American Consequences

You've reached your click limit.

You're approaching your click limit.

Subscribe to American Consequences to keep reading completely FREE, and get access to exclusive articles and our monthly magazine.

Please provide a valid email address.

American Consequences logo
Twenty dollar bill: Close-up, abstract, colorful

The Fed: All Dollars and No Sense

Episode #30  |  April 7th, 2021
Listen Now

In This Episode:

Globalism, meet socialism! Treasury Secretary Janet Yellen recently called for a mandatory minimum global tax for every corporation, intending to raise rates from 21% to 28% for “a more level playing field.” The Fed and D.C. are playing a dangerous game with our financial lives right now. We need competition for capitalism to thrive here and abroad and trying to legislate it out smacks of socialist re-engineering. Neil Grossman, a former senior executive at the Central Bank of Norway, returns to elaborate on the Fed’s malignant, negligent policies — and how to remedy them. The two also discuss hyperinflation, the market asset bubble we’re in, and how much the American taxpayer owes the rest of the world.


Neil Grossman

Former European Central Banker, former hedge fund investor, physicist, mathematician and attorney with an interest in constitutional law
Neil Grossman spent the last two decades in the financial industry working as a proprietary trader, asset manager and market-maker. In particular, he has traded liquid products in major markets around the globe, with particular emphasis on arbitrage-related strategies.

Episode Extras:

  • You can’t ignore the laws of physics, gravity, or economics, and America right now is spending itself into oblivion.
  • From 2010 to 2019, cumulative GDP growth was roughly thesame we’ve spent in the past year in COVID relief.
  • From Black Monday of 1987 to the 2008 Great Recession, America’s financial crises can nearly always trace back to incompetent Fed policies. 
  • The trillions in spending right now may lead to hyperinflation, with our economic landscape resembling that of Germany in the 1920s. 
  • The U.S government’s elected to serve the American people and not the global citizenry at the American people’s expense.


Trish Regan:               Globalists and socialists unite? It’s getting really crazy out there. Hello, everyone. Welcome to this week’s edition of American Consequences With Trish Regan. And Janet Yellen is telling us they want to actually put in a mandatory minimum global tax – a global tax that every company anywhere around the world is going to have to pay just for doing business so that they can rework the world in a socialist-style place?


I’ve heard a lot of things throughout my careers and a lot of dumb economic ideas. This might actually take the cake because I don’t know how egotistical you have to be to think that every other country is going to get in line and say, oh, sure, we’ll raise rates to 28%. That’s what you want, Joe Biden? Sure. Why not?


Ireland with 12%, you think they’re going to go for this? And China, meanwhile, good luck. Listen, we need competition. Competition is what makes the world better. It’s what makes America strong. And for them to try and legislate competition completely out of the scenario, well, that’s a dangerous path to go down.


Meanwhile, let’s talk about this market – this market that just keeps going higher and higher and higher and higher because my next guest who’s coming on says that’s not sustainable. He is very bearish. He’s been pretty bearish, well, for a lot of the time that I’ve known him. He watches carefully what the Fed is doing, and he worries that there are no consequences for anything, right?


So consequently – play on “consequences” there – we’re living in an environment where there’s no rationality to anything. In fact, the Fed is acting as an enemy to rational thought, right? Because if you’re a rational player, you’re like, huh, this is a lot of money, $20 some odd trillion that we’ve got in U.S. debt now.


Gosh, that’s bigger than the size of the U.S. economy. And by the way, it’s been growing and growing at a much faster pace in recent years, just in the last year, frankly. So, a rational person – a rational investor – says, gee, I don’t think this makes a ton of sense. And by the way, the S&P trading upward of 30 times earnings… maybe that doesn’t make so much sense either because don’t we have to pay this back at some point?


But then again, you’re being the rational player, and the danger in any kind of market environment when you lose that core yin-yang, that push/pull that involves normal marketplace sentiment, where you’d say, hey, maybe there’s some risk in this – when you toss risk out the window, you lose your way. We have lost our way as a nation when it comes to all this spending.


And by the way, if you read my piece on the grid, you know how worried I am about that. You know that I’m not against entirely infrastructure spending. I just want it to be spent right. And you can’t just come up with these grand social schemes and then stuff it into the infrastructure bill. That’s not going to fly… $400 billion to retrofit affordable housing kind of sounds more like social stuff to me. $200 billion to help with elderly care, again, kind of sounds like social stuff.


Not that it’s not worthy, right? We want to be as good a place we can be for as many people in this country as we can be, but we also have to think about what is actually realistic and what we can handle and what actually we can be accountable for. And there doesn’t seem to be any accountability anymore at all in Washington, D.C. So, this is what we’re going to dig into.


My friend who’s joining us, he’s really just a tremendous, tremendous guy, somebody I’ve known a long time, a former lawyer. He’s a former hedge-fund operator. He was a former central banker. You name it, Neil Grossman has done it when it comes to the space of finance, math, law, and science. So, it doesn’t get any more real than this, and I am so happy to have Neil Grossman back on the program with me this week here on American Consequences With Trish Regan.


Neil, I know you always get a little bit embarrassed when I say all that, but really and truly, you’re like one of the smartest people I know with all the degrees and the career chops to back it up. So, I like to highlight that.


Neil Grossman:           Thanks, Trish. I do appreciate it. At least you’re talking about physics, which I still feel I’m in touch with. But what’s going on around us in the world, I feel totally out of step, to be honest with you.


