility yet, but they did increase access to it. Broaden access to it, and so at some point, institutions will need it, and when they do need it, the Fed will be ready.

[00:17:44] Trey Lockerbie: I might be going out on a limb here, but for those of us in the Bitcoin community, which I am, a lot of folks on the Bitcoin side are basing their current thesis on this eventual monetary debasement or at least the gradual monetary debasement that is, seems to be inevitable.

[00:17:59] Trey Lockerbie: Does this fed tool throw a bit of a wrench in this thesis, at least in the short?

[00:18:06] Joe Brown: So yes and no. So this basically gives, puts that money back into the economy. It’s kind of separated out of the economy right now, that $2 trillion, it’s already been borrowed, but it hasn’t yet worked its way throughout the entire system.

[00:18:20] Joe Brown: It’s still sitting as deposits, you know, in money market accounts basically. But it hasn’t fully worked itself out into other asset prices or the prices of goods and services. And so as that drains out of there and provides additional go, Spending power, then there will be some additional inflationary pressures from that.

[00:18:36] Joe Brown: However, during this time, we’re probably also going to be seeing a lot of deflationary pressures coming up very soon here. So in my estimation, at the very most we’ll see an offsetting of those deflationary pressures. And so concerning Bitcoin, I would or any asset that you expect to go up from monetary or currency to base.

[00:18:56] Joe Brown: I would say we have a little bit of a further timeline that the Federal Reserve can continue to tighten since they have that $2 trillion to offset that tightening. And then once that is all used up yet, at some point they’re going to have to completely reverse pivot, and start easing again. And then at that point, you’d expect those inflation hedges to really perform extremely well.

[00:19:18] Trey Lockerbie: I’m curious to know if you have an opinion on when that might happen because you know, as of right now we are going to pay, I think around 400 billion in interest this year. And if. You know, these rates continue to normalize, say closer to 5%. We’d eventually be looking at like a trillion and a half dollars of just pure interest that we’re paying.

[00:19:38] Trey Lockerbie: So where is the breaking point in your mind as far as when the Fed will just be backed into too much of a corner?

[00:19:44] Joe Brown: So it obviously depends on a few things. When you look at projections, it’s based on, you know, some assumptions about how high-interest rates will go and what the government spending will be along that time period.

[00:19:57] Joe Brown: Because if they do implement any sort of austerity whatsoever and get back to, you know, 2019-level budgets or anything like, Then this can last a lot longer than people are expecting. In fact, we get interest rates for, you know, the average federal government borrowing costs, new borrowing costs up to, let’s say 6%.

[00:20:16] Joe Brown: It could still take five years or so before that becomes a problem for them to get the funding that they need. Simply because how long it takes their debt to roll over. So just because, you know, the 10-year treasury goes up to, let’s say 10%, that doesn’t necessarily mean that’s the borrowing cost for all of their $30 trillion that they currently owe.

[00:20:35] Joe Brown: As that debt matures and they have to pay it back, they’re going to borrow new debt to pay off that old debt. So, as that’s what’s, that’s what rolling over. So as that happens, then the total cost of servicing their entire debt. The debt pile does go up, and so at the current pace, I’m thinking that it would probably be.

[00:20:55] Joe Brown: Five years, four years before it gets to a significant problem where the government is just like, Hey, no matter what we do, we can’t pay our debt. Especially because, like if we push this to an extreme and we say, okay let’s imagine what would happen if interest rates are go to 20%. The Fed pulls a Paul Volker federal funds rate going up to 20%.

[00:21:13] Joe Brown: Well, Suddenly the federal government’s borrowing costs skyrocket, but that will attract a lot of capital. And so you would then have this flood of capital saying, Hey, I’d rather lend to the government risk-free. It wouldn’t be up at 20%, it would be completely, you know, severely inverted. So if maybe 15 or maybe even 10%.

[00:21:31] Joe Brown: And so you’d have a bunch of people loaning to the government at those really high rates that would suck capital away from the market. Given the fact that we have the most overleverage society in basic history, that would cause a huge crash. A lot of deflationary pressures that would completely eradicate any inflationary pressures whatsoever, it probably spills us over into a deflationary death spiral.

[00:21:51] Joe Brown: And so when we look at that then you’re not worried about the breaks on government spending going up because then they could just pull interest rates right back down at subsequently to that because they wouldn’t have to worry about inflation at that point. And so I don’t. Within the next five years, we’re going to be seeing major issues of like, the government cannot pay its bills no matter what.

[00:22:13] Joe Brown: However, within the next 10, probably 15 years, it’s almost inevitable that happens at some point.

[00:22:19] Trey Lockerbie: Fascinating. So when you said five years, or it might take five years, is that assuming that interest rates continue to stay where they are or higher from here?

[00:22:28] Joe Brown: No, it’s assuming interest rates. I mean if interest rates today were six.

