The Trump Crypto Bubble Already Burst (Uncut) 02-26-2025
The Trump Crypto Bubble Already Burst – Ep 1013
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Well, we had a very interesting day to say the least in the financial markets. I don’t know if it’s the good, the bad, and the ugly. I’m not sure what good there was, but there were a lot of things to be concerned about.
I’m going to start off with the market that rallied. So I guess that’s the good, if you happen to be long, and that is U.S. Treasuries. We saw a pretty big rally in the long end of the Treasury market today.
Now, I don’t think this is going to last. I am still bearish. The long end of the curve, despite the rally that we’ve seen today.
Part of that was the result of some increased optimism on another rate cut. So the markets are now expecting more rate cuts from the Fed. But what is prompting this optimism about the rate cuts and rally in bonds and drop in bond yield is pessimism on the U.S. economy.
And I have been talking about this and forecasting this for quite some time on the program, on my podcast I did on Sunday night. I went over all of the stagflationary data that came out last week. Well, we’ve already got more of that confirmation stagflation data that came out this week.
Yesterday, we got the Dallas Fed Manufacturing Survey, which in January was actually a positive 14.1, and it collapsed to a negative 8.3. That is a big drop. The production index went from 12.2 down to negative 9.1. But the news that came out today I think was even more worrisome for the markets, and that was February consumer confidence, which collapsed. They were expecting 103 from an upwardly revised 105.3 in January, making the decline to 98.3 that much bigger.
It’s the biggest decline in this survey in over three years, so a big drop. And the main reason for the loss of confidence is inflation and concerns over rising inflation. In fact, the expectation for 12-month inflation, so over the next year, rose from the prior month 5.2%, which was already a high number, all the way up to 6%.
So the public is expecting 6% inflation. Meanwhile, Powell is still claiming that expectations are well anchored at 2%. Whose expectations is he referring to when the surveys are showing that consumer expectations is three times as high, 6%? Also, the number of people who are expecting a recession to begin this year rose to now a nine-month high.
So people are more concerned about the economy. They’re more worried about inflation. Also, Trump is continuing to beat the tariff drum, talking about how the tariffs with Mexico and Canada, they’re still on.
They’re coming in April. Maybe we’re going to have tax tariffs on Europe. So all of this weighing on confidence, weighing on the economy, raising the prospect of recession, which, again, I think we’ve been in a recession the entire time.
Oil prices also moving lower. Again, I don’t expect this to stay. I think oil is going to reverse.
But oil down below $70 a barrel, $69 a barrel. The reason we’re seeing this downward pressure on oil, and it’s coming even as the U.S. dollar is drifting lower. It’s not collapsing, but the dollar index fell again today.
We’re down near the lows of the year. We’re barely holding on to a 106 handle on the dollar index, 106.23. But the drop in oil prices is due to the fears of a economic slowdown, and that is what is prompting the rally in bonds. But what bond investors are overlooking as they’re buying bonds is the strength in inflation, because inflation erodes away the value of the bonds they’re buying.
And so they’re just focusing on the weakness in the economy, and that’s kind of a reflexive move, probably a pre-programmed algorithm to, oh, buy bonds, because look at all this weak economic data. But the weak economic data is actually inflationary in that it’s going to mean bigger budget deficits and a weaker dollar, which is going to push consumer prices higher. Again, this is stagflation.
This is not the type of economic weakness that any of the people who are trading today or who are programming algorithms to trade have experienced. You have to go back to the 1970s to see economic conditions that are comparable, although they’re worse now because the financial position of the United States has deteriorated dramatically since that decade. But you have to go back then, and recession doesn’t guarantee lower yields.
In fact, I think it assures higher yields. And that’s why I’m confident that the rally in bonds is going to reverse, and that’s going to be even more problematic for the stock market. But the stock market is already having a problem with this dynamic because the air is coming out of the bubble of a lot of the momentum names, right? These speculative stocks that have been bid way up based on the cheap money bubble and the good times rolling, a lot of these stocks are getting hit.
But the risk asset that got hit the hardest today and the one I want to start the podcast really talking about is Bitcoin. And not just Bitcoin, it’s the entire crypto ecosystem, industry, whatever you want to call it. And I talked about this in the euphoria of the Trump victory as Bitcoin surged to 109,000 and all things crypto went up.
I was saying at the time that maybe this is the euphoric top, that everybody is so optimistic, there’s absolutely no reason for Bitcoin to go down. We’ve got a crypto president. We’ve got a crypto cabinet.
We’re going to have a strategic reserve. Everybody was bullish. Nobody wanted to sell.
And I said, you know, that’s the exact environment where you probably should sell. If you can’t think of a reason to sell, you probably should because everybody else was buying and we had a blow off top. Bitcoin today officially entered what Wall Street would call a bear market.
Earlier today, Bitcoin traded below 86,000. That was a 21 percent decline from the 109,000 peak from November. So that meets the definition of a bear market.
But Bitcoin is actually doing the best. Look at Ethereum. Ether is down 40 percent since December.
That’s doing worse. Now, one of the reasons that it was running into some problems was competition from Solano. Well, Solano was down 55 percent from its peak last month.
