Side Hustle City

From Bretton Woods to Crypto Trends and Today's Economic Complexity with Addison Wiggin

December 28, 2023 Adam Koehler & Addison Wiggin Season 4 Episode 64
Side Hustle City
From Bretton Woods to Crypto Trends and Today's Economic Complexity with Addison Wiggin
Show Notes Transcript Chapter Markers

Join us as we sit down with Addison Wiggin, the esteemed economist whose expertise spans over three decades, offering a wealth of understanding about the US dollar's journey as a fiat currency. Addison, the mind behind riveting titles like "The Demise of the Dollar," unravels the tangled web of our economy, from Bretton Woods to the pandemic upheaval.

We're not just talking numbers here; we're exploring the very fabric of financial history and deciphering the Fed's critical decisions that have sent shockwaves through our pockets and policies. Cryptocurrencies, too, enter the fray as we ponder their place in this economic saga, drawing lines between past fiscal fables and today's tales of digital currency.

Expect an enlightening narrative about the high-risk game of low-interest rates and its influence on the investment tableau, especially among the daring, tech-embracing youth. We hear the cautionary tale of a renovation foreman, swayed by his son's digital dreams, whose venture into cryptocurrencies embodies the era's speculative spirit. The episode doesn't stop there; it scrutinizes the domino effect on banks, behemoths like Amazon and Apple, and the sobering reality check served up by Silicon Valley Bank's downfall. We're peeling back the layers of what it means for tech companies and financial institutions as they navigate the end of cheap capital's heyday.

Our conversation doesn't shy away from the looming specters of debt and inflation as we dissect their distortion dance, luring consumers into a precarious financial tango. We cast a critical eye on the warning signs that litter the economic landscape, with companies like Kroger fighting to hold down the fort on prices. The discussion travels through the socio-economic terrain shaped by trade wars, dwindling personal savings, and the resurgence of union movements. As we traverse this complex terrain, we confront the ripples of these trends across the nation, especially in the charged climate of an election year, and reflect on the intricate dance of manufacturing, trade, and the overarching narrative of an economy in flux.

As you're inspired to embark on your side hustle journey after listening to this episode, you might wonder where to start or how to make your vision a reality. That's where our trusted partner, Reversed Out Creative comes in.

With a team of experienced professionals and a track record of helping clients achieve their dreams, they are ready to assist you in reaching your goals. To find out more, visit www.reversedout.com. We also recently launched our YouTube Channel, Marketing Pro Trends.

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Speaker 2:

Welcome to Side Hustle City and thanks for joining us. Our goal is to help you connect to real people who found success turning their side hustle into a main hustle, and we hope you can too. I'm Adam Kaler. I'm joined by Kyle Stevy, my co-host. Let's get started. Welcome back, everybody, to the Side Hustle City podcast. Today we've got Addison Wigan on the show. Addison, welcome, thanks for having me. I'm interested in what you have to say today. With some of the stuff that you've written and the book you've written, the Demise of the Dollar Very interesting New York Times bestseller there. I mean you've been doing this for over 30 years in economics you got a lot more experience than I do or probably anybody I've argued with on Twitter, so I thought it.

Speaker 1:

I actually had two books on it. As you mentioned, I had the Demise of the Dollar, which is it came out actually in May and this is the third edition of this, but just in October I released the third edition of Financial Reckoning Day. The Demise of the Dollar is really a look at the US attempt to manage the US dollar as a fiat currency since 1971. There's a lot of history that leads up to the Bretton Woods exchange rate system and how it falls apart, and then managing a fiat currency since then, even if we retain the reserve currency status of the world. So it's an analysis of what that has meant in terms of, like the decisions the Federal Reserve has made historically and then that period of zero interest rate policy, zerp and quantitative easing that we went through for about a decade after 2008 and the financial crisis that everybody thought was going to wipe out the global economy, which led directly to the inflation that we've gone through in the post-pandemic economy. So since the book just came out, the actually first edition of Demise of the Dollar I published in 2005. So since this book just came out, it brings those same themes all the way current to 2023. So it was a kind of fun project to do, because the themes were right on even back in the turn of the century, as it were, and so a lot of the updating that I did was changing the tense from this is what's going to happen to this is what happened. Like I didn't have to do a lot of effective rethinking of what analysis was in the first edition, but I did bring it current to the current situation with inflation, and then there's some forecasting on what I expect is going to happen next. And then with Financial Reckoning Day, it's a look at the boom and bust cycle that is caused by the Fed trying to manage the stock market, manage the economy, by raising, lowering interest rates, and we've been doing it effectively. A big chunk of Financial Reckoning Day looks at everything from 1987 that collapsed in the stock market, the flash crash and Greenspan's tenure through the 90s, the 2000s and then the 2000 teens and the booms and busts that happen. We began Financial Reckoning Day writing the Daily Reckoning, which is an online e-letter that I edited for almost 20 years, and we were looking at all the kind of goofy ideas that were going on with the dot-com bubble and then the bust, and then what we were expecting would happen and in the process, I went back through history and looked at booms and busts going all the way back to the Tula bubble. My focus in the beginning was more on John Law and the Mississippi scheme, just because I was living in Paris at the time and I thought that was a more interesting story to tell. But the hallmarks of booms and busts going all the way back to the beginning of the modern financial era as we know it. They have all the same hallmarks and all the same kind of fraud and imaginary gains and all kinds of things that we saw in the tech bust, we saw it in the housing bust, we saw it in the crypto bust in 2018. And there is a chapter in there. The story is not written yet, but there's a chapter on FTX and it's the same back in three, two, just because that's the latest example of a boom and bust in our own time. When I was writing that section, I was like, wow, this is great. We got a bona fide historic boom and bust on our hands right now. What a mess that was. I mean, that was a.

