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June 15, 2024 - Ron Paul Liberty Report
28:02
Life After The Bubble: With Special Guest Graham Summers

Graham Summers joins us today to discuss his new book: Into The Abyss. Amazon link: https://a.co/d/9J1wjqp

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Time Text
The Everything Bubble Continues 00:13:39
Hello, everybody, and thank you for tuning into the Liberty Report.
With us today, we have a special guest, Graham Summers, whom we have talked with and about in the past, and he's here to talk about his new book and how we're going to solve all those economic problems.
Welcome to our programs, Graham.
Thank you, Dr. Paul.
It's a pleasure to be here.
Very good.
I do want to start off by mentioning your book, The New Book.
The first book that I remember you put out that I knew about was the book on the Everything Bubble.
That was a catchy title.
Whoever did that was pretty good.
Everything bubble, and it's been used quite often.
This one is a very catchy title as well.
And I'm going to hold up the book so that people can see it.
This is, the title is Into the Abyss.
And that's the cover.
And I don't think it'd be very hard to drum up a position on describing the abyss.
I think most people are doing it.
It just comes out in different tones in different areas.
And that's been around now.
And I think that book came out this year.
And that's a continuation of this whole problem of central banking, how the bubbles are built, and people, and people attuned to this, individuals like yourself and many others, and understand monetary policy, you know, it's a little bit easier to spot the bubbles.
Some people would ask me often and say, well, why did you think there was a bubble there?
I said, well, it's not that dog.
They say, it's not all that complicated.
Keep an eye on the Fed and a few things like that, spending, and you can sort of anticipate what's going to happen.
I was thinking when I saw your title, Into the Abyss, I thought, well, maybe we should call it the everywhere abyss, because there was a bubble, and I can just see the abyss.
And this is unique.
And we want to end this.
Why is this one bigger?
And give us an outline of how you proceeded through processed through there from your last book to what motivated you to get this book out.
Sure, absolutely.
Well, the first book, the term the everything bubble was a term I coined back in 2014 and subsequently wrote the book about.
And the idea was simply that once the U.S. severed from the gold standard, which I know you've been a big critic of in the past, once that happened, it opened the door to sort of unlimited money printing or unlimited creation of credit.
And as a result of that, if you track, you know, historically the amount of debt in our financial system relative to our economy size, the two of them were much in tandem until we severed the gold standard.
And then the rise in debt was exponential, particularly relative to the GDP growth.
So if you look, I have a chart in the first book where you sort of see them going like this, and then the debt, the gold standard is broken and the debt goes like this, but the economy goes like this.
And the idea behind that was that once you get to the late 90s, there's so much debt in our system.
There's so many liabilities that our Federal Reserve, excuse me, our central bank, which is called the Federal Reserve or the Fed, they got into this intentional policy of saying, well, we don't ever want to have a really systemic event occur in which we have a lot of banks fail or a lot of debt go up, or excuse me, debt collapse.
And so consequently, what we're going to do is we're going to create bubbles in different asset classes, or we're going to allow those to occur.
And whenever those bubbles burst, what we're going to do is we're going to step in and we're going to try to reflate the financial system with another larger bubble.
So in the late 90s, we had the bubble of tech stocks, famously called the tech bubble.
That bubble burst, and they then created a bubble in housing, which is a far more senior asset class.
You know, tech stocks, you can buy a tech company's share price for, say, $20, $30.
For many people, a home was the single largest financial purchase of their lives.
So they created a bubble in real estate.
And because Wall Street was packaging up that asset class into these mortgage-backed securities, these derivatives, and that became a global issue because these derivatives were being sold all over the world to different banks and financial institutions everywhere.
So when that bubble burst, like all bubbles do, they had to become even more aggressive with monetary policy.
And that's when they introduced this idea of quantitative easing, which was simply, let's print money and use that money to buy debt securities, most specifically treasuries, which is another word for U.S. government debt.
We're going to essentially corner that market by providing an unlimited amount of money into that market, saying we're going to buy it at these levels.
And because those bonds are ultimately the sort of bedrock of our financial system, in many ways, they came to replace gold as the sort of foundation of everything.
If you create a bubble in those bonds, you're essentially creating bubbles in everything because everything you can name from stocks to oil to real estate is priced based on where the yields on those bonds are.
And when I wrote the first book in 2017, the big question mark was, well, I have a decent sense of what they're going to do when this bubble bursts, but I wasn't quite clear on how to invest based on what was coming because the big question was really, are we going to have another sort of great financial crisis like we did in 2008?
