Crashing stocks, bonds, real estate and currency all at once?
Mike Maloney, monetary historian and founder of GoldSilver.com, has just released two new chapters of his excellent Hidden Secrets Of Money video series.
In producing the series, Maloney has reviewed several thousand years of monetary history and has observed that government intervention and mismanagement - such as is now rampant across the world - has always resulted in the diminishment and eventual failure of currency systems.
As for the world's current fiat currency regimes, Mike sees a reckoning approaching. One that will be preceded by massive losses rippling across nearly all asset classes, destroying the phantom wealth created during the latest central bank-induced Everything Bubble, and grinding the global economy to a halt:
Gold and silver are tremendously undervalued right now, and I dare you to try to find another asset that is tremendously undervalued. There just is not. By all measures, everything is just in these hyper-bubbles. OK, real estate is not quite a hyper-bubble; it's not quite as big as 2005 and 2006, but by all measures, it's back into a bubble. But now, we've got the bond bubble, the biggest debt bubble in the world. These are all going to pop.
We had a stock market crash in the year 2000, and then in 2008, we had a crash in stocks and real estate. The next crash is going to be in stocks, real estate and bonds - including a lot of sovereign debt, corporate bonds and a whole lot of other bonds that will be crashing at the same time. So, it will be all of the standard financial asset classes, including the traditional 'safe haven' of bonds that are going to be crashing at the same time that the world monetary system is falling apart.
In response, there's going to be an emergency meeting of a bunch of like the G20 finance ministers and a bunch of economists or something like that, just like there was in 1922 in Genoa, the Genoa Conference, where they came up with the gold exchange standard. Just like in 1944 at the Bretton Woods Conference, when they came up with the Bretton Woods system. Just like in 1971, when they came up with the Washington Accord, which was a new monetary system that actually never got implemented because when Bretton Woods fell apart, it just dissolved into sort of a default: everybody had US Dollars, and so the US Dollar was just selected as the international currency. This has been to great benefit of the United States. Every time we create a new dollar and cause inflation, it doesn't just dilute the dollars within the United States since more than half of the dollars reside outside the United States. So, when we cause inflation of the currency supply that's outside the United States, it steals purchasing power from other countries and transfers that purchasing power to the United States.
So, we have had this privilege, and we have abused this privilege, starting with George Bush Jr., with the deficit spending that he started and then Obama magnified. And now last year, they're saying it was $800+ billion, but the national debt went up by like $1.1 or $1.2 trillion. We are already in trillion-dollar deficits right now.
So, we've got this convergence of things happening. But it gets worse.
One of things that I discovered when I was updating my book was the relatively recent financialization of government. I was looking at a chart of the tax revenues for the Federal Government. I went "Oh my God, this looks like a chart of the stock market." I overlaid tax revenues with the Wilshire 5000 total market cap index and loo and behold, they had no correlation before the year 2000, but since the year 2000, when the stock market goes down, so do tax revenues. When the stock market goes up, so do tax revenues. So, the government now is highly dependent on the stock markets doing well. In the stock market crash in 2000, tax revenues fell 18%. In the global financial crisis of 2008, tax revenues fell 28%. It took 4-1/2 years from the crash of 2000 to get tax revenues back up to the breakeven point, where they were in the year 2000. It took 5-1/2 years from 2008 to get tax revenues back up to the breakeven point. During these pullbacks in tax revenues, deficit spending explodes, and currency creation has to explode to accommodate all of the deficit spending. We are already doing these trillion-dollar deficits and that means when the next crisis hits, it's going to be one hell of a crisis. So, I am expecting the stock market to fall more than it did in the crisis of '08, and that means the tax revenues are probably going to fall by 50% or 60% or more.
Chris Martenson: Welcome, everyone, to this Peak Prosperity Podcast. It is November 1, 2018, and I am your host, Chris Martenson. As we near the end of the most recent, but listen, almost certainly not the last central bank printing spree. The big question on everybody's mind is - "What is next?" And after that, the next question is - "Well, what do I do? You know my position on this. It is time to prepare. This is really not going to end well. I think it is time that we turned to history and see what history has for us as a guide.
As you know, I am huge critic of the central banks. If you have been asking publicly lately, what the criminal or civil penalties maybe ought to be for central bankers that ruin the prosperity for one or more generations. I think there ought to be a penalty there. The answers from you all have been both humorous and sometimes scathing. So, we are in agreement. It is really just an astonishing piece of moment of history that we are in. Listen, while the money printing by the central banks is without historical precedent, in either scope or scale. They are hardly unique. Histories replete with attempts to print up prosperity, get out of fiscal jams, pull the future into the present, because well, now is always more important than later to politicians.
So, what can history tell us? Here to discuss that with us is none other than my friend, Mike Maloney, host of the smash hit video series, Hidden Secrets of Money, former Rich Dad, Poor Dad Advisor, author of the best-selling Precious Metals Book Guide to investing in gold and silver, and of course, founder of GoldSilver.com. For more than one decade, Mike has travelled the world sharing his economic insights with audiences from Hong Kong to Rome, and boy, we are going to talk about Rome today, from Silicon Valley to Wall Street. In case you have not heard, somehow it passed over your screen, and you missed it, the two most recent episodes of this fantastic video series, Hidden Secrets of Money, they are out. These would be episodes 9 and 10. So, let us get right to it, Mike, so great to have you back on the show.
