The Option Genius Podcast: Options Trading For Income and Growth podcast

May 09, 2024 Dollars, Gold and Bitcoin with John S. Pennington Jr - Part 1 of 2- 182

Allen Welcome passive traders. Welcome to another edition of the Option Genius Podcast. Today, I am here with someone that's going to blow your mind. I'll give you his name, you probably haven't heard from him. But what he says is going to make a big difference for you. So John S. Pennington Jr. in 2008, co founded a family of private investment funds that by 2021 had over $28 billion of assets under management and completed a successful IPO on the New York Stock Exchange. John then retired that same year but remains a significant stakeholder and is now partner Emeritus at the company. He has been married 38 years with three sons, five grandchildren, and he recently wrote a book which we're going to be talking about called Dollars, Gold, and Bitcoin. It's right here, I could not put it down, you can find it on Amazon and Audible. You guys need to get a copy of this book, because we are not going to be able to talk about everything in this book on this interview. John, thank you so much for being here.

John Allen, so good to be here. Thanks for having me.

Allen So now I have done. I have heard you speak in the past. And so a few podcasts, I don't should have looked at the episode, but it's one of the past episodes called billionaire lessons. I have talked a little bit and gone over some of the things that you presented on which were covered in your book as well. So it was one of our most popular episodes, really happy that you're here. I just want to get into it. So the book is titled dollars gold and Bitcoin. Now I've already you know, talked about your successful guy you're doing well. Why did you write this book?

John When I retired, some people asked me to speak on stage. And I, you know, I didn't charge them. And I just went to these masterminds and I thought, What do I want to talk about? And, you know, I just I looked at what everyone else talks about. And I thought, well, I got to talk about something different. So I started talking about economics and the Federal Reserve and the strength of the dollar and how, you know, the dollar is just a fantastic product worldwide. And I actually, you know, followed the Federal Reserve and how they promoted the US dollar over the years, and how they nudged people to make their product more acceptable around the world. And I kind of used that formula. In my company, or me and my partner's company, as we grew, we kind of use the same type of tactics that the Federal Reserve and the US government has used over the years to promote their number one product, which is the US dollar.

And so so it's kind of a, it's kind of reflection of my business history. But it's also a reflection of how I studied and watched the the greatest product ever become the greatest product ever. How did it get there, and then I just kind of wanted to learn from the best. So I just kind of use those tactics with me and my partners to kind of push our business kind of the same way. So that's why I kind of wrote it.

Allen Cool. Now, you know, the first time I heard you speak, I've heard you speak twice. And the first time and second time, I'm listening to you, and you are taking these what seemed to be very random events around the world. Yes. It's like, Oh, this guy said this, made this comment. And then this person visited this country, and then nothing happened. And then that happened. And then you took all of these to me, they were just random, you know, like watching the news. You story after story. But you took them and you whoa, this intricate, detailed story that linked them all together. And I'm like, Whoa, how does this guy think like this?

