 Ladies and gentlemen, good afternoon. Welcome to our webinar and the great COVID crash of 2020. My name is Jeff Deist. I work at the Mises Institute in Auburn, Alabama. And we're very pleased today to have our special guest with us, a friend of mine, someone whom I've known for several years. His name is Daniel Acayé. He is an economist who works out at both Madrid, Spain, and London, England. He's an analyst, prolific writer of books, an adherent of the Austrian school, and someone who really follows markets the way an analyst does, as opposed to the way an academic economist might. So all that said, Daniel Acayé, great to see you, and welcome to the show today. How are you? Very well. Thank you very much. Thanks for having me. Nice to see you over his shoulder there. His most recent book is called Freedom or Equality. It's just out on Amazon in 2020. It's really a book about markets and social cooperation. I'm sure a lot of our audience, Daniel, is like-minded when it comes to a libertarian worldview. I actually was given an early copy of this book by Daniel and allowed to write a blurb for it, recommend it to people. It's available on Amazon. And it's a book about what Mises thought of as social cooperation, which is really all that markets are. And giving everything that's going on in the world right now is something we could all use a little more of. So, Daniel, I want to start today with the big picture question, which everyone has on their minds, which is how bad is this? How bad do you think this really is? Are we looking at something that might be like the Great Depression of the 1930s, or are we hopefully looking at something that's more like the crash of 2008? It is, in my opinion, it is going to be somewhere in between. It will not be like the 1930s depression because, thankfully, the economy globally is very interconnected. The ability of emerging markets, developed economies, and the different financial markets as well to interconnect are going to help a lot in the recovery. However, it is not going to be as sort of short-term as the 2008 crisis. And many people view the 2008 crisis as a very dramatic one, and rightly so. However, the problem of this one is that we have seen for governments that they have conducted one of the most dangerous experiments that anyone can decide to undertake, which is the complete shutdown of an economy. And we're showing that that creates much larger and long-term ramifications than what many would have expected, and definitely what governments expected. They were all betting on a V-shaped recovery that is further and further away as we gather more data. So when we look at this, talking about governments in the West, let's say, and central banks in the West, there's sort of two things happening. One is that central banks are busy creating what they call liquidity. So we can talk a little about that. Governments and treasuries are creating, busy creating what they call stimulus, which you and I might call spending. So you've got these two things happening, and of course, these are inflationary, not only in effect, but also in purpose by design. But at the same time, you have individuals, businesses, households shutting down, not consuming, not working, not producing. So that's very deflationary. So you have this sort of tension here between inflation and deflation, and people have a hard time understanding which is which and how they can occur, maybe simultaneously. Give us your thoughts. Yes, as you very well say, it is very dangerous to implement inflationary measures in a lockdown. Why? Because what governments and central banks are trying to achieve is to a stimulated demand that is not going to be there, because we're all at home. And because there was no problem of demand previously. It is not an issue like in 2008 of lack of access to credit or an issue of lack of access to debt from households, et cetera. It is simply literally what starts as a supply shock is included with the lockdown, complete lockdown decided by governments. And then central banks and governments try to stimulate a demand that is not there and that the little demand that they're going to generate is actually not going to be followed by supply because many supply chains have been broken already. As such, in my opinion, we run the risk of seeing first a wave of massive deflation in CPI at the same time as we are seeing in so many economies in the West, also in emerging markets, rises. We see the rise of, for example, food prices, and the average expenditure of the citizen is actually going up despite the fact that we see headline CPI coming down. So to me, it is a very, very dangerous experiment because once the economy opens, the headline CPI is going to show that overcapacity that has been built coming to the market and generating deflationary pressures on prices. Governments will interfere even further with big stimulus spending in order to try to get a little bit of employment back in the economy despite the fact that that is not going to generate a lot. And central banks will continue to inject liquidity, which will be hugely inflationary on asset prices. It's already hugely inflationary on sovereign bonds. And then what it can create is the opposite effect that the economy stalls into stagnation while inflation starts to creep up. Commodities start to go back up. Food prices go back up. And central banks continue to unfortunately stimulate the economy the wrong way because if what you're trying to achieve is inflation, you are going to get it. The problem is when and how. And that is the, to me, the biggest challenge. But why this mania against deflation? When times are good, as they have been at least ostensibly on paper for the last five to seven years, central banks and central governments try to stimulate demand, demand, demand, demand. Now that things go south, they try to stimulate demand just more. In other words, it's like they've just got one policy. Well, I always say to my students that this is like a government in central banks driving Lamborghini, which is the modern economy, with the instructions of a Ford T. That's what they're trying to do. They're trying to generate inflation that would reduce their debts. But the inflation that they're generating does not reduce their debts because most of the liquidity is going to massive deficit financing. And by incentivizing current spending and incentivizing over capacity, you don't get the kind of inflation that as a government you would like in order to reduce debt in nominal terms. So to me, the big, big, big challenge here is not just the desire to create inflation, but the obsession against disinflation. I always ask people, who in the audience, who of anyone that is watching us right now has ever gone to a service station and said, I cannot tolerate this, gasoline prices, gas prices are down. Who has ever gone to a supermarket saying, this is unbelievable, food prices are down? Nobody, nobody. The consumer has never felt any negative effect from disinflation. Yet the average consumer and the average worker does suffer a lot from government-led inflation. Why? Because the formula that we create inflation and wages will increase with it is completely ludicrous. Real wages don't go up with the inflation that governments create. And therefore, the worst off out of the inflationary measures created by governments and central banks are actually the alleged ones that will be helped by it according to Keynesians, which are the salaries and the savings of the average citizen. That's why inequality becomes such an issue. Now I'd like to point something out. If prices are falling, let's say consumer prices are falling in a deflationary environment. But they're not