Interest Rates Just Made a MASSIVE Move! (Uncut) 02-19-2025

Interest Rates Just Made a MASSIVE Move!! (Something BIG Is Happening)

What’s going on with the treasury market? For some reason, the Fed funds is going down. The treasury has gone up almost a full point since last September, I think it was. It’s come down pretty substantially.

It’s come down almost 40 basis points in the last month or so. So now we’re back to the point, Kenny, where the 10-year is almost close to Fed funds again, and yield curve is almost flat. I was saying last night on a video, who knows? It’s so crazy out there.

We could invert again. I don’t know. It’s just, it’s completely nuts.

But I don’t know what’s going to happen, but I can tell your audience what has happened in the past. And this is very common in rate cutting cycles. And I don’t think most people realize that because they don’t have the time to study these things in great detail.

But when you go back and look at the rate cutting cycle, let’s just say in 2007 and 2008, the 10-year treasury yield went up from March of 2008 to July of 2008 by 100 basis points. So think about that. We started in the GFC, the recession that is now known as the global financial crisis, that started in January of 2008.

So during that timeframe, we were already three months into the GFC and interest rates at the 10-year treasury went up from March to July, like I said, by 100 basis points. And by the way, if you read the Wall Street journals from back in July, which I really like doing, and you ask, well, why did they go up? Because inflation expectations went up. Because the CPI started off at 3.5% when the Fed started dropping rates September 18th in 2007.

So 3.5%. Then the Fed dropped rates, they dropped rates, they dropped rates, very similar to what they did in 2024. And then the market thought, well, my gosh, they’re dropping rates too much because the CPI is coming out and it’s going up and up and up. Does that sound familiar? And the CPI went from 3.5% to July of 2008 when it was 5.6%. So think about that.

When we were in the global financial crisis, the worst recession since the great depression in the United States, the CPI went up by 2%. And the 10-year treasury yield within that cycle went up by 100 basis points. And so what happened next? Well, we all know how the movie ends, right? Because in July, again, going back to those Wall Street journals I was talking about, the Wall Street Journal was saying, oh my gosh, the Fed dropped way too much.

The Fed dropped too much. The economy is red hot. They’re going to restoke inflation.

We’re going to go right back to the 1970s. So the Fed going into the latter part of 2008, well, they’re going to have to start hiking rates again. They’re not going to just pause, they’re going to have to start hiking rates.

And two months later, where was Fed funds? That would be 0%. And four, five, six months later, what was the CPI? That was negative 2%. So I’m not saying that 2025 is going to be 2008.

But what I am saying is just because you’ve seen inflation CPI go from 2.4 up to 3%, and you’ve seen the 10-year Treasury go up by 100, and then back down by 40 or whatever, it doesn’t necessarily mean that it isn’t going to be 2008. Or in other words, it doesn’t necessarily mean that it isn’t going to be a recession. Or when we look back on 2025, it isn’t going to be a year of potentially disinflation and potentially lower interest rates.

Again, there are no certainties. There are only probabilities. But I’m just throwing that out there and going over history so people can better assess the probabilities of what’s going to happen in 2025 for themselves.

If you don’t look at history, if you just listen to what’s being said in the mainstream media, you think that we’re going straight into the 1970s because the CPI has gone from 2.4 up to 3%. And you think that we’re now in, you know, the 10-year Treasury yield is going to go up to 10, 12, 15%, like we saw during the Volcker era, just because you have seen this discrepancy between Fed funds and the long end of the curve, which is a very good observation, Kenny, by the way. But I think the main observation there is that the Fed doesn’t control interest rates.

So what would be the determining factor whether inflation goes out of control and they have to hold rates high, or inflation comes down and they have to start lowering rates? Because I think that’s kind of the fork in the road everyone is trying to figure out. It’s a great question, Danielle. And what I’d do is just go back to 2020 and 2021 and say, how did we get this consumer price inflation to begin with? And what we did is we locked everyone in a cage for two years and told them that they couldn’t produce any stuff.

We destroyed global supply chains. So you went into the shopping or the grocery store. I remember I was in Arizona in 2021.

You go into the grocery store and half the shelves are vacant. That’s number one. And then number two, what you do is you give out all these trillions of dollars with the STEMI checks.

So it’s not just fiscal spending. And that’s another thing that people kind of get, they don’t get into the nuance enough. If we have a deficit and our entire deficit is going to Ukraine, well, that’s not really going to impact prices in the United States.

But if you’re taking that entire deficit and you’re spending it on STEMI checks and giving it to people with a high propensity to spend, you are going to increase velocity. You’re going to increase aggregate demand while at the exact same time, you’re reducing the amount of goods and services due to the supply chain disruptions or destruction that I talked about as a result of the government’s response to COVID. So that’s what caused the inflation to begin with, right? So then we have to look at 2025 and say, what’s happening to global supply chains? Are we going to go back to what we saw during COVID? Well, I mean, maybe we’ll have to see how these tariffs play out.

I mean, that’s one way to screw up global supply chains is through tariffs. And now I’m not saying that if Trump implements a tariff here and a tariff there, that it’s going to disrupt global supply chains like we saw during 2020. So I don’t think that’s a high probability is what I’m saying.