[00:22:33] Joe Brown: it would take probably about four to five years for all of that to catch up as they roll over their debt to the point where it would be a problem for them given the current amount of spending they’re doing. And if for some reason or another, you know, we get a win for the American people and the government starts spending less money, it might last even longer than that.

[00:22:50] Trey Lockerbie: And what if interest rates go back to zero for another 10 years?

[00:22:55] Joe Brown: Yeah, well, if interest rates go down, we obviously have to worry about the inflation thing, but that certainly makes spending for the government a whole lot easier because borrowing is essentially free at that point. And I also have to mention, I didn’t even bring this up, but if the Federal Reserve is able to cause some sort of mechanism to where the rest of the world starts to dump US treasuries, that would not be a good long-term solution.

[00:23:17] Joe Brown: But any debt that the Federal Reserve owns is interest-free for the federal. Because any profits that the Federal Reserve has get swept back to the Treasury. So if the entire $30 trillion that the federal government owes tomorrow, we snap their fingers and that was all owned by the Federal Reserve and we’re paying 10%, 20%, 30% to the Federal Reserve.

[00:23:37] Joe Brown: Well, it doesn’t matter what the interest rate is, that’s all coming back to the federal government. So it’s a, it’s essentially like they’re taking money outta one pocket and putting it in the other .

[00:23:43] Trey Lockerbie: Now one of the other thesis for Bitcoin is a potential CBDC, right? A central bank digital currency, which we explored a little bit last time you were on the show a year ago.

[00:23:53] Trey Lockerbie: But at that time it was sort of just an idea. I mean, I think the government w had talked about maybe exploring it at some point, but I don’t know if anything had really materialized. How have governments, not just the US but other governments around the world progressed and what is the current status of a potential CBDC in America?

[00:24:11] Joe Brown: Yeah, absolutely. This is just recently within the month of, really, it’s all happened within the month of November, I believe, maybe the end of October. But we’ve seen governments all around the world, just especially in light of the collapse of ftx. We’ve seen governments just jumping on this as an opportunity to talk about and try and get people familiar with the idea of a central bank digital currency.

[00:24:30] Joe Brown: So, As a background, CBDC is basically the exact opposite of Bitcoin. Bitcoin’s a public ledger. Anybody can see all the transactions back to the very first one, all the wallets, how much Bitcoin they have versus a CBDC is a private ledger. Only the Federal Reserve and some financial institutions would’ve access to it.

[00:24:48] Joe Brown: Bitcoin, nobody can control how much of it there is The c. It’s fully controllable Bitcoin, no transactions can be stopped or caused a CBDC. Any transaction can be stopped or caused. And so it’s fully programmable and fully controlled and fully under surveillance at all times. Fully censor. And so you have 100% control over the flow of resources in an economy because you just control the money.

[00:25:10] Joe Brown: So anything that happens, you can stop or you can, cause you can credit money and say it can only be spent on gas. You can limit money and say you can only spend up to $300 a month on gas because people are hoarding. And so you can do all sorts of things that now don’t even require legislation, don’t require votes, don’t require politicians that have some sort of accountability to getting voted out of office.

[00:25:30] Joe Brown: You just have a small group of ivory tower elites controlling everything top-down, centrally in an economy. It is just a recipe for disaster. But we’ve seen governments all around the world recently talking about this. We’ve seen the Christine Lagar came out recently started talking about we might need a digital euro.

[00:25:45] Joe Brown: We’ve. The Federal Reserve just started a 12 week trial program with major financial institutions and banks like H s, BBC and Wells Fargo, and Bank of America and a bunch of others, to test a simulation of a digital dollar with the Federal Reserve. And then now recently we saw the UK talking about establishing a digital pound.

[00:26:07] Joe Brown: And so it looks like, you know, never let a good crisis go to waste. Take advantage of people’s skepticism and fear and the fact that they lost money in these scams and use it to usher in a bunch of new things, ultimately culminating in a CBDC.

[00:26:23] Trey Lockerbie: So a former member of the Board of Governors at the Federal Reserve, Kevin Warsh, wrote recently this week In The New York Times that the US should race to put out a digital dollar or risk losing power to China given their c and y.

[00:26:39] Trey Lockerbie: Is there. Any validity to this thesis, or is this simply self-serving propaganda?

[00:26:45] Joe Brown: It’s a little bit of both, so I don’t really think there are, there’s really anybody I would be willing to be, even China doesn’t see their CBDC as the future of, you know, the replacing the dollar globally. They’ve recently been in talks with Russia and the other bricks, nations like Brazil and India, South Africa.

[00:27:06] Joe Brown: Saudi Arabia, I believe, is in talks as well about establishing just a new currency that is just for international trade that is backed or redeemable with a basket of commodities like oil and gold. And so their model has always been to keep their, you know, an internal currency and then an external currency.

