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I want to start with the state of the US economy and the global economy, because there are often many distortions, and we often use indicators that have also been manipulated. Well, for starters, we are told that the economy is booming, the stock markets are rising. According to Trump, she is hotter now than ever before.
But I also see this new index of current conditions, the CCI, that was released and measures, you know, how people or businesses perceive the state of the economy, and it looks like it's the worst it's been since '51. How to explain this? Well, you know, first of all, what Trump says doesn't matter at all.
Trump will say whatever he wants. Facts or data mean nothing to Trump. In fact, he made his thoughts clear just a few days ago when he was asked about the agreement he claimed Russia and Ukraine had reached regarding an energy truce. And after both sides denied the existence of such an agreement, the journalist asked the president: " Mr.
President Trump, you said there was an agreement, but the Russians and the Ukrainians say they never made one." And then Trump replied: "Well, there's a deal." "There is a deal because I said there is one ." That's why. So , the economy is the hottest because Trump says so. That's all. That is, this is the only testimony, this is the only proof.
That's what Trump says. So he says we have a boom in the economy, even though it's a complete collapse. So, we have the lowest consumer confidence about current conditions in 75 years. This is exactly the period during which they collect this data. We have gone through many difficult periods: wars, recessions, financial crises, pandemics, all kinds of terrible events.
However, despite all this, the consumer was more optimistic than he is now. So it is impossible to claim that we have a great economy. If that were the case, the people living in this wonderful economy would appreciate it. And Republicans would get well-deserved points for it. Instead, they are blamed for everything.
And the reason they are being blamed is because the economy is bad and getting worse. But how, how do we explain the state of the economy right now, when the stock market is doing so well and the average American is already starting to, well, really feel the pinch? Well, the stock market always feels good.
We're at the 52,000 mark, right? The stock market continues to grow. This doesn't mean anything. You know, in fact, the wrong strategies that hurt the economy support the stock market. Under Biden, we saw record high stock prices. But Trump claims that under Biden we had the worst economy in the world.
So, apparently, stock prices can rise in both the best and worst of economies. So, this has nothing to do with the stock market. But what will really matter is a financial crisis: a debt crisis or a currency crisis. This is what awaits us, because interest rates are now normalizing , and they still have a long way to go before they rise to normal levels.
And the current economy will not be able to sustain normal interest rates, let alone the high ones we will eventually reach. But how, how did we get to this point ? Debt crisis , currency crisis...you said again that rates should be adjusted and continue to rise . Well , yes. Yes, we ended up here because of decades of waste, living beyond our means, huge deficits, and maintaining artificially low interest rates.
This allowed our economy to transform from a manufacturing economy to a service economy, focused on consumption. This allowed everyone—from government to corporations to consumers—to accumulate too much debt. We lived in a "fool's paradise, " which was actually not so paradise for many of us who experienced a decline in our standard of living.
But I think we are about to see the final payback. They say you have to pay for everything. Well, you know, it's been a long time since we last settled accounts. And I think it will happen. I know there are people who think artificial intelligence will be our ticket out. We'll see. I don't know if we'll be that lucky.
I think, I think AI will eventually bring significant benefits to humanity, but whether it will happen quickly enough to get us out of this mess—that seems unlikely. Well, for decades, at least since the 90s, we have been told about the successful transition from a manufacturing economy to a service economy.
But at the same time as this transition, we saw debt levels skyrocket . So, was it essentially a failed transition, or, in other words, what, what, what is the solution? Should the US Well, it wasn't, it wasn't, it wasn't a viable transition because we had a huge trade deficit . So, we have n't really reached the point where we can grow the economy solely through services.
We couldn't . We needed to import all the goods we couldn't produce ourselves. Perhaps if we had such a surplus in services, if we could sell our services to the world and use that revenue to import goods, then it could be a viable transition. But when you have over a trillion dollars in trade deficit a year, it's actually closer to 1.2 trillion now.
We have the largest trade deficit in history under President Trump. We also have the largest budget deficit in history under President Trump. So, the twin deficits have never been greater than they are now. And once again , this proves that a strong economy is a figment of Donald Trump's imagination.
Because if we really had a strong economy, this deficit would be decreasing . But is it possible to return to this, again, physical economy, industry, because I know that in Europe they are rapidly deindustrializing and would like to reindustrialize , but they see that they cannot compete with the Chinese.
That's why many are now talking about emulating Trump's tariffs and subsidies to try to find a way to create a competitive space for their own, or at least for their strategic industries . Uh, I don't know why you want to follow a failed policy. Trump's tariffs have not delivered what they promised.
The trade deficit is higher precisely because of these tariffs. Our imports have reached an all-time record high. With tariffs, we import more than we ever imported without them. All that has happened is that we are forced to pay more money for imports. So, Americans are paying higher prices because tariffs are built into those prices, but they, you know, have n't revived anything.
We did not return anything to the domestic market. So the tariffs did nothing but increase revenue for the US government by raising taxes on the American people. That's all he did. You know what's so great about raising taxes? No, this does not help competitiveness at all . But on the topic of distorting or manipulating economic indicators, how do you think the Federal Reserve has distorted the economy?
