In Transcripts

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Kevin: David, in the Bible it says that three score and ten is a generation, and you know, that seems like a long time, but in many ways, it’s not a very long time, and I know that this trip that you are just returning from is a trip to observe three score and then, what occurred in June, three score and ten years ago.

David: That’s right. Seventy years ago we had the D-Day invasion, the largest amphibious invasion in world history, and I want to share a few personal things today, and maybe it has nothing to do with the markets, maybe it has nothing to do with anything, but they’re still important observations to me, and so, take that for what it’s worth.

Kevin: Well, tune out if you’re not interested. But, you took your boys to Normandy.

David: Yes, I took my boys this past week to meet a few men. These were men with remarkable stories, and frankly, little time in which to tell them. First of all, we didn’t have much time with them, and second, they are all in their late 80s to mid 90s.

Kevin: It’s amazing that there are so many still around, isn’t it?

David: I know others have heard these stories before, and I wanted to make sure that these were not distant tales, but were really living memories for our family and my boys. I want my boys to see time compressed. I want them to know that young men become old men, and in the process, there are tales of manhood, there are ales of courage, there are tales of travail and struggle, and all of these are woven together. These are what we leave behind as a legacy. A legacy is not just financial. There is narrative to this. And frankly, not all legacies are equal, and some are downright tragic, and you see that, certainly, in the history of World War II.

Kevin: Well, you look at World War II, and the tragic stories that occurred in World War II also, there was, I’m not going to say an equal balance, but there was an amazing amount of men at their finest at the same time.

David: Well, you have bad ideas, on the other hand, and you have beliefs, which create tragedy, and leave a legacy of disappointment. You have good ideas that perpetuate the opposite, or at least, leave open the possibility of a magnificent legacy, and you have demonstrated courage, what leaves open the possibility for freedom. You have justice being served. You have men operating with integrity. You have entire communities operating out of generosity. You have individuals exemplifying, again, that bravery, and I think, in large part, what we take for granted today in the free world, is tied to what happened in those events.

Kevin: And you talk about free will, and you talk about liberty, but until you look like you’re about to lose that, which is what was happening in Europe, and actually, on the Asian side, as well, David, at the same time, both of those were threatened, and really, until that is threatened, I don’t think people really understand, especially younger generations, it’s hard to understand the potential loss of liberty.

David: And some of the stories are not being told often enough, some of the people we can learn these things from are dying of old age, and I want my boys to know them. I often recall John Templeton’s advice to invest in education. That it is, frankly, one of the best investments an individual can make. And I take that seriously for myself, and for my family, as well. And frankly, anyone listening, I hope you do, as well. I hope others do, as well.

It was fun, arriving back in the office today I found a stack of seven books waiting for me, and when that happens, honestly, I feel like a kid in candy store. I look at all of the things that I have been curious about, questions that linger, and resources that I hope to tap, to open up, whether it is a dialogue with that particular author, or again, just an idea to explore. Our philosophy of education as a family includes practical kinesthetic learning, doing things, along with listening, along with reading. This is why travel is a part of our education and it is a part of what I think everyone should include in their education, and frankly, whether that is science projects, going to the national parks or the beach, or covering long distances by plane, it’s just that we should do everything we can to foster a sense of curiosity.

Kevin: And David, last week it was sort of a unique program when you interviewed Larry Arnn, and the discussion was education. Where are we going? When we started that program we were talking, you and I, about the Fourth Turning, how yes, we may be culminating in some sort of major change in the economy, and it could be very painful, politically and economically. But your kids’ generation, if they have the education to see what you’re showing them right now, maybe they’ll be the guys who restart true liberty, true freedom of choice, true protection, constitutionally, the things we feel we’re losing at this point.

David: My son learns from books. He reads, and he listens intently to detail. On this trip he was the resident tank expert.

Kevin: I can see that.

