Based on a True Story

More than 3,000 years ago, between the 12th and 13th centuries BC, the legendary king of Ithaca, Odysseus, set sail from the ancient city of Troy to begin the journey home.

The stories of the Trojan War, and of Odysseus’s voyage home, have been passed down to us in the form of epic poetry from Homer. Most of it is pure fiction.

But like modern film, TV, and ‘true crime’ podcasts that abuse dramatic license to entertain their audiences, Homer’s epics may in fact be “based on a true story”.

The Trojan War, for example, likely happened. The bit about the horse, on the other hand, probably didn’t.

It’s certainly possible (and even probably) that one of the key leaders in the war had an arduous journey back home to Greece, spurring ancient entertainers to weave elaborate tales of sirens and sea monsters.

One of the most important parables in Homer’s tale of the long journey home for Odysseus is the story of Scylla and Charybdis.

Odysseus’s journey took him through a particularly narrow stretch of sea; on one side of the strait was a small, rocky island where a six-headed monster named Scylla lay waiting to destroy any ship that dared to pass.

According to Homer, Scylla was such a dreadful monster that “no one– not even a god– could face her without being terror-struck.”

But on the other side of the narrow strait was the deadly whirlpool of Charybdis, which would swallow up the entire vessel and all the men on it.

Odysseus’s impossible task, of course, was to swiftly and stealthily sail right down the middle… to just barely avoid the whirlpool of Charybdis, while somehow managing to avoid the long grasp of Scylla.

For a while, Odysseus refused to believe the situation was hopeless; he was convinced that he would be able to sail, unscathed, between Scylla and Charybdis without a single loss.
After all, he was a king. And an unparalleled expert when it came to sailing. Surely he would be able to succeed.

And yet everyone who had ever come before Odysseus had believed the same thing. But no one had ever succeeded. Literally every ship that ever tried to sail between Scylla and Charybdis had been destroyed by one of the two evils.

Eventually reality set in, and Odysseus knew that had would have to choose between the lesser of the two evils.

He chose the monster Scylla.

Odyssesus realized that sailing too close to the whirlpool would mean losing his entire ship and everyone on it. Sailing too close to the 6-headed monster would mean losing, at most, six men.

Odysseus concluded that it was better to lose six men was than to lose everyone.

And that’s precisely what happened; as his ship sailed through the strait, just barely avoiding the whirlpool, “Scylla pounced down suddenly upon us and snatched up six of my best men.”

But the rest of the crew (and the ship) survived the challenge and passed through the strait.

This story is one of the best allegories of the state of the global economy today.

Central bankers and economic policymakers are like Odysseus. They have managed to sail the global economy into a very narrow strait.

On one side of today’s economic strait is the evil inflation monster. And this monster is guaranteed to chew up and spit out incalculable quantities of unsuspecting, unprepared people.

Yet on the other side of the economic strait is the full-blown collapse of the sovereign bond markets… and by extension, collapse of the global financial system.

Like Odysseus, central bankers were at first in denial. They didn’t want to believe they were even in such dire economic straits. They infamously rejected the notion that inflation existed at all. Then they claimed it was transitory.

Then they finally started trying to do something about it– to turn the ship around. But it was too little, too late.

Now they find themselves squarely in the middle of these evils– inflation, and collapse of the sovereign bond market. And they’ll be forced to choose between the lesser of the two evils.

Inflation is, by far, the lesser evil.

The US national debt has doubled in the past decade, to $31 trillion. It will almost certainly double in the next decade, especially considering the massive $15+ trillion Social Security bailout that will be necessary by 2032.

The US government already spent $680 billion last fiscal year just to pay interest. And that was with record low interest rates.

Central bankers have been raising rates rapidly this year. But continuing to do so will bankrupt the Treasury.

Remember that the US government has to refinance roughly 20% of its debt every year. Now that interest rates are so much higher, the government’s total interest payments will soon soar past $1 trillion, then $2 trillion annually.

This would be devastating to national finances and potentially force a default. Central bankers know this, which is why they prefer to let inflation reign rather than risk a sovereign default.

The government announced earlier this week that inflation had decreased to ‘only’ 7.7%. Don’t be fooled; inflation is still very much the major economic story of our time.

This is the story of our podcast today– how central bankers find themselves between Scylla and Charybdis.

This podcast was actually a live recording, taken today at our Total Access event in Mexico City.

We’ll discuss why there are many forces that will continue to push prices higher for years to come, why the central banks are powerless to do anything about it, and how you can still take back control.

You can listen in here.

