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The debt doomsday clock is ticking and we're on borrowed time. It used to be that I thought that the chances of us having another inflationary recession were between slim and none. And we already had one in 2022. We'd had one in the early '7s. And us having it again were we're very slim. But this most recent big beautiful bill that's come out of Congress has gotten me to rethinking all of this.
This big beautiful bill is not so beautiful. It's full of all kinds of pork and it's extremely fat and full of all these things that these congressmen wanted to shoehorn in all over the place. Promises were made. Trump made promises. He kept a lot of the promises in the bill, but there are also all kinds of promises made by 400 some odd congressmen in the House of Representatives.
And all these things had to be included in the bill somehow. and it's added all kinds of pork and all kinds of spending that we don't need. I thought that we were be gonna be looking at cutting back on the spending that Doge was doing things to cut back on spending and we were going to be letting go of some people and cutting back on the bloated government.
We're going to be shrinking the size of government, reducing regulations. It looks like we may still reduce regulations, but this big beautiful bill is actually adding a whole lot of extra expense and a lot of extra spending that our country really doesn't need and is is driving up the the debt level, driving up our interest.
It's going to be harder for us to pay down our interest, harder for us to keep our interest rates down, and that's going to cause all kinds of problems going forward. The things we're concerned about include the fact that our debt levels are higher than they've ever been before. Our our debt compared to the GDP of the country is higher than it's ever been before.
Our interest expense is higher than it's ever been before. The percentage of the budget that is going to pay interest on the debt is higher than it's ever been before. It's a greater percentage of our budget than it's ever been. And it the higher it gets, the harder it is to cut back. It's like someone who gets behind on credit cards and things like that and eventually they just declare bankruptcy because they can't handle it anymore.
And unfortunately, this is what happens with some countries. This has never happened in the US and hopefully never does happen in the US. But we've seen country after country go through this and eventually have to declare bankruptcy on their debt. We've seen this happen with countries like Argentina.
One thing that a lot of people don't realize is that Argentina had a higher GDP per capita than any other country in the world back in the late 1800s. But they made some big big boneheaded moves right after World War II. And they went from being one of the preeminent countries in the world where everybody wanted to visit, everyone everybody wanted to live to a third world country now.
And they're starting to do things to turn things around. And we're in danger of that happening here in the US. But if we look at turning things around now rather than waiting till it's too late, it's going to be a whole lot better for us. Debts accumulate and interest payments accumulate. The debt service payments squeeze other spending and it's a particular problem when there is a need to borrow money in order to make debt service payments and the spiral begins.
What can we address here? So one of the things that we are concerned about is that the market cap to GDP as far as the the value of the companies in the US has never been higher. The the valuations are more bloated than they've ever been before. And so the last time this happened in the late 1990s and in 2000, we got a pin prick in the dotcoms and we had the.com boom and the.com bubble burst.
And it took a couple years for this to to play out and all the all the tech stocks came tumbling down and then we had a resurgence with real estate and then another burst where the real estate market came tumbling down and by the end of 2008 early 2009 we had things come way down from where they were at the end of 1999 and early 2000.
That's something that we're somewhat concerned about now in the US. The US has had we've had a really strong dollar for a while and this dollar is starting to weaken. And uh with the dollar weakening, it looks like as Warren Buffett says, the dollar is going to hell. And when the dollar goes to hell, there's going to be a lot of money that's going to be sifting away from the US.
The money is going to be coming out of the US. It's going to be going into other areas where the currency is stronger, like the European Union, like Latin America, like Asia. All these places are going to be attracting a lot more dollars, a lot more money. and uh these these areas of the world where things are a lot cheaper than they are in the US.
These valuations will be expanding and the US valuations will be coming down and that's going to be a big sucking sound from the US. As Ross Perau said, there's a big sucking sound going out of the US to other countries in the form of capital flight and you don't care about anything but making money.
there will be a J sucking sound going south and that's something that some people are afraid of or capital flight out of the US into other countries and there may be some things imposed upon the US markets where people are not allowed to take capital out of the US hopefully that doesn't happen but we want to be looking at investing in other areas of the world so that we can benefit from these areas moving up while the US is is suffering from the the weak dollar and the high valuations coming down of Of course, Warren Buffett right now sitting on more cash than he ever has before, ever in Berkshire Hathaway.
It's close to $350 billion worth of cash and short-term treasuries. And that cash and short-term treasuries eventually he'll find a place to put it. Usually, when we head into these recessionary periods, we see some deflation, but it seems like Warren Buffett is more concerned about inflation than deflation.
He's more concerned about about us spending way way above our means and causing more inflation. And this new thing that's come about over the last few years, we've we've implemented what a lot of people call modern monetary theory. The premise of modern monetary theory is basically we've got this big tub and we're filling up the tub with water.