how do you how do you come up with this? ,

John I don't I don't know. I just I just I think as an entrepreneur my whole life, I started my, well, my career, but when I was a young man, I just was really slow reader. I wasn't a good, I wasn't a good student. And I knew that I could not survive in corporate America. I just knew it would eat me alive. It didn't I just wouldn't fit there. And so I knew I had to be my own boss. And that means I probably need to just start my own companies. And so I remember looking in the mirror and this is I think I was 17 or 18. And I said to myself, these words and and I I've repeated this in the mirror, every year, 10 times a year, whatever, I don't know how many for 30 something 40 years, but I said this to myself in the mirror of John, you're not afraid of being poor. And John, you're not afraid of being old, you're just afraid of being old and poor at the same time. And that is stuck with me to push myself in the areas of, I have to start my own business, I have to save money to take risk, right. And so I started 14 businesses in my lifetime ish. And three, I've made a lot of money on obviously, the one I did with the funds and still in it made a lot of money, I three I've lost money on and the rest of them in the middle, you know, I made some money on them, they were pretty good for a while. But you know, so over those periods of time, when you'd make good money on one, you have to save the money and live beneath your means. So that when the next opportunity comes up, you have a war chest to go and try again. Because if you try a business, and it doesn't work, you lose the time and money. And sometimes I might, I've had a couple of businesses in a row not work. So you spend 910 months getting a business launched, and then you wait six, seven months, it doesn't work, and you go on men 18 months later, and now you're kind of out of money if you didn't save, and then you have another idea come up, and then you try that idea. And that's going to take a year, year and a half to figure out and spend all the money. So you always I always live below my means way below my means so that I would always have a war chest to take risk until I really, really, really made it. And when I first started my first fund in 2004, and then my second fund in 2007. And my third fund in 2008. You know, I didn't really know if it was going to work, work, work work work until about 2013. And up until that time, I was driving a car with 200,000 miles on it, you know, so but once I got there, then I got a Mercedes, you know, a small number, say a used Mercedes kind of thing. And so, but I was always I always lived beneath my means because I just knew I had to be a entrepreneur. So what I'm getting at was my business antennas, my business antennas my whole life since I was 17. I had been up trying to read listen to receive things, right? And when I graduated college in 8898, with an economics degree which if you have an economics degree, there's not a lot of really, you're not trying to do much right unless you go on to get a masters or PhD trained. Well, what do you I'm saying, right? I didn't matter I had a degree in and I wanted to start my business. My first business that I started right at night, not my first business but but my first successful business right out of college is in 1989 Ronald Reagan and Mikhail Gorbachev, they took down the wall in Germany, there used to be a wall right down the middle of Berlin, a physical wall, and they took it down. And before that time, kids in Eastern Europe could not get American products. They can watch American TV or watch American movies, but they couldn't get made in USA products. And when that wall came down, there was a flood demand because the US was like this golden child. And everyone loved the US for about 99 About 95 They just love love, love anything made the USA was the best. And they wanted American huge Levi's. Or they want American Levi's jeans because Mr. Levi Strauss in San Francisco was the first guy to ever make denim jeans. And he did him with a button flying and the original was the button fly 501. Well, all over the all over the world. These were being sold for hundreds of dollars. They were a fashion gene but in the Western United States, we'd had them for 100 years they were worth jeans. We grew up with them in high school, right but so anyway, two of my partner's eventually moved to Southern Germany and I stayed in in Utah, and I collected us Levi fiber ones all over the United States, mainly the Western United States, cleaned them up, sewed them had seamstresses, scrubbing them, cleaning them up taking the stains off of them sewing, and it shipped to my partners in Germany, and they sell them to Prague and all over the western eastern states. So I could buy new fiber ones on sale for 1499 in Utah, and they would go for 100 $120 in profit. So I had my antennas up. And so when I found out early on in Ada or early on at nine that we had a friend over there in Europe saying that people were at you know, walking up to him on the street trying to buy his jeans on down for $100 100 US dollars. And we could buy them used at a thrift store over here for $6. What's the probability I can make a business so we I ran this business for nine years From 89 to about 1988 1998. We ran this was my first real big, huge business. And it was booming. I mean, we were doing a lot of jeans. I think our best year total sales was $8.5 million. US Levi's, I think that was 9094, maybe 95. Somewhere in there. But it was the fast business. And I had, you know, seems so what I'm trying to say is, you asked me the question, how do I think this way, right? If you have your business antenna up, always trying to receive some information, and someone tells you, hey, people in Austria are paying $100 For usually buy 501 jeans, and you live in a place where you can buy them for $10. You have to think of how do I make that into a business? What's the probability? Not the prediction? What's the probability I can make that into a business? And that was my first real run into business employees in Germany employees here. It was really a fantastic, great, like classic arbitrage. Yep. Just yeah, that's right. We were value adding we were cleaning them up, right. We were selling them. We were repairing them. But yeah, it was it was a kind of arbitrage. Take a product. That's a in Nevada, or California or Utah. Move it to a place where it's a fashion gene and charge what the going rate is. Yeah.

Allen Cool. Awesome. All right. So let's get into the book. Now. I think that correct me if I'm wrong, but the big topic or the big overwhelming subject matter of the book is how the Fed operates and how they boxed in Bitcoin,

John or the US dollar no sorry, or gold or US dollar or the Chinese yuan. The basic point of the book is, I use the example of trying to box Bitcoin in because it appears to be an a competitor to the US dollar. Right. Gold. One point is your was a part of the US dollar and competitive US dollar. And I go in the book, I dip into the Chinese yuan that has become trying to become a competitive US dollar and the Fed, Federal Reserve's number, the US government's number one product, it sells better than hotcakes, people say it's selling like hotcakes. Well, they should start saying it's selling like the US dollar. So Allen, if I gave you $1 a second, right, like 123456. And I never stopped, never slept Neverland the restroom, it would take me 31.7 years to give you $1 billion. In other words, if you wanted to count to 1 billion, you would still be on the Zoom call this podcast 31 years from now. Right? So I tell them that on stage a lot because a lot of people misrepresent the word 1 billion they misinterpret it. They'll say John, I was just outside. And I saw this huge flock of birds, there must have been a billion birds. And I was gonna know there wasn't, you know how I know. I did the math. You know why I did the math. When my fund hit $1 billion. We started with managing $1 billion. It was like, holy cow, how much is a billion I started calculating it. 31.7 years of seconds. So when we talk about big numbers, I always do that on stage. So people really getting getting their head, how big $1 billion is and how erroneous that a lot of people use the term billion over time. So let me just do a little history for you. Okay. So, in 1914-ish, the Federal Reserve was created because there was a stock market crash in 1907, not not 2007 1907, the stock market crash.