Speaker 2:

I mean, I follow crypto and I'm an investor and I've been in it since 2015, with Bitcoin at least, and followed a lot of the stuff with the Ethereum, the ICO phase, the NFT phase. It's always like every few years, right when you start getting towards the having. You see this, you see people in the Ethereum community trying to give some sort of value or credence to why Ethereum exists. But whenever Bitcoin goes up, you see all these, what we call them shitcoins, right, and they all just kind of go up and rising tide raises all ships or whatever. So all these things go up too and you get this irrational exuberance around things that have nothing really behind them in a lot of cases, and I would argue, bitcoin does have something behind it, which is millions and millions of computers across the world. It also has a actually, I'd say the price is more stable than the, say, argentinian peso. I mean, if you were in Argentina, you might have done better, but you would have done better holding Bitcoin over the last I don't know 10 years than you. Oh, I mean, anybody would have done great holding Bitcoin over the last 10 years, but holding Bitcoin versus your local currency, your local fiat currency, and I think that's why you see a lot of people, especially overseas, adopting things like cryptocurrency or interested in cryptocurrency. Versus this sentiment you have in the United States, because we have the dollar, every other currency essentially in the world is pegged to the dollar because of oil we don't see the effects of hyperinflation. We did a little bit over the last couple of years, I would say, but we never reached that hyperinflation stage that you see in some of these other countries.

Speaker 1:

No, well, and also just to round out the discussion of Bitcoin, to me it's been interesting. We actually started covering it in the newsletters and published in 2009, when it was trading like around a buck, because of the sort of libertarian economic idea that it would be a competitor to the US dollar. And I've been covering the dollar for a decade. At that point in the vein of trying to understand why our purchasing power has been declining every year since the Federal Reserve was founded in 1913. And it seemed like there's a lot of promise behind Bitcoin to provide an alternative, a great alternative, to the US dollar. The dollar has an impact interesting feature in the fact that it is the world's reserve currency Against the basket of other currencies up and down, and we have periods five, six-year periods of a strong dollar and then it weakens. But all the time that it's going through those cyclical periods, trading globally, it's consistently losing its purchasing power for individuals, people that actually have to use it in the domestic economy, and I've always just found that that's an interesting thing. If I know that, then people who run the Fed know that too. Why are they consistently making decisions that weaken the purchasing power of the people who who have to use it and it looked like then what the natural alternative is marketplace to put other things in the marketplace that people can use that they're not dependent on the US dollar for their own purchasing. But then over the last, just following Bitcoin has been kind of frustrating because it does its subject. It's a new technology that's introduced into the marketplace and it's right now. It's what it's 15 years old, so it still hasn't rung out all of the speculative nature of it. There's still people that are a lot of excited. This year alone we saw it a lot genetically.