falling as much or as quickly as they would absent central bank intervention or government spending. I mean, doesn't that make a point that Austrians have made that, in fact, deflation is a good thing when it comes to prices and that even if consumer prices aren't rising, they might not be falling as much as they ought to be? Ah, completely, absolutely. I think that that is a critical point. Is that the reason why the average consumer in the Eurozone in particular, but I would say also in the United States is seeing a benefit out of this entire crazy monetary situation is the fact that prices are not rising as much as central banks and governments would want. But it also shows that economic cycles exist and that when the policy of central banks and the policy of governments is to generate inflation and to perpetuate over capacity and government imbalances, what that ultimately does is that prices don't rise and don't fall as much as they would. Think about it for example, right now as we speak. We should be thinking in an economy that is falling in the Eurozone, we're talking about 10% probably in 2020 that prices would at least fall 7% to 10%. Yet the estimates so far point to an average decline in CPI that will be around 2% to 3%. So think about this from the perspective of the average worker and the average salary. So prices are going to fall a lot less than they would but the economy is going to fall a lot harder than it should. So this time around central banks, ECB and the Fed have responded to the crash much like they did in 2008 by announcing that they were gonna purchase a lot of assets from banks, chief amongst those treasury debt and also mortgage-backed securities. That's a replay of 2008 but they've also announced that they're going to begin buying other kinds of assets. For example, municipal bonds, corporate bonds via ETF. So in the past, all of what we called QE, quantitative easing went to commercial banks whereas this time, some of the sellers of assets to the Fed in the United States are going to just be ordinary garden variety investors. So is this different, not just in quantity but also in quality from 2008 where the balance sheet went from less than a trillion to more than four? Now it looks like it's going from more than four to nine, 10, who knows? Is this different? Should we be more worried about it this time? Why do I think that we should be more worried? Because we have the example of Japan. As we speak, the balance sheet of the Bank of Japan has gone to about 110% of GDP. It is the biggest buyer of ETFs in the Japanese market and has become a top-tenture holder of almost all of the large companies in the Nike. What has all of that done to the economy? Nothing. It is an economy that continues to be in stagnation. The decline is going to be enormous. It was already enormous in the fourth quarter of 2019. Remember that GDP in Japan fell 6%. So why should we be more worried? Because at least the quantitative easing program that was implemented in 2008, in 2009, at least it was targeted to address what was actually a liquidity issue. There was a liquidity issue in the economy. So it had some logic to it. Not a lot, to be fairly honest, and definitely the quantity of it was random, but it had some logic. Now think about it. At least it allowed the economy to rapidly reduce imbalances, for example, in getting the inefficient companies in the energy sector, the inefficient companies in the renewable sector, the inefficient companies in so many sectors to clean up and become bought or restructured with higher efficient managers, better teams, et cetera. Now the problem when you start buying junk bonds is that you zombify not just government spending, you zombify the entire economy. You prevent the creative destruction, the cleanup of the inefficient sectors, the cleanup of those highly indebted and insolvent sectors. So you basically perpetuate insolvency. That to me is extremely dangerous. And it's extremely dangerous because liquidity injections, when they're targeted at something that looks abnormal, for example, the central bank believes that it is not logical that the treasury yields are at four or 5%. Okay, fair enough, I understand that. You're basically becoming a hedge fund that is going to buy something that is relatively cheap, leverage it up and make a profit. And it actually generated some profit the first QE. Now, when you start to zombify things that are expensive in the first place and at the same time, you decide to prevent the cleanup of the inefficient sectors, the collapse in productivity and money velocity might be phenomenal. And actually it's a perverse incentive to malinvest even more if the previous QEs were an incentive to invest in the riskiest side of the economy at very low rates. Imagine if you bail out the companies or you bail out the bonds of those that are more indebted of those that are in an insolvency situation. Well, so it's not just economics. There's a huge moral hazard here. For example, a municipality's been spending too much money. A corporation's been issuing too much debt, relative to equity, whatever it might be. So I want to ask about the Fed's balance sheet, which is something people hear about. Not necessarily sure what it really means. It's kind of like the national debt. It seems amorphous to us. So if we put the slide up of the Fed's balance sheet, a lot of people may not know that really from the Fed's inception in 1914 when it began all the way up into the 1980s, it had a very small balance sheet. And then in the 2000s it started to grow. You can see the spike here in 2008 when all of a sudden we had the crash and the Federal Reserve announced that it would begin buying assets from commercial banks and went up and up and up over the next several years all the way until about 2015 before there was any real tapering, so-called, got up over $4 trillion. It began to reduce slightly in the past couple of years, but then we get into the crash now of 2020 and you see that it's up over $6 trillion, approaching $7 trillion. So, you know, I like to think of the Fed's balance sheet as, you know, if it holds assets, then someone else has a liability out there in society. So I don't think it's a good thing, but I think a lot of people, the Paul Krugman's of the world, say that the Fed's balance sheet doesn't matter. So what does Daniel Lecaille say? It doesn't matter to Paul Krugman and it doesn't matter probably even, it might not even matter to me, but it matters massively to the average worker and the average citizen in the United States that may not be an economist, but understands that something is not wrong because, is not right, sorry, because they're not feeling all this exuberance of the economy. They're not seeing that this great environment that was created post-crisis actually went to their real salaries and their ability to save and their ability to pay for a better education for their children or better healthcare, their ability to save for a home. So, yes, it is a massive transfer of wealth from workers, real wages, salaries and savings into governments and those that are close to government. It's a ginormous cronyist policy that, and this is the key factor, is that we may understand now all of the ramifications, all of the implications long-term that it is created. We now, now it's not a question of debate between Keynesians and Austrians or hedge fund managers and university economists. It is something that we now know. We now know that the situation for the average citizen worsens, that productivity growth is extremely poor, that growth is weaker in the recovery and the crisis it's much stronger on the decline and that it benefits massively governments and sectors that