So they created the Federal Reserve. And then in 1929, we know there was a huge stock market crash again. So 1929, the country's really, really, really hurting. And then in 1933, two things happen. The SEC was created so that we would never have a crash again, okay. And in May 1933, now get this in May 1933, the president, FDR, he signed an executive order that made it illegal for your grandfather and my grandfather to own gold. So you had to sell all of your gold to the Federal Reserve. Or if you had a gold note, because it used to be that dollars were backed by gold, you had to sell your gold note your gold coin or your gold bars to the Federal Reserve. And they would give you a paper dollar for it. And then they would take that gold and put it in Fort Knox, and that gold would backup the US dollar and help us get out of the recession or the depression. And so if your grandfather, my grandfather was caught with five gold coins in their pocket, they could go to jail. This is United States of America. Okay, but it was patriotic, I think I think if you go back it was kind of patriotic. Like, we're all doing this together. We're all in together. We all have To support our number one product, the US dollar. Okay, so, so in that that was 1933. Okay. And so how long did that last year? 41? Obviously, so 1971 ish. Oh, wow. I'll get there in just a second. Okay. Yeah. So in 1944, we knew we were going to win the war. Why? Well, we were making 96,000 planes a year, and Germany was making 38,000 planes a year. We were making, I don't know if the numbers were making 21,000 tanks, they were making 4000 tanks. We just knew by math, we were gonna win the war. So 1944 44 countries sent 1000 people to a little place called Bretton Woods, New Hampshire. And they went there to reset the dollar. So the dollar was reset by the Federal Reserve in 2019 14. Then it was reset again in 1933, by the gold confiscation, and then in 1944, it was reset again. So what happened was at 1944, everyone agreed all the countries Listen, the French franc is no longer going to be backed by gold. The French franc is going to be backed by the US dollar. And the US dollar is going to be backed by gold. Why? Because this is a crazy Alan, this is a craziest This is in 1944, the United States had 66% of all gold bullion in the world. We had it here. And there are a couple of reasons. In the first part of World War Two, we didn't get involved. We were just selling our tanks, our steel, we're selling steel to Russia, they're paying us in gold. We're selling whatever to France, they're paying a single in a world war, one synth kind of same thing happened, you know, so, and we had a gold confiscation in 1933. It was illegal for a US citizen to own gold, but it wasn't in 1944. Say 1946. Okay, my granddad had a $100 bill. He couldn't turn that in for gold. But if you were a US, if you were a French citizen, and you had a $100 bill, you could turn it in for gold. Okay, so we have like we always do, we abused this thing called the world reserve currency. Okay, we abused it. And by 1971, President de Gaulle of France knew we had been printing too many paper dollars, okay. Too many paper dollars. So he sent two ships across the Atlantic with all of their US dollars. Okay. So he sends the two ships over, and he demands here's my US dollars, give me my goal. And on. It was a Sunday night, August 15 1971, President Nixon came on live TV and announced to the world. He said basically, this, market manipulators around the world are trying to hurt our US dollar. And so he said temporarily, we're going to stop having the dollar backed by gold right now. Right? So he just told to tape your show. You're not getting your gold, right. And that was a temporary fiat currency. And that has lasted till today. So it's 5354 years old ish, right? Our dollars 5354 years old. Okay. So, and it was

Allen supposed to be temporary? It was that it was supposed to be temporary?

John That's what he said. He said, This is a temporary pause,

Allen just like like income tax?

John Yes, exactly.