I think that, you know, we’re kind of on a pause. I think global supply chains could get better. I don’t know that they’re going to get dramatically worse though, is what I’m saying throughout 2025.

So you can kind of take that variable off the table. So then the next variable would be just direct fiscal going into the back pocket of the average Joe and Jane. Well, we don’t see that really happening either.

And I think, is that a possibility for 2025? Absolutely it is. Absolutely. But you would have to have a major recession first.

You know, if Trump is going to come out and give everyone $5,000 a month in UBI, it’s not going to be if the economy is booming, I can assure you. It’s going to be because the economy is contracting. And therefore you would have disinflation before you had that next wave of consumer price inflation.

And other people, some people might want to push back on that and say, well, George, you’re not considering the elephant in the room. And the elephant in the room is all the quote unquote money printing that the Fed did. And M2 money supply went up by 20%.

Let’s just say throughout a 12 month period between 2020 and 2021, actually about 25% if my memory serves me well. But if you zoom out, Danielle, and look at the money supply growth that we have had since 2020 to today’s date, it’s right around 38%. Okay.

Now that sounds like a lot, but then you go back to the five-year period prior to the GFC, exact same timeframe or the exact same time span, and M2 money supply grew by 30%. So it’s only an 8% difference. And so I don’t know how that 8% difference really can take us into, you know, the 1970s.

And especially when you look at M2 since 2022, it’s actually down. It’s overall, it’s down since 2022 in the United States. So that for me, that that’s not a recipe for a reacceleration of consumer prices.

I want to make sure your audience doesn’t misconstrue what I’m saying, because what I’m not saying is that prices are going to go back to 2019. That ain’t happening. That’s never, ever, ever, ever going to happen.

You might see asset prices back down to that level, but I can assure you, you are never, ever, ever going to pay, you know, for your health insurance or your grocery bill or your rent. You’re never going to pay what you paid in 2019. It ain’t going to happen.

But it doesn’t mean that we’re going to go into the 1970s either. You see right now, prices are increasing, if you believe the CPI, which obviously understates it, but let’s just use that as a proxy. Prices increasing at 3%.

Well, we can go down to, let’s just say two, even sub two, 1.5%. Prices are still increasing. They’re still increasing, but they’re just increasing at a slower rate instead of an ever-increasing rate. And the main takeaway there is I don’t see how prices can, for long term, can accelerate at a sustained level where they go, where the inflation is higher and higher and higher, unless we see the same dynamics that caused the inflation to begin with.

And I think that that’s very low probability in 2025, not withstanding a recession, which would cause the disinflation before we got the inflationary wave. I think, you know, George, prior to getting on with you, I was reading that a lot of people believe that the federal funds rate, it’s gone down, right? There has been cuts. And so why is the 10-year treasury up, right? And so that’s confusing to a lot of people.

And what I’ve been reading is, and I’d love to get your perspective, is the federal funds rate actually is more at the consumer level and it creates inflation. And so it’s been driving these prices up. And because of that, the 10-year is still remaining high, which is of course the borrowing rate.

And so, and if you could, could you take that all the way into the global implications? Because that’s actually where my head is. And then I want to talk about, you know, how it’s going to affect real estate. Real estate’s locked up right now.

You know, it’s, there’s not a lot of refinances. I think people saw these federal funds rates go down and they’re like, what’s going on with the 10-year? Because as we all know, that’s the borrowing rate, right? And it remains high, almost a full point higher than we saw it just four or five months ago. Just for the audience, that’s why interest rates have not been coming down, even with the cuts that the Fed has been making.

Right. Great point. So, Kenny, intuitively, I think you really hit the nail on the head right there.

What drives the long end of the curve, in other words, the 10-year treasury yield, is not the supply of treasuries. It’s not the issuance. It’s not how many treasuries or 10-year that Janet Yellen is issuing or Scott Besent or anything like that.

You nailed it. It’s growth and inflation expectations. That’s what’s going to drive the long end of the curve.

So, what happens is when the Fed funds is coming down, the market is perceiving that to mean that growth and inflation is going to increase. Now, this could be short-term noise, which I think it is, like we saw back in the 2008. That’s why I use that example.

But that’s the market saying, okay, we’re seeing a little more growth and inflation expectations because the Fed funds is coming down. But if you think that one through, it’s ironic, isn’t it? Because if we had to pick out one interest rate or one maturity that has the most impact on the real economy, it’d be the 10-year treasury yield. And so, most people think that, well, the monetary conditions have loosened dramatically because the Fed has dropped rates by 100 basis points.

Have they? The long end of the curve has gone up by 100. So, I think there’s a strong argument that monetary conditions have actually tightened over the last, call it four or five months, which again, makes you question, does the Fed really control interest rates, even at the front end of the curve? Because put yourself in the position of Jerome Powell right now. Okay, you just dropped by 100 basis points trying to bring down all interest rates.

And the 10-year just basically gave you the middle finger and said, no, we’re going up by 100. So, I mean, he’s got to be contemplating the possibility that if he continues to drop, the 10-year might continue to go up, do the opposite of what he wants. So, is he really controlling the front end of the curve or is the 10-year treasury saying, no, no, no, no, no, Jerome.

No, we control the game here, my friend, and you’re not dropping rates. You’re not dropping rates. So, why would you do that? It’s a great point.