are hugely indebted and does not help at all, actually, the small businesses. The fabric of the economy, the true fabric of the economy which are small businesses and workers. So, here's the question, I guess. Can the Fed just buy treasury debt forever and ever? I mean, right now, 10-year treasuries are in less than 1%. Now, that's actually a decent spread relative to some Euro bonds. It seems like if we listen to some people that the Fed could just always be there as an implicit backstop for treasury debt so Congress can just keep spending, the treasury can issue more and more debt and this can just go on and on and on because going from a $1 trillion balance sheet to a four didn't seem to destroy the economy. So, going from four to 10 or 10 to 100. I mean, when does it stop? That is a great question and I always say to academics that say that the balance sheet doesn't matter, that what they're doing is if you were going down the road at 300 miles per hour, looking at the rear view mirror and saying, we have not crashed yet, accelerate. That as an argument makes absolutely no sense. The fact that nothing first, a lot has happened. We need to start with that premise. A lot has happened. The rise in populism, the rise in lack of support of governments, the discontent of citizens exists and existed before the COVID-19 crisis. A lot has happened as well. Debt has ballooned to absolutely impossible levels. It's more than 300% of GDP globally. And the reason why the Fed and the Eurozone can maintain this situation is basically because monetary policy is not a game of who wins. It's a game of who loses first. And we are seeing the other side of the balance sheet, as you mentioned, which is a constant crisis in emerging markets. The reason why the Fed can continue to do this is because there's a tremendous shortage of US dollars in the global economy. And the more that other central banks in emerging economies try to copy the Fed without knowing or understanding the reality of the demand of their local currency, the more that they become dependent on the US dollar. In the situation in the ECB is different. The situation in the ECB and the reason why the balance sheet of the ECB is 44% of GDP. Think about this. The chart that we just saw of the balance sheet of the Fed is about 30% of GDP of the United States. The ECB's balance sheet is 44%. And the only thing that keeps that support of the Euro afloat is Germany. So it's even more, more challenging. And what keeps all of that together? What keeps it together is the faith that central bank action is going to lead to asset price inflation, which is going to lead to weak but acceptable growth and therefore the machine keeps running. What is the problem? The problem is when the diminishing returns happen on both sides. The diminishing returns happen and on one side you have equity investors that are angry because equities are coming down. You have emerging market investors which are angry because their currencies are collapsing and with them equities and asset prices. And you have, at the same time, the growth in the economy is actually not just very poor. It is actually inexistent. In the case of the Eurozone last year, we need to remember this all the time because governments are going to use the COVID-19 card to disguise all of their problems. And last year, in the fourth quarter of 2019, Italy, France, Germany were on the verge of recession already before any lockdown, before any of these things and with massive buying of treasuries. What do Keynesians and monetarists say? Well, governments and central banks are creating reserves. Those reserves are good for savers and as long as their savers are going to buy those reserves, the balance sheet and the debt of those countries can grow forever. Well, it cannot grow forever when those savings collapse. See what I mean? That's when the entire cookie crumbles. When those savings stop going to US dollar assets or to Euro assets, they will start with the Euro by the way, which will lead the US to become even more imprudent. But it all crumbles when domestic and international savers stop believing in the magic power of central banks. Well, and of course the United States is unique in that we still enjoy status as the world's reserve currency. So we've never really had anything like this in human history where the single currency which is used throughout the world has suffered some sort of precipitous collapse or decline. So we don't know what that looks like. We don't know how that happens. It may be actually a long way off because the dollar is the least dirty shirt in the laundry. That is a critical point. The reason why the US dollar, as we speak today, you look at the DXY index, the index of the US dollar, you'll see that it's about 100. It remains at about 100. It's been very, very stable for the past five years, despite the massive injections of liquidity, is because it is a game of the tallest short person in the room. And if we look at the dollar, the only thing that the Federal Reserve and the US government need to do every day in order to keep the US dollar as the World Reserve currency is to pay all of the attention to global demand for dollars and to pay and to continue to provide to global investors 100%. Investor security and private property security because that's what other countries are not doing. China, for example, can't contest the kingdom of the US dollar because they have massive capital controls and very little regard for investor and legal security. And that's why the yuan is only used in 4% of the transactions globally, whilst the US dollar, despite the actions of the Federal Reserve, is used in the vast majority of international double currency transactions according to the Bank of International Settlements. But it's a very fragile situation. The US government and the central bank need to have this in mind all of the time, all of the time. And if they stop doing it, then it will be a situation in which it will not be that the yuan or the euro or you name it displaces the US dollar. Is that then what we could see is the rise of the denationalization of currencies that Hayek talked about in his small book. And I think that that can be the biggest risk to the kingdom of fiat currencies and the game of who loses first. Well, let's hope it looks something like Hayek's concept of the denationalization of money. Let's hope it doesn't look like a monster global currency under the auspices of the IMF or something like that. But I will say this in reaction to your comments just now as an American, I gotta say this feels a little slimy. This feels like a form of imperialism, a privilege we haven't earned. We're not so particularly brilliant or productive or free. And yet we all enjoy a higher standard of living, maybe then we've earned as a result of our dollars status. Well, there is a certain level of earning it. It is one of the very few societies that remain as global leaders that has complete respect for private property. This is a very, it looks in the monetary debate, very few people say, well, I don't understand why private property and capital allocation decisions are important. They're absolutely important. The reason why you accept a fiat currency that you know will be somehow devalued in its purchase and power through time is only because there is a quid pro quo. And the quid pro quo is investor legal security and property security. When the rest of the contenders for global management or global dominance of the currency world, what they try to do is all that the Federal Reserve does without all of the investor legal security and property rights of the United States, then it doesn't work. That is a critical factor. So to a certain