Updated: Oct 21, 2022
Hey everybody, Mark Yegge coming to you from Athens, Greece right now. And I’ve got a lot to say about what’s going on in the world and how I think the Fed is kind of breaking the world economy. I help seven and eight figure investors play offense and defense in their finances, and now is a great time to be playing defense. Because let me tell you what’s going on. And you’ve probably heard me say this before, and it’s kind of the mantra on the street, the Fed is out there raising rates at an unprecedented rate, three quarters of a point, so, 75 basis points, they’ve done it three times in a row. And I think what they’re trying to do without saying this, and this is what the street believes, is trying to break the economy. They’re like a kid that goes into the store, and he starts breaking little things, and he sees if anybody’s noticed, and then he’s like, “let’s break this little bigger thing”. And pretty soon somebody notices, and it’s too late, they’ve already broken so many things. I think that’s what’s the Fed is doing, they screwed us up all the way down, they lowered rates and kept them low, way too long. And then now they don’t have any bullets left, the only bullet they have is to raise the rate. And they’ve done it three times in a row. at an unprecedented rate, it’s gone up 13 times. Even Paul Volcker, in 1980, only raised it a fraction of that I think it was three times, actually, I think it was even less. And so, whatever it is, they are raising it.
The problem is, there is so much debt, over almost $31 trillion, that the US owes and every time you raise it, you owe more in interest because of the refinancing of the new bonds. And so, when you put out something that creates extra overhead, you’ve got to print even more money to pay the interest on those bonds, that’s going to end up catching up. You can’t have something for nothing. It’s just a law of physics. And the Fed apparently is following this MMT, this modern monetary theory that basically says, “Don’t worry, dollars just fall from the sky.” And you just keep creating zeroes in people’s accounts, and bank accounts, and they lend more money and create even more debt. And all that’s fine. Eventually, it comes home to roost. It has in the 700 plus currencies that I’ve studied, it has every time in history that we’ve ever had fiat currency and Fiat means by decree. And when a government does something by decree, eventually people wise up, and they don’t value it anymore. And that’s what’s going on now. You’re starting to see things break.
So let me just give you some quick glossing over because I don’t want to go too far into this. But it’s important to know. And maybe you don’t care about what’s going on in Japan, or China or Europe or Britain, maybe you don’t care. And it’s okay not to care, you can go on with your life. But if you know a little bit, maybe you can prepare, and my investors are people that like to prepare. And so that’s why I make these recordings because I want them to be prepared for it, I want you to prepare as well if you’re not one of my investors. So let’s start with the Bank of Japan.
So, the Bank of Japan, the Yen is crashing, the Yen has crashed, so are other currencies against the dollar right now, in the land of the blind, the one-eyed man is king. And so, we have the dollar, which is the nicest house in a crappy neighborhood. And that happens to be where everybody’s moving to because we’re the world’s reserve currency. So, we’re losing that. But that’s what everybody trades in around the world. And so, as the dollar increases, these other currencies are all rushing to get to the dollar. Well, they need more and more and more of them to buy the dollar. Because nobody wants to accept these currencies. For example, the Turkish Lira, they have 100% official inflation rate, it’s about 400%, because I just visited, so their unofficial, but now officially they’re saying. “Hey, we got 100% inflation, which means that everything doubles in cost every single year.” In fact, when I was there, a lot of places didn’t even have menus that had prices on them. You would just go in and they would tell you what the price is for that day. Because the next day would change it would have to go up because of the devaluation of the lira. It’s happening around the world. And we don’t know about it in the United States, because we don’t get the press from around the world. One of the reasons I travel is I get to see what is happening on the ground, what’s going on in these different countries. So, the Yen is crashing. Why is the yen crashing? Well, the Yen has been in the recession, basically, for 30 years, they’ve been just they don’t have population increase. They don’t have workers, their population is aging, they have problems. And so, what they’ve been doing, especially lately is they just been printing money. Well, that money printing presses accelerating, the money is becoming worth less and less and less. And so, what is the Bank of Japan doing? They’re buying more bonds; their own bonds and they’re using their own money to do it. It’s like they’re taking it out of one pocket and put it in the other. The problem is they’re losing. And when you do that, it devalues and the bond people are like, “oh, I’ll just keep buying the bond, they’ll just keep printing money into oblivion and at infinity, and at the end of the day, they’ll buy our bonds.” Well, that means they’re worth less and less. So, the currency recognizes that. And the 20-year yield in Japan is over 1%. The first time it’s happened since 2015. Okay, data point number one.