[00:27:23] Joe Brown: And I don’t believe that they view their CBDC at least right now, as something that would replace the dollar. When we look at the way the world is going and we look at how, you know, the speed of transactions and the security of transactions, especially for international trade matters a lot, and the fact that the dollar makes up most international trade and it is built on this archaic system.

[00:27:45] Joe Brown: Is, you know, really slowing things down and giving the United States a lot of undue advantage over the global financial system. Then there is this ability for competition to step in and countries to say, Hey look, if we keep using the dollar, we’re going to have more and more disadvantages. But if we move over to this new option, we’ve got more and more advantages.

[00:28:03] Joe Brown: And so there is something to be said about the, if you want to maintain your power globally, you’re going to have to maintain the countries using the dollar. The way it’s going, it looks like technology will present more and more competition to displacing the dollar for that, and so it is a little bit of both, but I don’t think pointing at the C and y is going to be something that is extremely valid.

[00:28:27] Joe Brown: I would argue that the dollar has more competition. Globally from things like Bitcoin, from like a gold-backed currency or even the Euro moving forward into the future.

[00:28:37] Trey Lockerbie: You were talking about the US using a system now, is that the SWIFT system that we were using for sanctions on Russia and other things that probably most people are, we’re probably losing popularity with around the world, given that we use it as a weapon now, but is that the system you’re referring to?

[00:28:51] Joe Brown: Exactly. Yeah. And so the fact that you have everybody using the dollar and needing swift for international trade means that if you want to, you can abuse that power for your own advantage. But every time you do that, it weakens the rest of the world’s resolved to continue using that. And so it’s like almost like a one use or a two use weapon where it eventually destroys.

[00:29:12] Joe Brown: But specifically with Swift, when they’re looking out at the rest of the world and many countries are trialing or researching their own central bank digital currencies right now, there’s this fear that will be displaced, that we will not have any sort of control over cross-border payments anymore.

[00:29:28] Joe Brown: And so you can look up, the Bank of International Settlements is talking about looking at Swift and. Designing it with a new layer that has language to basically be the in between different central bank digital currencies that cannot communicate with each other. And so they’re, they like to maintain that power over those cross-border payments, international trade.

[00:29:50] Joe Brown: And so they want to be that in-between systems. So that one CBDC that is incompatible. Another CBDC can use SWIFT as the go-between, and if SWIFT stays as that infrastructure for international payments, then you get to maintain control over the global financial system.

[00:30:06] Trey Lockerbie: Now speaking of that control, you were kind of throwing out some examples of, I would say censorship or at least certainly control over how people spend or use the money.

[00:30:15] Trey Lockerbie: Is this based in any evidence or is this just sort of people that have postulated what you could do with something like Digital Dollar and to further the question, is this something Ethereum could be doing? Right? Because in my mind that’s kind of the exact same setup as a CBDC, right? It’s a central.

[00:30:31] Trey Lockerbie: Token, if you will, at least the ether is. And do they have that kind of capabilities? Theoretically at the moment ?

[00:30:37] Joe Brown: So just a kind of a funny way to look at this. A geeky way to look at this is in the movie Thor, when he is unworthy, Odin takes away the hammer and he says, you’re not worthy to be Thor anymore.

[00:30:49] Joe Brown: Taking away your power, if you would’ve looked at Thor and said, you’re not worthy to wield this power anymore, so I’m going to make the hammer more powerful. Everybody would’ve looked at that and said that’s a dumb story. But for some reason when we look at the government and we look at corporations and we look at lobbyists and we look at corporatism and we look at the, you know, movement towards totalitarian control of everything we say, what we really need is.

[00:31:11] Joe Brown: More power for the government as long as we just have the right person in power here, so that it’s completely backwards. What you need to do is strip that away and so we can look at track record to see, okay, well what have they done with their increased power? And we look at things like the Patriot Act and anti-money, any anti-money laundering laws.

[00:31:28] Joe Brown: And we look at things like KYC rules. You look at those and you see the abuse of that power over time. Who they decide to use that against and when, and what sort of recourse there is for people who. Kind of trapped in that. And you look at people who get locked out of paint systems, people who get censored because of political statements or disagreements about the way that things should be done, or even saying things that are highly offensive.

[00:31:53] Joe Brown: You get people that get locked outta the traditional financial system all the time. And so it really doesn’t come down to [00:32:00] is there evidence that A, a government will use a CBDC for this? The question you have to ask is, what have they done with the power that they have up until this point? And then does a CBDC represent more potential power or less?

[00:32:12] Joe Brown: And the answer unequivocally is the more power that governments have been given, the more they abuse it. That’s virtually universal. And then the A CBDC represents absolutely more power over the financial system compared to the traditional system. You might have banks able to. Control right now. And if you try and engage in certain business, it’s very difficult to get business bank accounts and use payment systems right now for certain types of business.

[00:32:37] Joe Brown: But it’s better to have 10 tyrants that are competing for power than one tyrant who just has it all. And so it absolutely represents the. Potential for more power to be abused. Now you brought up Ethereum and that’s an example where it’s like, hey, yeah, there’s, there might be the potential for them to abuse the power that they have because of how centralized it is, but they’ve never done that.