Mike Maloney: Thanks for having me, Chris. I always enjoy talking with you.
Chris Martenson: Well, first, congratulations on the release of episodes 9 and 10, and I have to tell you, episodes 1 through 8 are fantastic, but 9 and 10, the artistry is extraordinary. They are absolutely beautifully shot, edited, produced. So, huge kudos to you and your team. They are really a national treasure at this point, these video series. So, congratulations.
Mike Maloney: Yeah, Dan Roebuck, Aden Mackness and Lincoln Jude. Dan is the producer/director, cameraman, editor. He scores the things, and he also writes a whole lot of the storyline and script. When I went around the world, just saying historical facts into the camera, Dan would film me, and then we have to piece all these things together. Dan actually does help me with some of the writing. So, I have got a very talented team. Aden Mackness is the 3D animator, and Lincoln Jude is the 2D or the hand-sketched drawings animator. They have been working together for several years now, and they have really become a cohesive unit that produces extraordinary stuff. I am so lucky to have a team like that, because to get the maximum amount of prosperity for anybody, the goal is to serve the most people that you can. If you can serve and make people's lives better, whether you are selling a product or making a service, the more people that you can serve, the better that you are going to do.
Chris Martenson: Well, you know - I wish you should tell that to some corporations, because I think they have lost the thread on that particular model. Many products today feel abusive to me, not helpful. It is interesting. So, but you have got a great team. It really shows in these two particular episodes. I want to start now. Just, maybe, for the people who maybe are not familiar, the few that exist now. How did you come to make this series, The Hidden Secrets of Money? How long has it taken? Where did you start? How did this get going?
Mike Maloney: When I started GoldSilver.com, actually back in 2000 and 2001, after the Nasdaq crashed, and I started studying all of the global economy and markets and monetary history. I wanted to share it with as many people as possible; and then in 2005, I incorporated GoldSilver.com and I wrote my book, Guide to Investing in Gold and Silver. When I was writing my book, that was research from the year 2001 through 2007, so six and a half years of research and two and a half years of writing and editing. I learned an awful lot. Robert Kiyosaki, he was the guru of real estate. He wrote the largest selling financial book in history, Rich Dad, Poor Dad. Well, he is the one the one who told me to write the book. He wrote a book called Teach to Learn. If you really want to learn something, try and teach it, because you had better be right.
Chris Martenson: Yeah.
Mike Maloney: So, we went around the world. Hidden Secrets of Money is shot in 18 countries.
Chris Martenson: Wow.
Mike Maloney: There is a lot of footage that nobody has ever seen, yet. It takes a while to piece these things together, and they are extremely expensive. You are talking for the two that we just aired; it is probably one-quarter million dollars to produce them.
Chris Martenson: I believe it. It is hard work.
Mike Maloney: Yeah, and a few years' worth of production, because you are doing it with a small team. It is so gratifying. It makes me feel like I have done something for the planet.
Chris Martenson: You have. You absolutely have.
Mike Maloney: Thanks.
Chris Martenson: So, you know I remember you and I were talking about this years ago and this whole idea of "teach to learn." Listen, I do not know anything until I think I do, until I try and form the words to come out of my mouth to communicate it to somebody, and then I will find out if I do or if I do not and where the gaps are. Where you and I, and Robert Kiyosaki, a number of other people share a passion - this idea that people need to know where they are history. I think it is particularly relevant now because my judgement, my assessment is that both the educational system and the adult media, entertainment complex, which includes the New York Times. They do a really bad job of providing the context I think people need to get a grounding in -
Mike Maloney: Exactly.
Chris Martenson: ... where we are and where we are going.
Mike Maloney: Yeah. They give you these little snippets of what is current, but there is no context. There is no - How does this relate to things that have happened before? How does it relate to my life? Anything that a politician, a government, or a central bank tries, something similar has been tried in the past. All you gotta do is go back and look at several examples of what they are trying in the past. Whatever the outcomes were before, it is probably going to be similar this time. So, you have a road map to the future, if you look at the through the lens of history.
Chris Martenson: I cannot wait to get to these new episodes, but first, I want to know... has anybody, sort of approached you? Maybe a professor or a Fed Reserve Historian or a monetarist, somebody come forward and said Mike, here is something you really got substantially wrong. Let us talk about this; then you have the earlier episodes. Has anybody - this question is coming because I read this blurb about G. Edward Griffin on Wikipedia, and it used the word "conspiracy" to describe him as the author of Creature from Jekyll Island no less than eight times in the intro, but there was nothing in there that said - and here are all of the things he got wrong, right? So, I asked him -
Mike Maloney: Right.
Chris Martenson: I said, hey tell me who has approached you? What single thing have they pointed to in the book and said date is wrong, facts wrong, names wrong, something is wrong in here. He said nobody in 25 years in print - not one single substantive criticism has come forward. So, I am wondering, have you received any substantive criticisms so far?