So, but in 1990, am I gonna get my dates wrong? I was gonna do a cheat sheet because I don't want to mess my dates up. The 1960. The world reserve currency, the dollar was about 45% of all world reserve currency. Okay. In 2001, it was about 70 plus percent, maybe 78% of all world reserve currency is US dollars. And 19. In 2023. Just last year, my last statistics were 58%. Okay, so in 2023, US dollar is 58% of all the world reserve currency. The euro is 20%. Okay, the Chinese yuan is 2.7% of world reserve currency. Right? So we have a huge huge Headstart and a dominance with with our number one product across the world. And so we we mean you and everyone listening to this in the United States that use US dollars, we have an advantage where we we can go anywhere in the world and just throw our US dollars around and people will love them. Yeah, that's not true for other countries, right? You have to live in other countries. You just can't walk around and use your your fiat currency and just pay for things. And so we have a huge advantage. And so my question in my book is, how did that happen? How did we are the beneficiaries how do we become the beneficiaries of having most of the world use US dollars and In one way, in 1944, the Bretton Woods Agreement. No, it doesn't doesn't say this, okay. But this is kind of what happened. After World War One. Everyone's Navy is gone. China's Navy's gone. Japan's Navy's gone. Germany's Navy's gone, Italy's need is gone, France Navy's gone, everyone rushes Navy's got everyone's Navy is gone, the US has their navy intact, and Britain had some Navy still intact. Okay. And so basically what happened was we basically said, listen, navies are one of the most expensive things for a country to have. And if you just kind of agree to buy and sell your oil in US dollars, you don't even need anymore, we the United States will protect your shipping lanes. And so a little country anywhere in the world, if they buy and sell in oil in US dollars, then you don't need a navy anymore. And that allows us little countries sell their goods all over the world and take take their citizens from poverty levels up to you know, middle class. And so this is a phenomenon that's happened since 1944. Now, in 1971, when President Nixon did this, that's when our dollar became what's called the petro dollar. And that's when it really kind of heated up. And, you know, Saudi Arabia. So let's, let's just go to 1974. Okay, you live in Germany, and you want to buy a container of oil for Germany? You can't, you know, wire your Deutsche Marks from Germany down to Saudi Arabia. No, no, no, no, you have to wire your Deutsche Marks, using the SWIFT system, which will get back into the SWIFT system to the New York Fed, the New York Fed will then change your Deutsche Mark into US dollars, then you can wire US dollars to Saudi Arabia, then Saudi Arabia will send you oil, this creates insatiable demand for US dollars, right. And so to have a the number one product on the planet, by definition, you have to have insatiable demand, right? That's by definition, you have to have huge demand, right? So and the reason I know this, because we will make off the assembly line, we'll make a trillion dollars of our product, we'll make a trillion of them. And you and I will work 80 hours a week to get them more. The other people will lie, cheat and steal to get them right. They'll risk their lives on, you know, some crab ship in north north Pacific, you know, trying to get crabs and almost die trying to get more of these dollars. And then they'll will make another trillion and you Emil work 80 hours a week. Other people lie, cheat and steal. It's an insatiable demand for this product. And how did it get that way? And so to have insatiable demand, there's, I've outlined four ways in my book, one way is you tax your citizens in US dollars. So this year, I have to get us dollars to pay my taxes, I can't pay in cows, I can't pay in gold, I can't pay in Bitcoin. So that creates insatiable demand. Secondly, most countries around the world have to get us dollars to buy oil, because Saudi Arabia is the kingpin. Okay? That's it. That's the second way. A third way that you can attack a great is you create a worldwide Swift, bank to bank transfer system worldwide, where you transfer money back and forth. And it's a huge system, it's guaranteed, you know, bank to bank, and it's $1 based system. So if you want to transfer big large money from bank to bank worldwide, you have to have US dollars. And the fourth way to create insatiable demand is you can flood the world with low interest rate US dollar loans, that everyone has to pay you back for 30 years. So for 30 If you take one of these loans, for 30 years, you're gonna have to find us dollars to pay this loan back. Does that make sense? Now I'm going to stop there for questions. I got a few more things to say on that. But But do you want to any questions there

Allen that yeah, no, I'm totally with you. I mean, the SWIFT system is it's like basically, you know, you're forcing everybody to use your product, because you don't have a choice. I'm giving you money, and you have to use my system. And that's why, you know, when when they put all the sanctions on Russia a couple years ago, it was you know, supposedly, okay, we're gonna take you off the SWIFT system. Yeah. That was a mistake, big mistake. But it's like, oh, that was supposed to be the end of Russia as we know it.