I want to get started this morning with some big picture ideas, as I often do. And what I'd really like to do is synthesize a lot of things that we've been talking about. And as is kind of typical for me, we'll start by going back time, this time around 70 years ago. And you can see on the map here, xmarks, the spot in the Peloponnesian Peninsula in ancient Greece. Now, this is so long ago.  
This is thousands of years before Socrates and Aristotle. This is a really long time ago. And there was a tribe of unknown origins who came down into the Peloponnesian Peninsula. They were kind of hunter gatherers and nomads. And they came down and they settled here.  
This was really not long after the Agricultural Revolution, which most of the time was more formally referred to as the Neolithic Revolution. Neolithic actually comes from Greece, neo for new, lithos for Stone. So really the Agricultural Revolution was a new part of the Stone Age, right? And the reason why the Stone Age lasted for so long, literally millions of years, is because human civilization at the time was all hunter gatherers. And as huntergatherers, they never put down the roots of civilization because they didn't have the roots of civilization.  
They didn't have the capacity to build new technologies and things that actually propel the species forward because they were constantly getting up and moving and going to a new place. So as the Agricultural Revolution, the Neolithic Revolution, that actually made that possible to propel human beings out of the Stone Age and into the next, which was the Bronze Age. And so we have this tribe now here in the Peloponnesian Peninsula, not long after the Agricultural Revolution, they come across a place. There's abundant water, the soil is very fertile, and on a little hillside about 900ft above sea level, they built a fortress there. They had 360 degree views of the surrounding valley.  
It was a pretty strategic location. They could see and defend against any potential oncoming invading enemies. They were only about 12 from the coast, so they were protected from storms. But at the same time, they were only about a half a day's journey to the coast if they needed to get there. So it was a really, really good place, and they built a fortress there.  
And that fortress in time became a great city and eventually a great power in the region. Now, these people are known as the Mycenaeans. The Mycenaeans were the Greeks before the Greeks. Again, this is thousands of years before Aristotle and Socrates and Plato and everybody like that, that we all know and have heard of. And this was a civilization that really had a lot going for it.  
They had advanced technology. They had a writing system. It was called the Linear B script. It was one of the first writing systems in the world. It was actually a very interesting writing system in that it was unlike Egyptian hieroglyphics, which were purely pictographic to demonstrate in ancient Egypt.  
They had a symbol for specific nouns, and so it was basically very noun heavy writing system, linear B. They had some symbols to convey ideas. For example, they had a symbol for horse and a symbol for donkey and pig and things like that. But they also had phonetic symbols like we do in a Latin alphabet or Cyrillic alphabet. So it was a really advanced writing system, but they had way beyond writing systems.  
They had advanced mining technology, metallurgy smelting. They figured out how to melt tin. They figured out how to smelt copper and turn that into bronze. And this is really what got the civilization out of the Stone age, is the ability to do that, to create better, more superior tools that help them to continue advance in civilization. They had advances in construction technology, advances in military equipment and weapons and tactics and agricultural advances and all sorts of things that really made them the power that they were.  
But around the year 1181, 200 BC. They just disappeared. They disappeared from history. And we know a lot of things about this civilization. We know that their cities were burned, their temples were raised, their palaces were destroyed, and the city is essentially vacated entirely.  
And thousands, tens of thousands of people in this area just disappeared and began nomadically, roaming elsewhere. There is a fair amount of archeological evidence that exists, but there's also a great deal of legend. And pictured here, you see, is Homer. Homer tells us stories of the Mycenaean civilization, the most famous ones, obviously being the Elliott and the Odyssey. Now, a lot of what Homer has to say is complete bullshit, and we all know it, right?  
Fantastic stories about monsters and witches and all these things. But to be fair, that's not so different than what we see in today's. Modern media filmmakers are notorious for taking an extreme and absurd amount of dramatic license. So one of my favorite movies here, Amadeus, it literally says, you probably can't read this here, but it says on the COVID everything you've heard is true. That's actually everything you've heard is completely not true.  
Everything in that movie, sally ARY didn't kill Mozart. All these things that this sort of fiction that they're peddling, but they do it because it's so much more entertaining. It's so much more entertaining. And they know they need to entertain their audiences. They come up with these ridiculous stories of intrigue and murder and so forth because it makes it more interesting.  
And I actually put the Wolf of Wall Street on here. There's a lot of dramatic license in that movie. A lot of things that they did that didn't actually happen. And I actually put that on here because apparently Jordan Belfour was here yesterday having one of his sales conferences, so I thought I should actually be appropriate. But this was also normal in ancient civilization, the works of Herodotus had lots of fiction and we can see this obviously a lot in the Old Testament, but it's all based on a true story, right in the Bible there's an incredible amount of historical gold in the Bible and the Old Testament.  
They talk about all these different tribes and civilizations that did exist, the amirites and the Canaanites and the Israelites and the there's so many of these. And of course there was an exodus. Of course the Israelites were enslaved in Egypt and they had a grand exodus. But did a guy really pull out a wooden staff and part the Red Seas? No, probably not.  
Probably not. But it's grounded in truth, it's grounded in real factual history. It's based on a true story. And of course, the entertainers that they were, they had to come up with more interesting fiction to say. And then he pulled out his stuff and part of the Red Seas, but it doesn't make the rest of it untrue.  
So we know, for example, that most likely there actually was a Trojan War. The ancient name for troi was Ilios, hence why they call it the Iliad. Ilios was the ancient name for Troy. And Troy was built in an area of modern day Turkey called the Darden. Mills Dartnells have long been one of the most, if not the most strategic location in the world because you're basically control the trade route between the Mediterranean and the Black Sea.  
