April 11, 2024

MM#317--How The World Works: America on the Brink Navigating the Economic Precipice

Peel back the curtain on America's fiscal challenges with me, David Kaiser, as we confront the unnerving reality of the U.S. national debt now breaching the $34 trillion mark.

In a fusion of wisdom and warning, we dissect "Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail" by Ray Dalio, our spotlighted book--and perhaps my new favorite book :)--that sheds light on our economic conundrum.

Key Points from the Episode:

  • Prepare to be astonished as we navigate through an online portal that starkly visualizes our nation's soaring financial burden. The US debt clock not only presents these figures in real-time but also invites you to witness the historical climb of our debt through its time machine feature—a journey bound to leave you astounded.
  • Passing the $870 billion mark with interest on the debt is a brutal horrific milestone because it passes defense spending which is projected to max out at $822 billion at the end of this fiscal year.   
  • I share with you how Dalio's innovative writing style, marked by bolded passages for a quick read and red-dot denoted principles, makes for an indispensable guide in these turbulent times. 
  • As we parse through the crucial insights Dalio provides, we'll grapple with the implications of our country's financial trajectory and what it portends for our collective future.


Other resources:

US Debt Clock


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Transcript
WEBVTT

00:00:07.612 --> 00:00:20.807
Welcome to the Theory to Action podcast, where we examine the timeless treasures of wisdom from the great books in less time, to help you take action immediately and ultimately to create and lead a flourishing life.

00:00:20.807 --> 00:00:24.850
Now here's your host, david Kaiser.

00:00:27.699 --> 00:00:29.062
Hello, I am David and welcome back to another Mojo Minute.

00:00:29.062 --> 00:00:38.801
The headlines screeched across the airwaves as something from a dystopian novel was read.

00:00:38.801 --> 00:00:43.689
One verdict for the US economy, it said debt danger ahead.

00:00:43.689 --> 00:00:52.225
Another headline blared US national debt rising by $1 trillion about every 100 days.

00:00:52.225 --> 00:01:03.045
The next headline US large firm CEO says, quote $34 trillion national debt pushing the US off a cliff.

00:01:03.045 --> 00:01:10.156
The next headline the US debt stands at $34 trillion and counting fast.

00:01:11.561 --> 00:01:20.254
And if you want to see how mind-boggling this debt is, you can just check out the US debt clock.

00:01:20.254 --> 00:01:23.609
We'll be sure to leave a link in the show notes.

00:01:23.609 --> 00:01:27.007
It might just blow your mind.

00:01:27.007 --> 00:01:33.893
And did you know, at that same debt clock, that you can click on the time machine button and go back in time?

00:01:33.893 --> 00:01:37.424
So go ahead, go do that.

00:01:37.424 --> 00:01:40.689
Go back and see where the US national debt was.

00:01:40.689 --> 00:01:43.034
I don't know, say the year 2000,.

00:01:43.034 --> 00:01:46.280
Or perhaps even better, go back to the 1980s.

00:01:46.280 --> 00:01:50.170
It will blow your mind even more.

00:01:50.170 --> 00:01:53.689
It's staggering how far we've come.

00:01:53.689 --> 00:01:59.992
And what is even more staggering is we have US politicians that don't bat an eye.

00:01:59.992 --> 00:02:08.784
They simply shrug off the United States federal debt as it's no big deal, just no big deal.

00:02:08.784 --> 00:02:13.149
Huh, does that sound right.

00:02:13.149 --> 00:02:16.768
Does that sound true?

00:02:16.768 --> 00:02:30.126
Well, as that pastor on the south side of Chicago once said and was often telling his congregation, the chickens are coming home to roost.

00:02:30.126 --> 00:02:45.353
And even though I don't subscribe to any of that pastor's theology, I will have to say that that phrase the chickens are coming home to roost is absolutely correct, which brings us to our book of the day.

00:02:46.854 --> 00:02:56.854
It's a fascinating book Ray Dalio's Principles for Dealing with the Changing World Order why Nations Succeed and Fail.

00:02:56.854 --> 00:03:08.643
Now, this book has been out there since 2021, and I have been meaning to get to it, but there was always something that got in the way.