Mike Maloney: Oh, there are two episodes of... two of the videos that are on my channel, where I have received criticism. The largest one is about Russia versus the USA. I am showing why Russia feels they have always had sort of a mentality that they are surrounded and that the West is like about to attack or something like that. I have - there is a serious reason for this. If you take a look, Wikipedia has it. Go to Wikipedia. Look at the map of NATO. They have an animated map, and the NATO countries keep on creeping closer. There are more and more countries that join it over time, and it creeps closer, and closer and closer to Moscow and military bases and such. So, they have a reason for this, but in that presentation, it took several months of research to put it together and going over and over and over it, and one frame got dropped somehow. It got deleted out of my presentation, and the presentation when I am live on stage, and I have got an audience in front of me, I am using the presentation as sort of a bookmark, to keep me - I put up images and I put up charts. I do not put any words on my presentations, usually. It is rare.
Chris Martenson: Yep.
Mike Maloney: That keeps me on track. It reminds me of what to say. One of the frames got dropped and it was the fall of the USSR. So, I got a date wrong in there, and I just got crucified for it. It was an honest mistake.
Chris Martenson: Yeah.
Mike Maloney: Out of all of the years that I have been doing this because the YouTube channel started in 2009, I think.
Chris Martenson: Yeah.
Mike Maloney: So, for nine years, I have been making videos and stuff. There is this one accidental mistake that I just crucified over and over again for. The other one is in episode four of Hidden Secrets of Money, how currency is created. The Bank of England came out with a statement that the way that - there are three different ways that central banks create currency. I listed one of them, which is the most popular one, which The Bundesbank had a display, which is in my episode 5 of Hidden Secrets of Money, when we toured Bundesbank Money Museum that shows how fractional reserve lending works, and it confirms exactly what I said.
So, what I did to make it as simple as possible was, I picked a single way. Basically, a bank has to have a certain percentage of reserves. Typically, it is 10%, if they have got that. If you borrow currency to buy as house or a car or you sign a credit card receipt, they do not have to - they just type in all of the - they credit your account with dollars, brand new dollars that they just typed, and that is where that currency comes from, but they do have to have that 10%. I gave the Milton Friedman example, the Bundesbank example. So, on there, people are saying you are wrong. You are wrong. Because The Bank of England came out with a statement, but the Bank of England did not show the three different ways that they created it. The one that I showed is the way that most of the fractional reserve lending is created. If I had tried to show the way all three work, all it would do is just confuse everybody, the viewer. Because what I do, is a try to take complex, boring economic things and make them simple to understand and exciting, so that the average person gets it and is intrigued and at least wants to learn it.
Chris Martenson: It is damned if you do, damned if you do not. Ah, it is too simple.
Mike Maloney: Right.
Chris Martenson: That is too boring. Right? It is kind of hard to -
Mike Maloney: So, actually there are two things where I do get pushback in people saying that I am wrong, but actually I was not wrong. One was a mistake. The other one on episode 4, I am not wrong. That is one of the ways that creates currency, so, anyway.
Chris Martenson: Yeah. All right. Once I had a professor of economics in one of my - he was a Yukon professor. He stood up and he absolutely livid, and he explained that how I am explaining how money creation worked was absolutely not how it was working, and it was very wrong for me and I was misleading people. He was really upset. He had been teaching economics for 30 years. So, I just let him sort of vent, and then I pulled a comic book out and I said I learned it all from here. It is a comic book, but it is produced by the Federal Reserve. You can order them for yourself, but here is a free copy. Two years later, and very chagrined, and I said I did not even know that any of that was true, but it is. So, this whole idea of money creation...
Mike Maloney: Yeah, you know those comic books, I have got a collection of them somewhere, the comic books that the Federal Reserve produces.
Chris Martenson: Are they not great? You know? Yeah. They would give them away for free, so I ordered like 400 of them once, and I have got a box of them somewhere, but the point there for me is that - this is why what you are doing is so important because money creation, it turns out, is vital. How it gets created is vital. If you create too much of it, bad things happen. So, it can be taught in a comic book.
Mike Maloney: Yeah.
Chris Martenson: It really ought to be, but the number of people I have talked to who have been taught, instructed how money creation works is almost zero. I think have had two hands go up in all of history when I ask this question, and I ask it a lot. Who was taught how money is created in the banking system in school?
Mike Maloney: You know, there are a couple of college professors that have flown to events, like speaking at the Silver Summit or up the Cambridge House events in Vancouver, Canada. I have met a few different professors who have flown there to meet me and just tell me that they use Hidden Secrets of Money, to teach their students in college.
Chris Martenson: Well, that is gratifying, is it not?
Mike Maloney: It certainly was. It is just phenomenal to know that it is being used to teach, and some of them, they just use to generate controversy in the students. Here is what the textbooks say. Here is what Hidden Secrets of Money says, and it is different. What do you think? Yeah, you really have to research this, and like everything in episode 4, it was all taken from the Federal Reserve's website. Just everything in there comes right from the Federal Reserve. So, it is not like it is conspiracy theory, but I get labeled a conspiracy nut all the time.
Chris Martenson: Sure.
Mike Maloney: Because we deal in conspiracy fact, not conspiracy theory. It is researched.
Chris Martenson: I know. It is just such a lazy way for people to sort of dismiss an idea that makes them uncomfortable and they do not want to look at.
Mike Maloney: Exactly.
Chris Martenson: For those of us who want to know, I care about this. I am sort of [a] sleuth. I like to know how things actually work. I can smell BS from a mile away. It is a superpower of mine. So, I like to know the stuff, but I think it is critical. Again, to re-say this over again, if you want to know where you are going, you have to know where you are, and that means you kind of have to know where you came from. So, that is really, when we look at this - why I am super excited to talk to you today about - you released two episodes, kind of back-to-back here. So, let us start with episode 9, Fall of Empires, Rome versus the USA. Just a fantastic thing. Where do we start with this? So, tell us about episode 9, and I am really intrigued what you found in there as some of the key factors that really led to the downfall.