And especially in the ancient world, this was the most important place that you could control because you've got a lot of mining that's taking place, for example, as far off as Afghanistan and Persia into the Neo Babylonian Assyrian empires and all that is going to go through the Dardenales. And meanwhile you've got to the west, the entire Mediterranean and the Levante and North Africa and everything. And so you're right in the center of that. If you control that, you really control trade. And there was clearly a conflict, there had to have been because the Miternan civilization controlled they were the powerful force in the Mediterranean, so they controlled all the trade in the Mediterranean.  
Then you've got the Trojans that control the entrance to the Black Sea. And one of the most important resources in the ancient world, which was tin. Tin today is like nothing who cares about tin? But in the ancient world it was so incredibly important. It was as important in the ancient world as oil is today.  
So because of that, when there were issues with the tin trade or in the tin markets were in tin supply and tin production, it caused havoc across the ancient world and most of the tin was being mined in places like Persia and Afghanistan and Pakistan. And so it had to come across that route through the Black Sea, through the Dardanelles, and meanwhile you have in the Mediterranean where they're actually mining the copper and the copper is coming out of Cyprus and so forth, and the Mycenaeans are controlling that. So there was a lot of reason why there would have been a conflict between these two civilizations. So most likely the war between the Mycenaeans and Troy actually happened. This probably didn't the horse and all that ridiculous thing and the shot through the Achilles heel and all that stuff.  
Okay, yeah, that's the entertainment part. And it is very entertaining. It's really entertaining, you know, when you get into it. But a lot of this they probably made up. Or when they make up these stories, they make them up because they're more parables or they're symbols for other things.  
So, for example, in the ancient world, horses were often used as a symbology for a naval fleet. Ships were often known as seahorses. And so it could have been some acknowledgement of the Greeks, the Mycenaean superior navy and their naval forces. Who knows? But most likely I want a bunch of guys sitting inside of a horse waiting to raise the city.  
Then we have the Odyssey after the Iliad, which is the story of the Trojan War. We have the Odyssey, and that's a very familiar theme. The theme of the hero has the voyage home. And it's filled with a lot of danger and adventure and so forth as the hero, the war weary veteran who just won the war and saved the people. And now I got to make it home.  
And if you haven't seen Star Trek Four, it's a great movie, but completes the story arc from Star Two, the Wrath of Khan, where the needs of the many outweigh the needs of the few. And then in Star Trek Three, they got to go and rebuild Spock and then Star Trek Four, where they take the voyage home. And of course, it's filled with all sorts of crazy adventures. That's basically what the Odyssey was. It's just a story arc.  
And if you think about it in the same way that we look at movies today, we have entire franchises with 37 different movies and so forth. That's kind of what the Iliad and the Honesty were. It's just a franchise and they were making it as entertaining as possible. And this concept and story home, the Voyage Home is a very familiar one. You have odysseus.  
That leaves Troy. They just sacked the city and they won the battle. And of course, he gets kidnapped by a Cyclops and he is constantly being seduced by beautiful women. Of course it's only odysseus. It's never anybody else on the crew.  
It's only the hero with all these beautiful women constantly falling in love with him. And then he goes from one place to the other. Then he finally makes it home, where his wife Penelope is being courted by all these suitors that want to plunder his kingdom for all the wealth and money in the kingdom of Ithaca. And he goes home and he disguises himself and he slays all the suitors and we have a big happy ending at the end of the story. And it's a great story.  
It could very well be based on a true story. Is it possible that there is a high ranking king or a veteran or so forth in the Trojan war that had a lot of adventure on the way, had a difficult time getting home? Sure, of course that's possible. It's in fact, quite likely given what travel conditions were like in the ancient world. Did it involve monsters and sirens and witches and so forth?  
No, probably not, but it makes it very entertaining. One of the very important and famous stories from the Odyssey is the story, the parable really, of Sila and Caribbeus. This is the Sila was a mythological six headed monster, and Caribbean was a Whirlpool that would destroy every ship that went through it. Historically, nobody had ever, according to Greek mythology, nobody had ever been able to navigate it properly. And this is actually quite interesting, because in the odyssey, they discuss this.  
This actually may very well be based on a true story, because modern day historians and geographers have found that off the coast of Sicily is a place called the strait of Messina, where there actually is a giant rock. And inside that rock, there's a cave. And inside that cave, according to mythology, there's a six headed monster. And they actually did find a rock with a cave there, and across the water is a Whirlpool. Now, the Whirlpool, realistically, is not really that dangerous, and it's only going to negatively impact.  
It's going to be dangerous for really small ships, and everybody else is Like, Oh, It's no big deal, but of Course, they have to make this big deal about it in the Odyssey going, oh, anybody that Goes through There is going to get destroyed and everybody's going to Die and so forth. And so this is the story in the Odyssey. Odyssey comes up and he's warned in advance and said, listen, you're going to come across this place, on one side there's a rock, and inside that rock there's a cave, and inside that cave there's a six headed monster, and six of your men are going to die if you go through there. And on the other side is this Whirlpool, and Whirlpool's going to crush everybody, and you're all going to die if you go through the Whirlpool. Now, Odysseus odysseus was an expert, right?  
So at first he was completely dismissive about the risk. He said, come on, I'm an expert, there's no risk here. And he denied, deny, deny. He rejected it. He said, no, there's no risk here whatsoever.  
Then eventually he finally realized, okay, fine, there's a risk, but the Whirlpool, it's transitory and we don't really need to worry about it. And he insisted that he was going to be able to properly navigate him and the crew through this risk. There was one going to be any problem. But finally he eventually realized, oh my God, this is actually a really big deal. And he knew he was forced to make a very difficult decision.  
He would have to choose between the two evils and he chose the lesser of the two. He chose, of course, Sila the 6th headed monster. And his reasoning was really kind of the as I call it, the contrapositive of the needs. The many outweigh the needs of the few in that he would rather lose six of his guys than all of them. He'd rather lose six of his guys than the entire vessel and everything on it.  
So he chose the lesser of the two evils. And this parable, again, perhaps based on a true story, the Straits of Messina exist. There's a rule pool, there's a rock, etc. But they made up this whole thing about the sixheaded monster etc. But it doesn't change the parable, this very important parable of having to be forced to choose between two evils and you choose the lesser of the two evil.  