extent, Jeff, the US citizens have earned it by defending the constitutional rights to freedom and property above all things. Actually they have, unless they decide to change, they decide to go the socialist way and then they'll understand what it is to lose a world reserve currency status. Yeah, well, let me just say at the moment, we're doing a lousy job of defending anything. I wanna talk about a related subject. I wanna talk about the money supply. If we can put the graph up that shows the growth. And a lot of our listeners probably know that M2 is a measure of the money supply. It basically represents currency in circulation and also currency or excuse me, money that's held in demand deposits. Now this is the US M2 growth rate. So demand deposits being mutual funds, money markets, checking and savings accounts, plus the actual currency out there. So it's grown precipitously in the past couple months. There's a lot of debate over whether the money supply much matters. Now, Austrians don't accept the quantity theory of money, but that said, if the amount of money rises quickly relative to the amount of goods and services in the economy, that presumably means that prices are going to rise, everything else being equal. So Daniel, give us your thoughts on money supply. Yes, it would generate an increase in inflation of some goods and services. The fact that on the other side of that equation, you have the balance sheet of the Federal Reserve and the misallocation of capital that that entails generating and perpetuating overcapacity in numerous sectors and it will probably bail out sectors that already had problems of overcapacity and inefficiency in 2019 and 2018 will likely reduce the inflation. But I think that any citizen, I think that it's widespread that chart that shows what goods and services have gone up almost every year and why others have come down. So again, what this means to me is the following. What the Federal Reserve is doing and what the ECB is doing, those two in particular, is to massively increase money in circulation that is parked in assets right now in order to expect that once the recovery starts, all of that money in circulation will be utilized very, very quickly. That is the challenge is that if you think about this, central banks and governments, all of them have no plan B. The only A plan is the V-shaped recovery. But if it doesn't happen, because the economy is a lot more complex than what they and definitely any of us would imagine, if it doesn't happen, then that is going to create a massive divergence in price increases in the economy. And you're likely to see something that already triggered huge social problems, for example, in China, which is that the official CPI might be low, but the concerns and the discontent about rising prices in essential goods and services will actually go much higher, will increase. What does that mean? Maybe they just simply don't have a plan. I mean, we always assume that central bankers are smart people. I mean, are they just in the dark here? Are they operating on sort of an ad hoc basis, trying to just get through the next month or the next quarter, whatever it is? I mean, why? I guess even people who think like us tend to sometimes fall into this trap of imagining that there's some plan or omniscience on the part of these bankers and maybe there isn't. Let's put ourselves in the place of the committee of the Federal Reserve or the members of the central bank of Europe. This is the way that they think. The way that they think is the following. They say, okay, we understand that there are collateral damages to monetary policy. We understand that there is a risk of asset prices being inflated too much. And we understand that there are challenges in the economy because non-replicable goods are going up faster than real wages, all of these things. However, what they believe is that those are collateral damages that will be sorted out afterwards when the economy is growing at Goldilocks level. So the economy grows at 2%, inflation is 2%, unemployment remains low. And that is again the problem of driving a Lamborghini in using the instructions of a Ford T, is that you are ignoring all those side effects as collateral damages that should not matter right now because what matters is the stability of the financial sector. And if the financial sector stability is broken, then everything else collapses. But you also create a perverse incentive. And that perverse incentive is not being monitored by central banks. They actually, think about this. For example, Draghi, when he was at the ECB, he did not see over valuations in equity markets or in bonds at all. He said that there were no bubbles. He started seeing bubbles. You know, when he stopped being the president of the ECB, you look at the media and his comments after he left the ECB. And that is the problem of ignoring financial asset risks. I think that what central banks should do is to be a lot more technical and a lot less considering that they're going to continue to exist. They need to be a lot more technical and a lot less reactive to whatever. They believe that market wants, markets want. Because by the way, it is not even true that what they act on is what they believe that markets want. It is mostly what investment banker friends tell them that markets want. Markets in themselves are not demanding these things. Actually, markets would be extremely happy, in my opinion, to see a process of reallocation of capital and reconstruction in which investors are able to buy the assets of companies that have been doing the wrong things and being inefficient at attractive prices in order to generate higher productivity and more jobs. But central banks believe mostly that it is more important to keep the stability of the debt market, the debt market. Many people think that they look too much at equities. They think of debt markets all the time. Maybe it's time that we just started understanding that these central bankers are political, that they're not so independent, that they live in a bubble, that they have an agenda. I mean, we might be better off electing them by vote and then having at least some relationship between their performance in the market. I mean, this seems like we're at a place now where the public has never had less faith in this institution known as central banking. Why should they? If we're gonna have a crisis every 12 years, that's not stability in my book. To me, this is an opportunity to show that these guys are perhaps not as brilliant as we think. Well, yes, but there's a risk of allowing the central bank becoming, call it a democratic institution. And the risk is the following, is that you tell people that money is free, people are going to believe it. This is, and let me, we have a few, I believe, friends from Argentina here watching us. They know, they know the problem of the country. They know that the problem is that the central bank is printing pesos like there's no tomorrow. That's why Argentina increases its money supply seven times faster than the United States and has 40% inflation. They understand what I said before about the real demand of currency because they know that the reason why the peso collapses every year is because the demand for pesos domestically and internationally doesn't exist. They understand all those things, but you tell people as their current president or previous ones told them, yes, don't worry, we're going to solve everything printing money and people tend to think that that is a good idea. And when prices rise, and again, I come back to our good friends in Argentina watching us, when prices rise, who do they blame? They blame the shops. They say, hey, the reason why prices are