We're turning on the spot of fiscal stimulus. And this fiscal stimulus is just money that goes into the economy that Congress decides to spend and put into the economy. It may also be a little bit with the Fed deciding to print money. And so all this goes into the tub and the tub starts to fill up until all this money that's that's going in eventually starts to spill out of the tub.
Now, what a lot of people want to do in conjunction with modern monetary theory is they want to tax as well as spend. So when they're taxing, they're saying that the taxing will cause it not to fill up quite as much because they're able to take money out of the economy by taxing people. But a lot of what this leads to is a bigger and bigger government and needing to spend more and more money over time and also tax more and more over time.
And so another thought behind this is reducing the size of government, reducing the amount of spending and increasing productivity. And increasing productivity is what made China what it is today. Our country in the US is a consumer country. We think that the more we spend the better the economy is going to do.
We want to inspire a lot of consumption in the economy. And we're when we're consuming that is good for the economy. But if we're if we're going into deeper and deeper debt in order to spend and spend more and more that doesn't do us any good. Eventually we run out of people to loan us money. Now, if we're producing, we can produce goods and services and have other people spend, have other people consume, and that money comes back to us.
And we're able to build what we've got here in the US with the money that comes back into the US. We have a positive trade surplus. And when we have the positive trade surplus, that money comes back into the US, helps provide more jobs, helps provide more riches for our US citizens, helps provide more riches for the US.
The money's coming to us. other people are spending. We're the ones that are producing. If we produce more, we will do better. So, what we want to look at is become a better producer, not a better consumer. When you think of a family, you can think of the government kind of like a dysfunctional family.
Unfortunately, when you think of a family, sometimes you have one spouse that has one thought with regard to wealth, one one wealth language. You may have another spouse that has a totally different wealth language. And so right now our executive branch has an opportunity wealth language. And in in some cases, some people may say they have a future wealth language where they're not want to take a whole lot of risk, but they're thinking about the future.
An opportunity wealth language is where they are going to take a lot of risk and they're also thinking about the future. I think we're taking a lot of risk. uh especially with Trump in office, he he he does a lot of things that may seem pretty risky to some people, but this opportunity wealth language allows us to make big gains and turn things around in big ways for the future.
Some other people may not have a very very good future mindset. They may just be thinking about now. And unfortunately, a lot of these people who want to get elected, all they're thinking about is the next election and what they promised leading up to the election. and all they care about is spending and spending and spending in order to get reelected.
And unfortunately, this mindset leads us to get more and more in debt and get more and more trouble as we as we get in debt to spend and more debt to spend. It doesn't do us well for the future. We want to be able to not have to have as much in debt. We want to have a more lean and mean government and be able to have more productivity.
And how can we get these people to talk together better? How can we get Congress to hopefully think more about the future and uh maybe get uh our executive branch not to be quite so crazy, but who knows? Uh if we can think about these people thinking about the future together and budgeting and actually have a balanced budget, wouldn't that be great?
So, we got to get to where our executive branch and our legislative branch are actually thinking as one and working together for the future. Thinking way into the future about what we're going to accomplish down the road and how we can be better down the road rather than just getting elected in the next election.
Ray Dolly wrote a book about this recently. The book is entitled How Countries Go Broke. and he's talking about how we as the US can keep from going broke in that in that book. Obviously, he wants us to see how we can avoid going into these problems. Scott Besson, who's our treasury secretary, benefited greatly in the Soros fund by seeing these these countries go broke.
And he he profited immensely when a lot of countries went broke. He also profited immensely with the Soros fund when they did well. But uh he is in a great position to be able to help us from going broke and be able to re-engineer the situation with these these other countries and and rework trade agreements and what have you.
And hopefully it'll work. But what Ray Dalio says is that we go through different debt cycles. We have a short-term debt cycle and we have a long-term debt cycle. And the short-term debt cycle usually lasts 5 to 10 years. This last one is has been going on about five years or so. And uh the long-term debt cycle usually lasts around 80 to 90 years.
And the last time we went through the back back end of the worst of the last cycle was during the Great Depression and World War II. The one before that was the Civil War here in the US. The one before that was a Revolutionary War here in the US. And so we see a lot of upheavalss during these periods.
And sometimes we can get through this smelling like a rose and come out really well on the other side. We we got out of World War II smelling like a rose. We were the the toughest, most well positioned country coming out of World War II. But this time around, are we going to end up like Great Britain and go bankrupt?
Or are we going to come out smelling like a rose and end up better than we were going in? Time will tell. But uh the these situations we go through arise where the country's on the way up. During this period, we have strengthening leadership, we have inventiveness, education improves, we have a strong culture, we have strong income growth.
We go through a period where we're topping out and things start to become less productive. The people in the country become less productive. Things get overextended. We may have markets that are overextended and overvalued. And then there's wealth gaps. And so when we start to see these big wealth gaps, that is what inspires the civil war, the civil unrest that comes about after that.