Speaker 2:

When it needs more liquidity. The market cap needs to be higher for it to gain stability and price. It's just, it's so volatile. I think a lot of people are scared of it. But I mean you've got several ETF applications BlackRock, vaneck, fidelity. I mean big, big companies, well respected financial firms, looking to get into the Bitcoin game now, when just a few years ago you had people like Jamie Dimon and JP Morgan, you know, taking a crap on it every time he could. And you know Charlie Munger rest his soul. You know he wasn't a big fan of it and it doesn't sound like Warren Buffett is either. But you know, younger generations seem to want to adopt it. They like the libertarian bent to it. They like the idea of trading it. The 24-hour market, you know we're all. You know we all have ADD now, right. So you know, when the market closes, the stock market closes, you need something to follow. If you're a 4x trader or if you're just, you know somebody who likes to trade, you know you need something to follow. And there's a little Bitcoin all night just trading away, right. But you know, I think you're going to start seeing a lot more liquidity. I think it's going to be just like a lot of people say and we didn't bring it up yet but a competitor to gold, a competitor to silver, a competitor to other commodities. And I mean, if you look at gold I haven't checked it in a while, but last time I checked I think it was a what? $11 or $12 trillion market and Bitcoin's sitting there at what? Maybe $800 million I think it might have just passed a trillion again, you know but you add that type of liquidity into Bitcoin, you're going to start seeing some of that volatility go away and it's going to start feeling more like a stable currency.

Speaker 1:

I think that's a really important development that ETFs are being introduced because it gives people that aren't speculative by nature, they're not in their trading options or looking for fast gains on the price. They're looking for investments that capitalize on a more I don't know sober approach to investing and ETFs give that ability for people like that to access whatever other things they might be interested in. Bitcoin. And we also. We did see the same thing when GLD was introduced, introduced into the gold market. The gold market's much bigger and global and more well established. But even the introduction of GLD as an ETF in the gold market it actually helped to stabilize gold to some extent over the last 15 years or so and that's interesting. We're up, we were just above 2000 and they close out November above 2000,. First month long game of close above 2000. And that makes gold more interesting. If the momentum traders get way into the fact that people are interested in gold again, we could see it go to like 3000. Well, it sounds like the price is depressed anyway. At the same time as an alternative to the dollar. Gold has represented an alternative to the dollar historically, but Bitcoin is kind of competitive in that space. People think of it as an alternative to the dollar too. So we could see a rise in both gold and Bitcoin Even this month in December. As people typically do, in December, they invest a lot more specatively the Santa Claus rally being what it is people get investing in stocks and stuff, and usually gold, and I think Bitcoin itself will continue to do well, at least for the shorter specular period ending the year. But it is interesting that I think that that will provide bringing ETFs into Bitcoin and just into the crypto space is going to make it a more attractive investment as opposed to speculation. I actually got involved in trying to create an ICO in 2017-2018. But then we ended up just taking our money back out, like everybody that was involved was like, okay, crypto's crashing, this is not going to work. So everybody just took their money back out For a period of time. It was really interesting. It seemed like there was a big shift going on and then, like all speckled bubbles, it crashed. And then we saw, you know, ftx and stuff like kind of took the wind out of any revival because people just got fixated with the fraud between FTX and Alameda. And then Binance was a big. They just were fine. What was it? $43 billion for their role in trading crypto currencies. Through Alameda, like that whole area, there was so much dollar dollars like dollar signs being thrown around that it attracted a lot of attention for a short amount of time, but it was all you know. In the speculative sense, it was all just fake money being thrown around.

Speaker 2:

That's right, well it was a little weird and even in you know, this whole time that we've been talking about. You know we're talking about gold, just a second to go to. You know you've got a lot of these things where you've got people that are searching for, you know, higher yields and what they're going to get in the market. They think they see an opportunity. You know they jump into things like crypto because you know they know there's going to be this spike and it seems to happen consistently. There's just irrational exuberance sometimes just comes into these different markets and you know, in certain circles, you know people that are in the circles of gold have told me they're like, oh, adam, you know gold's so under priced, it's being artificially, you know, kept low by the government. And you got like a lot of people that are, you know they're in gold, that are in the dollar, that are in you know forex in general, that are these kind of almost like conspiracy theorists a little bit. You know, and it's like this should be a lot more that you know and you hear all these things and you're like, wow, like who do I trust what's going on? And most of the people that are in here and they're listening to these folks. They don't even have a base understanding of like economics, right, they're just in it. A lot of them are young. I mean, you know being in the crypto world. There were kids when interest rates were low on credit cards. You know taking out your loans off of their credit cards at 0% for a year, buying crypto with it. I mean that's a lot of the dumb money that goes into crypto is the younger generations and they don't have that. They're watching YouTube videos on how to trade and do all this other stuff and they're borrowing money from their parents. Oh, mom, dad, I got this idea. You know we're going to make a bunch of money. Just give me, give me a loan. Or you know, go to Chase Bank and get a you know 10 grand or something on a 0% credit card. It gets a little wild and I mean you've written a lot of stuff on the economy and just the way it works. I'd love for some people that I argue with politics all the time. I'd love for them to read your books, because I think they don't understand things. Yeah, they're just, they're out there, man.