Trish Regan:               Well, I don’t blame you because look, I think any rational person looks at what’s happening right now and is a little bit shell-shocked. I am for one. Well, I knew this was sort of coming, but I’m just still going, wait, what’s happening? They want to spend how much money? And the Fed wants to keep printing until 2024? How’s this going to work out?


Neil Grossman:           Look, if you took a step back and forgot about what’s actually in the infrastructure plan for the moment, and you hadn’t spent $5.8 trillion in the last year in form of handouts and all this other stuff, and somebody said the United States is underinvested in infrastructure for the last 40 or 50 years, which I think most of us wouldn’t necessarily disagree with, you would probably not argue with the idea that there are some significant investments that need to be made in the base structure of the country to maintain and hopefully improve competitiveness and to make lives more seamless, etc.


The problem is this is not in a vacuum. And on top of everything else, what we’ve already spent, nobody wants to ask the question, are there are any fiscal consequences in the large that are hanging over us like a sword of Damocles? And you know my view… you just can’t ignore the laws of physics or gravity or economics, and I think we’re spending ourselves into oblivion, unfortunately.


Trish Regan:               You’re not the only one who feels that way. Larry Summers, of course – the noted economist who used to work in the Clinton White House as Treasury secretary and then in the Obama White House as head of the National Economic Council – he’s come out swinging on this. And I have to give him a little bit of credit here because that’s not easy, right? You’re sort of going against your own team there, given how many Democrat administrations he has served. But to me, this doesn’t need to be political.


To me, this is just what’s good economics, what’s bad economics. I wasn’t crazy about the second round of stimulus the Trump administration put in because they said we can’t afford it. The first one, I get it. I got it. Everybody was reeling from the aftershocks –or the immediate shocks, I would say – of coronavirus, and the economic fallout was severe. But we were starting to kind of get our footing. And so, we didn’t need that second round in my view. I think you probably agree with that.


Neil Grossman:           Yeah, nor do we need the third round. And by the way, Trish, even if you want to argue that there were small amounts of targeted recipients that might’ve needed help, in the large, just handouts of trillions – again, the problem is we talk in theory, nobody even wants to look at the numbers. Understand we spent about $6 trillion in those gift packages in the last year.


And we measure economic progress by GDP gains, increases year over year. In the 10-year period between 2010 and 2020, more or less cumulative GDP growth during that decade was less than we spent or just about the same amount we spent in that nine-month period or allocated to spend, which is a staggering number. Even more impressively to me, in a sense – and this is where the worries are really starting – you have to understand, when Bill Clinton left office, the U.S.’s outstanding debt was about $4 trillion. When George Bush left, it was about $8 trillion. When Obama left, it was about $16 trillion.


When President Trump left – I’m going to leave the last year –more or less before that last year really kicked in, it’s about $20 trillion. In the entire history of this country, right before Donald Trump left office, we had managed to accumulate a $20 trillion liability. And, of course, that ignores all of the unfunded stuff we’ve talked about. U.S. GDP was about $20 trillion at that point. So, we’d managed over the last two decades to watch our debt to GDP grow from about 45% or 50% to about 100%.


The amazing thing, Trish, is at the end of fiscal 2020, which ended I think in September, maybe October, I always forget… that number had gone from $20 trillion to $27 trillion. I believe when we stopped –


Trish Regan:               Say that again, Neil.


Neil Grossman:           It had gone from $27 trillion in one year. I think, and again, we’ll see what the numbers come out, but I’m guessing that this year, that number will go from $27 trillion to say, $33 trillion to $35 trillion. So, let’s use $33 trillion to $34 trillion for fun. And although it’s very hard to see into next year, I’d be shocked if that number doesn’t go to someplace between $37 trillion and $40 trillion by the end of fiscal 2022. So, understand that in a three-year period, we will more or less have doubled the outstanding debt of this country. That’s a staggering, staggering number. That is one of the reasons you start to worry about things like not just simple inflation, but lots of inflation.


That sort of acceleration in liability streaks – and remember, we’re only a handful of years away from when these things start to grow. And those unfunded liabilities that are attached to things like Social Security and other long-term liabilities start to hit the cash accounts as well. And those numbers will grow really fast. Questions like, looking backward, the German hyperinflation in the ’20s start to come to mind, those sorts of worries.


And again, with it, Trish, the Fed is artificially holding interest rates down. And under the surface of all the arguments about fiscal support – and you and I have talked about this for a generation now – I think there’s a very strong argument, and I’ve been hopping on this really for 20 years, that these ultra-low rates actually impede growth. However, I think they now understand that on the other side, given the acceleration in how much we are spending, at $33 trillion of debt, every percentage-point increase we’ll hit the country’s bottom line by $330 billion.


So, if we were to move to what would be considered a more normal interest-rate environment of say 3% to 4% Fed funds and maybe 4% to 5% average funding cost across the curve, you’re talking about $1 trillion to $1.5 trillion a year at these debt levels of incremental per annum cost and debt service. That’s 5% of current GDP.


Trish Regan:               Right, and it just spirals out of control from there.


Neil Grossman:           It’s very easy when you come into office, you don’t want to pay attention to these problems. You don’t want to find yourself handcuffed by constraints that argue against doing what you want to do. And maybe you wake up in three, four, five years and we’re talking about $40 trillion or $50 trillion outstanding. We’ll see what this all brings.