So, what everybody wants is for the 10-year to go down, right? Yeah. So, how do you get it down? Yeah. How do you get it down? That was my question to you.

Answer, you don’t. You don’t, Kenny. The only thing that gets it down is growth and inflation expectations.

And people will push back on that and say, oh, George, well, the Fed is just going to come in and do quantitative easing. And they’re going to buy the long end of the curve and that’s going to bring interest rates down. Don’t you remember, you know, 2010 to 2020? Well, go back in the history books, look at some charts and see what the 10-year treasury yield did during QE1, 2, and 3. What do you think the 10-year treasury yield did, Kenny? It went up.

Yeah. It went up when the Fed was buying all of those treasuries, trying to get the long end of the curve down. In other words, get the yields down.

The yields did the opposite of what the Fed wanted, even with all that additional demand. Why? Because the market perceived that to be inflation and growth expectations increasing. So, they sold more than the Fed bought, which made the rates go up.

So, again, focusing on your initial point there, it’s all about the Fed doesn’t have that much control, especially at the long end of the curve. So, if we as real estate investors, you know, we’ll take a look at it through that lens. If we are trying to figure out what’s going to happen to the 10-year, you forget the Fed.

Forget the Fed. Just try to ask yourself what you think is going to happen in the real economy. You know, what do you think is going to happen to the CPI? Because I know it’s a bogus number, but the bottom line is it moves the market.

And obviously, you know, the people that are buying and selling the 10-year treasury, they’re going to pay a lot of attention to what’s going on there. And so, then if the Fed does, if we see economic weakness, and then we do see the Fed drop rates, well, then you’re really going to see the 10-year treasury come down. Because the Fed doesn’t have a zero impact, you know, the front end of the curve.

It does have a slight impact. And it’s almost like a release valve, you know, that it’s artificially propping up the 10-year treasury yield. And if they start dropping, then you’re likely, likely going to see the 10-year treasury come down if, if, if the data continues to soften and the economy gets worse.

But if the economy stays the same as far as the headline numbers, and then the Fed starts to drop, then you can expect the 10-year treasury yield to go back up. So, my point there is, when you’re starting your analysis, start your analysis by looking at what you think is going to happen with consumer prices and inflation expectations in the real economy. Do that first, and then try to ask yourself how the Fed is going to respond in relationship to certain scenarios.

And that’s how you can kind of use some gain theory to set up your portfolio or know if, you know, there’s going to be an opportunity at the end of 2025 to refinance at a lower level. So, part of this data is also the job numbers, right? Like, it’s not just the inflation, it’s also the job numbers. Do you think that Trump is, the Trump administration is aware of this? And that’s why they’re, because the Biden administration, you know, I don’t know if the job numbers they were reporting were accurate, right? Because they would report job numbers, and then they would alter them significantly on the back end.

That was kind of their game to prop up the economy. Do you think now with the Trump administration, it’s kind of in their best interest to see softening in the job market to try to move this 10-year? And don’t forget about the federal workers, too. I went back and looked at 23, 24, the federal workers that they hired was nuts in the last two years as well.

I know that they’re starting to purge that now. 30,000 a month. Yeah, that was a big number.

Yeah. So, I just want to make sure we’re not putting the cart in front of the horse because the 10-year treasury yield is going, especially over the long term, the 10-year treasury yield is going to reflect what’s happening in the economy. The economy isn’t going to reflect what’s happening with the 10-year treasury yield.

So, if the 10-year treasury yield is going down, that’s not going to make the economy boom, right? It could make the economy a little better than it otherwise would have been, but it’s not going to lead to an economic boom like people think. And also, if you see interest rates going up, it doesn’t mean that the economy is going to crash, right? So, what happens is you’ve got to rearrange the thinking and realize that the 10-year treasury yield is basically a derivative of the economy. So, if we want the economy to grow, we want to see a higher 10-year treasury yield.

Absolutely. Because that’s telling us that the economy is growing. And guess what? Guys like Kenny McElroy and gals like Danielle McElroy, they’re not going to care.

You’re not going to care if interest rates are going up. Why? Because you’re going to have so many damn customers and you’re going to be able to increase your rents because the economy is growing. And the 10-year treasury yield is just simply a reflection of that.

You don’t get both, right? You don’t get a booming economy and low 10-year treasury yields. Yeah. It’s just funny though.

So, whenever I’m talking to people and they’re like, I’m going to wait until the price is another 2008, to your point, unless you have literally enough cash in the bank to buy it with cash, good luck. Yeah. Or the relationships.

And that’s why building relationships is so darn important. And at the end of the day, every single business you’re in is a people business. And so, that’s probably my best advice to the real estate investors, no matter how big or small, watching this video, is what you can do right now to prepare for whatever happens in 2025 or 2026, interest rates, tariffs, whatever, is just work on those relationships and work on that network.

And George, I wanted to chat about one other thing. I know you’ve been in this business a long time, same as me. I think a lot of people in this last real estate cycle specifically, never really experienced foreign, real foreign investment, real foreign capital coming into the US.

We had Brent Johnson on, and we were talking about this in detail, about how the strong dollar, the milkshake theory, essentially, a strong dollar attracts foreign capital. I remember going back from Asia, certainly I remember in Japan, when their economy was going sideways. And what people don’t realize is the global implications.