Speaker 1:

Yeah, it's just that you bring up the kids buying, buying crypto. When, in it, during the crypto bubble of 2017, 2018, we were doing renovation to our house and we had a crew in here and the foreman of the crew is probably like in his mid 40s or something like that and he had a teenage son and the teenage son had just really gotten into this guy's head. He's a really nice guy and I, you know, I talked to him all the time while he was working on our kitchen and stuff like that, and he was taking money from from the you know, from what we were paying him to renovate our house, and he was dumping it all into these rare crypto coins, coins that I hadn't even heard. He had to ask me what's this with that? And, like, definitely no one was talking about it, but he was convinced that he was going to take money from the construction business or renovation business and he was just going to parlay it into billions. Wow.

Speaker 2:

That's what he was going to do.

Speaker 1:

Yeah, that environment. You know we're talking about the economy as well. That environment, that level of speculation, can't happen unless you do have zero interest rates. Unless we had this whole period of time from 2011 to about 2017, where it was money was free. It was free for Wall Street banks and the banking system in general. The entire system became accustomed to the fact that rates were so low and everything dropped, like mortgage rates dropped to I think the lowest it dropped to was like 2.6% on a 15-year fix. It was like free money, and the business model of banks shifted to accommodate. For free money. They had to be much more competitive because they couldn't borrow the money at this and then and then make money back on interest anymore because nobody nobody was paying interest on anything. And the higher business model and then, by extension, the way that the Wall Street banks were operating was just dependent on this era of free money and when that era came.

Speaker 2:

Look at the technology companies. That's how you fund growth, if you're a tech company, I mean. And now look at who's driving the value in the S&P. It's still the tech companies, even with money being expensive at this point.

Speaker 1:

Yeah, but the thing is, the ones that made it, the magnificent seven, the ones that made it that are driving. They really drive the entire economy. They are. They figure out business models that produce profits. They have products that people want, like Amazon's a good example. They're really just a logistics company and they're the best at it, so they provide a service that people want and they're cash rich.

Speaker 2:

Yeah, they got money.

Speaker 1:

Yeah, they got cash rich so they can drive. They have economies of scale working for them because they can go in and change the prices of the goods that they offer to. So they have a lot of things that are going for them. And they did. They use that model where they borrowed money for free forever and use that money to build out the infrastructure that we all kind of rely on. Now Amazon's one of my life's favorite companies because she's the prime number, and that especially during the pandemic. But then we adopted our kind of habits to the pandemic way of doing things. We still get packages on our porch a couple times a day and most of them come from Amazon. But so during that period of time the entire economy sort of adapted to low interest rates. Some companies Apple and Amazon, and even NVIDIA, where there's- so much in AI. Those companies figured out how to actually turn a profit and make themselves the behemoths that they are because they're providing services people want to get. But there's a lot of the changing of business models didn't account for the risk that would happen once interest rates started rising again. Earlier this year, we had a banking crisis, which I cover in demise of the dollar too. Silicon Valley Bank is a really good example. It's the first sort of headline bank that failed. Tech companies were borrowing money at zero rate and they were making money mostly by getting capital infusions from Wall Street banks and or hedge funds that were investing in tech companies, and then they were taking that money, dumping it in Silicon Valley bank. Most of the clients, the depositors for Silicon Valley bank, were tech innovators, entrepreneurs. They were dumping it in. So much money was going into the bank that they didn't have to lend it out in order to make a profit. What they were doing was taking it and buying treasuries with it, and more than half of the books at Silicon Valley bank were treasuries that were purchased when interest rates were to 3% and then, when interest rates started rising, the value of the treasuries didn't rise with them because they had bought them at whatever 10-year or 30-year notes, and then it became more difficult for tech companies to fund payrolls and those kinds of things because the cost of money rose and none of their business models accommodated for that. And so when they started saying, hey, we need our money out of the bank, Silicon Valley had to sell the treasuries that they were just taking money in, converting it to treasuries and using the spread on yeah, they were just making money on the interest rate. But then when they had to actually sell them in the marketplace, they saw a sole metal loss. And once tech entrepreneurs, once their depositors, figured out that they didn't have enough to cover they didn't have enough assets to cover. The deposits that were in there were dug out and there was a classic bank loan. The bank went out of business in 48 hours. It's just wild. So that is an interesting thing. It led to massive speculation in cryptocurrencies, but it also changed the business model of the banking system itself. This long period of free money that ended with it ended in two phases. One with the government just handing out money, the stimulus checks during the oh, my God $600 for every kid every month or something.