Or are we going to have a similar event, but one in which sort of inflation is the final level?
Right.
I got a lot of criticism for that because people were saying, well, this is great, but how do I invest based on that?
And the answer to, I don't know.
We have to see what they do.
And then COVID hit, and all those answers came out of the woodwork.
Because when we talked about those other crises, we're talking about things that took, say, 16 months to unfold.
The COVID meltdowns, because we chose to intentionally shut down our economy, that crisis was about six to eight weeks.
And it was so, let me back up because I want to be very clear there.
What I mean is that financial meltdown.
Obviously, the crisis lasted years.
And I want to be clear when I talk about COVID, I'm just talking about the economy and the financial system.
I'm not a healthcare expert.
I'm not talking about the disease.
So because the meltdown triggered by the shutdowns was so violent, so rapid, what the Federal Reserve did was they basically showed us their entire playbook for how they think about everything because they didn't really have a choice.
Normally during a crisis, they might show us one or two pages with some new policies.
With COVID, they threw everything, the kitchen sink at it.
And that allowed me to say, okay, I now have a very clear understanding of what's likely to happen when the next crisis comes.
And that provides a framework for understanding this new world we're in.
Because the reality is COVID was a game changer for many things.
But one that many people didn't notice was the entire sort of way our financial system is regulated was completely changed.
But because everybody was focusing on the pandemic aspect of it, many people missed this.
You know, the size of this is a fascinating thing as well.
Currencies have come and gone.
There's been empires, several, and the collapse of empires very often are related to the destruction of the money value.
And in comparison, I get the sense that this might be the biggest ever and the most dangerous situation and ever, but that's an opinion.
But it is big, and I think it is considered or should be considered big because of the significance of the reserve currency control by the United States as the international currency.
And it really directs the financial situation of the world.
And also, it directs foreign policy as well of what we can do.
So the dollar is very, very important.
And with technology today and the advancement of economic conditions and information, it's tremendous.
I see it as much bigger and can collapse with a bigger burst when it happens, because even though the others have all been bad and we've even gone through quite a few that have been real serious.
But I think there's a lot of people, probably you as well, that we anticipate there's something else in store because we haven't corrected the problem.
And I see that we have to go through a period of time where we're going to have liquidation of debt and get some type of control over the Federal Reserve.
How do you put this condition that we're facing now in perspective?
I know it's hard to say, yes, this is the biggest and this sort of thing, but it has to impress you with the size of this problem we have.
Absolutely.
I address that a lot in this book.
If you look at, say, the amount of interventions that occurred after the great financial crisis, I mean, the Federal Reserve spent about $3.5 trillion in the span of seven years.
Well, they spent $3.5 trillion in six months in 2020.
So you're absolutely correct.
From a purely dollar amount perspective, it's absolutely unfathomable.
I mean, if you add up all the money that the Federal Reserve and the federal government spent fighting the pandemic, it's $11 trillion, which at the time was something like 45, 50% of our GDP.
So just jaw-dropping amounts of money.
And what's really come to be interesting is that things that were previously thought to be unthinkable are now just normalized.
And I talk about that a little bit in the book because much of what we're doing in our country, Japan is about 10 to 15 years ahead of us on.
You know, Japan first introduced quantitative easing in 2001.
We did it in 2008.
Japan first introduced zero interest rate policy in 1999.
We did that in 2008 as well.
And Japan has since done even more egregious, crazy things.
They had a QE program equal to 25% of their GDP.
We roughly did the same thing when we introduced the unlimited QE during the COVID lockdowns.
So there's sort of a sense of where this is going.
There's obviously some key differences between the United States and Japan that mean the outcome may not be the same.
But the key thing I note in the book is simply we now have a very clear framework for how policymakers think about this stuff, which is simply the only real solution they have to anything is to print and spend money.
And in some ways, that was always kind of obvious if you look at what they were doing.
But the pace of the spending, the size of the interventions, the degree to which they're willing to be buying asset classes that technically are illegal.
This wasn't even discussed because everyone was scared during the pandemic, but by law, it's illegal for the Federal Reserve to buy corporate bonds or stock ETFs or these other things that they were buying, excuse me, not stock ETFs, corporate bond ETFs and things like that.
And the way they got around that was they print the money, they'd give it to the Treasury, the Treasury would buy the assets.
But the reality is they spent trillions.