Mike Maloney: Well, it is history repeating over and over, and in episode 9 and 10 there is a timeline that we follow. Aden Mackness came up with a 3D room in a building in Rome, an ancient building. There is a table with a scroll that is laid out on it and a timeline that you can look at, and we compare things that Rome did that eventually brought about the fall of their great empire, to the things that we are doing today. Most of it is deficit spending on war, public works and social programs. Athens, 500 years earlier, had public works and war that they were doing deficit spending on, and that caused them to - the classical period of Athens, where all those great structures were built on the Acropolis and so on. That came to an end when they did deficit spending to fight a war with Sparta, and other monetary historians have called it debasing the currency. The public does not understand debasing the currency, but if you take a gold coin and you melt it down and you add 50% copper, now you can mint two gold coins and you can spend them.
Chris Martenson: Yep.
Mike Maloney: Athens had a working tax structure. They were doing that. It was part of the reason that Athens sort of faded into history and became nothing more than a satellite of Rome, eventually; but Rome was doing the deficit spending for war and public works, but they also added social programs, and 20% of the population of Rome, which was about one million people back then, were receiving daily distributions of wheat. So, that is basically welfare. It is just the same thing that we do with food stamps today. There was a whole bunch of programs and things that the different emperors came out with to keep the public placated, and we are doing the same things. These things do bring about the fall of empires; but in episode 1, one of the things I touch on is wage and price controls, because that famous speech that people have seen before, where Nixon ends the Bretton Woods system and severs the connection between gold and the US Dollar. August 15 of 1971.
In that same speech, he announced a 90-day freeze on wages and prices across the US, all wages and prices. So, it is the government trying to dictate - it is one person trying to dictate what the economy is going to do, and it does not work. We come to that part, where he is announcing it, and then Aden takes the bust of Diocletian and dissolves Nixon into this bust of Diocletian but keeps Nixon's lips moving on Diocletian's bust, and you know that the exact same words were coming out of Diocletian's mouth 1,700 years earlier, when he was introducing his Edict of Prices.
Right now, we are in very low inflation and the economy is actually trying to deflate, and the Federal Reserve fights this with inflation. Eventually, we are going to come back - there is going to be energy released in the opposite direction. After they are done with all this currency creation and zero interest rates and all that kind of stuff, there will eventually be a backlash. They will have printed too much currency, and there will [be] price inflation. At that point, you can just bet, you can count on it. The politicians are going to say, well if we just tell everybody that prices and wages are not going to change, and we threaten them with jail time if they increase their prices or their wages. They are going to try it again, and you can see it from history.
It did not work - they tried it in the French Revolution also. It was called the Law of Maximum. They executed a lot of people for trying to charge a living wage or get a fair price in selling a house or a cow or the wheat that you grew. When they do these wage and price controls, the end result is - I do not know if you remember back during this period. I remember like Walter Cronkite or Dan Rather showing these pictures, gruesome pictures of a tractor scooping up a bunch of chickens and dumping them into a dumpster, little baby chicks, because it was going to cost the chicken farmer more to raise those chicks - he was going to be selling them at a loss. I remember milk being dumped into gullies, dirt channels. I remember peach farmers just taking trucks and dumping the peaches on the dirt roads that run between the peaches in the peach orchards, to sort of let them rot and have the peach pits pave the road, instead of having the expense of gravel. So, wage and price control, every time they introduce them, what happens is there is either too much of something or not enough of something. It usually means empty store shelves, and that is what we had back in the '70s, when Nixon tried this, and they had to repeal it. It did not work.
We are going to try it again sometime in the future. I do not know how far that is away from us, but that, in episode 9; but episode 9 it starts the thing of taxes that are too high to pay for deficit - they take the taxes, and they would melt down the coins, expand the currency supply and spend currency that did not exist before. That is deficit spending on war, public works and social programs, and they keep the public placated with the games. The Coliseum, where they would give away free bread and wine. So, it was bread and circus, which is the title, basically American Bread and Circus of episode 10. They keep the public distracted, and we keep the public distracted - you know if you look at our football stadiums, it looks very much like the Coliseum. We shot a lot of this in Rome, and then I spoke with a local business owner, a restaurant that is phenomenal - and if you ever get to Rome, please go visit Fiore Di Zucca, a little family restaurant, located in the middle of a residential neighborhood, where the owner battles the same types of things... too many regulations, too much licensing, too much bureaucracy and taxes that are too high, trying to stay in business. He who serves the most wins basically. When the government stops people from serving one another, that reduces all of our prosperity. Whenever there is a regulation or a tax burden, that causes fewer transactions to happen, the entire world suffers. If you have fewer transactions, you have less prosperity. That is it.
Chris Martenson: Well, I have heard it said that the difference between now and then is that back then, if they were clipping coins, they were pushing currency straight into the system, but now we have the magic thing called debt. One of the great inventions of the modern banking era under the Rothschilds and beyond.
Mike Maloney: Yep.