If we have a strong dollar, we are going to attract foreign investment. It’s going to make it more competitive here locally. I’d love to get your comments on that.

I mean, I don’t know if we even need a strong dollar for that. Look, I’ve been talking about how the probabilities, let’s say, of the United States going into recession or an economic slowdown, let’s say. But I can assure you that whatever happens in the United States is going to be a lot worse everywhere else.

There might be some exceptions. You might have some smaller countries that are doing better than the United States. But overall, these big developed economies, if the United States is growing at, let’s just say GDP goes down to 1% real, I can assure you Japan is not going to be growing at 3%.

I can assure you Europe is not going to be growing at 5%. The United States is definitely the strongest economy in the entire world. And that’s even if we go into a recession.

So when we’re sitting there talking about the Fed dropping rates down to zero or whatever they drop it down to, guess where the ECB is going to be? Answer, lower. Guess where the Bank of Canada is going to be? Answer, lower. Right? Guess what? Japan, they just had a good number as far as their GDP, but I can assure you that’s going to go in the opposite direction very, very quickly if the United States catches a cold.

So it’s almost, and I’m sure Brent kind of came to this conclusion as well. It’s almost tough to think about a scenario where the dollar would go down, just because everyone else’s is a lot worse. But let’s just assume that it does.

Still, you have to look at the overall economy and you have to look at the track record of the dollar over the last, call it 10 years versus other currencies. And this is very difficult for Americans to do because Americans just assume that the dollar always loses value. Look at inflation.

You know, I can’t buy as much with my dollars as I could in 2019. And that’s very, very true. But that doesn’t necessarily mean that Colombians can’t buy as much with their dollars.

See, and this is, again, this is very tough concept for Americans to understand that the dollar has gone up. Let’s just use Japan as an example. The dollar has gone up by, let’s just say 100% relative to the Japanese yen over the last, call it the last decade or so, last 12 years.

But the inflation rate, the cost, the price of the stuff they buy, the goods and services has only gone up by, let’s just say 25%. So think about that. If the dollar has gone up versus the yen by 100% and the stuff you buy has only gone up by 25% and you own dollars, guess what? You’re getting richer.

The dollar is increasing in purchasing power, not just relative to the yen, relative to the stuff you buy. Well, I always use this example because I always have these waters with me. These are the ones I drink here.

And when I first got to Colombia, the peso was trading at about 2,800, let’s say something like that. So for every $1, you’d have 2,800 pesos. Today it’s trading at 4,200, right? But the cost of the local stuff hasn’t gone up by that much, gone up by a lot, but not that much.

So this bottle of water, let’s say that I could buy it for $1 in 2014. These are the approximate numbers, just for the sake of the example. Let’s just say I could buy it for $1, one US dollar back in 2014.

Today I can buy it for 75 cents. See? So the point there is even if the dollar does go down slightly, you have this recency bias with a lot of these foreign investors, whether it’s right or wrong, it is what it is. And then you have to look at the economy of the United States, even if it’s in recession, most likely outperforming their local economy.

And it’s like, if you have all this savings, where are you going to put your money? You’re going to most likely buy USD denominated assets, whether that’s the S&P 500, whether that’s real estate, whether that’s treasuries. In fact, one of my assistants, Ali, he’s been working for me, he’s like Daniel, he’s worked really hard to save his money and he’s doing well and he’s budgeting and everything. And he was able to save up about $1,500 or $1,000 and he started a brokerage account.

So he could start buying stocks. I’m like, Ali, that’s fantastic. That’s awesome.

What stocks are you buying? And what he did is he just listed off all of these US companies. And I’m like, why are you buying US companies? I mean, you know the companies here a lot better. He’s like, because I want dollar denominated assets.

I want my savings denominated in dollars. And so that’s not going to change anytime soon, in my view, even if the dollar on the DXY goes from, let’s say 106 down to 95, which I think, again, the probabilities of that are extremely low. So there’s never just, nothing is just black and white.

I think hopefully that’s the point of this whole conversation. There’s a lot of variables out there. There’s all these cross currents in the ocean and you have to consider all these variables to determine the probabilities of specific outcomes, right? And then you have to set up your portfolio accordingly.

So when you’re, yeah, go ahead. I was going to say, one of the things that really landed for me when I was speaking to Brent is a lot of people, if they are in the US and they see, oh, we’re printing, we’re printing, we’re printing, we’re devaluing the dollar and they’re kind of hanging on that. But what he said was when we print, they print because they have to print because, you know, they’re not going to let their currency flap out in the wind either.

So if they have a central bank, of course, right. And so not necessarily exactly like us, but to your point, the cross currents, if we’re printing here in the US and we’re paying them in US dollars, but they also have whatever their currency is, they’re doing the same kind of thing in that country because the US is doing it to just make sure that their currency isn’t crashing as well. Right.

Yeah. I mean, Brent, what Brent’s doing is, is he’s keeping it pretty basic. So, so, so let’s, let’s go into that first and foremost, because he’s assuming that what you’re saying is, is correct, that the United States is printing money and that’s going to lower the value of the dollar and, you know, all these things.

But if you go back and look at, you know, QE, we, the Fed took their balance sheet from 800 billion straight up to, or we’re at top out 9 trillion, something like that. And let’s just look at the DXY and you can, I’m sure the editor can pull up a chart of when they started QE and look at, or during the GFC and look at what the dollar was back then on the DXY. And it, the answer, the punchline there was, is a lot lower.