David: I was watching his amazement as Shermans were rolling down the street, and I listened to him teach me, frankly, more about tanks than I had ever known before. My other son is the active learner. He is geared for rolling up his sleeves and tumbling into old bomb craters with careless abandon. And that’s exactly what we did. At Pointe du Hoc, there he is diving into where we had literally bombed the Germans. These guys were so embedded, to see the amount of steel and concrete that they used for these bunkers was amazing. Massive guns that were intended to be used on both Utah and Omaha, and after we bombed them, they moved the guns out because they didn’t want them destroyed. With all the bombing that we did, they kept those guns intact because the bunkers were so well built. So, it was pretty amazing, because, again, one bomb, and you’re talking about a 20-foot crater. Maybe it’s 15 feet today because it’s been filled out with grass and what not over the years.

Kevin: It’s not a surprise to me that that son you’re talking about that learns from experience, this is the guy who, I remember you getting the call from your wife while we were in New York, and she said, “He’s jumped out of the shopping basket again; I’ve had to take him to the doctor, again.

David: He landed on his head. He’s been in the ER four times. He is definitely a “lead with his forehead” guy.

Kevin: One of the things that I like is that we have not forgotten Normandy. I go back 30 years to Reagan’s speech. It was so powerful.

David: It was a little bit different than Obama’s comments while he was there this last week. Reagan’s speech 30 years ago – powerful indeed. To be at Omaha Beach and Pointe du Hoc, to me, we read the speech to them while we were there, I don’t know what they got out of it, but to reflect on, we’ve moved on from that. Thirty years later, the Cold War has ended, a lot of his comments had to do with a world in conflict, a different kind of conflict, not the hot war of World War II, but the cold war of the 1980s and 1990s, and years before that, of course. To be at Omaha Beach and Pointe du Hoc and watch my children play tag and run around – they don’t have a concern in the world. And Reagan’s reflections were, really, we still have concerns that need to be addressed. And obviously, we were there on those places 70 years ago because we had real concerns, and to me, there was sort of a redemption. What seemed part of a long-term redemption taking place, watching these children play on a land that had been bloodied and filled with body parts, and you just can’t imagine the devastation on that day 70 years ago.

Kevin: And these were average guys that were probably no more than about 10 or 12 years older than your kids were, playing there on the beach. These were not old adults that were doing this, these were just kids.

David: Yes, we had sort of a snapshot of a time and of a place where it was, as you say, our average men that served as heroes. I love that aspect in fairy tales, you know, how heroes in fairy tales are the common people, and they are doing the uncommon things, and to me, that is so much more powerful than the comic strip heroes of our day. Typically, they capture heroism, and it’s attached to a super hero, not the ordinary man or woman in our midst – maybe you, maybe me, maybe someone else. I think that every one of us has that potential to be a hero, and we see that drawn out in war time. Who were the remarkable men? Well, we don’t know who many of the remarkable men were. Many of the deeds that they did won’t be known because they died and their stories will never be told. The ones that survived, they feel that they’re not heroes. The heroes are the ones that are not with us any longer.

Kevin: A lot of times they don’t even want to talk about it. You know, Dave, I was talking to you last Friday. I called you on the phone, we needed to talk about something, and the way we ended the conversation, and by the way, you never called me back, I just want to let you know that, (laughter), you said you would. But the way we ended the conversation, I heard your son yell, and then you said, “They’re jumping out of the planes, again! I’ve gotta go, I’ll call you back.” That was the last I head of you until just a few minutes ago.

David: Yes, the sights and sounds all around, they were electric. You’re talking about hundreds of old vintage jeeps, troop transports and tanks rolling through the countryside, sitting in the squares of normally very sleepy little French country villages. Additionally, that week, there were paratroopers filling the skies, old planes rumbling above us, tanks clanking down the streets, everyone on those tanks and all around us in full military garb of the period. So, we’re in Normandy on D-Day, actually in Saint-Mere-Eglise, and my boys were speaking with veterans and asking questions. It was a special time. And honestly, I wasn’t aware, up to this point, of how lively these celebrations were. One of the reasons that I wanted to go was because I know that 70 years on, these men may not make it back next year, the year after. And granted, maybe when my boys are in their teenage years, which they are not today, they would have gotten more out of it, but none of these men would be there to tell their stories.