A friend of mine joked at the time, the only thing they weren't buying was old NFL contracts.
And it really creates this understanding of what's to come, which is there's really no solution, at least in terms of major policymakers, that doesn't involve just spending money.
And ultimately, that does make sense because when it comes to debt, you have three options.
You can either pay it back, which clearly we're not choosing that.
We haven't in decades, probably never will.
The second one is you default on it, which is always a possibility, but I don't think people understand the significance if the U.S. actually defaulted on its debt, what that would do to the financial system.
Because again, our debt is the sort of senior most asset class in the world.
So if that, you know, that's the collateral for trillions of dollars of derivatives.
If that stuff goes up, it's like 2008 on steroids.
Or you can inflate away the debt.
And that's typically historically been what every major empire has chosen to do.
You just referenced, you know, debasing your currency.
Well, the reason you usually debase it is to try and sort of pay off your debt with cheaper forms of currency.
And ultimately, that will lead to some kind of default down the road, but it definitely kicks the can down the road a long way.
And it's lasted longer than most people ever expected, I imagine.
Well, you know, one factor that keeps it going is the confidence.
We look at this situation and we see reasons why we don't have very much confidence in it, but a lot of people do.
And it's precarious, and that's what you do a lot of describing of the precarious nature of the system.
And yet, you know, there are some people who say, well, we can just get the computer out and calculate if we do ABC, we're going to come up with this.
But there's a Austrian economics teaches that there's a subjective element to this to it.
People might have confidence.
Maybe they have confidence in our dollar because we're still very rich.
And we still have a very big military.
And the strength of our dollar is undeserving because of these problems.
So there is this element which makes it very difficult to understand.
Data's Subjective Element 00:09:17
But I did want to ask you a little bit because I'm fascinated with people who arrive at this position and why more people don't come to our side.
And I'm sure there may be some similarities how I arrived at that point.
But I'd like to know where you came across this.
Did you get this from college?
And how long have you had this?
And was there a big event that said, hey, there's something wrong with our system?
And just how did you come to this point where you're basically, you know, a sound person man and limited government and all the things that I've talked about over the years?
Oh, yeah, sure.
So I was actually raised by a family of academics.
They were typically left-leaning.
We didn't really talk about these sorts of things around the dinner table.
What changed for me was starting my first business.
When I first started my first business, I'd always had an entrepreneurial slant, whether I was involved in a sports team or a musical group.
I always took sort of a leadership role and was always very sort of into making things happen.
And so I think it was very sensible that I'd end up starting a business.
But once you start one, it's very different from sitting in a classroom or having a spreadsheet and arguing about how you think things are going to turn out because you're actually seeing how they turn out and you've got to make payroll and you've got to make a living.
And once you start doing that, I first started my first business in 2008.
And that was very interesting because I'd been a financial analyst for a larger firm.
I was the youngest senior analyst in the history of the firm.
I'd been very aggressive, very ambitious with that side of things.
And I figured I'll start a business.
At the time, I wasn't married.
I didn't have a house I owned.
So I was thinking this is a, from a risk management perspective, if this doesn't work out, the only person who gets hurt is me.
So I started a business in 08.
And it was very clear to me looking at the situation in terms of what was going on with derivatives in the financial markets that there was going to be some kind of crash.
Now, looking back on it, pretty much the whole world likes to say, oh, I predicted the 08 crash or I knew that was happening.
But, you know, I was actually out there in April of 2008 saying we're going to have a crisis in the fall of this year.
It's going to be one of the worst crashes we ever have.
I had my clients investing in cash and shorting financials, going into layman, failing.
And people forget this was a time in which Jamie Dimon, the CEO of J.P. Morgan, was coming out saying our balance sheet is rock solid.
You know, the CEO of Merrill Lynch, all of these big, really, you know, titans of the industry were out saying, this is all done.
Bear Stearns was the worst it's going to get.
And so I really made a name for myself in 08 because I was one of the people who six months in advance was saying, this will happen.
It did happen.
And my clients did very well from it.
So that kind of put me on the map.
And then we had a sort of one-two punch with debt crisis.
We had the 08 great financial crisis and then Europe had their debt crisis in 2011, 2012, which was another situation that to me was very clear and played out how I thought it would.
And my clients made a lot of money.
So that really sort of put me on the map.
But then the issue with things like that is if you're talking about things from a policy perspective or you're talking about risks or problems, that's one thing.