Chris Martenson: Figuring out how to really make debt. So, if we print a lot of money and dump it into the market today, we steal purchasing power today, but when we print a lot of debt, what we really are doing is stealing from the future. How much can history tell us about that process versus just the act of creating a ton of currency?
Mike Maloney: Well, I don’t feel like I am - you know, I am qualified to comment on it, but the historical examples, just offhand right now, I cannot think of the first bonds and so on. So, you know, there used to be a term: debt slave. There was debtors prison. So, I will have to make an episode of Hidden Secrets of Money on that because if you really want to learn something, teach it.
Chris Martenson: Yeah. Well, tell me this - What surprised you -
Mike Maloney: You know, I want to comment on that a little bit further though before we go on to something else -
Chris Martenson: Go for it. Sure.
Mike Maloney: Because we have created this special group of people that are exempt from moral laws of humanity. We have created a special set of laws for bankers and central banks that allow them to commit fraud and theft. This is just so morally bankrupt to be duped, to be creating currency, counterfeited. That is the way the Federal Reserve, for instance, or the ECB, the European Central bank, or the Bank of Japan or the People's Bank of China. You want to get currency into circulation and stimulate the economy, the way you do it is you counterfeit a unit of currency and you buy something. Once you have bought that thing, the currency is now in circulation. That is the way they do it. It is that simple. Usually, in the United States, we would always buy treasuries, United States Treasuries, which is an IOU. So now, the currency is being used to purchase an IOU and the IOU is paid back, the Fed owns that IOU now, but the Treasury has to make payments on that IOU, and they do that by taxing us in the future. So, it is theft whenever they do this. It steals purchasing. Inflation is theft, and that inflation is caused by central banks working with the commercial banks, who get to create currency, and when you buy a house, they do not. The commercial banker does not understand that he commits fraud and theft every hour of every day, but there are laws that we have created to allow this. It is crazy.
Every time I pull a dollar out of my wallet, I just laugh. You know, you pull out a hundred-dollar bill, and here is this piece of paper. It has a picture of a dead guy on it and some numbers, and they have ruined the piece of paper. You cannot use it to make a list because they put ink all over it. So, here is this thing that’s absolutely totally worthless and somebody else can create more of them, steal the purchasing power out of that thing that we have got, and we trust this. We work for these things. It is insane. It is totally insane.
Chris Martenson: It is. It really is. It such an important point, this idea that the central banks don’t print out prosperity. They create the illusion of that, and people get all excited, oh my God, the Nasdaq is making new highs -
Mike Maloney: Right.
Chris Martenson: And look at the incredible prices for all sorts of stocks and bonds and these things, but what they really do, since you cannot print prosperity out of thin air. The central bank, they print real currency, it has real purchasing power, and everybody needs to ask the question, where did that purchasing power come from? Was it created ex filio. No, it came from somewhere and it was taken from somebody else. So, the central banks -
Mike Maloney: Exactly.
Chris Martenson: They are just giant redistributive organizations, they are entities that basically take from party A, give to party B. They have decided party B is the Davos crowd mostly and governments and all that, but they are taking from everybody and transferring over here. Historically, really that process is no different, right?
Mike Maloney: It is fine if you disclose it to everybody, but this is secret. It is breaking and entering. This is robbery. It is theft.
Chris Martenson: Absolutely.
Mike Maloney: Yeah.
Chris Martenson: So, historically speaking, I mean that is the same process, essentially that is clipping, but it is a little but more complex, so it is a little bit harder to get your head around, but if you understand clipping, I think you will get the rest of this, right?
Mike Maloney: Yeah. You know one of the things I want to mention. You have talked about exponential growth for years.
Chris Martenson: Well, we are getting to my favorite part of episode 10.
Mike Maloney: It is one of my favorite parts, too. When I see that scene of you and I - the images that Aden came up with -
Chris Martenson: They were brilliant.
Mike Maloney: The little gumby men sitting on the edge of Candlestick Park, looking up at planet Earth, and you are explaining these things. It just sent chills down my spine the first time I saw it, that and the head of Diocletian with Nixon's lips moving, these things - I just went, "Oh my God," when I saw this. It really drills home the facts that these things are so important, and there is something that everybody really needs to learn, everybody.
Chris Martenson: Absolutely. So, what we are referring to here for people who have not seen it is, yours truly has a guest appearance in episode 10, a lot of great stars in these episodes. You will see Ron Paul, Steve Forbes, incredible people, but what Aden came up with, particularly for, is that tour around the world, showing more and more and more everything. The graphics, the images... it just did a really spectacular job of driving that home, and I think once people get their arms and minds around this idea of exponential growth, you realize that, exponential money printing, like literally everything that the central banks are attempting to do, just does not comport with reality. So, that is really what came to me, watching episodes 9 and 10, was that humans have this amazing ability to depart from reality.
Mike Maloney: Yeah, you would think that Japan would realize by now that Keynesian economics does not work.
Chris Martenson: You would think.
Mike Maloney: Thirty years, they have been trying this. It just does not work.
Chris Martenson: I know, and it is going to end so badly. They have a shrinking, aging population, and they are printing more and more into that. The debt per capita is just spiking like crazy, and they have no way of bringing new people in because of their cultural -
Mike Maloney: Yeah.
Chris Martenson: So, it is just going to break at some point.
Mike Maloney: They have done experimental proof for all of us. They just keep on repeating the experiment, and they come up with the same absolute proof. Keynesian economics does not work. Oh well, it was because we did not try enough of it.