John But yeah, so I'm gonna get back to that in a minute. But that was definitely a mistake of the United States of America, because that hurt the glorification of their number one product, the US dollar, so let's go back to loans. Okay. Okay. All right. So the date is December 2018. Okay. The Federal Reserve says the economy is doing fantastic. Unemployment rate is low. You know, we're going to do next year in 2019. We're going to increase interest rates three times. Okay, great. Then less than 45 days later in December 2019, this is 45 days, they say, Oops, we made a mistake. We're not going to raise interest rates three times next year. We're going to lower interest rates three times next year. And I went, what just happened? I have an economics degree, right? Something huge just happened. I didn't know what it was. But I knew something big just happened. So I'm reading I got my antennas up trying to read everything I can. So March, a few months later, I read this report that says in Europe, there are $3 trillion $3 trillion of sovereign bonds, trading at negative interest rates. I have an economics degree. I've never read a book. I've never read a paragraph. I don't even know what a negative interest rate is. It's a bond that if you buy it, you're guaranteed mathematically to lose money. Why does that? Why would that even exist? Not in a couple billion, but 3 trillion? Why? That doesn't make any sense. Okay. And then a few months later in July, this is the summer 219, I read a new report. It's no, it's no, it's no longer 3 trillion, it's 14 trillion. What? There's $14 trillion. Okay, so then I think, okay, now I kind of know why the Federal Reserve lowered their interest rates almost to zero really fast. Because they're like, Listen, if you're going to borrow money around the world, you can borrow in Germany at zero. Or you can borrow US dollars at just a little above zero. So we're going to lower interest rates to compete, because we're trying to create insatiable demand for our number and product. And for the next three or four years, if you're just borrowing borrowing German and Spain dollars, right? That means you're not borrowing US dollars, right? And that's, that's not creating in the future. So what did the Federal Reserve they lower interest rates, but that doesn't just do it, you have to actually go into the market. So think about what I'm about to say here. They lowered interest rates, plus the Federal Reserve went out, and they purchased bonds, $120 billion per month for over 30 months. Because when you buy bonds, buy bonds, buy bonds, buy bonds, buy bonds, the price of bonds goes up. And that means the yields go down. Right. So if every month I'm purchasing 100 billion $120 billion for the bonds, I'm keeping interest rates low, plus the Federal Reserve as interest rates low. So they keep it low for years and years and years, a few years.

So that when you borrow money, you're least not borrowing someone else's money, you're borrowing our number one product, and that creates insatiable demand for their number one product. Does that make sense? Any questions? Yep. Yep. So my antennas again, back to your original question my antennas, how do I like this? My antennas are always looking for things that don't make sense. And then I try to read, how does it make sense? And when I keep putting the US dollar in the middle of things that don't make sense? It kind of makes sense. So I tell people, my book, I said, my book look, guys, ladies, I don't know if I'm right. I just I don't really run my life trying to predict the future because I don't think anyone can predict the future, right? I run my life on probabilities. And so I'm just saying the probability of me being right about the US dollar and being the number one product, Federal Reserve, and either US government and the Navy and whatever, I have a high probability of being correct, but I'm not I'm don't think I'm right. I might have a 20% probability I'm wrong. 80% that I'm right. If you don't agree with me that i Okay, fine. I agree. I might be 20% wrong, but just probability, right. So that's, that's where the essence of the book comes from.

Allen Right. Okay. Now, since you brought up the Fed, that was one of my other questions. It was in the book, you mentioned that, you know, the Fed is been out there talking a lot lately about oh, we want you know, our inflation rate to be 2%. We want unemployment to be a certain number, blah, blah, blah. But you're you've basically said that, that's what they're saying. But what they're doing is something opposite, and they actually wanted it to be much higher.

John Yeah, so this is what happened a few years ago after the financial crisis. 2008 9, 10, 11 Okay. The world realize that the world is a lot more fragile than you think it is. So Germany, not in Germany, sorry, Russia and China started buying gold. And every year they bought more gold and we're going to 1013 they bought more gold 2014 They kept buying gold. And I was watching this going okay. You know it listen, if I if I ran China, I was president of China. I would not like the fact that I have to get us dollars to buy Oil, that. And so I'm not blaming China, I'm not blaming Russia, I'm just saying, I'm on this side of the negotiating table there on that side, I'm just explaining their side. So they might have got together and said, Listen, in the future, we think the US dollar is going to have some cracks in it. And if it ever has a big crack, we can introduce the Russian ruble and the Chinese yuan as alternative currencies. And therefore, then we can start buying oil in our own currency that they're planning in the future. I see US presidents are kind of like temporary employees. They're 40 years, Putin has been president for what 27-28 years, they'll probably be president for another 20 years. We don't know. Xi Jinping is usually I've said his name, right. He changed the Constitution, and allows him the option to be president for Life for life. Yeah, yeah. So these guys are long term strategist, our president has to get reelected. He's a temporary employee, so they have an advantage over us. Okay.