And what really drove Solano up was all the mania about meme coins when people bought Trump coin and Melania coin. By the way, Trump coin is down 80 percent already. Of course, it’s going to go down 100 percent.
I mean, all this crap is worthless, but it is falling apart. But it’s not just the tokens. Look at the individual crypto stocks.
I mean, talk about bear markets. The mining companies are just getting killed. I mean, you could pretty much pick any one of these miners.
They’re at 52 week lows or multi year lows or they’re at the lowest they’ve ever been, like in their history of being a public company. I mean, if this is the age of crypto and we have a crypto president and everything is going to be great for crypto, why are these miners getting completely destroyed? Right. I mean, look at like Hive blockchain or digital technologies that closed at two dollars and 18 cents.
That’s a multi year low. The 52 week high was almost six dollars on on that stock. This other one here, I just had a few of them.
Oh, Mara Mara Holdings. You know, they recently started this Bitcoin strategic reserve, which is way underwater now, or they were down at 8 percent today. But they’re they’re at twelve dollars and 40 cents down from thirty four dollars was was the 52 week high.
Some of these stocks I haven’t heard of. Cleans Clean’s Park. It’s a minor.
It closed down like eight and a half percent. Eight fifteen. The 52 week high was twenty four dollars and seventy two cents here.
Argo blockchain. This thing is down at forty four cents. The 52 week high was two dollars and and seventy eight cents.
I mean, there’s a whole bunch of these stocks. You can just look them up and and see how much they’ve they’ve just crashed. But of course, the poster boy for the Bitcoin space is micro strategy, although it’s not micro anymore, although it’s going to be micro pretty soon as far as its stock price.
But it’s now just called strategy. But the real strategy is how to bankrupt your company, because that’s the strategy that Michael Saylor is pursuing. So strategy was down 10 percent about on the day, although at the lows it was down closer to 13 percent.
But there was a little bit of a rally. But strategy closed. Fifty four percent below its November high.
Fifty four percent. This is a brutal bear market. But even worse, because of all the massive dilution, because of all the stock they’ve issued since then to buy Bitcoin, the premium has collapsed at one point at its peak.
A micro strategy was almost triple the value of its Bitcoin. I mean, maybe two hundred and seventy percent premium. But for most of its history, it was like a double.
Like you were paying twice as much to buy micro strategy as the value of their Bitcoin. Now, the value of the underlying business, whatever software company is buried beneath this pile of losses. Who cares? No one even cares that they’re soft.
They ought to spin the software business off. But it was all trading off of Bitcoin. It was like a closed end Bitcoin fund that it was trading for double the NAV.
Well, now the premium is already down to about 18 percent. That’s it. So it’s like a 93 percent decline in premium.
In fact, to add insult to injury, yesterday, Michael Saylor announced on X that they had just bought a micro strategy, had just spent another two billion dollars buying more Bitcoin. Right. They borrowed the money they bought.
They spent two billion on Bitcoin. They didn’t buy two billion worth of Bitcoin because it’s not worth anything. But they blew two billion dollars.
Their average price on the ones they just bought was ninety seven thousand five hundred. As I’m recording this podcast now, it’s barely eighty eight thousand. So they’re already down like 10 percent on the buy that they just announced yesterday.
Now, the average price of the Bitcoin that they bought is now sixty six thousand three fifty seven. I mean, their average price and the market price are converging pretty quickly. And because we know he’s going to keep on buying at some point, his average price is going to be below above the market price.
It’s going to be at a loss. But, you know, you got to think about this. Where would Bitcoin be today had Michael Saylor not just bought another two billion dollars worth of it? I mean, he is the biggest buyer.
I mean, they’ve now spent thirty three billion dollars buying Bitcoin, most of it in the last couple of months. Yet Bitcoin is at a three month low despite all this buying. So all these Bitcoin holders have got to ask themselves who’s selling.
Right. Because somebody is selling their Bitcoin. And it’s not the holders who are who have been conned to never sell their Bitcoin and just go down with the ship.
Somebody is selling Bitcoin. And, you know, gold. Gold was down today.
Gold was down at one point. It was down like 60 bucks. But so what? I mean, I don’t even know.
It barely got below twenty nine. Twenty nine hundred. And in fact, it’s you know, it’s back above that right now.
Big gold is trading at twenty nine. Twenty seven. It’s up about twelve dollars in the evening.
It was down about by the close, maybe thirty five, forty bucks. Gold’s now got support at twenty nine hundred. That’s basically it.
The support level, in case you haven’t noticed, keeps on going up for gold. And now it’s like twenty nine hundred. So if you get a break below twenty nine hundred, you’re getting a bargain.
And soon three thousand is going to be the support. But gold is no more than two percent, less than two percent from its all time record high. And Bitcoin is in a bear market, 20 percent below its record high.
And what does that tell you? And also, Bitcoin is lower today priced in gold than it was at its peak in 2021. I talked about that a lot on this podcast, that even though Bitcoin was making nominal new highs, new highs in dollars, that it hadn’t made a new high in gold. And I said on this podcast, I thought there was a good chance that the high was in, that Bitcoin would never see a new high in terms of gold.