00:03:08.643 --> 00:03:22.074
Well, we have cleared the space, we have set everything off to the side and we are tackling as we speak, and I cannot read and listen to this book fast enough.

00:03:22.074 --> 00:03:29.373
In fact, it's my favorite book that I've probably read in the last two years, for sure.

00:03:29.373 --> 00:03:41.460
Now, before we begin, I want to share what is completely unique and I've never seen before in a book, and I just love how it was written.

00:03:41.460 --> 00:03:50.526
So let me share this great nugget of wisdom because it's fantastic, and so I don't spoil it.

00:03:50.526 --> 00:03:57.426
Let's actually go to our first pull quote how to read this book.

00:03:59.062 --> 00:04:10.633
In writing this book, I wrestled with whether to make it a complete or concise, and decided to try and make it both by bolding passages to create a quick read version.

00:04:11.401 --> 00:04:18.949
If you want to read the concise version, read what is in the bold letters, and if you want more, it's available to you as well.

00:04:18.949 --> 00:04:34.136
I also wanted to convey some principles that are timeless in universal truths for dealing with reality well, which I denoted by a red little circle, a little red dot.

00:04:34.136 --> 00:04:43.369
So putting a red dot in front of various sentences and italicizing them will convey these timeless and universal truths.

00:04:43.369 --> 00:04:55.190
For some subjects I had embellishments that I thought would be interesting to some, but not all, readers, so I chose to present them as an addendum to the respective chapter.

00:04:55.190 --> 00:05:06.247
Feel free to read or skip as you like, and at the back of the book you can find a glossary that explains the abbreviations you see in some of the charts.

00:05:06.247 --> 00:05:20.451
And finally, to keep this book from becoming much too long, there's a lot of supplemental material available at economicprinciplesorg, including reference material, citations and more data on the indices etc.

00:05:22.601 --> 00:05:24.048
Holy smokes.

00:05:24.699 --> 00:05:29.428
Oh yes, I mean, hold on, that deserves.

00:05:29.428 --> 00:05:33.788
We've never done this before, but that deserves another.

00:05:33.788 --> 00:05:34.875
Holy smokes.

00:05:34.875 --> 00:05:35.779
Hit that button again.

00:05:35.779 --> 00:05:40.088
Holy smokes, folks, did you get that?

00:05:40.088 --> 00:05:44.095
Let me just go back and recap it real fast.

00:05:45.281 --> 00:05:49.970
If you want to read the concise version, read what is in the bold letters.

00:05:49.970 --> 00:06:04.865
If you want more, it's available to you when you read and I'm reading off the Kindle along with the audible version but when you read on the Kindle, there is a lot that's bolded and you can literally.

00:06:04.865 --> 00:06:07.309
It's like reading the author's highlights.

00:06:07.309 --> 00:06:10.314
This is fascinating.

00:06:10.314 --> 00:06:27.132
I wish every writer would write this way, because there are some readers who want all the information, all the supplemental material, all the citations that's me raising my hand but there's many folks that just want the highlights.

00:06:27.132 --> 00:06:34.511
In fact, that's part of the reason why we even started the Mojo Academy with our Academy reviews.

00:06:34.511 --> 00:06:37.826
Be sure to check that out at teammojoacademycom if you haven't.

00:06:37.826 --> 00:06:40.954
But this is fascinating.

00:06:40.954 --> 00:06:43.021
I hope this trend catches on.

00:06:43.021 --> 00:06:45.526
I hope more authors do this.

00:06:45.526 --> 00:06:59.879
I think it's a wonderful value, especially in this digital age age.

00:06:59.879 --> 00:07:00.661
This is very, very good stuff.

00:07:00.661 --> 00:07:08.100
If you're a Pat McAfee fan, we can go ahead and replicate what he does all the time on his show, we can go ahead and say well done, ray Dalio, well done.

00:07:08.100 --> 00:07:13.872
You indeed know how to write a book, and I wish we could get all authors to write that way.

00:07:13.872 --> 00:07:19.569
That bold printing is just magnificent.

00:07:19.569 --> 00:07:21.093
What a fantastic idea.

00:07:21.093 --> 00:07:27.348
Whoever came up with that ought to be applauded overwhelmingly.