So anyway, so then a few years back, China and Russia, say, you know, we should do let's start $1 called the BRICS dollar, we'll call it Brazil, Russia, India, China, South Africa. And these countries will come together and have their own dollar called the BRICS dollar that is going to be backed by commodities. So if you have a barrel of oil, you get so many bricks dollars, if you have a bushel of wheat, you get so many bricks, if you have gold, you get so many bricks dollars, and they've been trying to launch this for years. Okay, so, so obviously, the Fed seeing this, and that's a competitor to the US dollar, and it's going to be a competitor to US dollar. So the Fed is strategically trying to move around to to make sure that doesn't happen. And that might explain why, you know, Putin, one of the reasons Putin took over Ukraine, Ukraine has a lot of oil and a lot of wheat. And he's like, the BRICS dollars going to be real in a couple of years. If I have all this, we know I get more brickstone That might be one of the reasons, okay. So. So the Fed trying to in this last year and a half just or two years, raising interest rates, the Fed to protect their number one product, and this is this theory. And again, I know your some of your listeners are gonna say, John, you're just you're being way too conspiracy. But when there's a lot of money on the table, a lot of crazy things happen because people coordinate a lot of things. Anyway, I think it's coordinate because the US dollar is the waterline in the table. So a few years back, China started to try to buy oil from Saudi Arabia using the yuan, because China is a big oil importer. Okay. And so far, I think we so far, I don't think Saudi Arabia has done it yet. But and not just to convince Saudi Arabia not to do it. The Fed i Okay, let's, let's just hypothecate the Fed wants to hurt China wants to lower their acceptance of the yuan around the world, and you want only accepted by 2.7% of world currency. So it's not that big a threat yet, but it could be in the future. Okay. So China does it to themselves. They have a big huge that in the last two years, they have a big, huge real estate collapse. They have a big huge employment collapse. Hundreds of companies have moved out of China to Germany have hundreds of companies from Germany, Japan and the United States have moved out of China. They've gone to India, they've gone to Thailand, they've gone to South Korea, all countries that purchase their oil in US dollars. China has been trying to purchase oil, not using US dollars. So we got to hurt that we have to hurt that country, because Okay, so how can I hurt that country? Well, one, China has said they're going to de dollarized the world. China said we're going to start selling our US Treasuries. Okay. Okay. So what we can do so let's just say, the Federal Reserve to make sure every time China sells US Treasuries, they lose a lot of money, because they bought US Treasuries back when bond prices were low. So let's just say if the Fed wanted to get interest rates to five and a half 6%. Okay, I thought it was gonna go six and a half, but it went to five and a quarter, five and a half. Okay. They can't tell you and me, Alan, hey, you a US citizens. We're just gonna raise interest rates to 2% because inflation is 2%. And we'd go Yeah, that's okay. That's okay. But if inflation is 2%, they could never convince us that they can raise to five and a half percent. That'd be egregious, right? But wait, if inflation is 9%, then you and I would accept 5% interest rates. Right, right. We don't like it, but we realize everyone has. Okay, so how do I get it? How do I get inflation to 9% when it's been almost zero for years and years and years and years and years? You print a lot of money. You see inflation come along, and it goes from zero to 2%. And you tell everyone with your mouth, on a microphone, it's transitory. It's just transfer Everyone calm down. Then a few months later, it goes to 3% inflation. Now, we're not going to move rates, we're going to keep rates low, at a quarter percent, we're not going to raise them because transitory it goes to 4%. And they let it run, it goes to five, it goes to six. And then they say, Well, maybe it's not transitory, maybe we need to raise interest rates, then it goes to seven, they started raising interest rates, and it goes to nine, and they're able to raise interest rates to five and a quarter percent, the fastest rate in history. And they lit they stopped, they stopped them there. Why? Because if they every time, they have interest rates sitting at five and five and a quarter percent, every time China goes to sell their US Treasuries, they get killed financially, it kills them. So my conspiracy theory is, hey, if the number one job of the Federal Reserve is to protect and promote the US dollar, they have ancillary jobs, low unemployment, high GDP, I get it, but their number one job, their baseline job is to predict or promote the US dollar, then, if they have a competitor to the US dollar, China coming around, we need to crush China's dollar. And right now, China prints more money than we do. Because they're huge depression right now, because of all the things that happened to him. And so they're selling all this, you know, US Treasuries, because they have to, because they don't want to because they're losing money on it. Why? Because they're trying to keep their economy afloat. Now, the Fed is sending a message to Saudi Arabia, Saudi Arabia, aren't you so glad? That a few years back, you didn't start selling your oil in yuan? Because you would have billions of you want in your bank right now? And the yuan is tanking. Right. So people say now, five or six years ago, if you told me, I agreed China was going to take over the world, China was going to be a superpower with us now. I don't believe that anymore. Clearly. Okay. China has had 40 years of the fastest economy growth ever, right? No society has ever grown faster than China has last 40 years. And they're only 2.7% of the world reserve currency. So are you telling me if they have the same growth for next 40 years? They would be 7%? No, I'm saying.