I think the only reason that that was wrong was because Trump won. Had Trump not won the election, there’s no way Bitcoin ever would have seen a hundred thousand. So I think that the high would have been in.
But even though Trump was elected and even though we went to one hundred thousand, one hundred nine thousand today, Bitcoin is lower by about 10 percent than it was back in in 2021, because Bitcoin is only worth about 30 ounces of gold. When I say only, that’s that’s still a big number. Right.
That’s ridiculous that you can even buy one ounce, that you could buy anything with a Bitcoin, but you can get 30 ounces of gold. But in November. Of 2021, you can get 34 ounces.
So it’s down by 10 percent. And so Bitcoin is broken back down. It was a false breakout in terms of gold.
And again, the only thing I think that really got the hype up there was all the talk about a strategic Bitcoin reserve, which I’ve said is never going to happen because Trump’s not going to enact it on his own. I don’t think it’s legal. Congress is never going to pass it.
It was all just a bunch of hype to get people to buy so the whales could sell, because there’s some big selling going on that was able to overcome all of the buying from MicroStrategy and not just MicroStrategy. There’s a handful of other companies that follow that ridiculous playbook of Michael Saylor that also have been buying hundreds of millions or billions of dollars worth of Bitcoin and putting it on their corporate balance sheets. But despite all that, Bitcoin is in a bear market, which means even if they were thinking about a strategic Bitcoin reserve, that’s dead.
I mean, why would they do it now? This thing’s in a bear market. It’s free falling. You know, how are you going to buy that if they actually did it? It would look like a Bitcoin bailout fund more than a strategic reserve.
Anyway, we’ve got a quick commercial break. Don’t go anywhere. Coming right back.
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Public Rec, where comfort rules. All right, so I’m talking about what’s going on, the carnage in crypto. And look, without Donald Trump coming out and somehow, you know, credibly announcing, we’re going to have the reserve, don’t worry, we’re going to have a strategic Bitcoin reserve.
And it’s not just going to be funded with the seized Bitcoin. We’re going to go into the market. We’re going to buy Bitcoin, right? Kind of like quantitative easing, except we’re going to buy Bitcoin instead of bonds.
Unless they come out and say that, which I don’t think they’re going to. Trump’s got a lot on his plate. The last thing he needs to do is expend political capital on this nonsense.
But unless there’s some solid, I mean, believable, credible statement that’s different from just saying, you know, what he’s been saying, because he had a speech last week where he said we’re going to be the crypto capital. Right. So but unless he actually says something, I don’t see what’s going to stop the decline right now in Bitcoin.
And, you know, despite the fact that we’ve had this drop, nobody’s negative. I watched the coverage on CNBC. Everybody is bullish.
Everybody’s shrugging it off by the dip. Nothing to worry about. Like overlooking the bloodbath in these crypto stocks.
What’s happening with all the other tokens that are not Bitcoin, but Bitcoin is also going down. There’s no fear. There’s no panic.
There’s no capitulation. That’s coming. But again, I think the first place we’re going to get it is from the ETFs.
And I’ve been talking about this since these ETFs started, that there’s going to eventually be a lot of liquidation and that’s going to overwhelm the markets because there’s not going to be enough real buyers who can pay with real money and not tether to let these guys out, because the ETFs own a very large percentage of the float of what actually trades in Bitcoin. And, you know, they haven’t been spooked yet. But, you know, a lot of these guys, most of them, I would say they’re not diehard Bitcoin maxis.
They just jumped on a moving train. They wanted to make an easy buck. And when it turns out that they’re losing money, I think they’re going to take their chips and go to another casino.
And they’re going to find that it’s a lot easier to get into these ETFs than to get out because, you know, people tend to want to get out in a rush. So people might have been buying over a year. But all of a sudden, all those people, let’s say half of them want to get out in a few days.
There’s just not the volume to absorb that. And also what’s going to happen to micro strategy. And this is the same thing that happened to the Grayscale Bitcoin Trust when it was closed in.
And remember, I predicted this, too. I mean, people think I don’t get anything right with Bitcoin because it’s gone up so much. But I was predicting when the Grayscale Bitcoin Trust was trading at a massive, you know, 40, 50 percent premium that it was going to go to a discount.
And it went to a huge discount. I was 100 percent right about that. And that was part of what caused the big bear market in Bitcoin.
But what’s going to happen with micro strategy? The only reason that this guy, a sailor, could keep on selling stock is because he was selling the stock at a premium. And then taking the cash to buy Bitcoin. That’s where he gets this ridiculous Bitcoin yield that he’s been fabricating as if it’s an actual yield.
Well, when the premium turns to a discount, that game is over because if he sold stock at a discount to buy Bitcoin, he’d have a negative Bitcoin yield. So he can’t do that. So selling stock is a done deal.
Now, he can still borrow money to buy Bitcoin. But who’s going to be dumb enough to lend it to him at that point? I think the pool of dumb creditors who want, you know, Bitcoin without the downside because they think they’re getting a free ride on this. That’s going to dry up.
So micro strategy, the biggest Bitcoin buyer, ain’t going to be buying any more Bitcoin completely out of the market. So if Bitcoin has been this weak with micro strategy buying this much Bitcoin, imagine what’s going to happen to the market when they’re out, when he can’t buy anymore. And so the downside is so phenomenal in Bitcoin right now.