This is essentially a situation that we find ourselves in today. We have a couple more experts here on the screen. These are basically the chairpersons of the Federal Reserve in the United States since really the early 2000s. Bernake on the on the right here, Janet Yellen who took over from Bernanke and my main man JPAL, who took over from Janet Yellen. And I'm sure these are all very nice people being nothing against anybody in terms of who they are and their character and so forth.  
And I think actually, if you guys came to the event and also, I know a lot of you did. And one of the things I actually found so interesting about Dr. Malone's remarks was he was talking about fauche. And how Fauche wasn't really the problem so much as he was a symptom of the problem. As it was, the system itself was the problem that enabled somebody like that to be able to take this control over everyone and everything.  
And that's, in a way, really what this is. It's not the individuals here, it's the system itself that has been established since 1913, since they passed a law establishing the central bank in the United States. And ever since then, they've anointed this to say you are going to run everything in the economy. You have supreme executive authority to do whatever it is that you want to in the economy. And when you step back and look at that, you go, that's actually insane.  
It's insane to think that a couple of people can sit in a room and think that something as complex as a 20 plus trillion dollar economy that has literally trillions and trillions of different units, economic units, businesses, transactions that occur every single transaction, every day. When you travel, when you buy food, when you fill up your gas tank. Think about the trillions and trillions of those transactions that take place in a given year. And to think that a handful of people are going to sit in a room and they're going to push a button and just everything's going to be optimized. It's insane to think that anybody can control that.  
It is literally insane. That's the system, these people are just representative of the system. And what they did way back, going back to the GFC, back in 2008, when the world was coming to an end because all the banks were failing and so forth. And so the guy on the right, Bernacki, he's actually credited everybody, says, oh, he saved the world. He saved the economy.  
No, he just created a really big mess for everybody else to come behind him. So he's the guy that slashed interest rates down to nothing. They printed gobs and gobs of money. He went to Capitol Hill, testifying in front of Congress, and I actually made a joke about it, said a trillion here, a trillion there, remember? And it was just no big deal.  
And they kept interest rates after he left, and then Jenny Ellen took over as head of the central bank. They kept interest rates at almost nothing for a really, really long time. That has consequences. Yet the whole time, they kept saying, no, no, no, it's going to be fine. It's going to be fine.  
We're the experts and the experts have decided it's going to be fine. There's nothing to worry about. Then Janet Yellen steps down, jerome Powell comes up, and when inflation came up, these are the same people that are saying, inflation. We talk about inflation? Come on, you're crazy.  
Inflation. Come on. And then eventually they came and they said, okay, all right, fine. There's inflation, but it's transitory. And then they abandoned transitory, and they said, all right, we're going to do something about it.  
I swear to God we're going to do something about it. But later, right? And they were saying this November, December, January, February, they're saying, we're going to do something about it. I swear we're going to do something about it. And they finally did.  
And I think I honestly believe that. They honestly believe that that first raise in March, the rate hike came, and then everything was just going to be okay, and inflation was just going to dematerialize, and they're going to say, See, I told you it's all fine. And then it didn't. And they go, oh, shit. And they did it again and again and again, and inflation wasn't coming down.  
And now it switched from this conference, almost James Bond like, I got this. I got this. Don't worry. Now it's like, oh, my God, we have to raise rates. The world's coming to an end.  
We're going to do something about it no matter what the cost. And it's turned into instead of this button down, cool, professional double seven monetary policy, now it says ultrapanicky hair on fire monetary policy. And quite interestingly now they had the inflation numbers came out just yesterday, it went from 8.2% to 7.7%. And everybody's seeing the Hallelujah chorus about this. Now that it's a big deal, but that's not really how it works.  
And if you'll forgive me a little bit for going back to Case, people slept through high school economics. We all know that price is basically the intersection of supply and demand. This is very crude and a lot of this is obviously in theory and you have elasticity and inelasticity and all sorts of things, but in short theory, sir, we've got supply and demand here. So we've got the demand curve there and the supply curve and price is where the two meet. Well, what do they do?  
If you think about to 2020, what they did here was they said everybody stay home. Everybody stay home. There's a virus on the loose. Stay home. Sit in your basement like Joe Biden, don't come out, don't go outside, don't go to work.  
Stay home, get fat, eat McDonald's, drink booze, take your drugs, beat your kids, watch them as their educational development regresses substantially. But whatever you do, don't go outside, don't get fit, don't get healthy, be afraid. Watch all the fear porn on CNN and stay home and don't work. So obviously what you had as a result of that was a decrease in the amount of goods and services. So supply, if we think about aggregate supply across the entire economy, we can see a decrease in supply.  
That's that shift you see from S one to S two. There basically we have an aggregate decrease in supply. But then what they did is they made it rain. They made it rain. The central bankers came out and said it's free money for everybody.  
And so they printed lots and lots and lots of money and the government gave everybody lots of money and they came out with the most creative ways of doing it. They said, oh, we're going to do PPP. Oh, but it's a loan, it's a loan, but it's a loan that has to be repaid. So it's free money. Then they just said, you know what, we're just going to put money in people's bank accounts.  
We're not even going to pretend. We're just going to put it right in your bank account. And they come up with the most creative ways of doing it. They gave states money, they gave foreign governments money. It was just ridiculous amounts of money.  
And so obviously that stimulates demand. And this is where we started to see issues with the supply chain. We started seeing people like, oh well, I'm trying to order this, but it's not available. Whether it was microprocessors or shoes and then cars and all these things, lots and lots and lots of problems. And so we can see this here.  