going up is because your evil greedy capitalists that are selling goods and services at a higher price, not because the central bank is debasing the currency. And it's very dangerous. I'm Spanish and I lived the time in which Spain had its own currency. And believe me, the government, every sort of five to 10 years made a double digit competitive devaluation and everybody blamed for the rising prices. Everybody blamed the companies and businesses. In the French Revolution, we saw the same situation. So I'm not entirely sure. I think that central banks should be a lot more technical rather than political, yeah. Well, when it comes to their role, central banks also concern themselves with unemployment. In the United States, we've got probably close to 40 million people who've lost their jobs just in the past couple of months. Our real unemployment rates probably pushing 20%. The labor participation rate, who knows? I mean, the number of able-bodied adult people who are simply not working, not looking, not trying. I mean, there are huge cultural and social ramifications to all this, especially with men who tend to tie a lot of their feelings of self-worth with their employment, they're providing for their families, whatever it might be. I mean, where do we begin with this? What does unemployment mean to all this talk about a V-shaped recovery? What does it mean for Europe? Where are we? Yeah, employment is absolutely critical to the recovery. There are good things about what we are seeing right now. Again, this depression is caused by the forced, by the experiment of the forced lockdown of the economy decided by government. But on the plus side, all of the productive capacity of the U.S. economy and the European economy, all of the businesses are there. Everything is there. Nothing has been destroyed in a sort of, it's not a war. Some people talk about it as a war. This is not a war. You don't have to rebuild the economy with the generosity of governments with taxpayers' money. It's there. The only thing that you need to do is to reopen it and reopen it as quickly as possible. The problem is that closing the economy is an experiment that is very easy to do and it takes a very little time. Opening it back, and I quote Deutsche Bank here in their estimates, can take between four to 10 times what it took to close it. So employment is going to be critical. This is why it's so dangerous that governments and central banks take demand-side measures in an environment in which what you have done is to shut down the economy by government order. Is that once the economy opens, the fabric of society that is losing the most jobs is the one that doesn't get bailed out. The five and a half million jobs in hospitality and restaurants that have been lost in the United States, six million jobs that have been lost in education and health. All of those jobs that have been lost are not jobs that existed in businesses that are going to get bailed out because they had large sums of debt issued in the markets. They are not going to get bailed out because they're too big to fail. Those are jobs that have been lost in businesses that actually probably didn't have any debt. They probably worked month by month, they generated a little bit of growth, a little bit of profit at the end of the year, and but barely enough to pay their salaries and bills. Those are the ones that are collapsing in the Eurozone because the data in the United States is very detailed and is weekly, but in the Eurozone, for example, in Spain, in only two weeks, we lost 122,000 companies. 122,000 companies, there's all the companies that were created in the recovery. Not the same, obviously. What I'm trying to say is that with the policies that governments are taking, the vast majority of what is going to be bailed out was already going to survive anyhow. And what is collapsing is are all those small businesses that had no debt, that didn't have assets, maybe had a rented property that they were using to conduct their business, services sector, et cetera. So employment is critical and employment needs to come back quickly. That's why the reopening of the economy needs to be immediate. Second, it is absolutely critical that the government understands that 70% of GDP in the United States, as it is in the Eurozone, comes from the services sector. And that as such, you're not going to get a quick recovery that helps the rest of the economy unless the services sector is quickly back in shape. For that, you need to immediately, and I'm going to be positive here, the US government, anybody from the US government that is looking at us, please, go immediately home, call South Korea, call Singapore, call Taiwan, see what they're doing. South Korea has 3.8% unemployment. Last data published this week. South Korea has only 259 deaths. South Korea is this year, is only going to fall its GDP around 1%. There are countries out there that are managing the pandemic and keeping the business fabric alive much, much, much better than those, like the Eurozone in particular, in which there's another very big problem in the Eurozone with unemployment, is that there's a very, an unknown experiment happening in the Eurozone. In order to reduce the severity of the unemployment impact, because by now, the Eurozone would have about 30% of its labor force in unemployment. What they're doing is to subsidize it. Now, what that looks relatively okay into a very short crisis, but if the crisis is prolonged, and I'm not talking prolonged until 2022, I'm talking prolonged until September, the impact on government budgets, on taxation, on the recovery is going to be huge. So there is a, let me say something that might look difficult to believe, but there is a plus side to what is happening in the United States, is that once jobs recover, it takes between one to three months in our estimates for the jobs lost in a month to come back. In the Eurozone, it takes between five to eight months, and with this new scheme that has been implemented, it might take even further. Yeah, I mean, we do think of Europe as being a little more slurotic when it comes to the bureaucracy, the job creation, all that. I mean, that said, Daniel, I don't know about 35 or 40 million jobs coming back in six months or 12 months. No, it's going to be very, I mean, let me start, sorry, by making a clarification here. The V-shaped recovery thesis is gone. I, like everybody else, we're looking at the data and how long it's going to be to recover the economy. It's not going to happen in six months, right? So presumably that means Trump is gone as well. I mean, it's hard to imagine a president winning re-election with 30 million people out of work, the economy in shambles, markets in shambles, but he's running against Joe Biden, and anything's possible. I was watching the other day, in an old stand-up comedy with Bill Burr, sorry, I forgot his name, Bill Burr, no? Yeah, I'm right, no? And he was saying, in the last election, I had to choose between Trump and the devil, no? I think that in this election, what citizens are going to find themselves is in a situation in which they might not see a discernible difference of policy that will make them be more secure about their jobs in either candidate. So I'm guessing that the level of abstention in these elections is going to be pretty high. Very, very difficult to predict. All right, there's our good news for the day. Fewer people voting, that's something we all need to encourage. You know, on that note, I want to talk a little bit about housing in commercial real estate. Obviously we're in a situation where major retailers in the United States are declaring bankruptcy. Some of them are Lux, high-end like Neiman Marcus, some of