Chris Martenson: Yeah. So, you have alluded [to] this a couple times - what happens when this finally runs out of runway? What does the end of this look like, do you think?
Mike Maloney: Well, you know, I have positioned - I have tried to protect myself as best I can, and I am actually grateful for the extra time that we have been allowed because this should have been a major disaster in 2008, but they slapped band aids on it that are a manipulation that is going to come back to haunt us. The size and scale of the manipulations that the world central banks did with the crisis of '08 is unparalleled in history. So, you have got to take the previous examples in history, and then go times what 10? 100? 1000?
Chris Martenson: Some big number.
Mike Maloney: 1,000,000? I do not know, but it is going to be big. I have often said that 2008 was just a speed bump on the way to the main event. There is a catastrophe coming and there - When I was writing my book, one of the things that I discovered is that every 30 to 40 years, the world had a brand-new monetary system, completely different from the last one. The classical gold standard before World War I, the interwar gold exchange standard and then Bretton Woods from 1944 to 1971, and now the global dollar standard. They are completely different. They way that these things work. The previous transitions have been baby steps from full gold backing to 40% gold backing to an unspecified gold backing to no gold backing.
When I was writing my book, I was researching all of these things and you could read about the different monetary systems in isolation. Nobody had put together the fact yet that the world's monetary systems change. Nobody had written like a book or an article on all of the different monetary systems together and these changes. Well, the worst designed one out of all of them is the global dollar standard. It was stable from '71 until Saddam Hussein started selling oil in euros, because it is also backed by the Petro dollar, an agreement that Saudi Arabia made, and it was actually top secret. It was declassified in 2016, and all the conspiracy theorists got proven correct that the US had made a deal with Saudi Arabia, to where Saudi Arabia would take all of the excess dollars that they got paid for by all of the oil that we import, and they would buy US Treasuries and that oil would only be denominated in US dollars. So, every country on the planet that bought oil had to hold US dollars. So, it sort of kept Bretton Woods, the old system before the Global Dollar Standard had made it so that every foreign central bank had to hold US dollars, then the dollar was the currency that was still pegged to gold. So, all currencies were pegged to gold through the US dollar, and then the Petrodollar sort of backed that up. Saddam Hussein was the first little chink in the armor of the Global Dollar Standard, and now these nails in the coffin of the Global Dollar Standard are coming to where there are multiple ones per week. It is just at an incredible rate. People do not realize how fast this is falling apart.
So, now, we have got something I called the everything bubble, a couple of years ago. Everybody is calling it that now. I also call it the Bernanke bubble, and it is going to be followed by the Bernanke bust. When the stock market crashed in 2000, the Nasdaq bubble was a Greenspan bubble. He created it, and then we had the Greenspan bust after it. He took interest rates down, way too low, trying to get the stock markets back up. He accidentally created a real estate bubble that devastated the world, and that popped and that was another Greenspan bubble, and it was a Greenspan bust. Bernanke was the person that was left to clean up the mess, and he created all of that currency and took interest rates way too low and held them there way too long and created what is now Bernanke bubble, or the everything except gold and silver bubble. It is the everything except gold and silver bubble.
Chris Martenson: Yeah.
Mike Maloney: Gold and silver are tremendously undervalued right now, and I dare you to try to find another asset that is tremendously undervalued. There just is not. By all measures, everything is just in these hyper-bubbles, and real estate is not quite a hyper-bubble. It is not quite as big as 2005 and 2006, but by all measures, it is back into a bubble. Now, we have got the bond bubble, the biggest debt bubble in the world. Those things are going to be popping. We had a stock market crash in the year 2000, and then in 2008, we had stocks and real estate. This crash is going to be stocks, real estate, and bonds, including a lot of sovereign debt that is going to - Sovereign debt, for anybody, that is listening that is debt issued by a country, the national bonds. So, there are going to be corporate bonds and a whole lot of other bonds that are crashing at the same time. So, it is all of the standard financial asset classes, including safe haven classes, bonds that are going to be crashing at the time that the world monetary system is falling apart. There is going to be an emergency meeting of a bunch of like the G20 finance ministers and a bunch of economists or something like that, just like there was in 1922 in Genoa, the Genoa Conference, and that is where they came up with the gold exchange standard, just like in 1944 at the Bretton Woods Conference, when they came up with the Bretton Woods system.
Just like in 1971, when they came up with the Washington Accord, which was a new monetary system that actually never got implemented because when Bretton Woods fell apart, it just dissolved into sort of the default. Everybody had US dollars, and so, the US dollar was just selected as the international currency. It has been to great benefit of the United States. Every time we create a new dollar and cause inflation, it does not just dilute the dollars within the United States and more than half of the dollars reside outside the United States. So, when we cause inflation of the currency supply that is outside the United States, it steals purchasing power from other countries and transfers that purchasing power to the United States. So, we have had this privilege, and we have abused this privilege, starting with George Bush Jr., with the deficit spending that he started, and then Obama magnified, and now last year, they are saying it was 800 and something billion, but the national debt went up by like 1.1 or 1.2 trillion - I do not now remember the exact figures. There is this huge area that is just a lie that they are telling us every year. We are already in trillion-dollar deficits right now. So, we have got this convergence of things happening.