Now we see demand from that original dotted green line to the blue line, it's shifting up. So we have a decrease in supply and an increase in demand. And so basically this is what you end up with. You end up with you can see the red circles here where the first intersection between the green lines, that was your old price and now you've got decrease in supply and an increase in demand and you end up with a new price. So wow, what a surprise.  
We have higher prices. We have higher prices. This is high school economics. It's not complicated. And so what are they doing now?  
Well, with the interest rate increases, what they're trying to do is by raising rates, they're trying to decrease demand, which is working, right? Because when it's more expensive to borrow money, people borrow less, which means they spend less, which reduces demand. That's the theory. And in part that's actually working. But what they're also doing is they're kind of decreasing supply as well because you've got a lot of businesses that are really over leveraged, a lot of businesses that have a lot of debt that now all of a sudden their business model depends on being able to continually refinance that debt.  
And now they can't refinance that debt anymore because capital is more scarce, the rates are a lot higher and becomes bankrupting. So you have people that are going out of business and when companies go out of business or employees get laid off, there's less supply because there are fewer people and fewer business producing goods and services. So sure, you have less demand, but you also have less supply. And so if you kind of follow the blue lines to the purple lines there, what you basically end up with is more or less the same price, maybe a little bit less, but not a material difference in your price levels. Which is why after all of this, we really haven't seen too much in terms of a decrease in our, in our price range.  
If you think about the Federal Reserve's key interest rate, they have increased it literally by 75 x from five basis points to 375 basis points. And yet inflation is hardly budged. A 75 x increase in their key benchmark interest rate has resulted in very little reduction in price level. The other part of this that's important to discuss is that you can't really fix this until you fix the supply side. And that's and we're going to hear about this a lot over the course of the weekend.  
There are a lot of things that are creating problems in supply. One of those is continuing lingering issues in the labor market. The labor force participation rate still has not recovered. It's still much lower than it was years ago. People, because of COVID and a lot of other issues have said screw it, I'm out.  
And they retired early and they quit the workforce. And meanwhile you've got a lot of Gen z interesting occupational choices. They're not going into truck driving and being forklift operators and farmers, a lot of these things. Instead they're professional video gamers on Twitch and they're posting butt selfies on Instagram for a living and all these sorts of things that don't actually contribute anything meaningful to the economy, right? And so you've got critical occupations that are being unfilled at a time when all these people are retiring and labor force participation hasn't recovered.  
So there's still a lot of issues in the labor market and that adversely impacts supply. There's a big reversal in the globalization trends for the last 30 years was an era of almost unprecedented peace and prosperity, certainly in modern history, where everybody had an incentive to just get along and play nice. And sure, there was occasional flareups and you had terrorist groups and things like that here and there, but among sovereign nations, there was a great deal of cooperation. You had even China and Russia, everybody just kind of more or less got along because it was in everybody's interest because they were making so much money. Who would want to screw that up, right?  
And so everybody's making a lot of money. And now that's reversed. Now you have countries that are saying, well, before we were doing winwin deals where we all got a lot of value out of it. But now, because of our geopolitical conflicts, now I want to block you. Now I'm your adversary.  
Now I'm going to take steps specifically to try and block you gaining. Therefore I only want to do a win lose deal. And if I can't do a win lose deal, then we'll all lose and we do a lose lose deal, which is the opposite of capitalism. Capitalism is about winwin deals where you create value and everybody gets to win and it propels everybody forward. This is the opposite of that.  
We're going to do lose lose deals, deals that are just remarkably stupid. And we see this a lot with the even the Russian sanctions. It's basically resulted in skyhigh oil prices that are actually benefiting some countries at the expense of others, like the United States. So we're seeing trends with reassuring where people realized after the, after the Pandemic and people were getting things manufactured in China, said, no, we can't do that anymore. So now we're going to bring that stuff back to the United States where we can't find labor.  
And the cost structure is so much higher. So it creates a lot of issues again in supply. And then you've got rising expenses, even for people that still manufacture overseas in places like, whatever, Bangladesh and India and different places like that, that now those costs are rising. So that was a force that for a long time had constrained inflation. But now that constraint, that force to keep inflation down, now that's going away.  
So this is also negative for supply. But one of the biggest issues by far is energy. And I don't. Want to talk a whole lot about energy because we brought one of the smartest guys I know to talk about energy. And you're going to hear from Adam here in a little bit.  
But let's just say that a man reads what he says. And I don't want to mean to pick on any one person. It's not polite to pick on people who have dementia anyway, so I'm not going to do that. But what I will say is these people have, from day one, targeted the fossil fuel industry. And now the outcome is exactly what they have engineered.  
Now they're pissed off about it. And now he's going and wagging his finger to everybody saying, you evil oil companies. And it's like, well, this is what you were wanting. You wanted them to produce less. You wanted to put these guys out of business.  
You wanted to make life difficult for them, which is why you created a mountain of regulations, which is why you are required by law to issue concessions and leases on federal land. It's not like optional. It's required by law. And they just don't do it. They just don't do it.  
And this was actually one of my favorite ones. This is a photo from this was a couple of months ago. And he was wagging his finger again. And his favorite target was always ExxonMobil. And he was wagging his finger at Exonmobile.  
And he says ExxonMobil makes more money than God, which is actually a really bad analogy given the pitiful state of Vatican finances. I think most people at this point make more money than God. If you look at it on a free cash flow basis, viktor is hemorrhaging money. They can't stop the bleeding. But anyways, what he goes on saying is, I'm going to make sure that everybody knows how much money Exxon makes.  