Data Point number two, the s&p 500. Our own s&p 500 is down 23.3% this year, that’s the fourth worst start in history. So, if you think everything’s going along great, like they’re telling you, I don’t know the data is starting to pile up. So that’s just another one that’s over here. Then we’ve got mortgages, you could have gotten a mortgage a year ago, for 2%, 2 ½%, 3% mortgages are now 6.3%, they’re almost a 7%, they’re pushing 7%, and they will be at 7% soon.
And so, the housing prices are now starting to feel it because people are not buying houses, why? Because their mortgage cost is going to be almost 7%, when just a year ago, it was like 2%, 2 ½%, 3%, whatever you want to call it. And so now prices are starting to feel like you’re going to start seeing a rollover in the real estate market. It’s going to crash when the real estate market rolls over, it crushes everything. Remember, 2007 2008 Everything got crushed, because real estate got crushed. So, I don’t know if it’s going to be that bad. I don’t even know what all this stuff means. All I can know is things are bad right now. And they’re starting to break. And I think it’s because the Fed and all the other central banks are purposely breaking them.
Okay, so then we’ve got the 10-year yield our own 10-year yield has had a surge. That’s been the worst since the COVID crash. So back in, you know, early March or February, we had this big crash back in the beginning of 2020. And that was the bellwether time for the yield on the bonds. And our 10-year yields on the bonds just surged at a record rate. So that’s another.
So, now we’ve got the British pound. And the GBP is now crashing, because they’re doing more money printing, money printing over there, you know, they had exited a few years ago, Brexit, they called it, and they exited the European Union. And I happen to do it at a pretty lousy time, because now there’s a global recession going on, because of some trade wars, because of supply chain issues, because of Putin’s invasion, because of the embargo on gas to Europe, and costs are going to go up incredibly, and Europe’s going to go into this big recession. And so, the pound is decreasing as well, they’re crashing, they’re printing more money. And they basically said, “you know, what, we’re not going to do anything for two or three years.” And the markets like, “Oh, you’re not?”, and so they just started selling off all their bonds. So, the pound is crashing, and I’m here in Europe right now. And a year ago, when I was here in Europe, it was it was $1.17 to buy a euro. Now it’s 96 cents. So, the Euro is crashing as it is down 20% in a year. That’s because what I just mentioned, the European economy is I think they’re coming apart. But they’re coming apart because of energy.
Now, energy has always been the measure of a healthy economy. We don’t grow our economies in the world we never have in society’s history, unless we have quality energy products and our energy has gotten more and more debts. So, we used to have sun and wind, 1000 years ago, that’s how we sailed around. And we used to use the sun to heat our water and things like that. And then we started to find different fuels wood, and then we moved to other fuels, petroleum and kerosene and lamps, and then candles and things like that. And then we found oil and oil is a very dense form of energy and we’ve got nuclear which is another dense form of energy. And so apparently, we want to go back to the Middle Ages and use solar and wind because apparently that solves all the problems. But you’re seeing the problems because we’ve tried to go back to solar and wind, Germany moved their whole economy to solar and wind and started to shut down their nuclear power plants and France did the same thing. And now they can ‘t get energy. Putin is basically saying, “Well, you want gas, well, maybe we’ll sell it to you. But it’s 10 times the price it was last year.” And so, these big companies that want to produce cars, they need dense energy, they can’t smelt metal and melt down molds for Mercedes in Germany, without really solid hot fuel which doesn’t come from Sun and doesn’t come from a little turbine, turning and generating a little immunity dense energy. So they want to take us backwards with this ESG environmental, social and governments crap. That is chopping the legs off at the knees of all these economies in the world.