But if you're actually trying to help people make money from the markets during this stuff, you start entering into a weird headspace where, you know, things don't always make sense from a logical perspective.
But you mentioned before, it's kind of a confidence game.
And for instance, you know, the economic data in this country, all of the economic data that's politically very relevant is heavily massaged.
You could very easily claim a lot of it borders on fiction.
And we see this.
There's always one, two, three revisions for it.
You know, suddenly they'll announce, oh, we made a million less jobs last year than we initially thought.
I mean, that degree of mistake is telling you that your model has very little value.
You're that wrong.
But the problem is that people like me and people like yourself and even people who would be considered very well off, we're like little paddleboards in the financial markets.
You know, the big financial institutions, those are the oil tankers.
And they all trade and invest as if the stuff they're getting out of the government is gospel.
And so, you know, if you're running $100 million for JPMorgan and the inflation data comes out and the inflation data sets it's coming down, you know, you're not going to come out and say, well, this doesn't, you know, match up with my experience at the gas station or the grocery store.
So I'm not going to believe this.
You know, you invest as if it's real because that's how everyone in the industry is at.
And so consequently, it becomes a reality.
And that's something I've had to learn to do for clients is that, you know, there are bad things that happen.
There are crises.
I've gotten very good at predicting those, seeing them in advance.
But, you know, between those things, you have to be willing to find a way to make money for clients because ultimately when it comes to the financial markets, you're sort of moving with tides.
And you've got to move with those tides if you don't want to just get wiped out.
You know, your story about how you got motivated because you're in business and why economics is very important.
But it was McGovern, I believe, that when he was done with politics, he went and started a small business, not a job big, any business.
And I think he made the statement that he was having trouble with regulations.
And I don't know whether he failed or what, but all I remember was the statement, if I had only known that, I wouldn't have voted for so many of those things.
And I keep thinking of that.
There are some people in Congress that have been very good at understanding economics and been in business and have done great things.
But the majority of them, and so many of our presidents in the past have never been in business.
People say, boy, if they'd only have to run a business once in a while, maybe we wouldn't be getting it.
So I think your story was very appropriate.
And experience will teach you something too.
You go to the school of hard knocks with the business, you're going to learn more than you might even from an MBA.
I have an MBA from Duke, and I learned a lot from that.
I learned a lot more from actually trying to make ends meet and put food on the table.
In terms of policymakers, it's a great irony, isn't it?
Every single politician you can name will come out and say they're a champion for small business.
But as you said, maybe a handful of them actually vote for things that would be beneficial for small business.
I mean, look at the lockdowns, right?
You know, we're all champions of small business, but all the mom and pops, you guys got to close.
But Amazon, Walmart, somehow the virus isn't going to affect them.
They need to stay open.
It's very, very strange.
I'm sure it's just coincidence that the large ones are the ones doing all the lobbying.
There you go.
And when these reports come out by the government, of course, and they talk about the CPI and others, but there are private individuals calculating these two.
People would say, well, if the government did give us all this information, how could we plan our business a lot better?
Somebody would fill the role of providing information, and they probably do.
They probably have their own.
But I think a lot of people on Wall Street, when they hear those reports, they don't necessarily believe them to react to them because they're calculating how many people are going to believe it and what will the banks do.
And therefore, they are affected by that.
And that's why I think sometimes you see, you know, when the Federal Reserve comes out and gives their reports, you'll see the markets shoot up and then two hours later shoot down again.
They're trying to sort it all out because governments don't in many ways think it's honorable to tell the truth.
And the longer I was in Washington, whether it was in foreign policy, how we sort our interventions overseas, whether it's economics and all these social problems, COVID was another.
Just think of the evil of what happened with COVID.
Not only that, you talked about the financial thing, but the medical things, the destruction of the doctor-medical doctor-patient relationship.
It's just horrible.
But I've come to the conclusion that our enemy to liberty are people who believe in nihilism.
Oh, they'll say, and they actually write this.
You can't know the truth.
You guys that think you can reach the truth.
You can't know that.
So they pick up their own truth.
They invent it, and then we're supposed to believe them as if it's true.
That to me is a big problem, I believe.
I agree with you.
I think, I mean, the reality is government's, I mean, what is it?
Shakespeare says, power corrupts, absolute power corrupts, absolutely.
This is something that's been going on for centuries.
What's concerning is in our country, because I'm an American, I have to focus on what's happening here, is that nobody is held accountable for these things.
And that's really all that the people in Washington, I think, ultimately understand.