And nobody, nobody cares. Everybody is complacent. And of course, ultimately, and I’ve been saying micro strategy is going to go bankrupt because at some point these convertible notes are going to come due and micro strategy is going to have to repay the lenders in cash.
And he doesn’t have the money and he just has Bitcoin and he’d have to sell it. In fact, normally, if you let’s say micro strategy stock starts to trade at a discount to its Bitcoin. Let’s say it’s trading at 10, 20 percent discount, which is coming.
And that discount is going to be because people are factoring in bankruptcy as a probability. Right. But because people say, hey, why wouldn’t you just buy? It’s a no brainer.
Someone wrote on my ex, you know, hey, if it’s trading at a discount, it’s a no brainer. I said, yeah, maybe you have to have no brain in order to buy it, because there’s going to be a real chance that you don’t get your Bitcoin because of the debt. Right.
Because of all that leverage. But under normal circumstances, if micro strategy stock is trading at a discount to the Bitcoin, what it could do to close that that discount is it could sell it Bitcoin into the market and then buy back its stock. Right.
And then it would the discount could go away if it did that. But micro strategy won’t be able to do that because if micro strategy ever sold any Bitcoin, Bitcoin would crash. I mean, the very first time people realized that he was selling Bitcoin, that it’d be all over.
And so then Bitcoin would crash and then his stock would crash even more. So he can’t do that. So there’s no way they can ever close that discount once it’s open because they can’t sell their Bitcoin.
It’s a monetary road for Motel. Right. That Bitcoin checked in.
It ain’t checking out until there’s a for sale, until he has to give the creditors their money because, again, they don’t want Bitcoin. The people who loan micro strategy money don’t want Bitcoin. If they wanted Bitcoin, they would have just bought it.
They didn’t want to take the risk of buying Bitcoin, but they wanted a piece of the upside. So they thought they were being cute and they bought these convertible bonds and they thought, hey, worst case scenario, I get my money back. No, we’re safe scenario.
Micro strategy goes bankrupt and you don’t get your money back. See that that that’s the worst case scenario that is coming. But anyway, you know, gold was down.
A lot of people are saying, well, gold was down, too. See, it’s just like Bitcoin. Gold is within two percent of its all time record high.
Nothing like Bitcoin. Gold is a buy. You want to buy the dip.
That’s the dip to buy. Although the real dip to buy were the gold mining stocks, which, again, they got hammered this morning. They were down three and a half percent, four percent, you know, because gold was down.
Why? I mean, even though it was down, it’s still twenty nine hundred. The stocks are a steal now. They rallied back.
They still closed down, but maybe about one and a half percent. So, you know, they recovered more than half their losses. But that’s the dip to buy.
I mean, these stocks, again, I am looking for a ballistic move in in the gold stocks. I don’t know. You know, it could start any day, any day this rally can start.
People are going to wake up. They’ve been asleep for a long time. So, you know, maybe it takes a little while to get all that sleep out of their eyes and recognize what’s staring them in the face.
But before that happens, you know, you could buy the Europe Pacific International Gold Fund. G.I.X. Did I get it right? Yeah, I got it right this time. E.P.G.I.X. is the no load symbol of our gold fund.
Or go to Europe.com and and talk to talk to the brokers there about our separately managed accounts and how to really take advantage. And, you know, if you’re in crypto, get out while the get is good. If you sell Bitcoin at eighty eight thousand, that’s a great price.
You know, people were saying, oh, it’s a you could get in below one hundred thousand. Like it’s a steal because it’s a sure thing that it’s going to a million. Right.
When everyone thinks it’s a sure thing, the odds are it ain’t going to happen. Right. But eighty eight thousand is a hell of a good price.
You know, you’re still getting, you know, what, 40, 40 ounces of gold or 30 out 30 ounces of gold for Bitcoin. That’s a lot of real money for fake money. And then, you know, you can use that to buy into into these into these gold stocks.
I wanted to make a couple announcements before the break and I’m going to come back and I’m going to talk about trade, about tariffs, about some stuff I heard Peter Navarro talking about, which, you know, really is, you know, it’s ridiculous how little this guy actually knows unless he’s lying. And he’s you know, he’s a top Trump adviser when it comes to trade. So it’s a very worrisome thing.
But I want to mention. So I talked about my dad on the last podcast. It was would have been his ninety seventh birthday.
I had posted this two hour tax talk that he did, surprised by how many people watched it stuck through the whole two hours. I read a lot of the comments. I really appreciate the positive things that a lot of people had to say about my father.
Yes, he was a very good, big influence on me, probably the most influential person in my life. A lot of people pointed out, you know, that he has a good sense of humor and he had a great sense of humor. That was one of the wonderful things about my father.
I think I got part of his sense of humor, but he used to get a lot of laughs when he when he gave his tax seminars. And when he stopped and the boys, you can see his humor in his books. I had great timing as well.
But, you know, I mentioned on the podcast that I was upset that someone had hacked into his pay no income tax Web site and wiped out all of the archives of his shortwave radio program. Well, somebody emailed me that, you know, they were still there on the Wayback Machine. And I had gone there myself and I saw the links.