Speaker 2:

It was $300. I can't remember what it was, but I was like this is going to end poorly and it just and this is why most of my debates about money and the situation we're in right now are around this you printed a tremendous amount of dollars, which devalued the dollar Basically right, devalued the dollar. These people went out with all this cash to buy less things, like there was less things available because you had COVID and you had a bunch of stuff that was sitting off shore that couldn't be brought into the United States and there was less stuff to buy. Whenever you have more cash, more buyers and there's less stuff, the prices are going to go up on those things, and people didn't understand it. But then, at the same time, everyone was saying I want to make $15 an hour, I want to make $20 an hour. So businesses were looking at that. They were like, well, we got less goods to sell. We got everybody wants them, let's raise the prices. And you get. The same time, you got people saying that they want $15, $20 an hour for a job that pays $12 an hour right now, and people just don't tie those things together for whatever reason, and they say it was greed. It was corporate greed is what it was. It wasn't all this other stuff that was happening at the same time. It wasn't basic economics like you write about it was corporate greed. It was such an easy excuse for their failed economic policy.

Speaker 1:

Yeah, I mean, if you want to destroy your currency, the easiest way to do it is to give it away for free, and we did it to the tune of $7 trillion, which is just insane. And then it caused, like you said, it just the knock on effect was that prices went up. More money chasing fewer goods. It's like basic, it's economics 101. 101. Yeah, in high school you learn that. But then, when inflation took the, so the second phase of it, first they just gave away a bunch of money and destroyed even destroyed the value of the currency faster than it was already being destroyed. But then the second phase is when interest rates started rising. The Fed was actively involved in trying to slow down the economy so that prices couldn't rise. They were, you know, it's the war against inflation. And once they started doing that, then the cost of money itself went up and it really messed with all these people that had it in their minds that money would be free forever, forever.

Speaker 2:

When it happened fast, very quickly, it turned around. I mean it was. I mean people couldn't even I'm glad I refinanced a mortgage before, you know, all this stuff started to happen. I saw it starting to go up, but I mean, you know, this is a basic economics. You saw it coming but nobody wants to believe it.

Speaker 1:

Yeah, and I had to with changing the tense of the book while I was editing because we did see it coming. We saw it coming from as early as the first edition was in 2005. And it was really look at a historical trends that were already in place and you could predict what was going to happen. What I didn't get right, though, in the first edition was I did not see a decade of zero interest rate policy. That was inconceivable even in 2005. Yeah, and I didn't see the extent at which they engaged in quantitative easing when they were trying to stabilize the mortgage-backed security market. During 2008, they started buying those securities directly in the market, but Fed was going in and loading up their own balance sheet by buying up those assets, and that was QE1, that was quantitative easing one. It was a way of ejecting capital liquidity into the market by buying up assets that nobody wanted anymore. And then they went through QE2 and QE3 and QE4. They extended programs and they bought up different things. At one point, they were just buying treasuries so that treasuries wouldn't fall apart, and that's what led to that whole extended period of low interest rate and quantitative easing To. In their view, it was intended to stabilize the global economy, but all it did was kick the can down the road and make it unstable for future generations. And when the pandemic happened, they gave away all that free money and the tide started turning. It turned very quickly, like you say. It just drives me crazy listening to mainstream news broadcasts, the way people talk about economics and stuff like that. They're wondering why consumers are spending more than they have and all of a sudden it's like well, no, this hurts.

Speaker 2:

It hurts the middle class the worst. Yeah, they don't understand. Like it's like you guys don't understand, like the people that needed that money the most, the people that wanted the money, the people that would have voted for it. Well, they did vote for that money, but they were like, oh, free money, I'll take it right. Who does that end up hurting? When interest rates go up and prices go up because you just added a whole bunch of money into the market? It's the poor middle class that get hurt the worst. It's regular people. Well, it's a good thing.

Speaker 1:

Yeah, they don't own assets right, they don't own real estate.