And you got to go, dude, it's a public company. They're supposed to report their earnings. Everybody knows how much money ExxonMobile makes because they require to report their earnings. Exxon already makes sure that everybody knows how much money Exxon makes, but he doesn't even understand the basics of financial markets. It's kind of embarrassing, but this is the result of it.  
The energy, the energy concerns, the energy issues that we have, it's not really an accident. There's so many things that they've done deliberately to create this situation. Whether this was the intended outcome or not, it doesn't matter. This is exactly what they've engineered. And again, not to just pick on one person.  
These are all the people that are now in Egypt at the top 27 nonsense where they all pretend that apparently saving the world from climate change depends on gender identity and all this stuff. They literally have an entire day set aside at Cop 27 as gender day because apparently that's what it's gender studies are going to lead us out of a climate crisis. It is so completely insane. There's not a single word about nuclear anywhere on the agenda. We can't talk about real solutions that actually work, but we're going to talk about gender identity because that's apparently going to solve the climate crisis.  
It's completely insane. So what we have here are major supply issues, long term consequences, long term implications that make supply a lot more difficult to come back to normal, right? And that's something that we believe is going to keep inflation elevated for some time. And it takes us back to what central banks are trying to do tackling inflation by raising interest rates and raising interest rates and raising interest rates. And so those increases in interest rates have consequences.  
And one of those consequences that interest rates, higher interest rates adversely impact heavily indebted entities of any kind where you talk about individuals, businesses, or even sovereign governments and you've got places like Greece, like Japan and so forth that really are in a lot of trouble if rates continue to increase. And of course, you've got the United States where the national debts basically doubled over the last ten years. It's been growing at an astonishing rate in fiscal year 22 that just ended on September 30. About six weeks ago, according to the government's own financial statements, they spent $680,000,000,000 in interest in fiscal year 22, and that's where the average interest rate was nearly at a record low. So now we've got rising interest rates.  
And by the way, I've got to say something here about this number. They pedal a lovely fiction on their financial statements where they say, oh, but that number doesn't actually matter, and they try and report a lower number that they call the net interest. And the difference between this number, which is gross interest and the net interest is say, well, some of the interest we actually pay to ourselves. So for example, we give $800 billion to the Defense Department and the Defense Department doesn't go and waste all that money immediately. They waste it over time, right?  
And so the money that they haven't wasted yet, they put in treasuries, so they earn a little bit of interest and so the Defense Department takes money from Congress and then they go and actually invest it back in US. Treasuries and they actually get a little bit of interest. And so the government likes to peddle a fish and they go, no, no, no. Well that amount doesn't matter. And you go, well, of course it matters because the Defense Department still gets that money.  
They still get the interest and then they spend that money. So it's not like it's just free money. The fact that the government sometimes borrows from itself and pays interest to itself doesn't mean that it's not actually real money that is owed and has to be paid and then later gets spent or wasted. So this money actually matters, and that number is $680,000,000,000. And that's before we factor in significant interest rate increases.  
If we look at ten year trades. Actually, if you go back ten years ago, even ten years ago, the ten year note was almost nothing. I'm going to just think pelosi right, nothing. Right? It cost nothing.  
The ten year treasury literally costs nothing. It paid nothing. And now you've got a lot of these ten year Treasuries that were issued way back when. It nothing and now has to get refinanced because when that stuff comes due, when the bonds come due, the bonds mature, the government has to pay back. But of course they never pay it back.  
They just go and borrow from somebody else, sometimes even the same person. They go, okay, we're going to refinance this. But they refinance it at a higher interest rate. Whatever the current interest rates are, they refinance it. So you go from half a percent to 4%.  
That's a really big difference. That's a really, really big difference. And so if you were to refinance a lot of this debt, you're talking about easily shooting past a trillion dollars and even getting to $2 trillion just in the amount of interest that you have to pay. And that doesn't even take into consideration the additional debt that they take on year after year after year. These people are bragging because they said, oh, the deficit was only one $4 trillion this year.  
And they think that's a cool thing. They think they've done a great job because the deficit was only one $4 trillion. And by the Treasury Department's own projections, the national debt will continue to grow higher and higher and higher and they're going to be paying new higher rates every year. Roughly 20%. 20% of us.  
Public debt has to be refinanced because the average maturity for US. Public debt is about five years, a little bit over five years. That basically means every year 20% of the debt has to be refinanced, but it's being refinanced at higher and higher rates. And so you can understand the problem here very, very quickly is that the amount of interest that the Treasury Department is going to have to pay is going to skyrocket and pretty soon edge out all other spending. That's a really dangerous scenario because if the US.  
Government were pushed into default, it would create a financial apocalypse. Everybody, nearly everybody would fall. Every bank, every corporate treasury that has, every corporation that has US. Treasuries, which is pretty much every major corporation, sovereign governments, foreign central banks, the US. Central bank, everybody would suffer immeasurably.  
Financial markets, stock markets around the world would crater. It would be so devastating. And central bankers are intelligent people. They understand this risk. They understand that you cannot push the leading sovereign government in the world into a state of insolvency where it's paying so much in interest it cannot afford to do so any longer.  
That is an actual risk. And they know this. And so therefore there is a level that they know they just can't go beyond in terms of their interest rate hikes. They know this. Even if you take the federal government out of the, out of the equation, you're talking about a lot of very heavily indebted businesses, state governments, et cetera.  
So there's a lot of pension funds. There's so many issues here because all these entities got so accustomed to zero interest rates for so long, they built up this portfolio that depends on all these things. And we've already seen this in the UK, if you guys remember, just over the last several weeks, where they had a major issue with the pound and UK government bonds with guilt because of pension fund issues there. Because you have so many of these funds that basically had to take on larger and larger risks because of the interest rate environment. So this is a real issue, and they know this.  