Allen I have to interrupt this message. Because I am super excited. I haven't been this excited about something in trading since I first discovered trading options. Okay, it is that important. Now, look, this is a new strategy that I've discovered recently, that is just out there, kicking butt and taking names. I can't give you all the details here. But if you go to market power method.com and get all the information again, that's market power. method.com. Trust me, you want to know what this is. Now back to the show.

John And so when someone says we're going to replace the US dollar, I give them this example. And I love people in Arizona. I love Arizona, but I'm just gonna give this example. Okay, it's not it's just a hypothetical. Let's just say you and me agree that all the water in Arizona is bad. Okay, we both agree. What do you want to do? Well, we want to, we want to, we want to replace it with Gatorade, okay, so we searched the whole world for all the Gatorade in the world, and we bring it back. And it's not even a drop. We can't even, we can't even begin. So if you want to replace the US dollar, you have to replace it with something, you just can't not have it anymore. You have to replace the water with something. And there's not enough of anything that none of you want in the world, none of euros. There's nothing in the world big enough to replace the US dollar for years and decades to come. So the US dollar in the dominance is going to be around for a long time. Now the BRICS dollar, they're going to chip away at it right. So China, you know, is a net importer of oil, and they're a net importer of food. The United States is a net exporter of oil and an exporter of food. We have a geographic advantage over most countries on the planet. We can have a bad precedent, bad precedent, bad precedent, bad precedent, bad precedent. And we still kind of survived because we have things that other people don't have. The Mississippi Valley is two thirds of the country. Although arbitrary rivers, you can it's a slow moving river, you can put grain on that barge and floated anywhere. A lot of countries don't have that. And we produce a lot of oil and a lot of everything. And we just have a kind of an advantage over most countries. So China has got to, you know, build pipelines as quick as possible to Russia. They have to solve their oil problem, because without solving their oil problem, supply they You can't attack Taiwan. Because our aircraft carriers, our Navy could cut off most of their oil within 120 days. It all comes mostly over the water until China gets that pipeline. Right. And they know it. They know that they are. They're not ready. They have an Achilles heel. So let me give you a crazy thing that happened in in the news just last year. I'm reading the report watching the news. China brokered a peace deal between Iran and Saudi Arabia. Why? Doesn't even make any sense. But if you put the US dollar in there, it makes sense. So China is trying to de dollarized the world. They go to Iran, they say Iran, listen, who do you hate more? United States or Saudi Arabia? Oh, we hate the United States. Okay, fine. Okay, listen, if you want to really, really hurt United States, we have to de dollarized the world. Okay, how we're gonna do that? Well, one way is you can stop attacking Saudi Arabia, because the United States has an aircraft carrier off the side of Saudi Arabia to protect Saudi Arabia against you. And Saudi Arabia needs the aircraft carrier, and the F 30. Fives on their bases and 5000 troops in Saudi Arabia, they need all that. That's why they can't sell oil from Saudi Arabia to China and the yuan, because they have to keep being in good graces with the United States. Because Saudi needs that military protection. But Iran if you stop attacking Saudi Arabia, maybe this year, next year, Saudi Arabia goes You don't want we don't need military protection anymore. So we're going to start selling our oil to shock to China in the yuan. And then the the domino effect, the US dollar comes crumbling down over years, and the United States power around the world gets demolished. So again, back to my probabilities. The Alan, I don't know if I'm wrong. It just seems when I put the US dollar in crazy situations. It makes total sense. Now, a few months later, President Biden realized he was losing the battle in the the, you know, the whatever battle you want to call it in the Middle East. What does he do? He takes his number one product, the US dollar, and he sends I think about $6 billion to Iran in humanitarian aid. That's his number. I'm proud to say I ran I ran And we're still your friends. If you're gonna trade around the world, here's some US dollars to trade in. Right,

Allen right. Yeah, that came out of nowhere. It was like, what, what's going on?

John Why, why? Why? Why do you do that? Because a few months earlier, there was a peace agreement between Iran and Saudi Arabia. Why? Because they want to de dollarized. They want to convince Saudi Arabia. They don't need us, Doc, but but the Fed is now still sending. There's two messages, right. And so about a year ago, year and a half ago, President Biden flew to Saudi Arabia. The thing about this, President states flies to see the prince. The prince didn't come to see him. He went to see the prince. Now we don't know what he said.