Speaker 2:

They don't own things. That hedge hedges against inflation. Real estate is a great hedge against inflation. I mean, I always tell people real estate doesn't really go up in value. Real estate just kind of it tracks the dollar really, because it costs a certain amount of money to buy wood, to buy nails, to buy all these other things to build the house right. As those costs go up, the price of real estate goes up Because in order to replace a home, it's going to cost this much and the market just kind of keeps up with that. You don't really make money. People think they made money off their house. No, your house just went up with inflation essentially is what it did, and I think people don't see especially these pundits that you talk to that the narrative, these narratives that they push, it hurts the people the most that need it. And you see that now. And people got into these habits because money was cheap. They were out buying expensive cars, they overpaid for their homes, some of them got arms, even like they did in 2008. Some people got arms. Those rates are going to adjust. Now you see people living off of credit cards and in personal debt. It's been in decades. This is not going to end. Well, I mean, where do you see this going and is there anything you could tell our side hustle audience. I mean, some of these people got small businesses that we're talking to on here, or they just work regular jobs they're looking at maybe picking up something else because of this debt they're taking on right now.

Speaker 1:

Yeah, I don't see it ending well and I think it's going to happen sooner than we expect. I'm looking at 2024. I released earlier this month I released a forecast of three things that I think are going to really come home to roost in 2024. One is this idea exactly what you're talking about that the consumers are overextending themselves on credit in an era of rising interest rates. So credit cards are adjustable. They go up. The amount of service that debt that you take on now is going to be more expensive. The Fed has not won the battle against inflation because of all that money that was injected into the system that still hasn't been reconciled yet. And even if you mentioned Jimmy Carter, if you look back at the late 70s, there were four different periods of rising inflation that was supposedly whipped and taken care of four different times before they, before VOKOR, came in and chased interest rates all the way up to 18%. We've only had one bout with it in this current period and some of the indicators measuring the rise of prices in this first round of inflation were. It was rising faster than anything we saw in the 70s. So it's not going to be an easy fix, but people have people for the most part, consumers think in short term and they want especially in, like holidays and like we're in right now. They want to be able to spend and they do have the credit is still available. It's just going to be more expensive to service that debt at a time when the economy itself is slowing down. It's intentionally slowing down because the Fed is trying to slow it down to get control of inflation. So people are taking on a historic amount of consumer debt. Rising interest rates are going to continue and the economy is going to be slowing at the same time. That's going to. That is going to be apparent in the, I say, as early as the first quarter of 2024. And we do see signs already that in big retailers, the their same store sales are either flat or declining and some of the earnings on like Walmart and Target. Those are that's kind of the leading indicator of when retail starts to feel well we just had a report today.

Speaker 2:

Yeah, I mean we're. I don't know if you know this, but Cincinnati is the home of Procter Gamble, right? The largest consumer packaged goods company in the world, right? So they're going to see it in Kroger, the largest grocery chain in the country. Well, kroger I just saw in the inquire today, and this is what led to my little debate on Twitter Kroger sales stall as grosser hits hints at lower prices. So I said, look, I, you know everybody that this narrative, that there's this greed, greed, greed out here. Well, look at, look at Kroger. Like I mean, if prices go up, consumers stop buying, you have to lower the prices. So you can only be greedy for so long before consumers say, hey, I can't afford this, I'm just not going to buy it. And then you know, the invisible hand of the economy takes over and does its thing, right, but you're starting to see these prices go down and people I know people at Kroger and they said, look, we artificially kept prices low, we got, we took out our own margin and Kroger only has like a two to 4% margin on most things. They took out their own margin to keep from having to raise prices during and after the pandemic. I mean you've got this big company. Everybody hates these big companies, but here they are actually trying to help the consumer and now, at this point, you know you see some prices going down because people, just you know they're, they're, they're living off of credit right now. They bought a Christmas presents instead of food.

Speaker 1:

Well, yeah, I mean just the, even the metrics you could see. That's what I think is important about studying economics, and even history too but economics in this sense that you can see the trends are in place, the consumer and their headlines are pretty obvious. Once you are aware of it, too, I really waiting for the consumer to tap out like they just can't do it anymore. That's a frequent refrain in both Bloomberg and and Wall Street Journal. It's like you can feel the tension at near the end of rising level of consumer debt and savings, which had skyrocketed during the during the pandemic itself. There's a big spike, but they're at all time lows. Now they're actually savings. Personal savings are below where they were in 2019. So you have this massive mounting consumer debt and you have a drop in savings rate at the same time. I think that's going to be, that's going to be one of the headline stories for next year. It's going to be difficult for people to keep the spending that they're they're doing right now Sounds like a recipe for disaster. Another one that I think we're not giving enough credit to is back in 2017, 2018, 2018, trump started his trade war with China and then, as the Biden administration came in and absorbed that relationship, they made it worse. They have been antagonizing big Chinese companies and the trade relationships that the US had adopted over the past two decades, where we were getting, we were shipping jobs over there, but then we were producing stuff at cheaper labor rates and at cheaper resource like that resources that go into things and selling them back in in the US at cheaper rates. That era is over, also because of the. You know it benefited consumers in the US for the period of time the sort of globalization period that we went through, and it benefited greatly the Chinese economy. That's how they leapfrog a bunch of other companies, countries, to become the second largest economy in the world. But now they're sort of competitive and there's all these trade restrictions on what you can and can't do. Tariffs have gone up and the piece that I was writing I was just comparing the tariff structures that are being used right now to what was happening in the 30s, when they went into economic decline. In the 30s, the result was similar to what you're talking about politicians and pundits getting in there saying we got to punish the Chinese. They have to pay their fair share, they have to pay tariffs on importing of goods and they need to pay us when they want to sell goods here, and that just raises the prices for everything. It raises the prices for shipping, production, end products and that era of cheap stuff. I call it the end of era cheap, because that era is gone and people with art aren't. Really it's kind of a complex idea, so it's not something that you can just say. We've benefited from two decades of globalization and now that era is gone because of this competitive tariff structure that both the US and China are engaged in right now. That, I think, is going to become a major issue next year also. That's part of my forecast for next year, as you've already got the consumer tapping out and then we're entering into a pretty aggressive era where cheap stuff is not going to be. Prices are going to rise. The third thing I think is going to happen, which I don't think we're given enough credit to too, is that everyone is aware of the political divisiveness in the country, the difference between progressives and the libertarians on the other side and the people that want to shrink government and the people that want to use government to control our entire lives. People are aware of that, but they don't recognize the economic input of that, with the economic anxiety that comes along with taking on more debt and stuff not being as cheap. That anxiety expresses itself in different ways. One of them is we've seen gangs of people break into Lulu Lemon and steal stuff. Those kind of stories are rampant. Now we're seeing just a general rise of violence in society that is caused by people going through economic anxiety. We saw it in the 70s, we saw it in the 30s. We saw it in the 1900s the first part of the early financial panic of 1907. That was a similar situation. These patterns repeat themselves. One of the hallmarks of a period of economic anxiety is the rise in the power of unions. We've seen all these strikes in 2023 as the power of unions tried to get. They try to get involved in the economic well-being of their constituents. They try to use the union power to whatever the biggest one was, like UAW or something. Yeah, you see union activity rise when there's a higher, heightened degree of economic anxiety in the country. That in 2024, because we're entering an election here that is going to express itself politically. I think we're going to see a lot more protests. Things can go wrong when you have the heightened anxiety mixed with political I think I'm right, yeah, I think it's getting a lot more of that next year too.

Speaker 2:

Yeah, you're on point there. I'm also hearing that Mexico has become a lot more competitive with China. That could solve a couple problems for us. In a way, it's like you're on shoring some of that, even though it's Mexico. Right, you're closer, you're a friendly country. It's a lot easier to ship things from Mexico than it would be from China. You don't have to go on boats. At the same time, you've got a lot of these economic migrants coming over. We already don't have any money. People are already struggling to find jobs. That's what the Fed wants. The Fed wants people to lose their jobs right now. They're not going to come out and say that, but they need that to happen as an indicator to stop raising interest rates. You see less and less people. You see all these people coming into the country right now, especially in places like New York. They're just flooding these cities and they don't know what to do because they don't have jobs available for them. They don't have anywhere for them to live. You've got all these problems happening right now. If you on shore, or essentially, you bring a lot of that manufacturing back to America. Maybe not all of it, because some of it doesn't make sense here, but you put it in Mexico or something like that. Maybe that keeps some of those people from wanting to be economic migrants to come to the United States. In a way, it helps to solve some of those issues that we're having with trade and with jobs and migration.

Speaker 1:

I think that that is true. But we're going to go through a period where the reshoring movement is alive and well, but it takes time to reshor those things. It took a long time to build factories in China and make our stuff over there, and then Vietnam and some of the other smaller Asian countries that benefited from that. But it took time to build that infrastructure and get stuff working. The same thing is going to happen in the reshoring thing. One of the pain points of the trade wars is semiconductors and China's belligerence against Taiwan. The political response was to prevent China from getting high-end semiconductors from US companies. They had, and then the US companies have to build them here. There's those trade restrictions on what can be done and they're willing to spend a ton of money to help companies build the infrastructure to produce semiconductors here in the United States. But that takes time. You have to build the factories first. The economic benefit of reshoring using just semiconductors as an example that is a multiyear project. That is not a solution that is ready made to handle rising levels of debt.