Kevin: And Dave, it’s not just there. Here, in Durango, there is a French baker who is a friend, client, listener, who put out a sign right in front of his French bakery that says, “Thank you, America, we still remember,” because his roots are in France. He owned a place in Paris for many years, and that is where his family is from. So there are French people who still remember that they were set free from the tyranny of what Hitler was doing at the time.

David: We got to speak with British, with Canadian, with U.S. servicemen. Yes, you’re talking about many a gaunt face. You’re talking about deep, sunken eyes, answering, with delight, almost any inquiry. And it’s almost as if because someone cared in the asking of the question, to me, what it suggested was that most every other day of the year these war veterans have already slipped through the cracks.

Kevin: And it’s not just the V.A.

David: And it’s not just the V.A. As a culture, we don’t do a good enough job asking questions, expressing appreciation. Most of them still have this youthful gleam in their eyes, reminiscing about, not only the end of the war, but surviving the day, and living moment by moment, thankful for every breath they got to take. And frankly, in some of them I saw a slight indication of what you might call survivor guilt, not being sure of how it is that they survived and good men, right next to their side, didn’t. But it was fantastic. Some were talkers (laughter) and they would go on incessantly. Some would not say a single word.

Kevin: I would guess that some of them, this is their first time back, and others, maybe they go back often.

David: That’s right. A few that we met, this was a return to the field for the first time in 70 years, and then some, 3, 4, 5 times they’ve already been back. There was one gentleman – I figured as much. I figured, this is a round number, this is the 70th. You might have more people making an effort on an every 5 or 10-year basis. But I didn’t want to risk coming back five years from now and seeing, of the few who are there relative to what would have been there 20-30 years ago, in terms of just the age and the demographic and what not, I think we’re losing a very valuable part of our history. There was one gentleman who had been there 50 years in a row.

Kevin: Wow! Some of those guys must have had some amazing stories. Did they get up and talk?

David: Well, none of them got up and talked. You had the formal presentations and what not, and that’s a local politician, or heads of state, standing up and saying, “Thank you.” There were about 18 heads of state, which made getting around very difficult. We had Obama’s helicopters fly overhead, and my oldest son kept on saying, “This is the second time I’ve seen the president. Last time we were in Washington, D.C. They shut down all the streets. Do you remember the entourage?” Yep, well, he owns the air space when he is flying through it.

One gentleman was telling us a story about once he landed on Utah beach, of capturing the German headquarters on the beach and ducking into a cellar. He was trying to ferret out German officers. So they opened the hatch, they go into this little area, close the hatch behind them, and they find a bunch of wine. And they kind of look at each other, “It’s been one hell of day, guys,” and they started drinking. I don’t know if it was French wine, but the Germans had stored down there, but then, the next thing they hear is German voices above them. And they stay in there, quietly for eight hours until they hear a different language spoken, English. Because they knew that they were in a very awkward position. They knew if they were discovered it would have been very easy, whether it was to spray them down with a machine gun, or just drop a hand grenade into the hatch and take them all out.

Kevin: Tom Hanks was in the movie Saving Private Ryan, and I have to say that first 12-14 minutes of the movie just completely wears you out, and I mean, this is a movie. These guys actually were lucky to be surviving, not just moment by moment, but second by second.

David: Nobody saw themselves as heroes, not a single one of the men that we spoke to. These were men that were looking to survive, one moment to the next, and I think history gives us the perspective to judge what may have been in that moment for them choosing what was just a common sense action, common actions we view in the light of history as uncommon valor. And when the dust settles, we can take into account and we can measure these things. For them, most of the heroes are dead. For us, there are a few of the heroes that remain and we can honor all of them. Again, life is learning, and each day that we can seek answers to burning questions, listen to others, take notes, listen intently, I think we should.