One of things that I discovered when I was updating my book, Guide to Investing in Gold and Silver, I call it the financialization of government. I was looking at a chart of the tax revenues for the Federal Government. I went, "Oh my God, this looks like a chart to the stock market." I overlaid tax revenues with the Wilshire 5000 total market cap index, so the value of the stock market and lo and behold, they had no correlation before the year 2000, but since the year 2000, when the stock market goes down, so do tax revenues. When the stock market goes up, so do tax revenues. So, the government now is highly dependent on the stock markets doing well. In the crash in 2000, the stock market crash, tax revenues fell 18%. In the Global Financial Crisis of 2008, tax revenues fell 28%. It took 4-1/2 years from the crash of 2000 to get tax revenues back up to the breakeven point, where they were in the year 2000. It took 5-1/2 years from 2008 to get tax revenues back up to the breakeven point. So, during these pullbacks in tax revenues, deficit spending explodes, and currency creation has to explode to accommodate all of the deficit spending. We are already doing these trillion-dollar deficits, and that means when the next crisis hits, and this is going to be one hell of a crisis. So, I am expecting the stock market to fall more than it did in the crisis of '08, and that means the tax revenues are probably going to fall by 50% or 60% or more. What are the current tax revenues? 3.5 trillion or something like that? We spend about 4.5 trillion.
Chris Martenson: Yep.
Mike Maloney: I have not checked it this month. So, I cannot keep up with it because it changes so fast. So, you are talking, you got to get ready for multi-trillion dollar deficits. That is what is coming, multi-trillion dollar deficits. Now, at that the same time, we have got an administration that is - I don't really care who is in office because it does not seem to make that much difference. I look at the economics, what is going on economically. So, I am not - What I do not like is that Trump is not understanding some fundamental economics. Let me see, there is an equation that I have to look at here, and the equation is... imports minus exports are identical to investment minus savings, plus government spending minus taxes.
So, if you want to do a bunch of deficit spending, either a bunch of people have to increase the amount of bonds that they buy in the United States, or you have to have more imports than exports and have excess dollars or excess dollars flowing out of the United States, so that a country that does not want its exchange rate to change, like China wants to keep their goods cheap, so they can keep people employed over there, making all these goods and selling them to us. Let me see... Sorry, I am hesitating here. I should not do this when we are on a live call, but I have to look at a chart here because out of the 21.3 trillion, 6.2 trillion is owned by foreigners. Seven trillion is owned by the US institutions and individuals. The Federal Reserve owns 2.3 trillion of the national debt. Intergovernmental agencies own 5.7 trillion, which is sort of a Ponzi-scheme-shuffle-stuff-around thing.
Chris Martenson: Yep.
Mike Maloney: Anyway, that 6.2 trillion, if the trade deficit goes away, then the US investors have to pick up that slack or the Federal Reserve. If the US investors have to pick up that slack, that means you have got to offer much higher interest rates to attract them to buy those treasury bonds, which slows down the economy and private business, and that will cause the crash. If it is the Federal Reserve buying it, it just means they are monetizing the debt themselves and you end up with - they can keep interest rates low, but you have to create enormous quantities - you know you would have to create 6.2 trillion dollars' worth of currency to take the current US debt off of foreign holders of debt, off their hands. That is what has to happen if Trump wants the trade of balance to go back into equilibrium. So, he wants to do deficit spending and - So, he wants to have his cake and eat it too, is what I am saying. He does not understand economics. There is math behind this. What he wants, he cannot have. Economics will not allow it.
Chris Martenson: Of all of that, what really jumps out to me here is this idea that you started with, which is that currency regimes have a lifespan.
Mike Maloney: Yeah.
Chris Martenson: The dollar has had a good, long run.
Mike Maloney: It is the oldest, and it is the worst-designed.
Chris Martenson: There are signs. There are signs everywhere. Yeah. I just saw another crumble at the base of the dollar wall today in the newspaper, where India wanted to buy some S400 antiaircraft missile systems from Russia. The United States said no, do not do that. We think that is a bad idea. India said, we will just pay for them in rubles then, right? Totally bypassing the dollar system for military hardware. Of course, Russia is busy coming up with a parallel swift system to bypass the US Banking System because the Treasury -
Mike Maloney: Yeah and so is China and -
Chris Martenson: China. It is happening really fast.
Mike Maloney: If you look at the currency swap lines. Canada and all of Europe now do currency swaps with China without having to use the dollar as the intermediary. These things are coming so quickly and there is such a variety of these, death of the dollar. When they revealed that the Petro dollar in 2016, when the documents were declassified, that that was true with China opening oil futures on the Shanghai Exchange, you know that pretty soon, China is just going to demand that OPEC - they are the world's largest oil importer. They are larger than the United States. They buy more oil from OPEC than we do. So, they are going to demand one day that oil be priced in yuan and that they buy it directly on the - that all China oil imports go through the Shanghai Exchange and are paid for in yuan, instead of... The thing is, when they deliver the oil into a contract, when an OPEC country delivers that oil, the contract is settled, now they have a bunch of yuan on the exchange and they can go over to a gold contract and turn it into gold and take delivery of gold off of the exchange. So, they can get paid in yuan or gold, or they can put it on the forex and get dollars. The thing is, the dollar is being bypassed all over the world, and we have been using the dollar. The dollar has been weaponized.
Chris Martenson: Uh hm. Yeah.