And now Europe is having trouble. You just saw it yesterday; this is the last point I’ll make. Because it’s I think it’s important is Italy, who’s perennially been having problems, or I think the third largest economy in Europe, they’ve been borrowing and living nice and eating their pastas and pizzas and enjoying their life. And that’s what they do in southern Europe. Meantime, Northern Europe has been working really hard to pay for all that. And now they’ve been okay with it. The Germans are industrious, and the Northern Europeans are industrious, and they’d like to work. But now, because of what is happening with energy, there’s going to be massive layoffs in some of these manufacturing companies that need a lot of energy because they can’t afford it. And they’re also telling the people, “Hey, we’re going to have to ask you to cut back on your energy snuggle up a little bit more, take fewer showers, turn your thermostats down this winter, so that you don’t use as much fuel, burn wood.,” Burn wood? That’s like what we did 500 years ago. And by the way, when you burn wood, it puts out tons of co2 and other emissions into the atmosphere. It’s not like it’s better than gas or hydrocarbon. So, we’re going backwards, we’re just not smart. As humans, we do stupid things. So, all of this is starting to reflect itself into the system. And now, it’s not just a recession in the United States. It’s not just a recession in Britain. It’s not just a recession in Japan, it’s not just a recession in Europe, it’s contagious. And it’s happening everywhere. I don’t know where it’s going to shake out. I’m just giving you a warning that it’s going to shake out. And so, I think at the end of the day, the big corporations, the big banks, the big government policies, are doing this on purpose. I really do. They can’t be this stupid, right? You and I could look at each other and go, that doesn’t make sense. Just print money out of thin air. And it’ll all be okay. You and I could look at each other and say that, but apparently, they can’t. I don’t believe it. I think they’re smarter than that. And I think they’re making stupid decisions upon stupid decisions upon stupid decisions, and they’re breaking the entire system. Sorry about the bad news. I’m really an optimist.
So, let’s talk optimistically, really quickly about what you could do about it. Well, the best thing to do really, is to be in hard assets, things that are going to hedge inflation. You know, if you live in a house, you live in a house, a house is worth one house, whether the house is worth $400,000 or a million dollars, it doesn’t matter. If you’re living in a house, if you have an asset that’s paying you cash flow, which I believe you should have, then that cash flow keeps coming in. Now the cash is worth less, because we’re debasing our currency. That’s a different issue, but at least you have cash flow coming in so you can pay your bills. We have a program called the cash flow machine, and I talk about it every once in a while, about how you can make safe reliable income in the market. I think you need to have something that builds you cash, because our economy is faltering. And there may not be the jobs that we think that there are coming up soon.
All right, other assets that are hedging inflation. Well, a lot of people believe in gold but gold has been relatively flat for 10 years. So, I don’t know why people still believe in gold. I think we have a new form of gold now called Bitcoin. And I think that’s the digital gold. And I think maybe everybody should have a little of that. So be smart be in assets, I wouldn’t be in bonds right now guys, bonds have declined, I don’t know, 20-30% this year, and the more they raise rates, which are telling us they’re doing, the more those bonds are going to decline. So why be in bonds if you can help it; it’s been a 40-year bull market to be in the US Treasury bond market. And I think that the bull market is over. And I think the Fed is telling us it’s over. Why don’t we listen to them. So de-emphasizing bonds is what I’ve told a lot of my clients to do, I’m not necessarily saying you should do it, you should seek some professional advice. But I think you need to be in something that hedges inflation, that’s assets, you need to be in something that gives you cash flow. That’s some kind of a program that is a high dividend program, but watch out for that because high dividends can chop you off to when the companies start to fail. And when the economy starts to fail, those types of dividend things, as we’re starting to see, are not good. All right enough for me. I wanted to give you the news of the World about what’s going on in economies. I find it really interesting and I hope it comes down to a macro scale for you, and you can decide what to do about it in the future and in your own finances. Thanks for tuning in to this edition of the wealth architect podcast. Hope to see you next time remember, never give up your power in your health, your wealth or your time. Have a great day.