[00:32:58] Joe Brown: And when you look at the track record, for instance, of the money supply, they’ve only made it harder over time. They haven’t made it easier. But really what it comes down to is, yes. Is the potential there? Like do they have the capability to go the other way? Because as long as that capability is there, it represents a temptation and a surface area of attack that somebody like the US government could come in and Trojan Horse that and take over it, and then use that to their own advantage.

[00:33:23] Joe Brown: If you have a tool that’s very powerful, it’s going to attract the people who want that power and a cbd. C is the kind of the ultimate example of that

[00:33:32] Trey Lockerbie: With all the FTX. Chaos that we’ve been seeing over the last couple weeks. You made this point that it’s given this, the government, this free pass to come out and say, Hey, look at this CBDC of ours.

[00:33:41] Trey Lockerbie: It’s way better, way more trustworthy. We’re also seeing at least talk of the SEC now cracking down really hard on these tokens and putting out a lot more regulation that would essentially be competing with their CBDC. Right. So are they, are you see a lot more of this regulation coming out against these tokens that will just kind of, you know, because now they’re competing with the actual government .

[00:34:02] Joe Brown: Yeah, 100%. So when you look at what’s going on right now, and over the last couple of years, what we’re seeing looks like a perfect storm. And I’m not saying that it’s designed or that it was premeditated, but at the very least, it’s a perfect storm where you have the creation of a ton of new money. First, whenever you have the expansion of the money supply, especially to the extent that it happened over the last few years, what you are going to have is fraud.

[00:34:26] Joe Brown: You’re going to have Ponzi schemes, you’re going to have thefts take place because everybody then is looking for a place to put all that money. . You have people, individuals, companies, organizations say, I feel rich, I want to get richer. So people start buying assets, prices start going up. And so it’s no longer good enough to get 8% because that’s, you know, just the boring old stock market from 30 years ago.

[00:34:47] Joe Brown: I want to get something that’s 20%, 30%. So people start buying these things that do that. And so you have fraudsters step in and take advantage of. The people’s willingness to invest in anything that just promises a higher return, regardless of any fundamentals that are not even there, regardless of any utility, regardless of any company behind the security.

[00:35:07] Joe Brown: And so you have all of this money just looking ravenously for higher returns. So you get the criminals that come out and take advantage of this and say, I’m going to create this. I’m going to offer. You get things that look great. Example is Nikola who created these videos of their semi trucks rolling downhill and then shifted the video to make it look like it was an actual truck that was driving down the road and attracted a ton of capital.

[00:35:30] Joe Brown: And, you know, they had no working product and it was, you know, a complete fraud. And that’s a very small example compared to all of the crypto scams. And what’s happening with like FTX right now. So you have the first initial phase, which is printing all the money and getting all of the investments in these things.

[00:35:45] Joe Brown: And coincidentally, we had no regulation. We had no new laws, no new rules. And so the big money, the real institutional money has stayed out of it this entire time because they don’t want to get involved in something unless they know these are the rules, because they don’t want to commit something and have the rules change and then have to undo everything that they were doing.

[00:36:05] Joe Brown: So a lot of the big money has stayed out of this entire space up to this. But that didn’t happen for everybody else all the retail money. And so you then have, you know, the regulators staying out of this and saying, we’re just going to let this game play out. And every time you have Ponzi schemes and frauds, big frauds like this, Charles Ponzi and Ron Bernie Madoff, these are always.

[00:36:26] Joe Brown: Built up during times of easy money, and they always collapse when the money printer shuts off. And so inevitably when inflation takes off, now the money printer shuts off. And like Warren Buffet says, you don’t know who’s swimming naked until the tide goes out. And when the money printer shuts off, that’s the tide going out.

[00:36:42] Joe Brown: And then all these Ponzi schemes are revealed for what they truly are, which is. Frauds that cannot continue going up unless new money comes in and, you know, the people at the top just, you know, stealing money from other people. And so that’s what’s going on right now. And we saw very curiously, absolutely no legislation or regulation passed about any of this.

[00:37:00] Joe Brown: It’s let all the money flood into these things that we know are presenting themselves as securities. So we know they’re violating securities laws. And so we’ve let all this happen. We know it’s going to collapse. We know a bunch of people are going to lose all of their money. And then once people are desperate and once people are begging for blood, once people are begging for regulation and begging for the government to save them, now we’re going to step in.

[00:37:22] Joe Brown: We’re going to create all these new laws about it to crush any real technological applications, any real progress in this space, that’ll be crushed because they can’t. Stand up to the threshold of those, the overbearing regulations that are put in place. And then we’re going to offer our own solution, which is going to be, hey, there’ll be a couple stable coins that might exist because they’re in close proximity to real financial institutions and Federal Reserve.