Kevin: It is interesting; I did a study the other day just out of a concordance on the word remembrance, throughout the Bible. That is something that God continually stresses – remember, remember, remember. And it seems that when man is sinning, it’s because he forgot. You see the word forgot, forgot, forgot around sin, and remember when people are in obedience. So I think remembrance is important, isn’t it.

David: It is. You and I have talked about this quite a bit, but how do you remember? How do you recall the things that you have tried to remember, including multiple senses, heightening an experience more significantly in your mind? Studies have shown that remembrance is made more accessible when there is more going on. So, maybe it’s wine with a special dinner, music as ambience. We tend to think of Old Saint Nick and the white beard and the red suit, mulling spices, music in the background, snow on the ground, at least for us here in Colorado. These are all things that sort of heighten an experience, and we might chalk it up to nostalgia, the fact that we have vivid memories of time with family and what not, but the reality is, there are a lot of things going on that allow for a visual, auditory, gustatory synthesis, that sears those memories into our minds. And I want the memory of the past to come alive and remain alive, as not only a source of inspiration, for my family, for my boys, and for the rest of my kids, including my little girl as soon as she is old enough to appreciate this, grounding their decisions, giving them a rootedness, giving them wisdom, offering guidance. This is, again, why I think some of these types of experiences, setting it up for them in this way, where it is visual, it is auditory, it’s not just out of a book. This is not coloring books with pictures of panzer tank divisions. We’ve got those.

Kevin: And we have movies, we have different types of things, but there are always motivations by some to change the narrative. The narrative of true history, we’ve talked about this with the financial markets and politics, but it’s also what you are talking about here with the Normandy retaking of ground. It’s not an invasion, it’s retaking. And we’re on the cusp of losing the narrative. Obviously, we have the history books – Ambrose version, which is great. The stories of the veterans from D-Day, now 70 years older, are as important today as they have been every day for the last 70 years. The only difference is that each year we are losing a few more of the surviving war veterans, the people that we can call heroes, even if they don’t call themselves that. So we can reference the history books, but we can’t sit down and have a beer with one of the boys that marched into Carentan, or exchanged fire with an SS Panzer division. And I won’t miss that opportunity. In fact, we did sit with one guy, very lively veteran from Canada, sitting there sipping a Heineken, and he’s telling us about his toughest fighting, how he was in an infantry division. He wasn’t there on D-Day, he arrived in July, and he said his hardest fighting, personally, for him, was in Antwerp. He was so grateful for the kindness of the Dutch as he spent the year following the war waiting to go home. And they were so appreciative and just sort of opened their homes and had meals regularly with different families. And to see again the oral history, it’s not everything, and frankly I think that sometimes memories can even be not as true as the histories that are told in the history books because of how enhanced our experience is. You see someone who is dead lying next to you in a pool of blood, and it may be from that that the entire seashore is, in your memory, full of blood.

Kevin: And even if it’s not something as graphic as that, Dave, just the fact that he was sitting there having a Heineken, he’s from Canada. He’s having a Heineken because he appreciated the Dutch, I’m assuming, right?

David: I don’t know, I don’t know. But there are things that we take for granted. In the U.S., German is an elective language. We get to choose it from 4-6 different languages, and most students study that or Spanish or something else because they know that the College Acceptance Board expects them to have two years of language studies in the transcript. History could have been different. We all could have been speaking German. And there are just different things that, had it played differently, a whole series of things – I mentioned the bombing at Pointe du Hoc. At Pointe du Hoc, had we not been bombing in April and in May, and had the Germans not taken those guns out, three guns pointing in the direction of Omaha, three guns pointing in the direction of Utah, and those guns would have been added fire power on our boys on those beaches. And had we not taken Normandy, we would not have taken Cherbourg. Had we not taken Cherbourg, we would not have taken Calais and Paris. Had we not taken those – these are just a series of dominos, and they all had to fall into place.