It was a lot lower. So the Fed printed all of this money. And what did the value of the dollar do relative to other fiat currencies? It went up, it went up.

And so my, my, my point there, and I think Brent was just trying to kind of play along, is that the Fed’s balance sheet has no impact whatsoever on the value of the dollar. No impact. None, none, none, none, none.

Now it might have, I mean, you could kind of argue it might have an impact on goods and services in the United States. But again, if we’re just comparing fiat to fiat, the Fed’s balance sheet doesn’t really make a difference. Over the short run, the interest rate can.

So you have interest rate differentials. So if the Fed is dropping rates down, let’s say the Fed is dropping rates while the ECB is increasing rates. Well then yeah, that’s going to put downward pressure on the dollar relative to the Euro.

But the, but that’s going to be more so temporary. Yeah. So what I mean, again, I think the main takeaway there for the viewer, Kenny, is if you’re trying to think through what impacts the value of the dollar relative to other currencies, you have to realize it has very, very little to do with the United States.

Very little to do with the United, and I would include the Fed. It has much more to do with what’s happening outside of the United States in the global monetary system, in the banking system. It’s actually creating the majority of the dollars by lending them into existence.

So do you think that this would impact real estate? It’s probably a question for, for Ken too, because with these, you know, we hear people that go buy real estate in New York City and never put a tenant in it because they’re from China. To your point, they’re just really leveraging their asset into dollars. So do you think we’ll see more of that as things start to get a little more rocky? I do.

I do. And this could, so does that mean that they go into risk assets though? Maybe. I mean, if things get really rocky, to your point, Danielle, they’ll probably go into treasuries, which then would lower rates, right? But again, that’s because growth and inflation expectations, not just in the United States, but globally are coming down.

But I think that if we do have, let’s say a balance sheet recession in the United States, like 2001, right? So the economy doesn’t do that bad, but it’s just the stock market goes down by 50%. Or maybe the stock market goes down by 50% and maybe housing goes down by 20% in nominal terms or something like that. So a balance sheet recession.

For me, especially if things got cheap based on the metrics I use, that would be a huge buying opportunity, massive buying opportunity. Because my base case would be that over the next five years, we’re going to see that dynamic where it is much more attractive to invest in the United States or dollar denominated assets than other places. And you’re going to see those capital flows, which will be a significant tailwind.

But again, notice I said tailwind. There’s a lot of cross currents here, right? There’s thousands and thousands of variables. And that’s just one variable that we need to consider.

There could be other cross currents that come along that overwhelm that dynamic, but that’s why we got to stay focused on this stuff. And we can’t just bury our head in the sand like an ostrich. So, George, I know in a couple of months, I always attend the Rebel Capitalist Live.

It’s coming up in May, the third week. I was just pulling it up here. I think the 23rd or 24th of May.

And talk about an incredible time. Like, it’s a few months from now. I’d love to know who some of the speakers you’re bringing in.

And also, what’s your crystal ball say? You’re going to have three or four months of doge at that point. You got all this stuff. It’s going to be very, very interesting time.

So first of all, tell us about the conference. I’ll be there. Obviously, we’ll be there with our mastermind, The Collective, beforehand.

But let’s talk about what your crystal ball sees this year. Unknowns. That’s the only thing that I’m confident in, Kenny, is that we’re going to have volatility, more volatility than we’ve had in the past.

And that doesn’t mean there’s not upside, but it’s going to be a bumpy one, like Danil said. And the only thing I know for sure, which sounds kind of weird, is that there are more unknowns right now than I think in any time that I’ve tried to analyze macroeconomics with the exception of COVID. Obviously, there was a lot more unknowns back then when it hit in March of 2020.

But outside of that, I don’t know what’s going to happen with the economy. I don’t know what’s going to happen to interest rate. I have a certain base cases, but I’m not as confident as I normally am because you just have no idea what Doge is going to uncover.

You have no idea what Trump is going to do. It’s just it’s very, very difficult to use game theory here because things are changing just so darn quickly. And so that’s why I think everyone should attend Rebel Capitalist Live because the speakers there are a hell of a lot smarter than I am.

And in their own individual areas, like obviously, you know, real estate better than I ever will. And we’ve got guys like Jeff Snyder that know the monetary system better than I’ll ever know it. We’ve got Brent Johnson, who you just talked about.

We’ve got Joseph Wang, who actually used to work at the Fed. He ran the trading desk at the New York Fed. He’s going to be there.

So you want to talk about having great insights on the Federal Reserve and how much control they have over interest rates. And he definitely has an opinion on what’s going to happen with interest rates throughout the rest of 2025. Lynn Alden is a maybe.

We’re going to have incredible VIP guests like we always have. Most likely, Kiyosaki is going to be there. And as usual, he’s probably going to want to speak.

But I don’t know, because he usually tells you about five minutes beforehand. But most likely even to hang out with Robert and have a couple beers. Everyone always loves that.

And Rick Rule is going to be there talking about commodities. I’m really excited about that. Then we have some other, you know, three or four speakers.