[00:37:47] Joe Brown: And apart from that, there will be the CBDC. Now, I have to say with a caveat that the only thing that I think that doesn’t include is Bitcoin. Because with Bitcoin it has kind of passed that point where you can legislate it out of existence, you can pass laws about it, but passing laws and enforcing laws are two entirely different things.

[00:38:04] Joe Brown: There’s just no surface area of attack for Bitcoin like there is for every other cryptocurrency. And so I do think that is kind of the way things will play out. And 95 to 99% of crypto will be dead in five years. And there will be a few stablecoin, Bitcoin, maybe Ethereum and A CBDC, and that’ll probably be it.

[00:38:26] Trey Lockerbie: I agree with you on that. You know, the FTX saga, I mean, the fraud knows no balance. It would seem, they’re just still uncovering things as we, we go along, and I’m still wrapping my head around all of it, but it’s kind of interesting, isn’t it, that to some degree what they were doing is. A little similar to fractional reserve banking, right?

[00:38:44] Trey Lockerbie: which is what we have now. I mean, they had this token that they made up outta thin air that were, they were using as collateral, but essentially what happened is there was almost like a bank run, right? They were just selling off this token and then everything collapsed from there. But what does that say about our own fractional reserve banking system?

[00:38:59] Trey Lockerbie: I mean, and are there any other risks or lessons to be learned from that?

[00:39:03] Joe Brown: Yeah, you’re 100% right. Back in the day when people had gold coins, they eventually trusted the banks to hold the gold coins for them, and they used paper receipts that were redeemable for those gold coins at any time. And eventually the banks took advantage of this printed way more paper receipts than there was actually gold to back it up.

[00:39:19] Joe Brown: And there would be a run on the bank. Everybody would go to get their gold because they would realize it’s not there. And. The first people in line get their gold and everybody else is screwed. And instead of outlawing this, governments centralized this and nationalized it and said, you have to have a license to do this and do this with the central bank.

[00:39:34] Joe Brown: And they were able to stop local bank runs, but they didn’t stop that same local effect from being scaled up to the entire system. And so that’s why after the Federal Reserve was created in 1913, just seven years later, you had the first Great Depression. It’s the Forgotten Depression. Great book by Jim Grant.

[00:39:47] Joe Brown: And then, Eight years after that, you had the second great depression that was even worse than the first. And so this is all because that boom bust cycle that used to be isolated to when the fraud would happen to a local economy that got scaled up and transferred to the entire system and caused even more damage.

[00:40:03] Joe Brown: Now the reality is today with our current system, we don’t have to worry about that because they don’t have a limitation on how much money they can print because it’s not tied to the amount of gold. So there is no bank run where people can. Redeem their dollars for gold. So today, what people do when they see that there’s not enough wealth to back up the money that was printed, they just go out and buy real stuff.

[00:40:24] Joe Brown: And so when we see massive inflation, that’s a bank run just on the economy instead of on gold. And then when we look at things like FTX happening, well, they don’t have. A monopoly on being able to create money out of thin air. And I would argue that the fact that you can’t create Bitcoin, you can create all your other tokens out of thin air, but they can’t print Bitcoin.

[00:40:42] Joe Brown: That was one of the catalysts that caused this bank run to really get going because of how many, how much in liabilities they had in Bitcoin. And so you’re absolutely right, this is identical to the thing that has always been done throughout history. But governments don’t like competition. And so when you start to run your own Ponzi scheme, they want to put you outta business because they want to have a monopoly on running the money Ponzi themselves.

[00:41:04] Trey Lockerbie: I love it. And this is, I mean, the fall of SPF is just the quickness to go from, I think he was around 30 billion. That was his net worth. Think it’s 26 of the last time I saw it. But that was, just to put that in perspective, that’s more than Ray Dalio . I mean that’s almost twice as wealthy as Ray Dalio, this guy, I mean, this isn’t, even though he is like a young kid, it’s like this guy was extremely wealthy and he went to zero.

[00:41:27] Trey Lockerbie: In a matter of days, is he going to go down as the face? Of this everything bubble. Do you think, because, you know, we had our Lehman moment with the GFC, we have this huge asset bubble that we’ve created. Is he going to be the pin that breaks it or do you think there’s more to fall given you know, how much is actually still in the system?

[00:41:47] Joe Brown: If I was betting one way or the other, I would say he probably will go down as the face of it, the Lehman, the Bernie Madoff, the big name that is remembered. However, we know that everything that was going on there is just a small example of what has been going on in our traditional financial system forever.

[00:42:04] Joe Brown: Like one of the key. Characteristics is you take an asset and you loan it out, and then that loan gets, you know, repoed and then reloaded out. It’s called reation. And so as this happens more and more times, well eventually you get to a point where if one of those links in the chain breaks, the entire chain breaks.