Therefore, if they have to choose between on one hand, we keep raising interest rates because we're desperately trying to battle this chaotic adventure in battling inflation that's not even working, and that could cause serious systemic issues, or we're just going to accept a certain level of inflation, not at the level it is today. Probably less. You know, we're not talking like seven, eight, 9%, maybe they get down to five and a half. I think they'd consider that probably a big victory. If they can stave off a major financial apocalypse, they're absolutely going to choose inflation because it is the lesser of the two evils.  
So this is, in a way, a major primary thesis of our organization. We believe that there are a number of forces that will lead to sustained higher inflation. Energy is a major factor in that. And we believe as well, that is what we observe, really, that the world is shifting from an era that we've enjoyed for so long, where there's been global peace and cooperation and easy trade, abundant energy, and now things are shifting. And now it's an era of geopolitical conflict and deliberate economic antagonism and energy scarcity and so many other things that lead to a higher level of sustained inflation.  
Now, I always have to acknowledge, hey, we could be wrong. Of course we could be wrong. And there are some factors as Putin put his tail between his legs, and there may be some signs that they're ready for a peace in Ukraine. And that may certainly happen. And I think if that does happen, there's probably going to be some at least short term benefit in energy markets.  
But peace in Ukraine won't solve the long term fundamental challenges, doesn't solve the long term fundamental energy challenges. So that may happen. But even if it does, I don't think that actually gets us out of the woods here. Is there going to be a major shift in political control in the United States? Well, we answered that question a couple of days ago, and the answer seemingly is no.  
Will there be a sudden reversal in a political ideology from the big guy? Absolutely not. And in a press conference on Tuesday, I think it was I watched it would have been Wednesday, I guess. In a press conference, he was asked by an Associated Press reporter, what will you do differently in the next two years of your administration based on the results of this election? What the people are telling you?  
And his answer was nothing. Nothing. Because he believes that he has, because they didn't completely get their asses kicked, that he has a moral mandate to continue doing exactly what he's doing. And so I don't think we can probably count on this sudden shift and everything's going to be so much easier in energy markets, and they're going to cozy up with the oil and gas companies now, et cetera. I don't think that's very likely.  
Possible, but unlikely. Does China put down its savory, completely abandoned, zero COVID policy? No, probably not. Just yesterday or today, they announced that they were going to loosen up the restrictions. So instead of Kimberly locked down for ten days, now it's going to be eight days.  
Things like this, you go, all right, maybe that's a little baby step in the right direction, but it doesn't really move the needle in terms of opening up a global economy and creating more supply. When you lock down millions and millions and millions of people across the entire province and one of the most important manufacturing hubs on the planet, you're going to have a decrease in supply, and you don't get out of an inflation situation until you can fix the supply problem. So China is definitely a major factor in this. Will it be a major oil discovery? Could be, but given the sort of political and regulatory headwinds, it makes, it a little bit unlikely they'd be able to exploit that.  
Are they going to suddenly change their minds and embrace uranium and nuclear power? Possibly, but doesn't really look like it at the moment, given what's happening at Cop 27. So there's all these issues where I fully acknowledge and say, well, hey, we could be wrong about some of these things, and there may be some things that we're not even thinking of, but we feel like we're on pretty safe ground in assessing an outlook that is more inflationary. By the way, an inflationary outlook coincides with literally 50 years of human history. History is inflationary, period.  
And don't forget about Social Security. We have eight years before there's going to have to be a massive multi trillion dollar, probably ten to $20 trillion bailout of Social Security. Nobody wants to talk about it. Nobody acknowledges it. The only people that actually do are the people that write the Social Security Annual trustee reports, including the Treasury Secretary of the United States.  
Don't take my word for it. Just read the Social Security Annual Report of the trustees, and they say, in black and white for anybody that actually cares to want to read this stuff. They say we are going to run out of money in this year. Circle a date, put it on your calendar and it's probably going to be accelerated given that now they're having to pay the highest cost of living increases in history, in the history of the program. So that's probably going to accelerate the date that the entire reserve and the trust funds are depleted.  
That's going to be a huge problem. And so either they're going to say, well, tough luck everybody, we're going to have to cut your Social Security benefits. And they actually say this in their report. They say, oh we can slash it something like 30%, 40% and we could slash everybody's benefits and then it won't keep up for inflation, obviously, because they won't have the money to do that. So over time it's going to be less and less and less, which is going to cause a major social crisis in the US.  
Given how tens of millions of people are dependent on Social Security. Or they got to figure out a way to bail it out and they're just going to print the money to do that because they don't have the money. They don't have the money. They don't have any financial assets. The only few financial assets they have on the government balance sheet are student loans and you got the stooges there trying to get rid of it.  
So no, no, we don't want this asset. Fortunately, they're actually blocked by a federal judge just yesterday, I think. So we'll see what happens with that. But this is a huge issue. So if we think about over a longer period of time, literally over the next decade, and you factor in things like Social Security and the need to actually bail out this program, the argument for inflation again feels like you're on even much more solid ground.  
So when we think about this, I'm just going to go ahead and call it stagflation because everybody's talking about recession. It's up to the National Bureau of Economic Research. Nobody else is entitled to an opinion. There's a bunch of experts that sit in a room and decide whether or not we're in a recession or not. Maybe we are already, maybe we're not.  
But if we are or we're heading that way and we're in inflation, that means stagflation. What works well in stagflation? Well, we're going to talk about a lot of these things this weekend, but real assets really make a lot of sense. Energy makes a lot of sense. Adam is going to tell you a lot about this and I'm really excited for those remarks.  