Mike Maloney: That is the problem. We have been using it against everybody for years, and this really, the weaponization of the dollar became big under George Bush Jr. It has become bigger and bigger and bigger, and the world is rebelling. So, this extraordinary privilege that we have had, that we should have tried to cherish because we were able to transfer wealth from the rest of the world from 1944 until whenever the end of global dollar standard comes, we will not have that extra income that we are getting right now of transferring of whatever the inflation rate is of the currency supply, that is the amount of wealth, the percentage of wealth that we are transferring from all of these other countries to the United States every year. If half of the dollars are outside the United States, half of those dollars are seeing the same dilution of purchasing power that the ones within the United States are seeing.
Chris Martenson: I know. It is nothing new under the sun, though, right?
Mike Maloney: Right.
Chris Martenson: So, history gives us a guide here - Listen, humans are humans. We want our free lunches. We would rather put something off to the future, if we can, and not take the pain today, but what happens is the potential energy just gets built and built and built. You add on top of that, a United States that has been behaving a little bit dictatorially.
Mike Maloney: Yes.
Chris Martenson: We have told other countries, here, grab this live wire, we’ll shock you with it whenever we want, and they are like, tell you what - How about we come up with our own system that does not hurt us as badly and as frequently, and they come up with parallel currencies system. So, really big changes coming. So, that is why I really want to direct people back to your Hidden Secrets of Money -
Mike Maloney: Not just that, your exponential growth example.
Chris Martenson: That is lurking there too.
Mike Maloney: We are coming to the end of this currency system, and in the exponential growth example, what you say is that - Everything speeds up at the end, and look at what we have already done to the base currency supply in the United States, and that is nothing compared to what is coming. Everything speeds up at the end, and when we get to the end of this currency system, you are going to see some massive currency printing going on. The next big emergency is going to be much bigger than the last. They had to add 400% to the base currency supply and take interest rates from 5.5% down to 0%, pretty much, to get this economic recovery that we are in that is phony because of that. It was all manipulated. So, the next time, if they want to get that same amount of kick - it is not increasing by the same amount of dollars, it is a percentage thing that is going to give them a kick. So, they have gone from 0.8 trillion of base currency, and right now, it is at like 4 trillion or, I am sorry, 3.2 trillion - something like that. They are going to have to quadruple that to get the same kick, but this crisis is going to be bigger, so that means that base currency is going to be larger. It is going to be bigger than our current M2. M2 includes all of this fractional reserve lending currency.
Chris Martenson: Which is why people should run, not walk, to their nearest gold and silver dealer. Really, honestly, if you have not bought something that is either nailed down or not nailed down or whatever. If you have not done that, I just - This is a thesis of mine, that when the big money decides to stampede away from all this [fake] paper stuff into real stuff, whatever that is, whether that is land or yachts or diamonds or gold and silver or whatever it is -
Mike Maloney: Yeah.
Chris Martenson: You are going to find that those doors are tiny. They are skinny, and that the people who have access to that stuff are going to be the ones who are going to be able to procure it. Guess what? The retail investors are going to have some tough times with that. With that -
Hey Mike, we are out of time for today.
Mike Maloney: Yeah, and gold and silver will become known as unaffordium and unobtanium.
Chris Martenson: Unaffordium and unobtanium. It happened briefly. I mean we talked about this before, back in 2009 in 08 and '11, when there were these big runs in prices, we saw the retail pipeline just dry up. I think that is going to happen again.
Mike Maloney: Yeah.
Chris Martenson: Of course, you know a lot more about that, being in the biz. We are out of time for today. Let me ask this in closing - How do we direct people to your amazing work, and how do they keep following your astonishing output?
Mike Maloney: You can go to hiddensecretsofmoney.com and the videos are there. You can go to our YouTube channel. If you go to YouTube and you just do a search for a Mike Maloney or Hidden Secrets of Money. If you watch this, at the end of episodes 9 and 10, there is bonus features that you can watch. So, watch both episodes. At the end of episode 10, click that bonus features thing. You will be taken to hiddensecretsofmoney.com, where you can watch bonus features. In there, one of the things I do is I have some stills of both episodes and I do commentary on the whole thing. Your viewers are just going to love this stuff. It is important if they have watched the crash course, this is another example of your exponential growth section of your crash course, just beautifully animated that brings everything home. All narrated, by you, Chris. I am very proud of my team. I want to thank them again. So, that is about it. Hidden Secrets of Money. Oh, when you go to my website, GoldSilver.com, you can download a free copy of my book, Guide to Investing in Gold and Silver, and only 20% of it is actually a guide to investing in gold and silver. The first 25% or 30% is very entertaining monetary history, how central banking works and so on. It is a little short history of the Federal Reserve, and then, there is some simple economics. The current state of the global economy, some potential outcomes, and then, the last 20% of the book is a guide to investing in gold and silver, but it is free at GoldSilver.com.
Chris Martenson: Well, thank you so much for all of that, and thank you for this work. Thank you for your time today. Really, everybody listening, you are just going to love this stuff, please. Check out the Hidden Secrets of Money. If you have not seen episode 1, start there, and if you have, if you have watched all the way up through episode 8, you have got 9 and 10 waiting for you. We have got the links at the bottom of this, of course to make it easy for you. So, with that, Mike, thank you so much for your time today and for this incredible gem of the series.