Trish Regan:               One of the things that Joe Biden apparently did, reportedly did, was he invited a lot of economic historians and academic historians to the White House, and they sat down, and he said, “Look, I want to go big. How will history regard me?” And, of course, the academics around the table – I wish he had invited Amity Shlaes who wrote a brilliant book called The Forgotten Man that looks at the real economic history of what happened during the Great Depression and how so many FDR policies actually prevented our economy from getting started again, Neil, as opposed to really revving up growth.


It wasn’t until World War II, where you saw legitimate demand for things in manufacturing, that we actually were able to get out of the depression. But anyway, he had a lot of academics there who said, “Listen, history will regard you very, very well.” And I’m like, I’m not so sure about that. I mean, one, I don’t want a World War III, clearly, to pull us out of this. And two, if what you’re saying, Neil, is true – and I believe it is because I’m just a simple girl who is not a mathematician or physicist like you, but I know that one plus one is two – I don’t know how there’s any other way to manage our way out of this mess in the coming years.


Neil Grossman:           I’m not really sure. Again, you talk about points of no return. I’m not sure there is a pleasant way ultimately out of this mess. Sooner or later, you’re going to have to take your medicine. I love this analogy. Again, coming from my physics and all that stuff – you know, I wanted to be an astronaut when I was a kid, and unfortunately, I was a little too tall, but I remember very clearly Apollo 13.


And when that explosion occurred on the spacecraft, if you go back and look at it, NASA responded with an amazing speed in reaching a decision to adjust the spaceship’s trajectory to allow the moon’s gravitational field to bring the spacecraft back to earth. If NASA had waited another hour or two hours, maybe even less than that, that spacecraft would probably be someplace maybe halfway to Alpha Centauri outside the solar system by now.


I think the same thing applies to the structural approach we’ve taken to economics. I call it “ostrich economics.” We bury our heads in the sand because the consequences of dealing with the reality of some of the stresses and strains we’ve created are too painful, and we just keep rolling it forward. And the consequences of when these problems occur grow and grow in magnitude. And ultimately, you hit a point where no matter what you’re going to do, the pain is going to be overwhelming. I think we’re past that point right now. Nobody wants to deal with it.


Trish Regan:               You and I have talked about this in the past. And one of your points, which is quite eloquent, is that if you go back in time, pretty much every economic crisis – and we haven’t had that many systemic crisis, but you’ve had asset bubbles, for example. In 2007 into 2008, you had an asset bubble that became a systemic problem in our global marketplace. But if you look at the underlying reasons for a lot of it, and there’s certainly plenty of blame to go around, but frankly, a lot of the blame can go right on that Federal Reserve.


And by the way, the government typically isn’t great because they’re willing to spend so much, but nonetheless, the Fed has been quite willing, ready, and able to make money pretty plentiful and pretty easy. When I look at what’s happening, say with Bill Hwang’s hedge fund right now and the dark pools of cash that were sort of unaccounted for, it was like the banks were looking the other way, Neil, until the chickens came home to roost.


Credit Suisse has taken a $4.7 billion charge and executives leaving. How is it that this stuff just like bubbles up and then it sort of boils over? And I guess the question is, if that happens to enough players, you’re jeopardizing the entire system, right? There’s a fragileness there that maybe shouldn’t be there to begin with.


Neil Grossman:           There is the narrow area of where a problem occurs, and then there’s the question of interconnectedness. So, for example, in 2007, every financial player was interconnected. And so, credit deterioration hit them all at once, and you ended up with a snowstorm or a tsunami, rather. What happened with Hwang, I haven’t looked into it too much. Obviously, leverage was a big factor, and leverage across bank to bank to bank to bank that nobody, I assume, it seemed was aware of.


So, when the house of cards came down, it was pretty bad, but luckily so far it appears that it was limited. But it goes back to the same problem we’ve seen over and over again. A central bank that makes money almost cost-free and risk-free and in this case, another one I think one of my friends said – I mean the bottom line is this Fed has said this is not a time to consider moral hazard.


Well, what better time to consider moral hazard than when you’ve inflated a bubble and all anybody keeps doing is taking risk and the belief that they can’t lose? And so, that’s how these problems occurred. And before you even get to 2006, 2007, the Nasdaq bubble and long-term capital were both consequences of relatively inexpensive money with a central bank. I’m going to go back to Mr. Greenspan’s 1996 speech about irrational exuberance trying to drive the financial system.


Trish Regan:               If anybody reads Neil’s writing – and by the way, he’s got some terrific pieces on But Neil is a wonderful writer. And if you appreciate colorful terminology, I think one of them is “Ali G” – Neil’s nickname for Alan Greenspan. But I’ll let you continue on because he had a hand in this long-term capital thing.


Neil Grossman:           It was Ali G., and of course, it was Bubble Ben. But you know, again, the problem was relatively inexpensive money. Again, if you really go back – and I’ve been doing this a long time. When I was first starting and on the financial side, leaving law, we had a sort of massive meltdown in 1987. And a number of us, including me, sort of felt that the reversal in the markets, although it was attributed to some market players, had the hand of god in it. But somehow or other, the Federal Reserve had frustrated intervention by using some of the major financial players to turn the markets around. And there was a term that came out of this called… I think they called it the PPT, the something protection team.


Trish Regan:               We had a PPP recently. Maybe this was a different PPP.


Neil Grossman:           Yeah. My memory is going on me. I’ll remember it, but the plunge protection team was what the terminology was. That somehow or other the Fed was there to have your back if things got bad. And the irrational exuberance speech a number of years after that sort of was trying to try to chide markets it seemed into understanding that type of risk protection wasn’t necessarily going to be there. But Mr. Greenspan immediately backed off his lecture, and the market started going straight up and, again, the same leverage factor started to accumulate.