Agriculture makes a lot of sense. Mining makes a lot of sense. Productive technology, which is different than consumer technology, the things that people just sort of swipe and scroll and actually make us less productive because you got an entire generation of people staying on the phones all day can't look up swiping and scrolling, scrolling and swiping like zombies, right? That makes us less productive. I'm talking about productive technology that makes things better, faster, swifter, cheaper, just overall propels our civilization forward.  
There's a lot of really interesting technology out there. You're going to hear from somebody about that today who's got a hell of an idea of what they're already doing and just killing it. Businesses that produce valuable goods and services, there's a lot of really great ways to invest. And this isn't uncharted territory. We've seen this before.  
We saw what happened in the 1970s. Real assets did very well. Energy companies, all companies, did pretty well. Exxon stock, this was back when they weren't combined with ExxonMobil. Exon stock did pretty well.  
Exxon between dividends and cap, gains average about 12% a year during the 1970s, precious metals did phenomenally well. Precious metals were up 20 x and more. Agriculture, farmland did extremely well in the 19th century. So this is not something that we have to be clueless about. We can look to history and see the things that have worked in the past.  
I want to leave you with a simple message in saying that this is not the end of the world. It is not the end of the world. I actually just finished this book called 1177 BC the Year Civilization Collapsed. Remember when I told you that the Mycenaeans faded into history around 1180 BC? This was a real thing that happened in history.  
And I actually I'm so fascinated by this period. And it's really almost prehistoric because of very few records that exist. There are some records in the Egyptians. We owe a lot to the ancient Egyptians and the scribes that they had in the writing system that were really, really on it. And there's a lot of what we know actually comes from the Egyptians.  
And this is a really fascinating period of history. It's called the Bronze Age collapse because you had all these civilizations right around the same time. And the author of this book, they picked 1177 BC as the year, but it was happening over a period of really of several decades, but over a relatively short period of time, you had literally the collapse of multiple civilizations. The Hittite Empire, the Mycenaeans, the Minoans, the Trojans, the Babylonians, the Amarai. There are so many different cultures and tribes and kingdoms and civilizations that just ended.  
They just ended. They ceased to exist. And a lot of historians have studied this and tried to figure out why. And the record, both the historical record, the archaeological record a little bit shy of details, which is why there are so many different theories about this. But the Bronze Age collapse is often cited for with a number of different reasons.  
One was climate change. They point to climate change. There were volcanic eruptions that caused really significant declines in agricultural output because they didn't have enough sunshine, literally not enough sunshine in order to produce their food. And so there were people that caused mass starvation and famine and so forth. They had a very powerful enemy, one of the most mysterious enemies in human history.  
A group that historians referred to as the Sea Peoples, some people actually claim might have just been refugees, possibly from Troy. They just started combing down through the Levant in the Mediterranean, just destroying kingdom after kingdom after kingdom. They were angry and they were very powerful. There was also a lot of some evidence that there was a pandemic. And the pandemic could have wiped out a lot of people and a lot of civilizations.  
A collapse of trade that there may very well have been an issue with the tin trade. And tin again was the most important commodity at the time, like oil is today and scarce resources, et cetera. We don't really know for sure exactly what it is, but we can look to history and see that there were possibly quite a lot of forces that literally pushed all these civilizations out of existence. But the good news is it wasn't really the people so much that went into decline. It wasn't human civilization itself that went into decline.  
It wasn't the system. It was the empires. It was the governments. It was the systems that were in place to say we're going to have a king and the king's going to make all the decisions. We're going to have this ruler and the ruler's going to make all the decisions.  
We're going to have a pharaoh, we're going to have a whatever, and this person is going to make all the decisions. It's crazy. It doesn't work. And that was the civilization that was the system that collapsed of giving all the power and all the authority to one person, to a single expert that gets to lord over all the peasants and the commoners and say, I and I alone can tell you what to do. I and I alone can deliver us from this crisis.  
That's the system that collapsed. It wasn't like everybody just spontaneously combusted. The people were okay. It was the system itself that collapsed and most notably was replaced by a new system because after this happened, 1177 BC. Over time, a new system developed.  
What we consider the classical Greek civilization of ancient Greece, of ancient Athens world. This is where we do have Socrates and Plato and Aristotle and Pythagoras and Hippocrates and all of the people that made a major impact on all the future. Human civilization came out of the came out of the collapse of the system from the Bronze Age collapse and the democracy, the new system where it wasn't all of a sudden one person gets to lord over everybody else. It was everybody else got to decide in a new system that flourished, a new civilization that flourished, where intellectual property flourished, where the economy flourished, where trade flourished, and everybody was better off because the old system collapsed and it was replaced by a new system. And I think, absolutely, that is what we're in for.  
I think that is absolutely what we're in for. Because there have been so many examples of the last few years of the system that we have right now that is just not working. And our future story won't look exactly like this. It will take its own story arc. There will be all sorts of fantastic things, and perhaps future storytellers will insert their own elements about what happened in monsters and beautiful women and all sorts of things.  
But most likely, we're on a much, much higher trajectory with a new system in place where, just like the ancient Greeks, they had a new system of government, they had a new system of delegation, they had a new system of trade. That a new system of money. That a new system of economy. Everything was new, and it worked. And they flourished.  
And so will we. And that's why when we see everything happening in the world, look at energy or we look at climate, we look at politics or whatever, it's okay. It's okay because there's something better coming. We don't know exactly what it looks like, but it will absolutely be based on a true story. And those are my remarks.  
I appreciate your time and attention, as always.  

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