00:07:27.348 --> 00:07:43.132
And the good thing is, like I said, if you want more information, you just keep reading past the bolded print and you get supplemental information, and if you're bored with that particular point by the author, you can move on to the next bold point.

00:07:43.132 --> 00:07:45.608
And in fact, let's do that.

00:07:45.608 --> 00:07:46.785
Let's go back to the book.

00:07:48.641 --> 00:07:56.514
The times ahead will be radically different from those we've experienced in our lifetimes, though similar to many times in history.

00:07:56.514 --> 00:07:58.564
How do I know that?

00:07:58.564 --> 00:08:00.610
Because they always have been.

00:08:00.610 --> 00:08:11.374
A few years ago, I observed the emergence of a number of big developments that hadn't happened before in my lifetime, but had occurred numerous times in history.

00:08:11.374 --> 00:08:14.057
But had occurred numerous times in history.

00:08:14.057 --> 00:08:22.680
Most importantly, I was seeing the confluence of huge debts and zero or near zero interest rates that led to massive printing of money in the world's three major reserve currencies.

00:08:22.680 --> 00:08:33.251
Big political and social conflicts within countries, especially the US, due to the largest wealth, political and values gap in roughly a century.

00:08:33.251 --> 00:08:35.054
And the rising of a new world power, china, to values gap in roughly a century.

00:08:35.054 --> 00:08:42.265
And the rising of a new world power, china, to challenge the existing world power, the United States, and the existing world order.

00:08:43.061 --> 00:08:48.120
The most recent analogous time was the period from 1930 to 1945.

00:08:48.120 --> 00:08:57.841
This was very concerning to me, very concerning to me too, as we continue on.

00:08:57.841 --> 00:09:12.245
I knew that I couldn't really understand what was happening and deal with what would be coming at me unless I studied past analogous periods, which led to this study of the rises and declines of empires, their reserve currencies and their markets.

00:09:12.245 --> 00:09:33.711
In other words, to develop an understanding of what is happening now and might happen over the next few years, I needed to study the mechanics behind similar cases in history IG, the 1930 to 45 period, the rise and fall of the Dutch and British empires and the rise and fall of the Chinese dynasties and others.

00:09:33.711 --> 00:09:46.525
I was in the midst of doing these studies when the COVID-19 pandemic struck, which was another one of those big events that had never happened in my lifetime but had happened many times before.

00:09:46.525 --> 00:09:46.919
Past.

00:09:46.919 --> 00:10:10.597
Pandemics became part of this study and it showed me that surprising acts of nature ig, diseases, famines and floods need to be considered as possibilities, because those surprising big acts of nature that rarely come along were, by any measure, even more impactful than the biggest oppressions and wars.

00:10:12.961 --> 00:10:16.350
Now, folks, that's fantastic writing.

00:10:16.350 --> 00:10:21.085
And why is all this even important?

00:10:21.085 --> 00:10:29.788
Because the United States just passed a brutal, brutal and horrific benchmark.

00:10:29.788 --> 00:10:32.682
Headlines from just this past week.

00:10:32.682 --> 00:10:54.150
The CBO now changes estimates of the US government will pass the grim and once unimaginable milestone that the federal debt is so large it will exceed federal spending on defense alone, not in 2028, as expected, but in 2024.

00:10:54.150 --> 00:11:03.229
In fact, we just passed that milestone in March and we blew past it like the roadrunner running away from Wildy Coyote.

00:11:03.229 --> 00:11:20.371
We have now banked some $870 billion on interest payments this year and we will spend roughly $822 billion as a nation, on defense, as a country.

00:11:20.371 --> 00:11:39.562
Let me repeat that again because it's so staggering we have now banked spending $870 billion on interest payments alone this year and we will spend roughly $822 billion as a nation, on defense, as a country.

00:11:40.903 --> 00:11:42.686
And how does Washington react?

00:11:42.686 --> 00:11:46.557
Both sides of the political spectrum, both parties, how do they react?

00:11:46.557 --> 00:11:51.167
Like a bunch of drunken sailors Give me another beer?

00:11:51.167 --> 00:12:00.203
They shout at the bartender as they slur their words and fall over, barely catching themselves to stay upright.