And uh luckily uh we've seen a situation where Trump is doing a lot for the common man and he's looking to bring back jobs here to the US. And hopefully that'll help shrink those wealth gaps. Time will tell. When we go into the decline, uh we have large debts. These debts tend to expand. Unfortunately, we're dealing with that right now.
We start printing money, more and more money. Of course, until the 1970s, we couldn't print money because we were on the gold standard. Now, since we've been off the gold standard, we can print money like crazy if we want to. There's internal conflict, increased internal conflict, usually caused by those big wealth gaps, and you end up losing your reserve currency status.
So, we've seen these countries over time. Great Britain was the last one that had the reserve currency and they had a reserve currency until the 40s and 50s and then they lost the reserve currency status. Before that, it was the Dutch that had the reserve currency. And before that, the Spaniards were on top of the world.
And so, we go through these periods where different countries are on top of the world. And hopefully, US remains on top of the world even after all we're going through right now. And we keep our reserve currency status. But it could be that um it already looks like a lot of countries are not wanting to buy US treasuries.
They're not wanting to deal in dollars. The dollar has been weaponized. uh and they're they're using things like gold. They're using other currencies to to do trade in. They're not wanting to use the dollar to do trade. And so that's causing a lot of issues. And so it may be that with the dollar weakening and people concerned about it being weaponized and what have you that the dollar is going to go away.
Hopefully it's going to take a while, but it does not seem that the dollar has as much pull as it's had in in previous years. And it looks like the dollar is going to weaken. Russia basically can't use any of their dollar denominated things. And so they've basically flipped to using gold and yen in all their trading.
China is using mostly gold. A lot of the brick countries are using mostly gold. Uh some countries are are still on dollar denominated types of things, but the dollar tends seems to be waning these days. The number way to get out of this malaise is to increase the productivity of our of our people. And one of the ways to help increase the productivity is through technology.
Of course, we've got AI, which is one way that we're looking at to enable us to do more with fewer people. And this AI, we need a lot of energy for that. That's something that we don't have in as much abundance as say the Chinese. So something that we're working on is producing more energy to be able to provide what we need for the AI to be able to power the higher productivity per worker.
We can also use robotics to help improve productivity. So this the robotics that are coming out of companies like Teslas and others can massively increase productivity. We can also do a lot to better educate our workforce. Our education system is woefully behind much of the rest of the world unfortunately.
And so we need to do more to get our people to the place where we can better compete. The educational system is the number one thing that inspires a big, happy, profitable, prosperous country. We want a strong culture, strong competitiveness, great education, great resources. The one thing that the US has in spades are great are great resources.
We should be good as long as we help turn around our education system, educating people to be competitive on a world stage and utilizing the technology to get there. The other thing we're concerned about is that government spending was at a level we'd never seen before. Onethird of the economy was due to government spending.
Almost a quarter of jobs that were being adding into the economy at the end of 2024 were government jobs. And so going into 2025, we were looking at, well, we're going to cut back the government spending. We're going to cut back the government jobs. And that could lead us into a more deflationary period, possible recession if we don't have enough jobs coming in from other means.
And so Trump was looking at how can he revitalize things from other ways, he's looking to reshore jobs and reshore productivity back into the US. So to the extent that we're able to reshore jobs and reshore productivity and bring money into the US through the tariffs, that can help our economy stay afloat.
But a lot of these cuts, a lot of this austerity, less government spending is uh is is possibly going to be deflationary and could lead to a recession. This whole big beautiful bill has t changed all that and now it looks like we're going to have more spending than we thought. And some people were already thinking inflation.
I know Buffett was already thinking inflation. It gets a lot more people thinking inflation. And that inflation leads to higher interest rates. And the higher interest rates are are not good for us long-term. It causes our interest to be a higher and higher percentage of the GDP and makes it even harder for for us to balance the budget.
So we can either go into a deflationary period where we go through a brief recession or we spend too much money and we go into another inflationary period which is probably going to be pretty bad. So, if we're going to be looking at which way we want to be going, we probably want to go into a recessionary period we're actually able to cut interest rates or continue to cut interest rates some.
And so, we don't know if that's going to happen. It may be that we go through a period where we're able to cut interest rates a little bit more, maybe stimulate a little bit and then have the inflation again, but it looks like we may not be curbing this inflation for a little bit. Unfortunately, we we hopefully will get the these interest rates down and be able to go through maybe a small deflationary period in a recession that is actually good.
Recession is actually good sometimes and be able to get to the point where the the valuations of companies is more reasonable and our investment in overseas investments looks really good for us as well. These are just some things that uh things are that are changing in the markets as we speak. Uh, if you like to go through these things and stay in track with these things, please put your thumbs up, click that notification bell, subscribe to the channel. As always, stay thirsty for knowledge. We'll catch up with you next time.
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