them are downscale like The Gap or J Crew, but a lot of companies in between, a lot of iconic American companies like JCPenney and Sears are in big trouble. I think that already in the Amazon age, there was a lot of downward pressure on commercial real estate and brick-and-mortar retail. There's a lot of people who are maybe rethinking life in larger cities, very expensive housing markets. This seems on multiple levels to look like a very, very bad time for real estate in the next, you know, let's say year. Very much so. I completely agree. I don't think how something that was already challenged in 2019 and 2018, this is something that we all need to remember. In 2019 and 2018, the signals were already there for the risk of a recession, but the rhetoric and the propaganda and the messages out there came constantly that it was all due to the trade war, due to Brexit, due to whatever, using the excuse card. So I think it's very, very difficult because not only we're talking about all the time about what is going on in the economy relative to what happened before, but I think that something else is happening in this crisis is that the mentality and the actions of consumers are changing and the behavior patterns are going to change quite significantly in the next years. I don't think that consumers are going to spend the same amount of time going to shops as they used to. I don't think that commercial real estate that was already in very elevated levels of valuations is going to come back to the levels where it was. I think that, yeah, I think that real estate in general needs a level of exuberance and credit and household debt that is unlikely to happen. And this reminds me again, Japan, this reminds me of Japan in when the bubble burst in Japan, it was like at least five to six years in which every year one used to hear from investment bankers or from experts saying next year the real estate market in Japan is going to go through the roof. It's going to come back and it's going to come back hard and it didn't. And the reason why it didn't is because citizens change their mentality. These citizens start to behave in a way in which they understand that shocks like these catch them unaware. And if you are unaware and unprepared for a shock like this once, okay, but the second time you can get in real trouble. Yeah, and it goes I think to the point that central banks and governments are always sort of reacting to past events in a certain way. The markets are too complex, especially today in a global world. Markets are just too complex to control. Absolutely. And yes, absolutely they react to the past. They have been working very, very hard throughout the last eight years to prevent another 2008 style crisis. Phenomenal. The crisis are never the same as the previous one. And I'm gonna say something in favor of governments and central banks here for a change. They can't think of the future the same way that if we all of us collectively here in this call very informed and analytical people decided today what is going to be the future? We're going to be wrong. The problem of central planning is central planning itself is that somebody in a national or super national body decides that they have more or better information about where the needs of goods and services are going to be than all of us collectively. So it's not a question of changing the government or changing the people at the central bank is that our nature as analysts makes us fall into three mistakes all the time, all the time. I talk about this in my book. The first one is presentism, which is to look at what's happening right now and exaggerate it. The second one is nostalgia, which is to think that 10 years, 20 years, 30 years ago things were a lot better and this is what we should do. And that's where we're going to go in the future when they increase in protectionism, et cetera, et cetera. The third one is dystopia, which is to think that everything is going to be an absolute disaster in the future. And as such, we in power need to do quote unquote something and something big that grabs big headlines. Because if it's not big, then it doesn't grab headlines. Imagine a government that today says, this is what we're going to do to address the COVID crisis. We're going to step back. We're going to reduce government spending because obviously the circumstances have changed and we're going to allow businesses to understand how they can get better, each of them individually out of the situation. And we're going to give, we're going to facilitate that they figure it out as quickly as possible and as sufficiently as possible. That doesn't create a headline. It is much better to say, hi, I am the God of the future and I'm going to invest. And now it has to be trillions, where you say a couple of billion doesn't even make sense. If I'm going to invest 20 trillion in the economy and immediately you have huge headlines saying, ah, here comes the savior. That's the problem. The problem of central planning is central planning. Doesn't work, never worked. Yeah, you know what strikes me is that when, for instance, the US Congress presents a stimulus bill, which the Democrats are currently working on, it's about $3 trillion with the T. There is some sense, I think, even amongst the political class that views the economy as something that can just be commanded. There's a sense amongst them that the public understands on some level, however sort of in Coate that there's a reason why it can't just be five trillion or seven or 10, that people understand the natural limits to all this because if they didn't, why not have it be five or seven or 10, why even start with three? So I think there's, I think people have a visceral understanding that there are limits on government spending. Absolutely, yes. I think that when these packages are presented, you can see it immediately in the reaction of the average citizen. If you give a figure that looks too high and completely impossible to implement, then it doesn't generate any type of positive reaction. If you give a figure that looks too low, it doesn't create it either. So it's almost like, you know, every year when you start the year 1st of January that consensus estimates of next year earnings are always 10%, almost 10%, a little bit more, a little bit less, they're never 30%. You say that next year's S&P 500 earnings are going to be 30% to growth. Nobody will believe you. If you say this is going to be 1% growth, nobody will care. So when you say 10%, to be, I'm making a simplification here but I'm not that wrong. Governments and politicians know that if they present bills that are too excessive, people are just going to go the opposite way because they, I think that by now I don't think that there's any citizen in America that doesn't know that a three trillion package means three trillion of taxes in the next 10 years. Yeah, I'm not sure a lot of Americans much care though or think about it, at least not the way we think about it. I mean, that's one of the problems with politics with democracy is it creates a sense of fatigue. It creates a sense of something for nothing. And I think over time, our common sense, our wisdom becomes denuded and we end up in a situation where people are like, hey, maybe all that stuff, you Austrians or you libertarians are saying is true but it's down the road. Right now we have a problem. Exactly, that is the problem. Right, it is short-term thinking which democracy encourages. Now, obviously we have problems with retail. Obviously we have problems with commercial real estate. Those are right in front of us but a little farther behind that we have all kinds of commodities. We have things like oil which you've written about at