And 1998 came along and all of a sudden, there was the long-term capital crowd, and all of these leveraged plays. Now, some of the leverage in this system is not the type that brings down the system. The long-term capital not only was doing what you would consider more traditional fixed-income arbitrage. By the way, the long-term capital folks had come out of Solomon Brothers, and this is something that had been developed over time. But all of a sudden, they were doing trades involving risk arbitrage. I remember they had the United Airlines risk arbitrage trade, which went bad, and they were playing with emerging markets. They had all these equity options structures on.


Trish Regan:               All kinds of problems. You know, Neil, my first job actually was right after long-term capital, and I was at Goldman in the emerging markets group. So, I was very familiar with some of the things that had happened there. I would say this though… For as much as we want to pile on some of these aggressive players, what’s fascinating to me though, is a lot of the liquidity that’s available to everyday consumers and to homeowners, a lot of that does come from the sophistication of some of these products. So, I don’t blame them entirely.


Neil Grossman:           Absolutely. I don’t argue with allowing things to be done. And in fact, the mortgage securities market, which dates back to Lewis Ranieri at Solomon Brothers, and then the Fannie and Freddie Mac structure of generations ago were designed to help consumers have access to reasonably cost money. But what a consumer used to pay even reasonably cost was so far higher than what a major player would play.


But the problem wasn’t so much the products, the problem was the central bank making the cost of the underlying money so cheap that the leverage factors could increase to such an extent that the unwind was impossible to cope with. And that’s what happened with some with this long term, and that’s really what happened with the Nasdaq. And that’s what unfortunately brought the system to the brink of catastrophe in the crisis, the great financial crisis. And we keep doing that. Every one of these moments where they talk about temper tantrums and this and that, all of it is tied to excess leverage with the inability of normal participants to say I have some excess capital here to put into the market that will provide stability.


So, we destabilize the market to such an extent with risk and leverage that the unwind is like watching the World Trade Centers fall in the last few seconds of their life. And it’s going on again. My favorite phrase these days, and you’re kind enough to keep repeating, it is the Federal Reserve is the enemy of the rational.


Trish Regan:               That’s what I’m calling this podcast. Today’s podcast is entitled “The Enemy of the Rational,” direct quote from Neil Grossman who, listen, you called it in 2007 and as we went into 2008. I didn’t know you as well when the tech bubble was bubbling up, but I know that you’ve told me since on a personal level, and you were pretty smart about that one. And I don’t dispute, by the way, that we’re in an asset bubble. I’m fully confident when – what are we trading at? More than 30 times earnings on the S&P?


Neil Grossman:           Probably trading between 60% and 100% of historical average prices. t


Trish Regan:               OK. So, this is a bubble. And the question is, what pricks it? I’m a realist, and so I want people to be invested smartly and diversified in this market right now because I don’t want the ship to sail right past them. I watch our bond markets coming from the fixed income field originally anyway pretty closely.


And so, I’m watching the 10-year yield and I’m sort of shocked that it hasn’t risen more in light of what’s going on. But maybe that gets back to what you’re saying with the Fed and there’s so many asset purchases. Do you think if the Fed said, OK, we’re not going to keep buying up bonds like where would interest rates be, Neil?


Neil Grossman:           A couple of things on that. First of all, there’s what they’re actually doing, and then there’s also what they’re saying. And again, I think there’s an element in the market that’s very afraid of taking on too much risk that is in opposition to what the Fed – again, you’ve got basically three or four academics sitting there trying to tell everybody in the world that there’s only one way to do it and it’s their way. And God forbid, you should try and cross them. They will destroy you.


Again, this is the distortion in the market. There is no natural equilibration going on because, unless you time it right – and by the way, the Fed didn’t win in 2007 and 2008 to begin with. Ultimately, they brought the system back into control, but you’re going to have to potentially take an awful lot of pain fighting with these people. So, again, it’s arguing against being rational. You can’t behave and do things that would be intelligent in a normal market like reducing risk and allocating here and there because they’re telling you that they don’t like that and their goal is to hurt people who do things that they don’t like.


I’ll give you an argument… Let’s take a look at some of the statistics, which are quite interesting. This is an amazing one to me. The Treasury now – and this is going to go up – but it’s issuing about $325 billion a month in two- to 30-year Treasury securities. So, just under $4 trillion a year. So, think about this. We’re now issuing every year with the entire outstanding debt of the United States was 20 years ago. Of that $325 million, a significant portion of that ends up being purchased by what you would call rollover debt – debt that major players are holding that are coming due and they’re reinvesting.


The Fed is adding another $80 billion to $100 billion dollars, I believe, a month of buying. And so, between them, they’re occupying a reasonable portion of the buying, which maintains stability. However, think about this… the Fed’s balance sheet is $7.5 trillion give or take. They’re buying about $100 billion a month. And that means in the next, say, three years, at where things are going, their balance sheet is going to be pushing $10 trillion.


In the meantime, as we’re also discussing, given the rising level of U.S. debt, by that point in time, probably the Treasury is issuing $400 billion to $500 billion a month, and so, you’ve got the following. The Fed, to get out of the way, has three things it’s going to have to do depending on the backdrop. They’re going to have to stop buying. By the way, this as I understand it, is going to be the order that the Fed tries to get out of the way.