If you go to the Web page, RebelCapitalsLive.com, you’ve got we’ve got question marks there because I’m kind of keeping them a secret and we’re going to release them as we get closer to the event. But I can assure you, every single one of these speakers is going to completely blow you away. And the real benefit there is being able to network with other like-minded individuals that value freedom, liberty, free market capitalism.

I mean, there’s been so many incredible relationships that have been built at Rebel Capitalists Live, not just with the attendees, but also with the speakers, as you know. And it’s just a real magical time. It’s a magical event.

It’s very special. And especially in these times of uncertainties, I think it’s paramount that people attend, if it’s not this, some sort of event that gives you an edge. Yeah, thank you.

I highly recommend you guys go. We’ll be there for sure. I’m going to talk about what’s going on in real estate at the time.

Who knows where the tenure will be at that point. But, you know, but I think it’s one of these places, guys, that you need to go to. You need to show up.

There’ll be almost a thousand people there all trying to figure out what moves do I make in the second half of this year. And I think it’s really, really important that you spend just a weekend just to try to figure that out. And you guys can click on the link below to go to Rebel Capitalists Live.

Like I said, we will for sure be there. We’ll be listening. When I go, of course, George, as you know, we do the mastermind before, but I’m in every single event.

I’m taking notes like crazy because I don’t understand. Robert’s always in the front row. Robert Kiyosaki.

Yeah. You know, at 75 years old or whatever he is, he’s always in the front row taking notes. I mean, he’s, that just shows you that he’s just such a great.

That’s why he’s so great at education, because he’s so great at learning. Yeah. Well, I can’t wait to see you then.

You’re in Columbia now, a little bit insulated from the crazy stuff that’s going on here in the U.S., but I can’t wait for that event. Any final words you had, George, or anyway? No, they can just click on the link at RebelCapitalistsLive.com. The faster they buy the tickets, the cheaper they are, because as we get closer to the event, the tickets go up in price. So there’s some urgency there.

This conversation about Doge, because that seems to be the hot topic, hot button topic right now. Yeah. I mean, what they’re doing, I think is fantastic.

Where I think it really moves the needle is for the normie out there that kind of just lives their life where they’re not really focused on what’s going on with politics or with macroeconomics or with the Federal Reserve. You know, they just think the government’s kind of a docile entity that kind of has, you know, you got some bad actors here and there, but for the most part, they’ve got the best interest of the people as their number one priority. And, you know, even if that’s not what’s happening, I really don’t have any time to allocate to it.

I don’t have the mental bandwidth because I’m focusing on my nine to five job. I got to take my kids to soccer practice. You know, this weekend we’re going up to the lake to go hang out with my friends for a barbecue.

I don’t want to, I don’t really care what’s going on at a political level or with Jerome Powell or with USAID. It sounds good. You know, they’re donating to little kids that need rice in Africa.

So, you know, if they blow an extra billion dollars, who cares? I think that was the mindset for the normie. And what this is doing is it’s just opening up that whole can of worms to where the average Joe and Jane is really starting to now understand just how corrupt their government is, and they’re getting pissed off about it. And I think it’s not just on the right.

I think it’s for a lot of the people on the left as well. They’re looking at this saying, whoa, whoa, whoa, whoa, whoa, timeout. This is not what I signed up for.

When I signed up for additional taxes, I signed up for that tax money or that government spending to be spent effectively and something that really helps out the people, whether it’s the people of the United States or people of Africa or South America or Asia or whatever. I did not sign up for government spending to go directly into the back pocket of all of these entities that are trying to basically promote propaganda and censorship and to overthrow foreign governments and whatnot. You know, I didn’t, I’m not voting for what government they overthrow or what the CIA does in Peru or something like that.

And you know, why am I funding all of these media organizations just to spread propaganda that I don’t know what propaganda they’re spreading. Maybe it is American. Maybe it’s not for the best interest of America.

And the point is they’re shining a light on all that to where now it’s in the mainstream media. People are talking about it. The average Joe and Jane is cognizant of it.

And I think that’s very, very, very positive. So do you think that, you know, this additional unemployment is going to lead to any disruption in the economy? Because they’re going to be letting go of a lot of people. And Ken and I were looking last night and the average government job pays $106,000.

So these aren’t necessarily low paying jobs. So I think it’s regional. DC is going to get completely wiped out.

You know, DC and Virginia, like Tyson’s Corner, they’ll probably have an economic depression there. That’s for sure. But I think it all depends for more if we zoom out, which is what your question, I think, is really pertaining to.

It all depends if they’re reducing regulations, bureaucracy and red tape, because what we want, guys, is we want the private sector to grow. We want the entrepreneurs out there. We want the Kenny McElroy’s of the world, the Robert Kiyosaki’s.

We want them out there producing more goods and services. So if you, let’s say, fire 100,000 government workers, then yeah, it’s going to be bad for them. There’s no getting around that.

But on net balance, it’s going to be a positive if, and that’s a huge if, you’re reducing regulations, bureaucracy and red tape, because that’s what’s going to allow the private sector to grow to the point where they’re going to be able to create more than the 100,000 jobs that were lost by just getting rid of all the inefficiencies, which is the main objective of DOGE. So that’s why I always say that I applaud their efforts, but I always take a step back and say, remember, guys, this has to come with the reduced regulation. If you just get rid of, let’s say, 100,000 employees and you don’t reduce the regulations, then that could be a net drag on the economy, not just in the short term, but potentially in the long run as well.