length. I mean, I see oil is back up to almost $30 a barrel. You know, there is sort of a weird twisting in the economy because unless you're in the oil business cheap oil is a boon to just about every industry you can think of. So why should we be lamenting when oil prices drop so far that tankers are sitting offshore with no buyers? Oh, we shouldn't. The same way that we shouldn't complain about the fact that you go to a supermarket to buy the latest iPhone and that they're on sale. You're happy, you know, you should be happy at least if you're going to buy an iPhone or whatever device you want. The idea that commodity prices need to go up in order for the economy, for the global economy to improve makes absolutely no sense even in commodity producing countries. Because when you think about the vast amounts of money that are being squandered by governments in commodity producing economies that have generated absolutely no growth, no improvement in welfare, no improvement whatsoever. Just incentivize cronyism. Then you think, well, it actually becomes almost the same perverse incentive as cheap money, no? So what I think it's interesting, I saw this morning somebody shunned me a tweet saying, what do you think about oil prices soaring? And I said soaring to 30 is that this book here The Energy World is Flat was published when oil prices were 130 and we said that oil prices would sort of stop at around 50. And you know, what it's showing basically is that the long-term disinflationary effects of technology, of aging of the population and of the perpetuation of overcapacity in other sectors. So I think that long-term commodities are more likely to go lower in real terms than higher. Obviously with spikes like the ones that we're seeing right now. Well, so there's a couple of other assets which are actually very different, but people tend to hold them for similar reasons. And that's of course, gold and Bitcoin. Both of them are viewed as money in certain segments and both of them are viewed as a hedge against all the things governments and central banks are doing. So give us your survey of those two assets because I know a lot of our listeners today are interested in them. Yes, I mean, as an investor, you need to have gold. You need to have gold, not just because it works as a hedge to inflation or because of as a hedge to the debasing of the currency by central banks. You need to have gold because it's a decorrelated asset in an environment in which central banks are correlating assets too aggressively. We've seen in the past years fixed income and equities move almost in tandem. That is extremely dangerous. So you need to have gold. And the other thing is that, many people might say many things about gold, but the reality is that we have centuries of experience with the reality that gold is money, centuries. We don't have centuries of experience of the success of the euro or the yuan. But we know that gold is money and that in extreme circumstances, you need to have gold. Bitcoin is not the same. Bitcoin can be an alternative. Cryptocurrencies can be an alternative, but they're not an alternative yet. That doesn't mean that they won't be. And money, for something to be money, it needs to be a reserve of value. It needs to be a means of payment and it needs to be a unit of measure. None of those three things are things that you can attach to Bitcoin yet. But it is true that as we live in either in developed economies, we live in the US, in the UK and in the Eurozone, it doesn't matter. In developed economies, we can have the luxury of not looking at alternatives to fiat currencies because the pound, the euro, or the dollar are relatively stable reserve currencies. In emerging economies, people that are watching us right now from all over the world, they don't have that luxury. They know that every year, the purchase and power of their local currency is going to fall between 10 to 20%, depending on the craziness of their central bank. As such, as analysts in the West, we are ignoring the trend that is happening in emerging economies, which is that more and more, citizens have only two options to defend themselves against the destruction of purchase and power of their salaries and their savings. They cannot invest in complex products like we can do, et cetera. The maximum that they can do is buy some gold or buy some Bitcoin or other cryptocurrencies. That's why I think that cryptocurrencies are startup currencies. We go back to the book that we mentioned before by Hayek, the denationalization of currency. Before the internet even existed, what he was saying is that many of those currencies would end up disappearing because they were not general means of payment. So we need to start to understand which ones are going to be general means of payment to believe that they're going to be an alternative to fiat currencies. But the reality is that slowly but surely the demise of cryptocurrencies is not even in the agenda anymore. If you remember a couple of years ago, people were talking about, oh, these cryptocurrencies are not going to exist in six months time. Well, look at where we are today. So pay attention to it. I'm not an investor in Bitcoin, but I do understand that as a startup currency, it is a very, very interesting concept. Well, I want to go on this a little bit farther. There's an argument for holding cash, US dollars, for example, which tend to be a good thing to hold right now, a liquid asset, an asset that is improving relative to other currencies. And the argument against Bitcoin and gold that naysayers make, and I own both of those assets personally, but is that the only scenario under which gold or Bitcoin go to the moon is a scenario where you've got bigger problems. You have some sort of really severe economic collapse where you're going to have a, gold isn't going to be used anywhere to exchange for physical goods and services. I mean, so there's the, you know, and as you suggest that we shouldn't be too dystopic in our thinking, you know, maybe there's a middle scenario in there somewhere. And, you know, I'm struggling to understand this simply because in 2008, Daniel, we saw that all different kinds of assets could drop at the same time. Even assets that were supposedly counter cyclical to one another. And I just wonder, you know, we haven't seen gold drop. We've seen gold do pretty well. It's up in the 1700s now. Bitcoin is back up close to 10,000, but it was there a year ago before this crash. It's hard for average people to look at this and understand what's going on. Well, I think that, and the reason why it's very difficult for all of us, even people that are looking at markets all the time, is because in many cases, an asset that works as a hedge against fiat currencies drops because somebody has held it long and needs to sell their loans in an environment in which everything collapses. So we have seen, for example, how gold underperformed for a while because at the beginning of the crash because many people had to sell their gold because in order to generate some cash, you see. What I think is the US dollar will continue to be a relatively strong currency. And I wrote an article a few years ago talking about the US dollar as the new gold, but relative to other fiat currencies. And the reason why people want to hold on to US dollars is because they perceive that the purchase in power relative to their local currencies is going to be higher. And obviously because it's an easier means of payment than gold or silver or palladium. So what I think is that as long as the US dollar remains the world reserve currency and as long as the Federal Reserve continues to pay attention to global demand of dollars above and beyond what other