Kevin: So when you talk about history being very different, we’re not talking just speaking German, we’re talking about being under a Nazi regime, and an entire race being completely eliminated. I told my boys, we wouldn’t be here. We wouldn’t be here. Four generations back, Abraham Meyer is in our family. Does it count out to be 1% of Jewish blood? No, it doesn’t. Maybe even 1%, I haven’t done the math, but we wouldn’t be acceptable. And I’m telling my son, who is blue-eyed and blond-haired, you’re not good enough. Not according to what was considered biological perfection. Again, this goes back to ideas. Ideas can be logical. Ideas can have a natural linear sequence, and they can still be deadly and false.

Kevin: It is interesting. I was just reading a book on methods of healing Down’s syndrome. They have a drug that can add as much as 15-17 points of an IQ to a person with Down’s. But what was really distressing was, they can’t get research money, because Down’s can be predicted ahead of time now in the first trimester of pregnancy. So they are saying, we have really eliminated the possibility of Down’s because we’ll just abort the babies. So this eugenics can creep into anything. This is why we have to know history, Dave, because that’s how Hitler thought.

David: It’s worth looking at what we have to be grateful for. This is 70-year-old history, where most people are more concerned about the tweet that comes through in the next two seconds, or the Facebook post that comes through in the next half hour.

Kevin: But there’s a currency to that 70-year history, that’s what I’m saying.

David: Well, exactly, and what would be the difference today? Would we have the same freedom of expression? Would we have the same freedom of the press? Would we have freedoms that we witnessed as a consequence of the Civil Rights Movement? No. They’d still be on a wish list. We have what we have because of the lives given to stop an evil which would only too gladly have dominated the entire world. For that, should we be grateful? I think so. And we can fixate on whether or not our 401k’s will be of a size which justifies retiring this year, next year, five years from now, 20 years hence, or at all. But to be honest, there are other issues in play that matter far more than money.

Kevin: Right. You know, David, as we talk about memories and we tie that in with Normandy, I can’t help but think of some of the history that has been captured for almost a thousand years. The Bayeux Tapestry…

David: Is in Normandy.

Kevin: Yes. It is basically a long sequence of pictures in a tapestry that tells history that we are still learning from today.

David: So, there is someone out there who is going to say, actually, it’s not a tapestry, it’s an embroidery, and technically you’re accurate. But still, we call it The Tapestry, and it is, according to those terms…

Kevin: I don’t know the difference, Dave.

David: I don’t know that I appreciate the difference, and I hope that doesn’t offend anyone, but it tells of the Norman invasion of England around 1066, and it is the oldest remaining, and perhaps it is even the first ever comic strip. It’s fascinating, because who were the good and evil? Of course, the victor narrates the whole thing.

Kevin: Sure.

David: But you’ve got coarse jokes and satirical commentary all throughout. And the Tapestry gives a voice to a narrative which would otherwise have been lost. I don’t know what is that “tapestry” for the World War II guys. It may be our current day tapestry is the movies that we have. Perhaps they need to be scrubbed a little bit of Hollywood impressionism, how they interpret it, perhaps, but we see the players in the Bayeux Tapestry, we see who was vying for power, and again, sort of the side stories, the local conflicts and what not.

Do you have any idea, it’s 70 meters long – 70 meters long. It’s a massive, massive tapestry.

Kevin: Obviously, somebody felt the story needed to be preserved.

David: And I guess, the thing is, it’s a testimony, it’s a witness. And again, we mention, maybe first person history has some limitations. You have psychologically real, and certainly, existentially complex, it’s a great touchstone, particularly for a person, and certainly we can learn from it. In this you have a testimony, you have a history. This thing was put together about 50 years after the actual history. But memory is aided by these things. We have pictures which aid our memory. Do you do that as a family? I know we do. When we look at our photo albums, it’s almost as if things that would have slipped way altogether, all of a sudden are there in living color.

Kevin: David, we do that here. We were sitting out back just the other day, talking about how we’ve been so blessed as a group of guys here at this company. Some of the guys have worked together almost 30 years, some more, so yes, you are right, we have to remember to recount the history because there is a lot that goes into deepening the roots.