So we’ve got to compartmentalize things, right? We can’t just say that because they’re shining light on all of this waste and all the grift, quite frankly, that is absolutely 100% good. But at the same time, if we look at it through an economic lens, it’s going to be a net positive just so long as we focus on what we really need to, and that’s unshackling the private sector so they can do what they do well. Yeah, I think it’s also short-term and regional, as you kind of pointed out.

If you take a look at D.C. already, the listings have almost doubled. The price of homes went from $6.99 into the high fives. Now, that’s the median, so that could be skewed, obviously, depending on what makes that.

But it’s down over $100,000, the average or the median price of a home. What’s really interesting is, to your point, Trump is actually talking about selling off some of the federal buildings as well. So I think that could come down the line, and that could be in Atlanta, it could be in Salt Lake City, it could be all kinds of places because some of these departments are really getting pulled back.

Yeah, like the leases, the leases that are long-term. Right, right. And Trump, of course, Musk did this already on Twitter, right? Yeah, and I mean, so again, you can look at that and say, oh my gosh, that’s great, they’re reducing spending.

Is that going to make a difference in the grand scheme of things? No, no, because you’re getting rid of, let’s say, a $100,000 lease, and the budget deficit is, let’s just say $2 trillion. So yes, you can have these little wins, and I agree, we should be doing that. But again, what we have to really focus on is, okay, let’s get rid of that government lease, but let’s get rid of all the rules and regulations that the people in that government building were hog-tying the entrepreneurs in their local area with, right? You get what I’m saying, you can’t just get rid of the building and get rid of the lease and do all this Twitter stuff, which I think is great, and then at the end of the day, you say, look at this, Kenny, my goodness gracious, last year we saved $5 billion.

Well, fantastic, the government spends that every 10 seconds. Yeah, I was actually looking at it from a real estate perspective, not from a reduction, I was looking at it as a positive that some of these buildings are in great locations, and depending on what has happened, I’ve had friends actually do this before in prior cycles, and if you can snap up a building, even a state or federal building, with a long-term lease on it, it’s a cash cow. Yeah, well, I had a good buddy in Kansas City who was able to not just buy, but take over one of the local high schools, and it was right down by the plaza in an area that had really gone downhill, and they basically condemned the high school, but it was this huge building that used to have, I don’t know, 1,500 students or whatever, they had a track, they had like a football field, like an auditorium, like everything, and it was just decaying into nothing, so the county or the city or whatever, they gave it to him, and they also gave him a ton of these tax credits to refurbish it, so then what he did is he took the tax credits, and he sold them off, and then he took the money, and then he started turning the high school into a coworking space, this massive, massive coworking space, and then he turned the cafeteria into this really cool food court, and just made it really awesome, and then what he did is he went back to the bank once he got some tenants in there, and now he had pro forma numbers, and he said, okay, now I need another, whatever it is, $20 million to redo the rest of it, and then he took in that $20 million, and then he leased out all the rest of the square footage, and then he takes a loan at like 70% LTV at a property that’s now worth 100 million, and he takes back the 70 million with the loan that he’s using the tenants to pay off, and he takes the 70 million, and then he pays off all of his other debt, and he pays himself like 25 million, and then he’s, bye, have fun with it.

It basically is one of your plays, Kenny. It’s exactly like something that you would do. That’s exactly why I’m excited, because we’re going to start to see those kinds of opportunities, and oddly enough, to your point, the government will offer financing as well on a lot of that stuff, because if they have a decaying building or something that’s vacant, it’s still owned by them until it gets sold, so I think you’re going to start to see some creativity.

Yeah, I think a lot of these buildings, though, they don’t own. I think there’s $5 billion in leases on them, and so some of them were in like 10-year leases, so I don’t think there’s a lot of ownership of these buildings from what I understand. Yeah, so it sucks for the landlord, but I think for the community at large, it’s going to be a big win, because those were scarce resources with alternative uses that were being used for destructive purposes.

So we obviously can’t cut our way out of this, right? No matter how many jobs we cut, like to your point, we’re just spending too much money, so we also have to bring more income coming in as well. So what do you think of Trump’s plan with the tariffs? Because I know that some economists love it, some hate it, some are undecided. What’s your opinion? Well, it’s a little bit like the argument that Andrew, I think that’s his name, Andrew Yang, I think that was the gentleman that ran for president four years ago or whatever it was, and remember his big thing was UBI.

Oh, we got to have UBI, we got to have UBI. And then what he would do to appease the free market people is he would say, look, it’s not my idea, it’s Milton Friedman’s idea. Milton Friedman was talking about this back in the 1970s or the 1980s or whatever.

And so what he’s doing is extremely disingenuous, because Milton Friedman’s idea was you get rid of welfare, you get rid of welfare, food stamps, section eight, yada, yada, yada, yada, and you replace it with UBI. What Andrew Yang wanted to do is put the UBI on top of the welfare. That is not Milton Friedman’s plan.

So my point with Trump is, look, if you want to do this, and you’re looking at this strictly through a lens of taxes, right? Because that’s what your question was. Now we can look at it through economics, through jobs, what it does to China and negotiating tactics, those are all separate issues, right? But we look at this just through the lens of tax revenue, and, you know, bringing in more money for the government. Well, again, my big thing is we’ve got to increase efficiencies, we’ve got to reduce the size of government, reduce it.