One, they’ll stop buying. Two, they’ll raise rates. And then three, they will reduce their balance sheet. But if the Fed is forced because of inflationary pressures or other liquidity problems to sell, if they want to reduce their balance sheet at a reasonable pace, at $100 billion a month, it’ll take them years to reduce their balance sheet. But even at that minimal amount, you’re going to have stopping buying and adding $100 plus billion a month. The markets are going to have to absorb $600 billion, $700 billion of Treasury securities on their own.


That’s going to be a very, very difficult thing to do. And my guess is, Trish – and we can get into this in a moment because I know you’ve talked about it – based on what Chairman Powell said, which again, I almost thought was bordering on gross negligence, and I’ll explain why in a second, I think there’s a reasonable argument that within 36 months, you’re looking at a 10-year note between 4% and 5%.


Trish Regan:               Wait, but is that with the Fed still doing what it’s doing, or is that if we were to take away the Fed’s buying of these securities?


Neil Grossman:           Well, it could be both, but let’s look at why. I mean, listen, if the economy is collapsing by then and prices are dropping, it’s a different story, but on the assumption that the amount of money that is cascading toward us doesn’t stop for the moment, then the economy has some measure of underlying support for the moment and prices are rising. By the way, CPI should print 3%-plus by June. It’ll moderate a bit as he says, but I suspect we’re looking at a 3% area.


Trish Regan:               OK. That’s inflation.


Neil Grossman:           That’s inflation. But here’s the amazing thing to me. So, this is a body that has been begging the federal government to help them achieve whatever their goals are by spending money. They spent money at an incredible pace. At this point again – and we can argue what the real effect on the unemployment rate is – but based on the last employment report, we’re already down to about 6% unemployment.


The Fed is predicting solid growth over the next few years in large part due to fiscal policy. The Fed is predicting unemployment dropping to a historical low of 3.25% by the end of next year, I believe, end of 2022. They’re also predicting just 2% inflation. There’s no possibility in their head of anything bad going on.


But with that staggering economic background, and the amount of money that’s, again, “cascading” seems the right word right now, out of the Treasury, they’re telling you that there’s virtually no possibility that they are going to even think about raising rates for a long time, and they don’t believe they’re going to have to be raising rates before 2024. Now, I find that an impossible way to understand their primary mandates of employment and inflation. If we’re over around 2% – I know, again, they’ve self-serving, redefined inflation to be some sort of averaging function now.


But with all of that in the background, for them not to understand that there are black swan events – and I will give a nod to Mr. Taleb with that wonderful book he wrote years ago, Nassim Taleb – they don’t want to understand that they’re bringing into play black swan events at a fairly high probability. And to tell people and to try and insist that people not worry about risk because they’re not going to do anything that they’re supposed to seems to me to just be almost beyond belief.


And if we see with the creation of rising debt and prices rising, irrespective of what they say, I think there is a growing risk that long-term interest rates are going to be forced to go much higher than anyone wants to anticipate. Of course, the consequences of that are probably going to be on the other side, which the stock markets, which are hyperinflated to implode.


Trish Regan:               And then you’ve got more than just a market sell-off, right? Then you’ve got, I fear, systemic problems as you try and recover in that kind of environment because you’re going to be left with a Federal Reserve that will have no choice but to, if you’ve got that much inflation, raise rates at a time when you can’t really be raising rates, if you’ve got a bubble that’s just popped.


Neil Grossman:           Right. That’s the problem. So, I think, again, they’re self-defining their own behavior. Again, this goes back to some of behavioral economics. I think they’re arguing to themselves that the consequences of doing what they’re supposed to do will precipitate a situation where they believe they’re going to have to react by intervening in asset markets again. So, they’re self-justifying not doing what they have to do because it’s going to force them to do what they don’t want to do. It’s sort of a Gordian knot at this point.


Trish Regan:               And if you think about the hyperinflation in Germany in the 1920s, they were coming out of the first World War and they were paying off all those debts that they had – like a huge amount of debt – and then they just printed money. They printed and they printed and they printed.


Neil Grossman:           Sounds familiar, by the way.


Trish Regan:               Yeah. We’ve got different kinds of – I guess we were at war with COVID, as the president has said. I keep pointing out, the good news is Mr. President, we seem to be near the end of the war. Let’s hope we are. And so, why are we spending money at the end of the war? Again, I didn’t have a problem with it initially. By round two, round three, round four… and like you, Neil, by the way, I don’t disagree. I did a big story actually for American Consequences –it’s on – on the dangers that are presented via our electrical grid that just hasn’t been updated.


Neil Grossman:           Oh yeah, we talked about that as I recall.


Trish Regan:               Yeah, we have. I think I quoted you in it because I was like, you’re a physicist, help me understand this grid and its vulnerability and what an EMP is and what that would look like. So, look, I’m all for spending money where you need to spend it and doing so judiciously, but not just throwing everything at the wall to see what sticks. And this we’re told, anyway, is just round one. They’ve got another round coming up in the coming months for childcare and health care expenses.


And so, I have a feeling there’s going to be a lot. Like I said, I mean, he’s emulating FDR, but FDR’s policies at the end of the day really were not the things that worked to get us out of depression. In fact, Amity Shlaes and some other financial historians would tell you they left us mired in depression for a while with eight years into FDR’s spending and an unemployment rate that still averaged 18%. That’s not exactly success.


Neil Grossman:           No, but I’d also point to Japan, Trish. I think the same problems are suggestive when you have overextended economies and overextended asset markets that are so unstable and so distorted, the unwind processes last extraordinarily long periods of time. Again, I believe the move to ultra-low rates only embeds those problems. I think a lot of the economic structural issues of the last three quarters of a century can go back to some of the stuff Roosevelt unleashed.