David: I like telling stories, and I think it’s healthy for a community to do that. It does mean looking back, it does mean keeping some of that history and memory alive, and I think honoring those that precede us sets the stage for a society to look ahead, with the inculcated wisdom of the past. Honoring those that have gone before us sets a standard for the preservation of ideas and values through time. And without it, there is a tendency toward what you might call generational solipsism, where we think the whole world revolves around us – world and history revolving around this moment, right here, right now, that’s the only thing that matters – me, myself, and I. The Bayeux Tapestry tells a lot about the conflict of the day, and you see that people who were farmers became warriors, and I think we have warriors among us, like the infantrymen from the Canadian regiment, the guy who was sipping the Heineken and telling me about Antwerp. He spent the next 40 years working quietly as a brick layer. He’s been back a few times, and he wanted to make it back for this one, but he did tell me he wouldn’t be coming back again. But 40 years as a brick layer – how many days did he work in the quietude of his trade, with people asking him questions, with people caring, with people wanting to learn from him? And you realize that there is a part of that narrative that needs to be kept alive. Again, I don’t know what we can do to create the equivalent of a Bayeux Tapestry, that a thousand years from now recognizes bravery and courage, that recognizes what it takes to stand against evil, and honors that, doesn’t just honor perpetual neutrality on any and all issues.

Kevin: I think you bring up a great point. We’ve talked before about Neville Chamberlain’s huge mistake, and that is, to not recognize the threat. And so I think we need to bring this into current day. Let’s just look at the tapestry from this last 70 years. You had Europe – it was a complete mess as the war ended. You had America on a gold standard. You had America, basically, come up with an agreement that said, “We’re going to promise you to have a redeemable currency that will be sound and we’re going to help rebuild you.” That’s part of the tapestry. Now, what we’ve seen since then, obviously, we’ve seen the degradation of the dollar, we’ve seen the euro come about.

But Dave, this last week, and I don’t mean to put a negative spin on this, but I think we need to understand the reality of the threat that we face right now. The European Central Bank is charging people interest to have money on deposit. What is that saying about the current economic situation, and what does that say in the tapestry?

David: This is the first time in history, that I am aware of, that I am aware of, that rates have been taken into negative territory. Now, you have real rates that are already negative here in the U.S. when you factor in inflation. Or inversely, you can look at the inflation rate, and if that inflation rate is larger than your interest rate you are in “negative territory.” But what the ECB did this last week was actually take an official rate under 1%, not even under ¼ of 1%, but it is now, as you say, in negative territory.

Kevin: And they want to still tell us that we’re in a recovery, Dave, when banks are telling you we are charging you to put money on deposit. That’s not a recovery.

David: So the two key take-aways were this: Number one, they took rates negative. That’s a big deal. The second big deal, which, maybe is not that big a deal because we have to see how it plays out, but they are saying, basically, they have 450 billion euros…

Kevin: That’s 550…

David: 542 billion…

Kevin: Yeah, roughly.

David: Dollars.

Kevin: Dollars, yeah.

David: 542 billion dollars, 450 billion euros, to the banking system to make loans to small businesses. Now, here’s the interesting thing: You have to make the loans or they want the money back by 2016, so you actually have this period of play…

Kevin: That’s forced liquidity.

David: Between now and 2016 where the banks get 400 billion dollars, and they may or may not lend it out, but if you’re caught not lending it out before then, then you have to give it all back. If you do give it out in terms of loans, then you get to really earn a handsome profit. How is that? Well, you don’t have to charge individual business the low, low, low, low, low interest rate that you’re getting, which is ¼ of 1% from the ECB. You might charge them, 2, 3, 4, 5% and pocket the difference. And your rates, your ¼ of a percent rate from the ECB is fixed for 4 years. It’s kind of an interesting thing. They are basically being asked to play quarterback on the loans, and keep a sliver of the profit.