But when I clicked on them, they didn’t work. But this somebody found a way to get it to work. And then another guy emailed me about it.
And he had already downloaded most of them. So I listened to one of them the other day. Yesterday, I listened to one of them, but we’re going to have all of them and you don’t have to look for them on the Wayback Machine.
When I get them, I’m going to upload them and then I’m going to start posting them on the YouTube channel. And I have a special, you know, section for my dad’s shortwave shows. These are all from the early 2000s.
And by the way, if you remember or if you are a listener to my early podcast, I mean, my podcast, my first radio show was Wall Street Unspun that I did every Wednesday. And it started on shortwave and I did it on the same station as my dad. That’s he gave me the idea.
And so he was doing his shortwave show at the same time that I was doing mine. So he was doing his on taxes and, you know, the economy. I was doing mine on investments.
And and, you know, but there was some overlap. But but that’s what got me started. It was my father’s shortwave radio show that got me to start my my shortwave show on the same the same shortwave network that he used to use.
And it kind of all evolved from there. And, you know, it’s not just my father that I’m encouraging people to listen to. I’ve been encouraging people to listen to my wife, who has is a very talented actress, a singer, songwriter, you know, has been mainly a wife and mother.
But recently she’s got the creative bug and she’s been performing songs and singing and writing songs. And she you know, she hooked up with this guy, you know, not literally a fan of mine who used to be the guitar player for Third Eye Brine, Tony Fratnelli. And he he wrote all this music.
And my wife wrote the lyrics and sings the songs. And so far, three of the songs from their album have been released on Spotify. We’ve got a couple of videos that we posted on her YouTube channel, but her fourth song called Lucy is going to premiere this Friday on the 28th.
So I would encourage everybody on Spotify to go to her Laughing Cats is the name of the group Laughing Cats and go on Spotify on Friday and listen to her new song. I all of her songs are great. I mean, if I don’t I mean, I think I’m obviously I’m biased, but, you know, I mean, people listen to them.
They’re good songs. I get a lot of positive feedback about her songs. I’m surprised, actually, more people haven’t listened to them.
I would really encourage everybody who listens to this podcast to take some time and listen to her song. In fact, don’t even wait for Lucy to come out on on Friday. Go to her Laughing Cats on Spotify and listen to her other three songs.
You know, G.Y.B. is one of them. What are the names of these songs? There’s a slip of my mind. The ones that she’s already released.
Jerk, right. How can I forget Jerk? Jerk is one of them. And Love on Fire.
I think those are the I think I think that’s still that one’s already out. I got to I forget because she’s got a bunch of them and she hasn’t released them all yet. No, electric, not love.
That one hasn’t come out yet. Electric was the last one that she released. So listen to all three of those songs, Electric, G.Y.B. and Jerk.
And then you’ll be ready for Lucy that is coming out. Now, also, you know, Laughing Cats has a YouTube channel and I’ve linked to it and I put in my favorites. She’s got a couple of videos for two of her songs for Jerk and G.Y.B. We produce these videos.
So if you don’t have a Spotify account, these are free. Right. They’re up on on her YouTube channel.
So you can listen to the songs there on YouTube. And she may even have other songs on her YouTube channel. I forget.
Maybe she put them all up there on YouTube, but Spotify is where they come out. So try to do that. And then let me know what you think of those songs, because I think they’re great.
I think she did a really good job. Anyway, we got one more commercial break. So stick around.
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That’s SelectQuote.com slash SHIFT. And also, silver. I forgot to mention silver got hit today.
It was down more than 50 cents. As I am recording this podcast, it’s $31.87. So it’s back below $32. It was $32.50 yesterday.
And the week before, it traded above $33. So you want to buy a dip? This is a dip to buy. Buy silver.
In fact, go to SHIFT Gold tonight and buy some silver. Load up your cart and check out before the price goes back up. Because anything below $32, I think, at this point, you’re buying the bottom.
I don’t think there’s much downside in silver. I don’t think it’s going back down to $30 again. But I think it’s going to have an explosive move.
Again, it’s like any day. It’s like you’re playing with fire if you don’t get in because you’re going to be burned if you miss out. I think you just buy it and you’re lucky to do it.
People are going to wake up and they’re going to wake up soon to the reality of what’s about to happen. But anyway, so I want to talk about the trade and the tariffs. And this, you know, there’s just such a misunderstanding.
And it’s just, you know, it worries me that, you know, Trump gets bad advice. I know he gets bad advice on crypto, right? He’s got all these crypto guys in his ear, right, which are giving him horrible advice. But Peter Navarro, right, who is his advisor, right, his top guy on international trade, right, who’s telling him about, you know, how great these tariffs are.
So I saw him interviewed the other day because, you know, they’re talking about these 25 percent, you know, auto tariffs, right, 25 percent tariffs on imported cars. I mean, you want to screw up the automobile market, right, put 25 percent tariffs on cars. You know, I think we actually import more cars than we produce now, which is a shame.
But the tariffs aren’t going to solve that problem. They’re just going to they’re just going to make cars a lot more expensive. And they’re already more expensive and they’re more expensive to finance.