But Roosevelt, I think was really much more economical. Even at my advancing age, I’m a little too young to remember Roosevelt too well, but I think he was focused much more on the economic consequences. I think what’s going on and what you’re talking about is that this is actually a social reengineering. And the economic consequences of that social reengineering are in second place or less important than the social issues.


So, all of these things, no matter what they cost and what they’re doing is to try and functionally create a redistribution to implement social policies that the progressive wing of the Democratic party has prioritized and is now extending across the board economic sway. Even Mrs. Yellen, if I listened to her correctly, Trish, I think she’s talking about, not only this country, by the way, but she’s talking about socially reengineering the world at the expense of a small portion of the American economy.


Trish Regan:               Oh, this is Janet Yellen. Yes. And I do believe that we have that sound. I want to play it for our listeners right now because this is wild. I mean… I just… my jaw dropped to the floor. I shouldn’t be surprised, but nonetheless, I am. Here we go.


Janet Yellen:               We’re working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom. Together we can use a global minimum tax to make sure that the global economy thrives based on a more level playing field in the taxation of multinational corporations and spurs innovation, growth, and prosperity.


Trish Regan:               OK. There’s a bit to unpack there. Look, I think Janet Yellen is a bright woman. I have a lot of respect for her, I really do. And it’s wonderful, first female Treasury secretary, first female head of the Federal Reserve, but I’m like, what the heck? Were they just like sitting around smashed out of their minds when they came up with this idea that somehow the rest of the world is going to be OK with us dictating their tax rate?


We decided it’s 28%, so, hey, guess what? Ireland, instead of 12%, we’re going to require 28%. Neil, the egos that have to be involved in this – let me just say for one… off the charts to think that you can dictate the rest of the world, not to mention they want to strip away any ability for people to compete and for countries to compete. And to your point, they want to reengineer all at the expense of American businesses?


Neil Grossman:           Look, there are some good words in there. I think she used some other terms in the course of that, which goes back to the social engineering as opposed to simply the economic. Listen, something that spurs global prosperity – OK, nobody really should really want to argue that. Although, again, one can ask at this point in time looking backward whether they have the flexibility to cause an outcome like that because of the other consequences of what we’re looking at. But you’re right.


First of all, let me take a first step. I sent you something out of the Constitution this morning, which is they’re elected to serve the American people. They’re not elected to serve the globe at the expense of the American people. And I can understand some arguments about, listen, if you’re making 90% of your money in the United States, and somehow you’ve figured out a gimmick to transfer those games to another low-tax jurisdiction and avoid paying some semblance of taxation for what’s happening, I can understand looking at something like that.


But again, this is a long policy concept, but the bottom line is you want to create an environment where your businesses do well, are competitive with the rest of the world, and can provide reasonable compensation and benefits to the people working in this country, etc. And we seem to be hell-bent on finding ways to attack our own institutions and use that to propel other agendas that are not necessarily even domestic agendas. And there’s a bit of an unsettling in that to me.


Trish Regan:               Yeah, no, it’s unsettling in so many ways, and it was so brazen for her to come out and say that look, here’s the reality. Nobody wants to get taxed to death, OK? It shouldn’t be that hard to understand. You’ve got corporations in America that are used to the 21%. Hey, a lot of corporations came back. They relocated operations from overseas back into distribution centers here because it made economic sense, right? Taxes were lower and you could be closer to your end-product consumer.


But now, we’re in a case where hey, Ford is looking at relocating one of its projects out of the Midwest worth $900 billion to Mexico. Because when you talk about the margin difference between 21% and 28%, it actually does matter, and you factor in labor, etc. They’re like, OK, yeah, so maybe we’re not as close to the end-use consumer. We’ll make up for that in higher shipping costs, but so what?


And so, I think that Biden and his team, they have to know that. They have to know that companies will look to invert. Remember those tax inversions that were so popular during the Obama/Biden years? And so, they’re trying to get ahead of it.


Neil Grossman:           Again, the bottom line in all of this is companies try to be as smart as they can about – let me rephrase that, used to be smart as they can about maximizing the bottom line. We’ve now redefined, and we’ve now gone from focus on bottom line to ESG. And it’s an interesting question where you might argue they should be paying a little bit more here, but ESG in the United States is not moving all of our workforce down to outside the country. That’s for sure.


There are some other things that are going on under this. I’m going to change this very slightly because I think you’ll like this sort of perspective discussion. But at the end of the day, all of this stuff also begets the question of who and how it’s being paid for. And it’s not just a corporate question that you’re pointing to, but it’s how they’re reallocating liability streams to the Americans within the American taxpayer base.


And again, the ideology here, you can ask yourself – let’s transfer to a slightly more sensitive subject on the Mexican side for a moment, but you’ve got staggering amounts of people, theoretically, not theoretically, on the border trying to enter the United States, right? And we can ask ourselves as a personal question, how you feel about people who are starving or struggling and want to come here, etc., but ask yourself the following question. And it goes right to what you’re also saying.


If you ask most people with a caring heart, do you care about somebody who’s in dire situations? The answer is almost always going to be yes, right? Now ask yourself the following question. Let’s take that same situation and say it’s going to cost this country – and let’s use a big number – let’s say $100 billion dollars for the fun of it. And you ask that person what they think about doing some good for somebody if it will not cost them one penny, and of course, they’re going to say yes.