Kevin: What is sort of scary about that, Dave, is that we saw something similar in the mid-2000s here in America, where banks were encouraged to give mortgage loans that they knew they couldn’t have paid back. So what is happening is, they’re giving them liquidity and saying, “Look, loan it out or you’ll lose it,” but there aren’t really strict guidelines as to whether that can be paid back.

David: I do think that making loans to businesses makes a lot more sense than making loans in terms of home mortgages to average families. I don’t mind the 400 billion being loaned out to small businesses. I think that loophole of having until 2016 to get it done or you lose it, that use it or lose it clause which you just described, I think that’s a little squishy. But again, your first point was excellent. If we were recovered, if Europe was recovered, if the banking system was recovered, why are we continuing to see these extraordinary measures. And it kept in place that possible quantitative easing measure, which is still extra ammunition.

Kevin: That was the third point that they said that they would add if they needed to, and they are looking seriously at it.

David: So borrowing cheap money under one guise, only to use it for another, and potentially lucrative, purpose, this is where I would remain concerned. Banks may sit on it, may speculate with it for the next two years. Keep in mind, do you remember how Rothschild made his initial fortune? He was a coin collector, he sold numismatic coins, and he put together collections to then sell to people that had money. Who are the people that had money? The royals. And he came across one royal family who was wanting to invest, and so Rothschild basically took his money and speculated with it for a matter of days, very high-risk, because the speculation yielded him, I want to say, better than 100%. And that gave him a monetary stake. He was using someone else’s money to gamble with. So here’s what happens. If he lost the money, he just needs to disappear, (laughter) and we would never have known the Rothschilds. As it was, he took someone else’s money, gambled with it, basically went out and bought lottery tickets, if you will, won the lottery, and that put the Rothschild family in business from that point forward. So that’s what you see with the ECB offering the European banks, “Here’s 400 billion. You can gamble with it for the next two years. It’s intended to be loaned out, we suggest that you loan it out, but there is really no way of guiding that process and making sure that you do that, for at least 24 months.” Rothschild only needed 24 hours. (laughter)

Kevin: And he used other methods often, too. Insider trading, that type of thing. Speaking of speculating, Dave, I just read an article today, actually, that talked about how we are entering the greatest and the longest bull market, and I know the Financial Times has been writing about that, as well. It’s driven, however, by something other than what you would think would drive a stock market.

David: Normal growth in an economy. The Financial Times article over the weekend was great in pointing out that it’s all funny money. It’s easy money that for the last 24-36 months has been creating both a class of income-starved investors who are now squeezing into junk bonds. Anything where they can find a modicum of income, they’re buying. You have that on the one hand, and you have asset prices going through the roof on the other, as a consequence of the easy money policies.

Kevin: And it seems like it’s never going to stop. I mean, really, we’ve seen things like this before, but we’ve really never seen this amount of control based on funny money.

David: It’s our modern day version of the perpetual motion machine. Rates have been moving lower. Yes, that’s caused asset prices to move higher. Of course, others will recall that artificially low rates have never been kept there. You can’t keep rates at any level, frankly, high or low, for a long term. The central bank activities of the Fed, of the ECB, they have supposedly tamed volatility, and they’ve brought investor interest back into the marketplace. My suggestion is that you should expect a major reversal in asset values. Again, you’ve got the asset classes which are being priced to perfection because of the easy money that is flowing into them. That’s your junk bonds. That’s your bond market, particularly your longer-dated bonds. That’s the stock market. You have all of these asset classes which today are being pumped up, and can you sustain it for a year, can you sustain it for two years, can you sustain it for a period longer than anyone would expect? Yes, but ultimately it’s not sustainable.

Kevin: And Dave, I think it’s worth pointing out that you can try to manipulate interest rates and keep them low for as long as you can, but what happens is, the value of the currency suffers. Ultimately, you give it back in buying power in the currency.