So before we have an external revenue service, we need to eliminate the internal revenue service. We don’t want both. Because I know the argument is, well, once we get the external revenue service up and running, and we’re creating all this revenue, we’re all going to be rich because we’re making so much money in tariffs, then we can go ahead and reduce the IRS or eliminate the IRS.

And I can assure you, that’s not the way it works. That is not the way it works. You’re going to end up in 10 years with both.

And the external revenue service is going to be even bigger of a monstrosity than the current IRS. And you’re not going to have one of them. Like I said, you’re going to have both.

And by the way, you have to think this through, which I don’t think many of the Trump fans have done. Because if you want to source all of your revenue for the government, let’s say, through these tariffs, which is what Trump talks about going back to the late 1800s, early 1900s, but you also want to bring manufacturing back to the United States, what are you saying when you say you want to bring manufacturing back to the United States? You’re saying you want to reduce the amount of imports. Okay, well, if we are successful in bringing all those jobs back to the United States, you’re going to bring your imports down to almost zero.

Okay, but that’s where you’re making all of your revenue. So the better you do over here, the worse with this plan, the worse you do over here. And I don’t know how you square that circle.

If you’re someone that believes in Trumponomics or something like that. So I don’t think that… I’d like to hope that the tariffs are just a negotiating tactic. And Trump is obviously using them very, very well as a negotiating tool.

But I think as far as an economic policy, whether it’s through jobs or tax revenue or anything like that, I don’t think it’s a really good idea. Another thing that people don’t really think through is we already have tariffs. Every single good that we import into the United States already has a tariff on it.

It’s called transportation costs. Right? So let’s think about it. All else being equal, is it cheaper to buy a widget from China or from the United States? Well, assuming wages and everything like that are all the same.

Well, it’s going to be way cheaper to buy it in the United States. Why? Because you don’t have that transport cost shipping it across the Pacific Ocean. That’s not free.

So that’s a tariff. You’re increasing the cost. And so we have those tariffs.

So why haven’t those tariffs created all these additional jobs or U.S. manufacturing? I don’t know. I think it’s just a question that we need to ask. So again, my position on this is they’re fantastic negotiating tools.

Hopefully, Trump can use them to bring down other tariffs that other countries have on us. I totally get the argument. But as far as the argument that it’s going to be an economic boom and we can get rid of the IRS and all these things, I’m all for that.

But you got to get rid of the IRS first before I’m going to believe her. So how would you bring manufacturing back to the United States from a cost benefit without tariffs? It’s simple. Simple, Danielle.

Just reduce regulations, for heaven’s sakes. Let’s not forget. Look, this argument drives me crazy when I hear this on social media and whatnot.

Look, you’re competing with a communist country, for heaven’s sakes. You don’t think that they’ve got any drawbacks to doing business in China? And I love the argument that, well, they’re a currency manipulator and they have all these tariffs, so we need to have tariffs. Well, that argument is okay.

Well, they’re doing central planning so awesome that we just need more central planning to be able to compete with them. No, I’ve got an idea. How about free market capitalism? How about that? How about that competes? They can do all the stupid tariffs against the United States.

They can have cheap labor. They can destroy the environment. They can cheapen the yuan.

They can do all that nonsense. Well, fine, but they still have central planning. And last time I checked, that wasn’t very efficient.

When you have to check every single thing that you do through Xi Jinping, you don’t think that is a headwind to you doing business? Of course it is. And if in the United States, we don’t have those headwinds, then that allows us to compete. Now, we might not be able to compete again.

I use the example of basketball, right? So let’s just say they’ve got a seven foot guy and we’re saying there’s no way we can compete with them unless we have a seven foot guy. No, that’s not true. That’s not true.

We just need a six foot five guy. That’s a hell of a lot faster. And then we’re going to beat them every single day, every single day.

So I would much prefer to make our businesses or our products, let’s say, a lot better. And that’s how we compete with them instead of just making their products a lot worse. Because at the end of the day, if all we do is just make their products worse, in other words, more expensive, then that’s just going to impact the consumer.

And then the consumer loses and you say, well, we’ve got all these jobs. Great. So let’s just think that one through.

So you increase the prices at Walmart that has, let’s say, 100 million American shoppers on a weekly basis just to bring back 10,000 manufacturing jobs. Well, that doesn’t make a lot of sense to me. And then another thing you have to think about is the strong dollar.

And if you have a strong dollar that completely nullifies or not completely, but it could completely offset the tariffs. Because if I’m a Chinese producer and I’ve got a 25% tariff, if the dollar goes up 25% relative to the yuan, well, I can just lower my price by 25 and I still get the same amount of yuan cashflow to pay my expenses. My profit margins didn’t decrease at all.

You see, so there’s a lot of these factors and people like to look at it through a lens that’s oversimplistic. And I think when you do that, you lose a lot of the accuracy. But again, it goes back to the fact that these tariffs are fantastic negotiating tools.

There is no doubt about that. But as far as an economic policy, you’ve just been sold oceanfront property in Arizona. As always, thanks for your time, man.

All right. Bye, guys. Good seeing you.