00:12:00.203 --> 00:12:02.046
Catching themselves to stay upright.

00:12:02.046 --> 00:12:17.830
This country needs to sober up, and sober up real quickly, because, as Ray Dalio points out in the book, the trend lines are menacing.

00:12:17.830 --> 00:12:30.428
Going back to the book, my most recent study, on which this book is based, came out because of my need to understand three big forces that hadn't happened before in my lifetime and the questions that they prompt.

00:12:30.448 --> 00:12:33.557
Number one the long-term debt and capital market cycle.

00:12:33.557 --> 00:12:42.725
At no point in our lifetimes have interest rates been so low or negative on so much debt as they are as of this writing.

00:12:42.725 --> 00:12:49.643
The value of money and debt assets is being called into question by the supply and demand picture for them.

00:12:49.643 --> 00:13:05.226
In 2021, more than $16 trillion of debt was at a negative interest rates and an unusually large amount of additional new debt will soon need to be sold to finance those debts.

00:13:05.226 --> 00:13:18.061
Number two actually, let's stay on that because, as I looked as I turned the page, we have some more bold writing.

00:13:18.061 --> 00:13:21.408
So let's hit that as a reserve currency.

00:13:21.408 --> 00:13:22.847
So let's hit that as a reserve currency.

00:13:22.847 --> 00:13:28.830
A reserve currency is a currency that is accepted around the world for transactions and savings.

00:13:28.830 --> 00:13:31.890
The country that gets to print the world's primary currency.

00:13:31.890 --> 00:13:54.500
Now, the United States but, as we'll see, this has changed throughout history is in a very powerful position, and debt that is denominated in the world's reserve currency, ie the US dollar denominated debt right now is the most fundamental building block for the world's capital markets and the world's economies.

00:13:56.263 --> 00:14:00.590
Number two the internal order and disorder cycle.

00:14:00.590 --> 00:14:15.115
The internal order and disorder cycle Wealth and values and political gaps are now larger than in any other point during my lifetime.

00:14:15.115 --> 00:14:17.538
And number three the external order and disorder cycle.

00:14:17.538 --> 00:14:21.628
For the first time in my life, the United States is encountering a true rival power.

00:14:21.628 --> 00:14:27.388
The Soviet Union was only a military rival, never a significant economic one.

00:14:27.388 --> 00:14:38.101
China has become a rival power to the United States in most ways and is becoming strong in most ways at a faster rate.

00:14:40.244 --> 00:14:48.668
Now, all this is to say that we need to study the past so we can learn from it and we can anticipate where we're going, and to plan for those times.

00:14:48.668 --> 00:14:53.572
And to plan for those times is what we call prudence.

00:14:53.572 --> 00:14:58.365
It's a virtue, it's the way the world works.

00:14:58.365 --> 00:15:11.719
That's important because it can help us.

00:15:11.719 --> 00:15:13.581
We should exercise this virtue of prudence and study the past so we can learn the future.

00:15:13.581 --> 00:15:25.456
So in today's Mojo Minute we should apply that virtue of prudence to our individual lives Because, based on all accounts, washington DC is never going to learn that virtue.

00:15:25.456 --> 00:15:29.980
So we must anticipate how our world is going to be changing, and changing drastically.

00:15:31.120 --> 00:15:39.106
And the first way to help you ask and answer those questions is by reading this fantastic, fantastic.

00:15:39.106 --> 00:15:55.597
I cannot recommend it more recommended Analysis by Ray Dalio in this book because it is going to indeed change the world order.

00:15:55.597 --> 00:15:56.961
In fact, like I said in the beginning, it's my new favorite book.

00:15:56.961 --> 00:16:04.865
So let us begin today to study our past, to learn about our future, and that study can begin today with this book.

00:16:04.865 --> 00:16:07.221
It's a fast read, it's an enjoyable read.

00:16:07.221 --> 00:16:18.787
It gives some dire predictions, gives some dire trend lines, but I think we would all rather know the truth than be sold a bill of lies.

00:16:23.414 --> 00:16:24.676
Thank you for joining us.

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We hope you enjoyed this Theory to Action podcast of lies.

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Until next time, keep getting your mojo on.