Allen And everybody made fun of him. Everybody, ever they funded media was all I got. I

John gotta give President Biden kudos. Right? Because I think I know what he was doing. I think he was over there convincing the Saudi prince not to sell oil in anything but US dollars. He creates because

Allen they had made an announcement. Before that happened. They had made an announcement that we're going to we're going to switch and we're going to do both or something that I remember something's right. Yeah.

John So if you ever take a negotiation class, okay. There is there's a lot of different ways to negotiate. But one of the ways one of the tricks in negotiation is you ask a question to your opponent, and then you let them try to answer it. So we I don't know what I don't know what President Biden said. But he could have said this. Okay. Mr. Saudi prince, if you start selling your oil to China in the yuan, all right. How am I as the US President going to convince the US Congress to pay for aircraft carriers off your coast 5000 troops on your soil, sell you f 30 fives, and then also give you satellite information from our secret satellites? How are we going to pay for all that? If you start selling your oil in you want then what you do in negotiation? You zip your lip, you shut up, you say no more and you sit back. And you you allow your opponent to try to very uncomfortably answer your question. And they sit there and go. Well, you can no you could you Oh, you know what? You know what, Mr. President, you can't convince Congress to pay for all that. Exactly. So therefore don't sell your oil to China in year one. And then a few years later, guess what? The Yuan is crashing because they're spending so much money. because we got interest rates up to five, because we want to win because we got the inflation to nine. So we five and now the Chinese economy look China did to themselves, we just poured gas on. Okay, one more example. That is. So we know of two people that sold a lot of oil not using US dollars. And that was Moammar Qaddafi of Libya, and Saddam Hussein of Iraq. Both of these gentlemen, I don't know how else to say it a few years after they did this large sales of oil without using US dollars. Both of these gentlemen were killed. They left the planet. And I'm not saying the US killed them. What I am saying is the US backed away from them, and let other people get them all the way, you know, take them out, right. So the last person that we know of that is doing oil and gas, not using is Putin. Putin said less Jaffa the war, he says, you know, after we took him off the SWIFT system, which we shouldn't have done, we should have left them on SWIFT system to keep them using US dollars. We took them on SWIFT system, we weaponize the US dollar. And that allowed China and Brazil go wait a minute. If the government the United States can seize my US Dollars anytime they want, then the US dollar really isn't a store of value. It's that yeah, that woke the world up a little bit. And we shouldn't have done it. Right, because our number one product is now damaged a little bit. Okay. But anyway, so Putin says, hey, you know, we're going to do so Putin goes into Ukraine and button think about the rhetoric. Biden says, We think Putin, you're a bad guy you gotta get out of Ukraine. Then Putin says, we're no longer selling our oil and gas, we're only going to take rubles and gold. Then Biden changed his rhetoric. Biden said, we now need a regime change in Russia. That's way different than saying we need you out of Ukraine. When you say I need a regime change, I think about Moammar Qaddafi, and Saddam Hussein. Right. That's a big difference. Okay. So what happened was a few months after that, after Putin says we're not selling, we're not selling oil and gas. With us dollars anymore. There's there's a pipeline, there's two pipelines that go under this was this was hilarious, isn't it? Yeah. There are two pipelines. They go from Russia under the Baltic Sea to Germany, and they sell Germany natural gas. Well, a few months after this happened that Putin said, I'm not going to take us dollars anymore. Someone with a submarine blew up. Nord Stream one and Nord Stream to

Allen someone we don't know who know, they claim responsibility,

John no responsibility. And I'm sure I'm sure that you know, President Biden, when he talks to the Saudi prince goes, Hey, Saudi prince, we're so glad you're still you know, selling all of your oil in US dollars. No one by the way. Did you hear about Nord Stream? One Nord Stream two? Yeah, crazy, right? We live in a crazy, crazy world. It's just I'm sure he reminds everyone this right? That you don't mess with the number one product the United States, you just don't mess with it. Right? So this is all these are all chapters in my book, at least the first half of the book, you know, a lot of economics that I'm trying to about. I'm just trying to get people to think on a different level. And a different thing that kids these days like to play these video games all weekend long, they'll go on three day weekend, you know, never go to sleep. Well, this what I've explained to you is the biggest game ever invented. Yep, there is no bigger game. And when I'm explaining to it's the biggest risk game, the biggest global game. It's the biggest game ever. And I'm studying it and watching it. And it is fascinating to me. And I don't even know if I'm right. But man when I keep doing probabilities, and it just seems I'm right.

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