But he was interviewed by this woman and she said, well, aren’t the tariffs, you know, aren’t they going to raise prices? And he said, no, they’re not going to raise prices at all. He said our trading partners are just going to eat it. You know, he said America is such an important market that they’re not going to want to lose any share.
So, you know, whatever the tariffs are, they’re just going to cut their prices so that, you know, we don’t have to have a higher price, which is complete nonsense. I mean, first of all, there are a lot of companies that are selling to us that don’t even have a 25 percent margin. So if they ate the tariff, they’d be losing money.
Well, how are we a great, important market if they lose money selling to us? Right. I mean, we’re only a good market if they can make a profit selling to us. If they have to lose money, well, then obviously they’re not going to do it.
They’re better off not selling at a loss than selling at a loss. And, you know, the reason that businesses sell to us is because we’re the highest bidder. And if somebody else will pay more, then that’s where the stuff’s going to go.
And so let’s say the our tariffs are 25 percent. Well, maybe other people, you know, they can cut prices by five percent and they can still make the sale. Well, that’s where it’s going to go.
They were selling to us because we pay the extra five percent. But, you know, if we can’t pay it because we got a tariff that also has to be added, you know, they’re not going to sell us. But there is a chance that in the short run it may it may take them some time to reorientate, you know, reorganize their shipments to other countries.
But the danger is once they get everything organized, it doesn’t come back. You know, I talked on the podcast. I don’t know how far away they are.
But China is building this deep water port off of Brazil so that they could ship back and forth between China and Brazil, bypassing the United States. Because right now they don’t have a deep water port. So these big container ships that are bringing stuff in and out of South America go to Long Beach.
They go to Los Angeles. And so they also bring stuff for us. But when this new port is finished, they don’t have to go to California at all.
It’s going to be a lot cheaper and a lot easier for China to trade with South America and a lot easier for South America to trade with China. So we are really playing with fire with a lot of these tariffs and what it could mean, because we are so unfortunately so dependent on these imports for our economy. Yes, we have to wean ourselves off them.
We have to go back. I said this to a save and produce economy. We can’t just continue to be a borrow and consume economy.
But the transition is going to be painful, especially if we have to do it quickly, you know, because of because of tariffs that might that might come in. But also, you know, I’m listening to him today to show this like complete lack, lack of understanding. So he’s talking about.
Germany and cars in Germany, and he’s talking about how it’s unfair because they have a VAT system that he says operates like a tariff. He says they have a 20 percent VAT. And he said it’s he first he also said it was a subsidy for exports and a tariff on imports.
And he’s wrong on both occasions. So, first of all, a lot of my listeners might not know what that is. You know, I mean, the ones that live in Europe do because they’re very common.
But if that is really a sales tax, it’s just a less transparent sales tax. So here in America, we don’t have any VAT. We just pay a sales tax at the end.
So you go into a store and you buy something for a dollar. And if the sales tax is eight percent. It’s a dollar and then there’s an extra eight percent.
You see it added to the bill. So you pay a dollar eight. If it was a VAT of eight percent and not a sales tax, you’d still end up paying a dollar eight.
But it wouldn’t be broken out. It would be embedded in the price. You wouldn’t see the eight cents.
That’s one of the reasons that they love VAT taxes, because they’re less transparent. Right. It’s not like sticker shop.
But the way that that works is each step in the production chain where you add some value, you pay the VAT on the value that you add. And so by the time it gets to the end consumer, there’s been several levels of VAT. But at the end of the day, it’s exactly the same money as if he had paid it all at the end.
Right. Let’s say there’s a VAT of of eight percent. And so instead of you pay eight dollars on a hundred dollar item, let’s say there’s two levels.
Somebody adds fifty dollars of value and pays a four dollar VAT. Then another guy as for fifty dollars of value pays another four dollar VAT. And now there’s you end up paying one hundred eight dollars for the product that’s been taxed twice through the VAT system.
It’s basically the same thing. So here’s what Navarro is upset about. He’s upset that when a German car company manufactures a car and they export it to America, the exporter gets a credit back for the VAT so that the VAT comes out so that the the car is not exported with the VAT.
It’s exported without the VAT. Now, he Navarro said, see, this is an unfair subsidy. No, it’s not.
Because the VAT is the sales tax. Why is that that there? It’s the Germans government’s way of taxing Germans for their national health care system or for whatever services that the German government is providing to the German people. They pay for that when they buy a car.
Now, if the car is exported to America, the American who is buying it isn’t getting any value from the German government. He doesn’t get German health care. He doesn’t get any other German roads, German police or whatever the taxes are paid for.
So why should the export include that VAT? It’s got nothing to do with the American who’s buying that car. Now, the same thing happens when we export a car. Let’s say a car is made in New York state.
We probably don’t make any cars there, but whatever we may or maybe I should say Detroit, Michigan. Right. We still make some cars there, I guess, but a lot more made down south.
But, you know, Michigan’s got a sales tax. I’m not really sure what it is. Let’s just say it’s eight percent.