No one, you know, people will say certain things, but until they're actually booted from office, it's just words.
You know, I'm sorry, I got it wrong.
Well, yeah, but you've made all this money and nothing happened to you.
So the thing that's been kind of shocking for me is the fact that we now have absolute conclusive data.
And we can even, I'm not a healthcare expert, but I follow the news and I follow the stuff that's come out.
We have absolute conclusive data that many of the people telling us this stuff were just lying and they knew they were lying, but nobody left office.
You know, none of the people that voted for lockdowns, none of them have been held accountable and forced out of office.
Absolutist Conclusive Data 00:04:52
Fauci's being grilled on Capitol Hill, but he's made millions of dollars.
You know, they have their private emails from him where he's saying masks don't work to his friends in like April of 2020.
No one cares.
Or if they do care, no one's done anything about it.
And I'm not saying do something about it, like get involved personally, but like at least vote against the people that did this, right?
I mean, put someone else who didn't do this in office, but I don't know.
It seems as though our country has a big problem with apathy, and people like to rage on social media, but they don't, you know, just showing up to vote, they don't do it.
Graham, this has been great.
We are going to wind down on it, though.
I would like you to put out the information and if some of our viewers want to get in touch with you, I know you have this Phoenix Capital Research.
I know you're an investment advisor, and you described a lot about your experience in that.
Why don't you tell the viewers what you're involved in and where is the best place to go to keep tabs on what you're doing?
Sure.
So I have a financial research company called Phoenix Capital Research.
We just do research.
We don't broker deals.
If I talk about something, I don't have any relationships with anybody.
It's not like I say, oh, buy Apple and Apple's paying me to do that.
I just tell people what I think are good investments.
And if it works for them, they stay with me.
So my business model for Phoenix Capital Research is that it's strictly investment research, talking about the economy, talking about how to manage your portfolio to make money.
On the side, I do consulting and I do some public speaking.
I've written two books.
You can look me up on Amazon for Graham Summers.
I'm right at the top.
I also, you know, like I'm going to be featured on a radio show that's going to be syndicated that's coming out starting in July.
I'll be one of their financial experts.
So there's a lot of different things going on.
But if you Google Graham Summers, especially Graham Summers with the word investing or stock market or something, I'll be one of the top things on it.
Okay, I want to finish with seeing if I can get something from you because we talk about reality and a lot of it's pretty bad.
And I talk to a lot of young people and yet they want to hear something different.
Can you close our interview today by saying something that appears to you that is positive and that we've been through problems in the past, something that would give at least young people from your story about you learning your lesson and getting trying to start a business, something like that, that might be a good idea for a lot of people.
Yeah, absolutely.
So you should absolutely never give up.
They're never the ideals of what you can accomplish are still true.
And I like to use, you know, people talk about, say, the financial markets.
There's all these bad things.
All this horrible stuff can go wrong.
My answer to that is like, well, think of your own health, right?
You've got whatever, 200 bones, 11 organ systems, trillions of cells.
You know, this sheer amount of things that could go horribly wrong with your health every day, it's uncountable.
But for the most part, every day we get up and we go about our lives and we do things and our health stays pretty, it works fine.
We're okay.
And when bad things do happen, there's usually some warning signs and you can hopefully do some things to prepare to sort of mitigate it.
It's the same thing with life.
It's the same thing with business.
You know, there's always 100 million things that can go wrong.
But the reality is the old ethics, the old virtues of hard work, dedication, patience, that stuff can all still work and pay off greatly in our country.
You know, the idea that we're somehow completely doomed, I mean, I started my business with $75 in my pocket.
You know, I was dead broke.
So you could, and I worked myself up to where here I am being interviewed by Dr. Paul.
I mean, things can really be transformative in this world.
But it really, I don't know anybody who succeeded who didn't work hard.
I've never seen that.
And I don't know anyone who succeeded who didn't choose to be enthusiastic and optimistic about the future.
Because if you're just worried about everything can go wrong, you're paralyzed.
You make no movement.
And I think as an entrepreneur and as someone who's found a lot of success, you have to believe in yourself and choose to ignore problems and really just keep pushing.
And who knows, you can go places you'd never imagine.
Graham, I want to thank you very much for being with us today on the show, and I'm sure our viewers have been impressed.
But thank you for being with us.
Always a pleasure.
Happy to be here anytime you like.
Thank you.
And I want to close by addressing our viewers by saying thank you for listening and thank you for helping us spread the message of liberty.
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