[00:42:22] Joe Brown: And that is the, that is like one of the pillars of our global financial system, whether you look at gold contracts, whether you look at cash, whether you look at bonds, whether you look at like currency, like everything is based on, you know, this continued loaning out again and again. And has created the most over-leverage global economy in world history.

[00:42:44] Joe Brown: And so it’s possible that just like Block was about to collapse, SPF F came in and rescued it, and then that led to his collapse. Well, eventually, there’s going to be something maybe pretty soon here that, you know, a European bank goes out, or the UK pension system goes out and a bailout comes in, but it’s not enough to fix the rot and that bleeds over into something else that’s bigger.

[00:43:07] Joe Brown: So it’s possible that we have not even begun to see the carnage.

[00:43:11] Trey Lockerbie: Yeah, I’m not so sure. And that’s why it’s so interesting all these signals you’re getting, because when I see, you know, this bullish signal, maybe for the put call ratio, you mentioned these deflationary pressures that you might see coming down the pipeline.

[00:43:22] Trey Lockerbie: That could reverse course a little bit. I just, I’m not so sold on it because I’m like, I don’t know if that’s enough. You know this FTX thing, while it was extreme, it’s also very isolated, right? It’s kind of, there’s not really. I mean, so far we haven’t seen much contagion happen from it like we would’ve in a Lehman moment.

[00:43:38] Trey Lockerbie: So it’s just interesting to see, is this really the bottom of the market or are we going to bounce back from. Stan Druckenmiller actually has this theory that we’re going to just be sideways for, you know, the next decade. What would be your take over the next 10 years if you had to bet on which way this market’s going to go?

[00:43:54] Joe Brown: Yeah, so this is where I like to differentiate between asset classes because I think we’re going to see a lot of variability here. I think crypto, almost everything is going to zero. So anything that still exists right now that’s still trading, eventually, most of it is not even going to be trading. Something like the stock market, we can look at the major indexes and say, okay, the major indexes might have some more room to go down, but when you look at a lot of stocks, like in the s and p 500 event, more than half the stocks are down 30.

[00:44:23] Joe Brown: 40. A lot of ’em are down 60, 70%. When you look at tax stocks, a lot of those, especially the ones that iPod in the last couple of years, are down 80 to 90% from their highs just within the last few years. And so we’ve seen a lot of economic. Priced into many stocks already. When we take a look at something like the overall economy that I was talking about, the deflationary pressures, basically what happens is you have more money come into a system that chases the existing wealth, that bids up the prices.

[00:44:52] Joe Brown: That’s the basic mechanism. When money stops increasing, there’s no more money to continue pushing prices up and when people buy things because the prices are going. They sell them. Once the prices stop going up and when the people start to sell them, then the prices start going down and cause even further selling the money supply has not increased since November of 2021.

[00:45:14] Joe Brown: It is sideways. It is actually a little bit down. We know that the money supply changes take a little bit of time. There’s a lag between the money supply change and how it hits the overall economy. That would mean in my estimation, Starting 2023, we start to see some severe deflationary pressures. We start to see unemployment.

[00:45:33] Joe Brown: We start to see price cuts. We start to see major economic pain. Now, I’m not saying that means the stock market, the indexes have, you know, another 80% down to go, but I’m saying that households will probably experience a lot of economic pain over the next year. And so that’s why I differentiate between asset classes there because I think they’ll all respond very differently.

[00:45:54] Trey Lockerbie: We’ll just touch on the consumer there for a minute as well, because another indicator we’re seeing is the level of [00:46:00] debt that just the households have right now versus, you know, credit card debt versus savings, for example. Savings at near all time lows. What is this telling you about the actual economy underneath these markets that might be propped up by institutions or other kind of liquidity?

[00:46:13] Joe Brown: Yeah, absolutely. That’s another thing why I say that American households probably have a lot of pain ahead because they’re most over-leveraged that they’ve been ever. And so one of these things is going to be mortgages obviously, but you also have credit card debt absolutely skyrocketing at the fastest pace.

[00:46:29] Joe Brown: It’s skyrocketed, and we have credit card rates going up. Dramatically at the exact same time. And so you have people who have depleted their savings, like all the money that people had from stimulus checks, the mortgage refinances and all that’s gone. People have depleted their savings and debt is through the roof, and people are using their credit card just to make ends meet.

[00:46:50] Joe Brown: Well, eventually. People start not being able to pay that debt, which means they start to default, which means that debt for everybody else dries up, which means that more people start to experience economic pain. Because if everybody starts defaulting on their credit cards, guess what the credit card companies do?

[00:47:05] Joe Brown: They stop letting you use the credit cards. The credit card, the credit limits go down. They stop letting you put more on them. And so people can’t pay the bills then, and people can’t get groceries. And so people have to start making sacrifices and stop spending money on other things. And everybo one person’s expense is another person’s income.

[00:47:19] Joe Brown: And so you could have the entire economy. Really slowed down, grind to a halt and experience some big economic pain. And so if the massive debt load is a huge issue right now.

