Being Rich #3

 I remember in 98 when the ruble Russian ruble crashed Jim Rickards our friend was that long-term capital management I was trading derivatives at Bankers Trust in the First National Bank of Chicago and I saw them out there and Everybody wanted to do business with long-term capital, you know a big hedge fund and it nearly it nearly went bankrupt beneath LTCM nearly took on took down the world economy. Yeah, one hedge fund one hedge fund with these quote-unquote fake assets Well, cuz nobody took him to counterparty a risk to it, right and he were highly levered because they were these rocket scientists, right? No, Heron Prize winners. Yeah, Nobel Prize winners. Myron scholes and then one of the big guys from Salomon Brothers, John, Merriweather Yeah Merriweather. It was in that book liars poker.

 Yeah, they went out there and on the reputation alone They didn't have the balance sheets back it up They got 20x leverage 30 X 40 X 50 X leverage and they had massive positions and when the ruble moved and markets moved Not only were they about to go bankrupt, but all the institutions that had blended money to them We're about to go bankrupt the counterparty. Yeah, the counterparty and I saw this happening and it was pretty crazy. Yeah But explain how can you explain that to people and then what do they need to know about fake assets to protect themselves? Especially from this upcoming crash or crisis that's going to happen. Can I give you a very simple? Please okay. I think I got it. This is Cuz I like to you know, rich data is important to keep it simple. Okay? This here is a balloon so in 1971 Nixon took the dollar off the gold standard. So what did that mean? That meant the US government the US Treasury Could now print money so they the US Treasury Would sell a bond to the Fed over here with a Bank of England Bank of Japan ECB and all this So in 71 it was the u.s. Not anybody else basically screwed the world economy So rather than fix the economy, they just did this So things were fine, they fixed the economy, you know inflation went through the roof There's a dollar sign on it is pumping money into the system So 87 that was, you know the real estate Everything's getting expensive inflation's going creases in the 80s, right 87 crash big crash do anything happen? No, nothing happened. They just So 87 that went like this and then then there was the LTCM plus the Southeast Asian crash the rupiah crash and all this. Yeah 96 So what did Greenspan do it was the Greenspan put right he says oh, don't worry We'll give the bank's all the money of a what so you won't crash so the banks and Treasury and the central bank the Fed and bank of Bank of England, they're like keeping this thing else everything's inflated Now they're pushing money into system to prop it up every time fake money fake money. This is fake right going in So then in 2000 the dot-com crash hits goes but So Greenspan kind of panics and he says oh my god we better keep this thing going cuz that was a pretty bag Pop you know, yeah So 2008 that's when everybody was into derivatives and you know pumping this baby up and it did nearly come down Yeah, some Lehman came down and Bear Stearns was wiped out and it was like this.

 So, what did Bernanke and those guys do more So after 2008 they just kept pumping it and it's getting worse so now we have the stock market this one area of the economy all-time highs floating on fake money Real estate. I mean, I don't know how people can afford to live in a little in, New York I was looking at a condo for 55 million in real estate in Silicon Valley you you can't afford to live there And then all these companies started borrowing money So the economy's good and you know unemployment slaw and all this they say there's no inflation But have you seen the price of food real estate and student loans and medical.

 It's a bubble, you know So now what's going to happen is the baby boomers my generation are gonna start to retire And there's no money there Social Security's broke pensions are broke Students the students are broke. Yeah, we're screwing everybody with debt So let me ask you a question this is cause this is making me nervous I know this is called economics This is called bubble dynamics But they'll never teach you this in school And why do they keep to printing money because they want to save something because it's an addiction you Know this is like heroin the moment you take that one hit they say, okay I'll quit next week And the economy gets worse so they could go Trump gave us a tax cut in America. This thing gets bigger and bigger and bigger So what happened in 2008? They stopped it by printing money. So we they call it the Great Recession But they didn't really fix anything right, you know derivatives went from 700 trillion to 1.2 trillion today twice as much and that is Net you know, that's not doesn't tell the whole story. So when so when the recession hit The PhD standard came in that was Bernanke, you know, and then Yellen the PhD said they have PhDs What's no different than long-term capital LTCM? They had Nobel Prize winners people like my poor debt academics, you know .

So anyway, this is what's going on in the world economy today. So the baby boomers are gonna retire now Student loans are bust So Do you have to be an economist to say what's going to happen? Because they this we're fighting a 12-year war now Entitlements are going through the roof National debt, the GDP is a hundred and nine in the mare hundred nine percent Ninety percent is too late. We have to keep printing now. So this is called bubble na mcc's and this is what's going to happen Got it. I got it the economics one on one Scary stuff it's happened throughout history. And that's what I would To continue watching the rest of the episode for free visit our website London real TV or click the link in the description below