David: It was interesting, we were in France this last week, and I talked to a number of people, and they said, “You know, we just want the French franc back.” I said, “Why? Why do you want the French franc back?” Obviously, this showed me their lack of understanding of debt, but they said, “Well, we can’t manage our debt. The only way you can really manage debt is by having your own currency and having the ability to manipulate it lower in value and pay off those debts with cheaper currency.”

Kevin: Competitive devaluation. Yeah.

David: If you can devalue, then you don’t have to have austerity. That was truly French. When I heard that, “We don’t like austerity. Just devalue the currency and we’ll be fine.” That’s how pragmatic and short-sighted they are, because devaluation causes a whole host of other problems, which no one really pays attention to.

Kevin: But the sad thing is, it’s not just the French, Dave. We’d better look in a mirror. I mean, it’s American. Yeah.

David: I know, I know. But that is our course, that is the course that we are on, a devaluation course. Low rates are an interesting byline to the story.

Kevin: Yes, Dave, the concern that I have is, we’ve talked to guests who understand the liquidity that is sitting in the system, that has already been created, and you said, “That liquidity is going to have to be sterilized, and it really can’t hit the economy.” Yet, we’ve got a rock and a hard place, here, because Mario Draghi is saying, “Look, if you keep that liquidity in the bank, we’re going to start charging you interest.

David: What is interesting is, I don’t really understand what Mario is trying to do with this, because when you take rates and make them negative, it forces the money that is in banks into the system. There is no longer a reason to keep it there. It’s a penalty for money that’s being kept as an excess reserve, right? But actually, there’s only a fraction of the excess reserves at the ECB. There was close to 700 billion, now there’s more like 200 billion. I don’t know what he is trying to accomplish, honestly. I feel like he is grasping at straws.

Kevin: You think this is window dressing, then.

David: I think it’s window dressing. I think he’s grasping at straws. I think he is playing a long-term game, and I think it really is going to depend on who sort of out-lasts the other person, who gets to the crisis stage first, and they will be the country that is hit the worst.

Kevin: Well, remember John Maynard Keynes said, his whole philosophy is based on making sure that the money continues to flow, and that it’s not saved. He believed in zero interest rate policy, which is what we’re doing right now.

David: And Draghi.

Kevin: Yeah, and Draghi seems to be doing the same thing.

David: And we’ll see more of that here in the U.S. Honestly, I don’t like being compelled to do anything. I don’t like being forced to do anything, and I feel like that’s what the central banks are doing today. They’re forcing the hand of investors to say, “Get the money out there, get it into the system, don’t sit on it as a savings cushion. Get it out there, because we’re going to penalize you for doing so.” So I think over the next 12-18 months you’re going to see a continued trend of murky waters in which to invest. Where do you go? Because on a rational basis you know everything’s already expensive, and yet, it may get more expensive from here, and when it’s no longer expensive and it’s getting cheap, people are going to lose their behinds. There’s a lot to lose, and I think the next 12, 24, 36 months, it may only last 12 weeks, not 12, 24, 36 months.

Kevin: I read PIMCO’s latest analysis and they are calling it, instead of the new normal, they’re calling it the new neutral, because what’s happening is that the volatility has been completely tamed out of the system. Now what that means, to me, is that somebody doesn’t want volatility, and so they’re inputting where they need to input to keep things just flat.

David: The interesting thing is, when you do that, all of your major financial firms who have been speculating and making money on the basis of volatility, being long or short, and making money in either direction, they will die on the vine. So, again, I don’t know how they’re choosing the winners or losers, or if they actually have a grand scheme. It may be that this is a financial system which is entirely held together with baling wire and chewing gum and they’re doing their best to window dress it. That’s my sense of things.

We’re out of time today. We haven’t even mentioned this last week, the 25th anniversary of Tiananmen, or the victory of the Solidarity movement in Poland. Listen, so much has changed in 70 years, so much has changed in the last 25 years, even in the last few years, in any of those time frames – 70 years, 25 years, even the last few years – we have so much to be thankful for, and so many people to remember.

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