[00:47:29] Trey Lockerbie: Yeah, the household debt is actually over 16 trillion at the moment, which, you know, it does include mortgage debts, but I’m kind of curious about what your take is on mortgages and where they’re going, because real estate appears to be in this negative feedback loop, if you will, where prices are high, interest rates are high, but supply and demand are low. In your estimation, will these factors actually keep us from entering a crash like we saw in 2000?

[00:47:55] Joe Brown: Yeah, there are a lot of indicators that people usually look at for the overall real estate market, and really, in my opinion, there are only two that matter. The first one that matters is, The number of, the total number of housing units compared to the uh, overall population.

[00:48:10] Joe Brown: Basically, how many places are there to live and how many people are there that need a place to live? This number has been getting worse and worse for a very long time, especially because we had basically a decade where no houses were built compared to population after the last housing crisis.

[00:48:26] Joe Brown: And so then you get to the last two years and everybody who could, everybody who was planning on it at some point bought a house and got. Two and a half, three, 3%, three and a half percent for their mortgage. That means that right now you have most Americans who own a home. Sitting there and looking at, Hey, that’s a home that’s equal to my home.

[00:48:46] Joe Brown: If I want to sell my house and buy that house, my payment will go from $2,000 to $4,000 a month. I can’t afford that. So I can’t move. And if people can’t afford to buy the new house, they also can’t afford to sell their current house. And you might think, okay, well everybody’s just going to sell or walk away and start renting.

[00:49:02] Joe Brown: Well, that means that all the investors will buy up the houses to rent them out, which will again be a floor underneath prices. And so, We don’t have a situation where rents are really low right now, mortgages are really high, and that could spill over into an equalizing effect where house prices come down to compensate.

[00:49:18] Joe Brown: It’s just not happening because there are more people who need a place to live right now than there are places to live. And yeah, we had about 18 months where housing starts jumped. Because of, you know, all the new money, but that’s dropped off a cliff. Home builders are not building anymore homes now, and so it doesn’t look like that was a sustainable increase in home building.

[00:49:34] Joe Brown: So right now those are the factors that we have to look at for the housing market. Doesn’t look anything like it did in 2006, 2007, 2008.

[00:49:44] Trey Lockerbie: What should people who don’t currently own homes know about where this market’s heading and how would you advise them to?

[00:49:52] Joe Brown: Yes, this is one of those areas where I feel the most compassion and the most, like I, I really feel very strongly about this for a lot of people who I know have been sitting on the sidelines since 2011 or 2012, and they’ve been saying, I’m just going to wait for the next crash.

[00:50:08] Joe Brown: When the next crash happens, then I’ll buy. They’ve been maybe saving a little bit of money. They’ve been renting, their rents have been going up every single year. And meanwhile, home prices have doubled or tripled depending on the city that you live in. And so we’re getting to a place where right now, the housing prices should have crashed.

[00:50:25] Joe Brown: If they were going to crash, we should have seen foreclosures. We should have seen short selling. We. Seen prices collapse because interest rates are higher than they’ve been in a very long time and nobody can afford to buy. Right now the housing prices have not come back down. And on top of that, we’re getting to the point where, in my opinion, we’re going to start to see some deflation soon, which means the Fed is going to back off on raising interest rates, which means that mortgages might stay.

[00:50:48] Joe Brown: At 6%, 7%, even 8%, they’re probably not going to move much higher than that, and there’s a chance they might start moving down in anticipation of the next Fed interest rate drop. And we already saw that anticipation with mortgage rates having their biggest drop in a long time. As soon as the inflation numbers came out just a little bit lower than expected because mortgage rates stopped in anticipation.

[00:51:07] Joe Brown: The Fed’s future pivot, which has not been announced yet or even talked about yet, and so we’re in this position. Housing prices might be at a place where they might not come down much from here, and the next move, the next economic move might make them go up even more. And all the people sitting on the sidelines right now waiting for the next crash, don’t have their foot in the game, don’t have their foot in the door.

[00:51:28] Joe Brown: And so when prices do eventually start to go back up from interest rates getting pushed down again, at some point in the future, they’ll be locked out of buying forever. We’ll, no. No longer have the ability to save up enough for a down payment and will be stuck renting. Basically forever, and this will happen to a lot of people who are going to be turning into a nation of renters and landlords.

[00:51:46] Joe Brown: And so I’m not telling people to go out and start investing in real estate to start buying up a ton of rental properties who don’t know what they’re doing. I’m not thinking that this is a time period like 2011, 2012, where all you had to do was buy and you’re going to make money. I am saying though, that.

[00:51:59] Joe Brown: If you’re renting and you don’t have any skin in the game for real estate whatsoever, it might get to a point very soon where you’re locked out forever and you’re going to have to have a mortgage or a rent payment either way. So at least for 30 years, you’re going to be paying for where you’re going to be living.