So if there’s a car that’s manufactured in Michigan and then we ship it to Germany, we don’t Michigan doesn’t stick on the eight eight percent sales tax. No, it goes out without the sales tax because the guy in Germany doesn’t live in Michigan. He doesn’t have to pay for the public schools.
He doesn’t have to pay for the roads and or, you know, the fire department. No, he’s in Germany. And so it’s ridiculous to say that not making the German exporter add the tax that’s there to fund government to add that back into the car.
Now, it’s not like, you know. The German company doesn’t have an income tax, they do, they pay income taxes in Germany, just like we pay income taxes here. Right.
So they don’t they don’t get a credit back for their income taxes. The only thing they get a credit for is the VAT and the VAT should not be in a U.S. car. Because, of course, when an American buys a German car, he still pays the sales tax.
If you’re in New York and you buy a Mercedes, you’re paying New York sales tax on that Mercedes. It’s the same sales tax you would pay if you bought a Ford car or General Motors car. Right.
Everybody is subject to it because you’re in America and you’re paying taxes here to fund the government here. There is nothing unfair about it. It doesn’t give any kind of competitive price edge to the German manufacturer.
Now, the other thing that Navarro said wasn’t fair. He said, you know, the terrible thing is if we send a car into Germany. Germany puts the VAT on the car so that when a consumer wants to buy the American car, they have to pay that 20 percent VAT.
And he says that’s like a tariff. No, it’s not. Because if they buy an American, if they buy a German made car, they pay the same 20 percent VAT.
You know, if you’re in Germany and if you buy a new car, you’re paying a VAT, whether it’s an American car or a German car. It’s the same thing. Now, I think if you buy a used car, right, I don’t think you pay it because it was already charged.
It was the VAT is already paid. But if you import a used car into Germany, then you pay it because it’s it’s never been paid in Germany. Right.
So on the importation, you would pay it. And there may be some other duties and some other local charges. But they have that stuff here.
I mean, you import a car into Puerto Rico, you pay 20, 30 percent tax to do that. It’s expensive to bring a car into Puerto Rico. Right.
You know, I’m not sure what it’s going to cost to bring it into the mainland because I’ve never done that. I brought a car here, but nothing that’s happening is the equivalent of this big tariff. And the reason that we’re not selling as many cars in Germany is because, you know, they got great cars in Germany.
They make that they have so many car companies in Germany that they don’t need to buy as many American cars. I mean, we sell some. But the reality is, if we had these big tariffs on imports, we can’t make the cars ourselves.
The U.S. automakers, basically GM and Ford and Tesla. Right. They don’t have the capacity to make all these cars.
The car prices would go way up. And, you know, the other problem that would happen. So let’s say they actually put this 25 percent tariff on all imported cars from everywhere.
So car prices are going to go up a lot, especially for the imports. Now, a lot of Americans are just going to not buy these cars because, number one, you don’t know if these tariffs are permanent. Right.
Trump puts in tariffs. He could take them out a month later, six months later. Right.
So why? Why buy the car with the tariff and pay the extra 25 percent? I’ll just wait. I’ll wait them out. Right.
Because that’s a big that’s a big nut. Right. I can I can make do with my used car for another six months.
Let me see if Trump gets rid of the tariffs. I don’t want to buy now. I guess I don’t want to pay the tariff.
So you’re going to have that. But you’re also going to have the problem with financing or leasing in particular, because an important part of a lease is the residual value of the car when the lease is over. And the bigger the drop in the value of the car, the more expensive the lease.
Well, if I want to lease a car that’s been tariffed by 25 percent and I got it, basically, you know, you’re borrowing that money. But the the leasing company doesn’t know if in three years when the lease is up, are there still going to be 25 percent tariffs? Because the tariffs will help keep the used car prices high. But if the tariffs go away, then the value of that car is going to plunge because you can buy a new car without a tariff.
Right. If you’re if you’re paying 25 percent over sticker and then you expect someone to finance that, loan you money on that, knowing how much less the car is going to be worth in the future, because, you know, the tariffs may not be there anymore. The lease rates are going to go way up.
And the same thing with loans. I mean, if somebody loans you might buy a car. I mean, think about that, you know, because if you want to buy a car that would cost you 40,000 and you’re going to borrow 40,000.
But now there’s a tariff on the car and it costs you 50,000. Now you’ve got to borrow 50,000. But now the company that’s got to lend you the 50,000.
But now there’s a greater chance that there’s a bigger depreciation in the value of that car. And you and you walk away. Right.
When they go to repossess it, they can’t get their money back. So there are so many things that could screw up the domestic economy if all of a sudden we put the type of tariffs that Trump is talking about. Now, again, they may never happen.
Like, I mean, if Trump really believed in these tariffs, why wait till April? Just put them on right now. If they’re so great, why wait to get the benefit? Right. Why just constantly tease us about them and just and not do it? Right.
I mean, so maybe the whole thing is is is is just a bunch of talk. But, you know, it’s all of it is dangerous stuff. And it’s just a lot of guys.
There are some good things about Trump and there are some bad things about Trump. Trump, in many cases, gets half the story right, but he doesn’t get the whole thing right. He knows that the trade deficits are bad.
He knows that, you know, this is not good for the country, that we should be producing more, that we should be manufacturing more. He just doesn’t understand what is necessary to do it. And he still has it backwards when he thinks the world is taking advantage of us.