central banks are doing which is disregard completely the demand of their currency. The US dollar will likely continue to be strong with gold and with Bitcoin which actually is what we have seen recently is that gold is up, dollar is up and that shows not necessarily a complete crisis, a complete depression which is what the person that was talking to you was thinking of but simply a stagnation environment. A stagnation environment is good for gold, is good for the dollar and is good for Bitcoin. You know, we've seen a lot of questions from our viewers today and of course they're all in different financial situations, different ages, different stages of life. What would be the low down, dirty version of Daniel Akae's protective program? In other words, what can people do to hedge or to protect themselves against all the uncertainty out there? Well, as an investor you cannot protect yourself against all of the uncertainty but what I would say is that there are three things that we have learned as investors in this crisis in particular is that the optically cheap assets are not cheap and they actually when the market is down they fall more and when the market is up they go up less. So the first thing that I would say as an investor is to avoid value traps. So those allegedly blue chips that look very, very stable and very big and that ultimately generate no value. The other thing that we have learned is that what we perceived as extremely expensive it is actually not that expensive. Look at the beautiful situation that we're living here with this conference, with this webinar. So technology is actually showing that its multiples were better justified than for example, the multiples of the autos or the oil sector. And I would say that to have a combination of gold a combination of investment grade fixed income and the reason why I say that this is because companies are going to do reasonably well in managing their balance sheet. They've done it in the past. To have a little bit of technology in equities and to diversify the portfolio with a little bit of gold a little bit of cryptocurrencies and exposure fundamentally to US dollar assets. That to me should work pretty well in a downturn. You know, we've seen some US federal government officials talking about, hey, don't run to the bank and get cash. There's plenty of cash, you don't have to worry. So of course that makes me want to run to the bank and get some cash and worry. I just wonder whether average people, to the extent possible, ought not to go out there and get $1,000, $5,000, $10,000, whatever they can muster and actually have some of that at home physically because you're not earning interest on it. There's no great loss here. And even if there isn't some sort of bank crisis where there's a shutdown, ATMs aren't working even if there's just maybe some inclement weather or a power out or something like that near you, it doesn't seem like the worst idea. Well, usually holding cash under the mattress, as they say, is a good idea when you think that there's going to be a very big risk of a bank run or a financial meltdown that brings banks to not be able to service their customers with money. Well, that's the last thing that we should be worried about. You'll be able to get all your cash out. Another different question is what will be the purchase and power of that cash. But I don't think that that is going to happen. If there's anything that central banks and governments are going to do at any cost in this situation is to make sure that the transmission mechanism of monetary policy in the banking system is unchallenged. And I think that it's, I mean, obviously, if you believe in a complete meltdown, you should not have dollars. You should not have cash. You should have gold and food and guns, maybe. I'm joking here. The reason why I'm saying this is that if you reach to the point in which the economy is so in such a level of collapse that it gets to that level, the first thing that the government would do with in order to avoid you using your dollars under the mattress is to change the dollars. The first thing that they would do as they've done in so many economies is to print them with a different, you know, instead of maybe Joe Biden's face instead of the founding fathers, I am joking again. And then make it unusable. You see what I mean? That happened in the past in many emerging economies. And so, but again, I'm coming back to the point that I was trying to make is we're not going to get out of the crisis in a complete meltdown. We're going to get in a stagnation Japanese style, in my opinion. Well, in a sense that's actually encouraging to me and maybe to some of our viewers that in your view anyway, we don't necessarily anticipate some great depression like crisis and that's probably as good as we could hope for given all the debt, all the malfeasance we've had in government and with central banks, you know, not just in 2008 since the 1970s and even prior to that. There's a lot of questions in the queue. I noticed two themes keep coming up so I'd like to get your takes on these silver. People are asking about silver and also people are asking about political action, you know, how people ought to participate politically, don't participate politically. You know, what sort of posture you take on politics? Yeah, silver. If you like gold, you have to like silver, but they're not the same. This is different, okay? As an investor, gold has very different qualities of hedge relative to numerous factors that silver doesn't have. Silver is more, you know, actually if you want to have something that is closer to gold, palladium makes more sense in my opinion, but again, you know, I like silver relative to many other asset classes and definitely relative to industrial commodities like copper. Political action, it's a very contentious issue. I personally decided to participate in politics. I remember thinking a few years ago what Murray Rothbard did and Mises himself did, just to participate in politics and try to influence from the inside knowing that all of the things that we believe and all the things that we know are not necessarily going to be implemented, but if we don't participate, the problem that we find in the libertarian and free market community is that we start being seen as utopians or people that basically talk of things that are like, I don't know, like things that that are never going to be implemented and that such, you know, okay, fair enough, you're pretty good at analyzing the problems, but you're not pretty good at giving solutions. That's why in every single book I have written, I always, at least I try to give solutions that are implementable. So I personally think that we have to be involved in politics, but again, I completely understand those colleagues and friends who say no, what we want to is to defend our ideas and be outside of the dirty world of politics, but obviously that is my opinion. Well, Daniel Lekai, I wanna thank you for your time on a Friday evening from Madrid. I wanna thank everyone who's been listening, watching from both the US, Europe and beyond. I think we have some people in Asia watching as well. We're going to send everyone an email, which will have a link to the video of this and also links to Daniel's Amazon page, to Daniel's Twitter, so you can follow him. He's one of the better followers on Twitter. I absolutely recommend him in terms of FinTwit and I just wanna thank everyone for joining us. I look forward to having many more of these webinars as events now that we're all at the moment anyway, it's not traveling. So thank you very much, Daniel, thanks to all of our viewers and everyone have a great weekend. Thank you very much, stay safe.