The more interesting question to me might be if you want to look at this type of social conscience. And it’s an interesting question since this is not really what we’re doing for domestic consumption per se, and whether you should be able to argue that the normal American tax structure should be applied in terms of rectifying global issues. If you said to the average American taxpayer and person, look, this doesn’t fall within normal American balance of how things are paid for. Every American taxpayer must pay the same dollar amount, no matter whether you’re rich or poor.


And if you asked anybody on that spectrum, let’s say somebody earned $45,000 or $65,000, and you said to them, what do you think if it’s going to cost you $6,000 this year and $6,000 next year for example? I suspect that the perspective of whether this should be done would change dramatically. And I think that I’ve chosen a particular subject that’s in front of everybody right now… But take this onto the broader playing field of what they’re proposing, and ask every American now if they’re willing to absorb the costs on an equal basis per American taxpayer.


Forget this issue of fairness… “because I don’t earn as much as the next guy” or “he doesn’t pay.” We’re going to ask the American taxpayer on an equal basis are they willing to foot this bill to try and raise the rest of the world and ultimately at the expense of the American beneficiary? I think you would get a very, very different answer to what people would like to see. I think people would definitely love to see the American economy serve as an engine to help spur growth globally.


I think they would love to see the fact that the American engine is American businesses because that benefits. But I don’t think the average American wants to be the one primarily footing this bill. And unfortunately, our government – and this has started maybe before, but clearly in my mind with Obama and using the word “fairness” as a sword to impale opponents or to self-define what’s good for your constituent. And at somebody else’s expense, we are using all of these ideas as a way of also rectifying what’s perceived to be an unfair playing field on people who’ve generated success in this country.


And again, it’s an interesting question to me. I may get yelled at for saying stuff like this, but I sort of feel it’s an important point to discuss.


Trish Regan:               Look, you’re never going to get yelled at here because I live free or die, born and raised, OK? I am a big believer in real, intellectual, honest debate. You’re a good person who cares so much about so many people all around the world. I know all about your philanthropic activity. Listen, this is just trying to think logically here. Getting back to the title of this podcast, “the enemy of the rational,” right?


There’s no actual rational reason to think, like, how are you going to manage this? How are you going to pay for this? How are you going to have American businesses effectively subsidized the entire world? I look at the problem right now on the border. I wrote a paper years ago, actually. We both went to Columbia University, and I wrote it on, Neil, how I wouldn’t be surprised to one day see a Western hemisphere where the United States of America effectively is the ruling power in the entire North and South, Latin America included.


And I’m looking at what Kamala Harris – she’s been charged with dealing with the border. She hasn’t gone down there by the way… apparently is either insubordinate or saying, I don’t want to open that can of worms. But how are you going to manage that when people are going to still want to come here? The only way you can really fix it is if you were to say, get your hands in there, influence the policies in Latin America, perhaps actually even take over Latin and South America.


I’m just speaking theoretically here, so people don’t get too freaked out, but until you’re actually responsible for it, you can’t be responsible for everybody who wants to come here. It’s such a messed up world that we’re living in right now, and nobody’s really thinking through to your point, the consequences. Good point, given the title of this show, American Consequences, of what we’re doing. And I literally said, what is she smoking?


Neil Grossman:           Trish, here’s another question that you’re asking, which is a great question I’ve actually thought about. And again, we can get into different levels. I’m going to quote some of my friends more than me, but I’ve got a lot of friends in this COVID issue who have been very upset to find out that they’re not entitled to get vaccines until people outside the country are getting it, or even people sitting on the borders waiting to get in illegally, yadda, yadda.


We can ask what you want to do per se about that, but what I’ve also found interesting is also the growing concept that we need to use our resources to fund vaccination programs in all of these poor countries because the people down there can’t afford them. Now I’m not going to even say that’s not OK. I’ve been asking or saying to my friends, OK, what I don’t understand is let’s take Venezuela. Mr. Maduro and before him Mr. Chávez and the generals are worth staggering amounts of money.


And my guess is, they make Mr. Zuckerberg and Mr. Musk and Mr. Bezos look poor, or certainly if you add it all up commensurate in wealth with guys like that. So, my question is, why is an American taxpayer for good purposes to try and help somebody at our expense if our government is not willing to tell those folks who run those countries, “Your people need these drugs? It’s coming out of your hide.”


For example, talking about the arguments about fairness and who pays them, these guys who run countries don’t pay a penny of tax, I would guess. That’s part of the way they’re able to accumulate staggering sums. We’re going to take that money and we’ll use it to help vaccinate and make sure that the appropriate health care is being delivered before we’re going to turn around and tell the people in this country who are already paying. And I’ll say this much, they can argue fair enough.


But there are a lot of people in this country who are paying staggering percentages of their income and other things in taxes. And we’re going to tell those people who are citizens that they have to keep anteing up? If you don’t as a head of state want to understand that, then I can turn around in good faith and tell my people, look, it’s not that I don’t care, but this is not right.


Trish Regan:               Well, it comes down to an ideological difference, I think. You have the sort of George Soros’ of the world that really want to establish equality all throughout the world, in every single country, and they would prefer to see Americans live more poorly so long as a bunch of people in some other country can live a little bit better. And the problem of course with that is… you’re the American that’s going to wind up losing out because there are global organizations that are prioritizing the globe and how somebody is faring in some foreign part of the country, despite the fact that maybe their governments are just poorly run.


Look, I think what you’re hitting on, Neil. It’s something that any listener to this podcast right now can appreciate. And what you’re saying is there’s the onus of the individual, right? Like the responsibility of the individual in all of this. And so, whether we’re talking about Chicago and what a nightmare Chicago has been for decades now, and I’m like, oh my gosh. It just keeps getting worse. Those poor kids. Listen, if you’re in some suburban area elsewhere in the country, I bet those kids are in school… But Chicago, Illinois? It’s bad leadership.