Well, the Federal Reserve has been distorting the economy for decades by constantly expanding the money supply and artificially holding down interest rates. It is because of the Fed's intervention in the markets that everything is so distorted. You know, that's why we don't save as much as we should.
This is why we borrow too much. That's why we have too much debt. That's why we don't produce as much as we should . All this is due to the distortions that have been introduced into the economy by the Fed's monetary policy. And, of course, we have reckless fiscal policies, so I don't want to absolve Congress or the president of responsibility for these distortions, because they are also to blame, and both parties share this guilt.
It's hard to say that Democrats should bear more responsibility than Republicans, when you look at what Republicans are doing now that they control the White House, and currently the House of Representatives and the Senate. They won't keep these organs for long, but they had them for a year and nine months, and they only made the problems worse.
So this will continue. And, of course, regulation is not just fiscal policy, it's regulatory policy that has distorted what could happen if we had freer markets. And the most efficient markets, the best way to allocate resources, are without government intervention. Anytime the government intervenes through regulation or taxation, you get a suboptimal outcome.
So you have a lower standard of living than you would have had in the absence of such government intervention. I remember about 20 years ago, the argument was often made that the amount of debt the US was taking on wasn't really a problem. This was a sign of US strength, as it showed that the world had confidence in the American economy.
No one makes such an argument anymore . But we were... Well, I never, ever believed that getting into debt was a sign of power or wealth. Uh, when people experience an increase in their wealth, their income, they tend to pay off their debts. And people want to get rid of debts, to be free from them.
You know, it's a sign of abundance when you don't have, when you don't have debts. But if you keep getting into debt and owing more and more money, you, you know, you're moving backwards. You're not, you're not moving forward. Here I am, I would distinguish between certain types of debt. So if you're accumulating debt, let's say as a business, you're borrowing money for capital investments , well, that's, that's normal.
Or if you, you know, are developing rental properties, commercial or residential, and you take out a loan to finance that, but the cash flow generated from the property, the rent that you receive, exceeds the interest that you pay on the borrowed funds, well, then that's good. But when it comes to consumer debt, you're talking about borrowing money to buy things, whether it's credit card debt, car loans, or a home mortgage—that's not good.
You know, taking out a third mortgage on your house is not a sign that things are going well. Yes, people are eager to pay off their mortgages, pay off their credit card debts, own a car without encumbrances, right? And so, these, these are good, these are good things. Uh, you know, being deep in debt is a sign that you're struggling, that you can't make ends meet , and so you resort to borrowing to keep your economic head above water.
And so, you know, it was all just a rationalization. They saw a problem, and instead of acknowledging it, they rationalized it as if it was a good thing, right? So, they turned bad into good because they didn't want to deal with bad or acknowledge the existence of a problem because they didn't want to try to solve it.
Because solving the problem creates an even bigger problem for politicians. But they had a similar argument about inflation, saying we are meeting our 2% inflation target. Uh, it's under control. Well, but again, this narrative seems to be a bit shaky as well, but it still assumes, I guess, that this is a transitional period that will stabilize itself.
Well, how do you look at this? I mean, what fuels debt and why should it stabilize on its own? Will it get out of control? Well, it doesn't stabilize. I mean, the only thing that could ultimately do that is raise interest rates so much that the government has no choice. But the Federal Reserve can step in to save the government from having to make such a choice.
Because the Fed could simply buy up all the bonds to artificially suppress interest rates. But then we will get uncontrollable inflation. So it's not exactly, you know, a free way out of the situation for all the debt, because Americans will pay the price in inflation and higher consumer prices. But you know, it will happen.
I mean, it hasn't happened yet. That is, the stakes have risen. Yields are now above 5%, 5.3 on the 10-year, 5.6 on the 30-year. But they are still historically low compared to where they were in the 70s , 80s, 90s. And I think we're heading back to the rates we had back then, or even higher, because our financial situation is much worse than it was in those decades.
But we have much more debt than we did then. So we can't handle debt service. But now we are facing a conflict over bonds. Well, here, that includes debts. Well, the US dollar can also, yeah, uh, be questioned. You know, the US economy does not exist in isolation. That is, the entire world economy was organized around it for decades.
How do you see the development of this economic crisis? I mean, will she be there too, yeah, sorry. Yes, well, I do believe that the global economic order needs rebalancing. As a result of monetary and fiscal policies and the reserve status of the dollar, Americans have been able to consume a much larger share of the world's economic product than they would actually have been entitled to consume.
And so too many goods were going to America, and too few were being consumed outside America . Foreigners have accumulated too many of our liabilities. So, we owe the world much more than we could ever actually repay. And the world, uh, made a lot of misinvestments of that capital. Instead of lending money to Americans who can't pay it back, they should have borrowed or invested it elsewhere.
So, all of that will change. And the result will be a significant decline in the standard of living of Americans, because we will lose the global subsidy that we used to enjoy. So because of this, consumer goods will become significantly more expensive and, accordingly, less affordable for Americans, and interest rates will rise significantly.
Uh, so this will be a game-changer. Again, the only way this will change is if AI can transform the economy quickly enough so that we can produce ourselves, with the help of computers and robots, what we currently depend on China and the rest of the world for. We'll see.
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