Speaker 2:

We've got a new Intel facility that's popping up here near Columbus, up north, a little bit kind of in between here in Columbus, but closer to Columbus. It's multi-billion dollars to build this chip facility. I mean tons of money, but it's going to bring a lot of jobs. It's going to bring a lot of high-end jobs I mean $100,000-plus-thousand-dollar-year jobs to the area and it's a big, big deal. That was a huge win for Columbus. Ohio needs those types of jobs. We need those types of manufacturing jobs back here. Even the guys that are sweeping the floors and keeping the place clean and going out and working on the parking lots and checking the HVAC systems it takes all kinds to run a factory. There are plenty of jobs there for people who are just like hey, I just want to sweep a floor, I just want to work on HVAC system or do whatever. But still, even HVAC systems require some intense training. Nowadays it's hard to find a job where you just go in and pull a handle all day and leave. How many of those jobs are left?

Speaker 1:

Yeah, to me those are the major overriding things. For me, looking at the economics of how we got here, they're the symptoms of running the currency. That's what demise of the dollar is all about is. Running the currency the way we have it has knock-on effects in the economy that most people don't see. There's a famous French economist named Frederick Basia who said there is the scene and there is the not-seen. He does a whole economic theory, an inquiry into what happens when you have immediate impact of spending money. People see that and that's what they think is economic process, but what they don't see is the investment behind the scenes that leads to productive jobs, that leads to creation of that money. The two don't often meet and on the political front, especially when people are feeling anxious, they want to see what they got in the pandemic. They want to see free money mailed or digitally transferred directly into their savings accounts. That's what they see, but what they don't see is the amount of investment that needs to go into making an economy productive over the long period, that adjustment period. I think, because of the way our political system works and how divisive it is right now, I think that it's going to cause a lot more problems than people are really prepared to deal with.

Speaker 2:

It sounds like you've been pretty accurate with your predictions and I want to see what's going on. You're on the show here and I want to keep following up with you to see how those change over time.

Speaker 1:

Yeah, I made the forecast in mid-October and I'm in the process. I'm actually editing it. It's a new report I'm putting out. I'm hoping to get it released by the end of next week, but it always takes longer than I think it's going to take. Oh yeah, but it's an update on those things. So far I've been pretty accurate, although I'm a little bit more astounded by the level of which people are willing to in depth themselves right now than they are. So I'm watching that one closely. I guess If you do want to follow along, the easiest thing is join thesessionscom and that gets you signed up for the Wigan sessions, and I do. For some reason I didn't done five recordings this week, but I try to release one a week and then I write about it in a daily message that goes out and that's an email newsletter where I write about the themes that we cover in all of the interviews that I do. It's a cross section between economics, history, I cover some philosophy and then, even though I don't want to, I cover a lot of politics, because one of my little mantras is you ignore politics at your peril, because it does have an impact on what's going on in the economy, even if my preference would be that it doesn't, it still does, so it's important to pay attention to what's going on in politics as well. So I have guests on that talk about all these different kinds of things.

Speaker 2:

When I've learned to don't get so married to your political party. I mean, if you want to make money and you want to not fall into the trap, your politicians will lead you right into the trap. They are the Pied Piper Pied Piper's of poverty is what they are. So I mean, if you don't want to be led down the wrong path, don't be so married You're married to your party that you stop listening to the other side of things or you stop listening to just common sense and ignoring what's happened you know, yeah, I agree. Yeah, sorry, sorry. Yeah, so great. Well, addison, I really appreciate it. I would recommend everybody go check out your books, check out your podcast, your newsletter and we'll put everything in the description, guys, so you can you could check him out and follow Addison on all the economic stuff so you do not fall into that trap.

Speaker 1:

Hey.

Speaker 2:

Addison, thanks so much.

Speaker 1:

Thank you.

Speaker 2:

Adam. Yes, sir, thanks so much for being on the show. Thanks for joining us on this week's episode of Side Hustle City. Well, you've heard from our guests. Now let's hear from you. Join our community on Facebook, side Hustle City. It's a group where people share ideas, share their inspirational stories and motivate each other to be successful and turn their side hustle into their main hustle. We'll see you there and we'll see you next week on the show. Thank, you.

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