Now you could say, look, the people should not be electing bad leadership. There are a lot of reasons to blame. Meanwhile, over in Venezuela, again, bad leadership. You don’t want a Nicolás Maduro there. Unfortunately, in some of those countries, too, as you well know, people don’t have much of a say because –


Neil Grossman:           They have no say, and that’s part of the problem. But again, in Chicago – look, this goes back to another problem. You want the right to vote. In this country, we think it’s important. But if you choose bad officials, who should pay for the consequences of your choice? And this goes into the – by the way, I know we’re going all over the place, but this goes into part of the last package, which was bailing out the states, right?


And again, they couch it in all sorts of language. But at the end of the day, a big piece of that allocation of money to the states was designed because these states are in bad fiscal positions that they’re all making, right? Personally, I think it’s unconstitutional. Look, I’m in a state where there are bad fiscal problems as, by the way, are you in Connecticut. So, to some extent being in New York, you would say, OK, this is a good thing.


I will still say as a New Yorker or any other person. I didn’t have a right to vote in the last 20 years or 30 years or 40 years or 50 years, or any time in any election in California at a local or state level. And I can’t understand what the ideology that we in this country feel is so important that you have the right to vote, that not being able to vote somehow ends up in my being responsible for the fiscal mess that the state and its population have created.


I think, in fact, California and its liberal governor should look at this. And I know Mr. Newsom feels voting is proper, and I think he ought to offer for the people of New York State and Connecticut and Florida and Texas the right to vote in every election going forward until California pays back to the United States government and the other people of the country what’s being handed out to help California deal with its own fiscal mess. By the way, vice-versa. They should be able to say to New York, I’m not the ones who voted, and by the way, there was a way out of this, Trish.


Trish Regan:               This is why we say keep government small and lean. This is why you don’t want a big, gigantic federal government. The federal government there is there to handle big, big, big problems, but not to be so steeped in sort of individual outcomes in such a state and micro level.


We’re running out of time, and I have a special message for the viewers, so don’t go anywhere. But I do want to thank my good friend Neil who’s just a brilliant guy and thinks about all of this stuff in depth from many different perspectives, including that of a physicist and mathematician, and I should add winemaker because you have a wonderful, wonderful vineyard there in New York State, Elizabeth Vineyards, and just wonderful, wonderful stuff. We’re looking forward to when you can sell it.


Neil Grossman:           That’s true, Trish. And by the way, being able to drink good wine at night makes some of these issues that are sort of upsetting a little bit easier to deal with.


Trish Regan:               Good point. My thanks to you, Neil Grossman. Thank you so much for your time today.


Neil Grossman:           Thanks, Trish.


Trish Regan:               Wow. What a fascinating conversation. Neil is just a deep thinker and someone I’ve known a long time. He and his wife are terrific people, and he has just really – I think his concern right now has ratcheted up to a level that’s worth noting. Again, I have a feeling the party, the euphoria, is going to continue, but you have to be well-aware of what lies on the other side. And he’s right in that this is not sustainable. And at some point, the you-know-what is going to hit the fan, and we need to be prepared for that.


There are a lot of different ways to do it. I keep saying everybody needs to be diversified. You can check out last week’s podcast, too, because I really dove into the whole bitcoin investing arena and like the good, the bad, and the ugly. And that’s a space that I think a lot of people – you could argue maybe it’s partly inflation – but also, a lot of people are looking to bitcoin because it’s a way to shield some of their assets, perhaps from this insane global socialist quest.


And so, that’s worth looking at. I encourage you to go to, and you can hear a presentation there by a gentleman named Eric Wade, whom I work with. And he’s a former bitcoin miner actually, and he’s just devoted his career to analyzing this space, cryptos in general. So, that’s worth looking at. Of course, you know Ron Paul has always been a gold fan. He talked about gold, of course, on this podcast as well.


That’s very interesting, but you also just have to recognize that timing is important, and you need to be sensitive I believe to where interest rates are heading. And so, I encourage everybody to keep watching the 10-year Treasury note because once that starts to creep upward of 2%, you might start thinking about how you shift your assets.


I’m always invested for the long term. I should point that out. I’m a big believer in America. I’m a big believer in our stock market. I’m a big believer in what we will be. I’ve always said, do not bet against America, but nonetheless, you want to be smart about how you’re positioning yourself throughout these cycles. And if Neil is right, and I believe all of his analysis is pretty spot-on, then this is not something that can continue forever.


Think about that when you invest. Go to, sign up for our e-mails there. I’m always at You can see me there as well, the writing in both places, but again, look out for yourself. Look out for numero uno right now because you know what? Uncle Sam sure as heck isn’t going to do it. Thank you so much for listening. I will see you right back here on American Consequences With Trish Regan next week.


Announcer:                 Thank you for listening to this episode of American Consequences. Want more Trish? Read her weekly articles Thursdays in our magazine at and subscribe for free to get all of our daily articles and the monthly magazine. We’d love to hear from you, too. Send Trish a note, [email protected] This broadcast is for entertainment purposes only and should not be considered personalized investment advice.


Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Trish Regan’s American Consequences is produced by Stansberry Research and American Consequences and is copyrighted by the Stansberry Radio Network.


[End of Audio]

{{ episode.title }}
Episode #{{ episode.episodeNumber }}