[00:52:15] Joe Brown: So the question is, do you want to pay for where you’re living and have exposure to the real estate market that might go up? Or do you want to pay for where you’re living and not have any exposure whatsoever and bet on something falling that the fundamentals don’t say has a real chance of falling A lot.

[00:52:30] Trey Lockerbie: Yeah. As my friend who’s a real estate agent, would say Purchase price is permanent and interest rates are temporary because you can always refinance too, right? You can get in and sometimes we’ll see some, hopefully we’ll see a little bit of lower houses in the near term just because of these interest rates where they are.

[00:52:45] Trey Lockerbie: But I’m also curious about the 16 trillion of debt that we mentioned a minute ago. Should people be focused on buying real? Or should they be more focused on just paying down those current levels of debt that they have?

[00:52:57] Joe Brown: It depends on the type of debt. Very different things here. So I like to use the example of shorting of stock here.

[00:53:03] Joe Brown: Many people are familiar with the mechanics of shorting of stock. You want to sell first and then buy back to close out that trade Well, People who are new to trading. Kind of like it’s, I remember the first time I heard about shorting, it was like, well, how does that make sense? How do you sell something that you don’t own?

[00:53:15] Joe Brown: And the answer is you have to borrow it. So when you short something, you borrow those shares from somebody, you then sell them, you get cash for that. And then to be able to close out that trade and walk away, you have to buy those shares back with cash and then give those shares back that you borrowed.

[00:53:28] Joe Brown: And so the definition of shorting something is borrowing something and then exchanging it for something. And so you shore something that you think will go down in value. That way when you close out the trade, you get to buy it back for less than what you sold it for. And so when you look at the dollar and you say, okay, over the last decade, how much has the dollar lost its value?

[00:53:48] Joe Brown: What about over the last two decades? What about over the last three decades? The regular lake of a mortgage? The dollar’s gone down to value a lot. That’s what inflation is. It takes more dollars to buy the same amount of stuff because they’re less value, they’re more abundant. And so when you look at a mortgage that is by definition shorting the dollar, you are borrowing dollars and then exchanging them for a house, and then to close out the trade, you’d exchange dollars for a house again, and then give back those dollars.

[00:54:15] Joe Brown: And so you are by definition, able to short the dollar by getting a mortgage on a house. But the key is it has to be fixed rate because if your attempt is to short the dollar, your goal is that the dollar will fall in value. Well, that does you no good if you end up owing more dollars back than you originally signed up for.

[00:54:33] Joe Brown: That only does you good if you owe the same amount of dollars back no matter what. And so with a fixed mortgage, that’s true. You can short the dollar effectively if you expect the dollar to go down in value. However, with any adjustable rate debt, you’re going to be screwed because the lender will always increase the interest rate enough to compensate for the loss of purchasing power for the inflation that’s there.

[00:54:53] Joe Brown: And so, You’re not going to be able to short the dollar effectively because even if the dollar loses value, you’ll have to owe back more dollars [00:55:00] because the interest rate will go up and so on. Any sort of debt that is adjustable whatsoever, that is the first thing. No matter what, get out of that debt, especially that credit card debt.

[00:55:07] Joe Brown: The highest interest rate debt, that is priority number one for anybody above investing above anything, get out of that because it’s extremely dangerous. Next step would be get rid of the high interest rate debt. Pretty much always going to be above the rate of inflation, even if it is fixed. And then once you’re there, then you can say, okay, do I want to short the dollar and if so, mortgages are like the best way to do that.

[00:55:29] Trey Lockerbie: Well, Joe, it is always such a pleasure to have you on the show, and I always enjoy the content you put out there. It’s amazing. I recommend everyone go check it out. Please give a handoff to the audience where they can learn more about you and see all these amazing videos in the, in your own podcasts. I believe now that you have from the videos out in there to educate people. So tell ’em where to go .

[00:55:49] Joe Brown: Yeah, thank you. Heresy Financial, mainly on YouTube is where I put a video up pretty much every single day. Very active on Twitter, at Heresy Financial, on every social media, Instagram, TikTok, you’ll find me.

[00:56:01] Joe Brown: And then on anywhere you get podcasts, I’ve got a separate podcast as well now, and that one is called Financial Heresy. So just the opposite there,

[00:56:10] Trey Lockerbie: Joe. Always a pleasure. Let’s do it again.

[00:56:13] Joe Brown: Thank you so much for having me. It was a great.

[00:56:16]  Trey Lockerbie: All right, everybody, that’s all we had for you this week. If you’re loving the show, don’t forget to follow us on your favorite podcast app, and if you’d be so kind, please leave us a review. It really helps the show. If you want to reach out directly, you can find me on Twitter @TreyLockerbie. And don’t forget to check out all of the amazing resources we’ve built for you at theinvestorspodcast.com. You can also simply Google TIP Finance and it should pop right up. And with that, we’ll see you again next time.

[00:56:39] Outro: Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.