We’re taking advantage of them. But in the long run, it is a bad deal, just like any time you do this. Right.
You can you can borrow a lot of money to live beyond your means. And in the short run. Yeah.
Everything is great. Right. Because you’re you’re you’re living a better life than what you could actually afford.
But there is a consequence to that when you eventually run out of borrowed money and reality sets in. And and so, yes, we have been enjoying a artificially enhanced standard of living because of our ability to go deeper and deeper into debt and live beyond our means to buy what we don’t produce and to borrow what we don’t save. But in the process, we have really destroyed the underlying industrial base of our country.
We have sold off a lot of our assets and gone into hock. You know, we’ve gone from the world’s biggest creditor to the world’s biggest debtor. You know, and there is a price to be paid.
I mean, we’re paying it now. That’s why so many people are struggling so much. That’s why Donald Trump got elected and people hope that things are going to change.
They’re not. And, you know, I see all these Democrats now and it really bothers me. They’re on every day.
They’re complaining about how terrible this is. And they’re going to be right about one thing. The economy is going to sink.
We’re going to be in a protracted recession. Inflation is going to go up and they’re going to say it’s because of Trump. See, we told you so.
Everything was great. And Trump wrecked the economy with his crazy tax cuts for the rich and his giveaways for the billionaires. So they’re wrong about how he wrecked the economy and not even that he wrecked it, because when he got it, it was already wrecked.
It was pre-wrecked when he took it over. But Trump is not going to be able to admit that the economy is bad unless he can blame it on Biden, which, you know, he’s already trying to do. But I think that it’s going to be an easier PR campaign for the Democrats with the support of the media, because Trump promised a golden age.
He promised an immediate boom the minute he walked into the Oval Office. And when that doesn’t happen, right, you know, then, you know, it’s going to look bad and it’s not going to play well in the midterm elections. Meanwhile, look, they’re making a lot of talk about all the big cuts that are going to come out of out of Doge.
But look at what’s going on right now with the Republican budget that they’re trying to pass. Look, if they pass this thing, it’s still going to increase the deficit. There’s and they’re increasing the debt ceiling by another four trillion dollars.
Like what’s the first thing that this Republican Congress wants to do is increase the debt ceiling by four trillion. What does that tell you? Are they serious about cutting the debt? No, they’re not. If they were serious, they wouldn’t increase the debt ceiling.
Here’s your opportunity. No more debt. Let’s balance the budget.
Let’s figure it out. Right. What agencies can we get rid of? Because we can’t afford all the ones that we got.
Now, I said before, if you want to get rid of waste, fraud and abuse, you’ve got to get rid of entire agencies and departments, because even if you cut some waste, fraud and abuse, you’re not going to get rid of all of it. Because as I said before, you can’t have a government program that doesn’t have waste, fraud and abuse. That is the nature of the beast.
That is why you want to keep government to its absolute minimum size. You want the government to do as little as possible. That’s what the framers of the Constitution had in mind when they drafted the Constitution and only empowered the federal government with these short list of enumerated powers where they could barely do anything.
I mean, that’s why it might. And I was listening to what on my father, you know, the government has the power to tax, to pay the debts of the United States, to provide for the national defense of the United States and to promote the general welfare of the United States. That’s it.
That’s the only legitimate reason for taxation. You know, and it doesn’t say they can pay the debts of foreign countries. It doesn’t say they can pay the debts of students, you know, or people who buy houses.
It’s the debts of the United States, not the citizens of the United States. And the same thing is with the general welfare. It’s the general welfare of the United States, not the specific welfare of every Tom, Dick and Harry who lives in the United States.
Any federal government program that is designed to give money to one person to help that person out is unconstitutional. Now, if a state wants to do that, well, that’s fine. The Constitution doesn’t limit the powers of the states in that way.
The states can do whatever the Constitution doesn’t prohibit. And there’s just a very short section of the Constitution, right? Article one, section 10, that says what the states can’t do. And they could do whatever they want.
They just can’t do what the Constitution forbids them from doing. Now, of course, every state has their own constitution, which would limit what they could do. But the U.S. Constitution is not about limiting state power.
It’s about preserving state power. It’s only there to limit federal power. The federal government was supposed to be very small.
That’s why when Peter Navarro was on television today talking about a time a hundred years ago when the U.S. ran on tariffs, that’s where the U.S. government still abided by the Constitution. The U.S. government was tiny. It hardly did anything.
And because it hardly did anything, it didn’t cost very much. And because it didn’t cost very much, we could pay for it with tariffs. And so if you want to go back to the good old days of low tariffs and no income tax and no Social Security tax and no Medicare tax, right, when you get rid of all those taxes, you’ve got to get rid of all the government that those taxes pay for.
And the fact of the matter is they don’t even pay for it, because even with all the money the government collects in taxes, the four and a half, five trillion dollars they collect, it’s still two or three trillion short of covering the costs. That’s why we have these massive deficits. And that’s why we’re paying for government with massive inflation.
Anyway, that’s it for today’s podcast. Again, if you like the podcast, remember, give me the thumbs up. Write some comments.
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