.greetings and thank you for joining us at futuremoneytrends.com where we hope to deliver to you actionable personal finance and income ideas for the new economy our guest today has some of the most insightful articles that are featured on Zero Hedge com he's the author of several books including a radical beneficial world automation technology and creating jobs for all editor of two minds calm Charles Hugh Smith Charles thank you for joining us Thank You Daniel it's a pleasure to be on your program yes I've read your work for years on zero hedge and it's a real pleasure to be able to speak with you I always set aside your articles or bookmark them that way I can spend some quality time reading them there they're very insightful so everybody listening to this it's a real treat and real pleasure to have you on the show today Charles let's let's start off with some of the bigger things that are going to play out over the next three to six months in the US economy we have the Fed hiking rates we have a new president we have DC probably more polarized than ever we have a debt ceiling that that maxed out on the fifteenth I've read your work for years now and you've talked about the unsustainability of our system is is perhaps the trump presidency the the time that this unsustainability will prop will finally reveal itself in the markets and the economy well Daniel I think that's an excellent question and it's a question I think a lot of people are asking both from a conspiratorial view that some feel that Donald Trump might be being set up to be the fall guy for the next great depression other people feel that he's fumbling the situation and will will cause the great depression through his policies I I don't think that either of those positions is is really getting to the heart of what we're dealing with here which is these deep structural changes in the US economy and the global economy and our reaction to those structural changes has been inadequate and and my proposition is the system as we now have it whatever you want to call it the status quo the state cartel version of capitalism we have it's it's not capable of responding positively to the kind of challenges we have because it's set up and it's optimized for the economy of 1946 through like 1964 in other words the post-war version of capitalism when government intervention seemed like a positive thing and and the Fed kind of was in the background and pulling a few strings but every dominated and the whole populace seem to benefit from the prosperity of those decades you know what when people think about what you know Trump ran on bringing jobs back do you think this is even something that could have happened and do you think that Trump truly believed that he could bring jobs back well that's it's funny that's that's a great question because it it talks it divides two important concepts one is what's actually possible in the real economy and and what do we believe that we can manage and I think that's it's really a great question because it's not just what Trump believes it's but it's what the everyone else in the establishment believes and it's what the American public believes right and are we drifting away from reality and perhaps all those players are drifting away from reality and I would say yeah I think that we're all many of us are caught up in this view that we can go back to the good old days and so to answer your question I think we need to introduce the topic of the fourth Industrial Revolution and this is not my term this is a term I've borrowed from other really smart people who see that the digital revolution which includes the Internet of mobile telephony just a little crypto currencies everything that's coming of age and in this time frame it's digital this is kind of the equivalent of the of an industrial revolution like say in 1840 when steam engines and locomotives and all that developed or say in the late 19th century when the the technologies of a recording sound and telephones and all that were developed and so we're where these forces are beyond the reach of of any government regulation like you can't really say well we're going to create jobs by Fiat in this industry right it doesn't work like that so the problem is that robotics and AI software and marc andreessen famous phrase are eating the world in other words they are replacing low-end low-skilled labor and so the jobs that are being created require a lot higher level of not just education that that's the cliche everyone says well let's just get more education no it requires a whole higher level of soft skills in other words you can't just teach somebody to code and then drop them into the economy and expect them to to prosper they actually need a bunch of soft skills they need to be able to collaborate effectively they need to be able to communicate effectively these are skills that are more difficult to teach than just some technical skill and so we have this huge mismatch between the population that we have at a certain level of skill sets and in the needs of the fourth Industrial Revolution economy or what I call the emerging economy those are those are different and so we're going to have a massive realignment where a lot of people are saying I can't find a job but it's because they're not qualified for the work that's out there so in this transition what is the best response for the individual is listening to this show let's call it let's maybe perhaps address the two larger generations two largest generations the Millennials and the baby boomers each of them in a totally different scenario here what is their individual solution what is their individual navigator in this transition oh well that's a great question um I wrote a book a year or two ago called get a job build a real career and defy a bewildering economy and the bewildering economy part is you know part of our economy is the old system right a bunch of cartels like Big Pharma or the national defense industries or to me higher education the whole college university structure is like a cartel right they set the they have price setting there they have no competition really and so we have this old part of the economy that's that's basically controlled or managed by the central government and then we have the new economy you know the Google and the you know the Apple and Netflix and hundreds of other companies that are disrupting at the edges at least some of this the existing old style cartel state economy so it is bewildering because there are people that go to work for the government and and if you have a nice secure government job and you're looking out at the the economy going well what's the problem here I've got a great you know great benefits package I'm going to retire with a guaranteed pension and that point of view from that kind of inside the fiefdom if you will looking out over the battlements at that the economy that the non-government sector has to struggle with and they they they don't get it and so that the wildering part so that the answer is you we're all going to have to embrace technologies and and learn to use them and and so that skill set is what is still valuable so for instance by some of my contacts are in the oil services industry they're making pipe fittings and equipment for the oil and gas sector and so they are using high-tech tools right and so they need people employees who know how to use these tools and so I think that's a that's a hands-on example but of course there's lots of digital examples of that that that the machines can't do everything and humans are more adept at certain things and we have to exploit those as individuals so does the transition have to have some at some point some sort of implosion of the old system or can the new system with digital technology and innovation sort of outpace government inefficiencies and in the unsustainable trajectory of what the government has done to our economy can can this tsunami of debt and fraud be overwhelmed by a larger tsunami of technology and innovation well that's a fascinating topic because we see we see the forces you're describing a winning and losing depending on the sector say for instance within the you know cab industry or the carshare industry uber and and all these these startups they're certainly disrupting the old model but when it comes to the really big systems national defense you know the Pentagon spending health care which is almost twenty percent of our economy higher education you know trillion-plus student loan debt these huge uh you know cartels they have so much political power that they are going to fend off and fight to the death any any actual disruption so it's gonna I don't I don't see any path forward because they're not going to relinquish their power wealth and income it's just why should I you know I mean we've got this thing wired and they can buy the influence in Washington to protect themselves and so I think it's going to have to be a the internal contradictions in this old decaying system have to cause it to implode and only then will we be able to really and enable the digital revolution to to hit like higher education um health care excuse me and the national defense industries Charles I want to ask you about the crypto currencies if you thought Bitcoin perhaps was paving the way would be ultimately a sacrificial lamb maybe like the AOL or yahoo but really just paving the way for the real digital currency that's going to lead the way to the to the future yes Daniel I think I think you've pegged it perfectly and I think a lot of people in the cryptocurrency space have reached the same conclusion that you have that the problems that bitcoin is experiencing which for those people who aren't that experienced about the crypto currencies bitcoins basic structure limits the number of transactions that can occur and as it's become more popular and more widely used then it's straining the boundaries of the Bitcoin protocols and so I think the the other interesting things and I'm an amateur in this system I don't claim any expertise I'm just like everybody else constantly reading about it trying to educate myself about a very fast-moving industry the blockchain technology that underpins Bitcoin has much broader uses and so that this is why athyrium for example or dash these other cryptocurrencies are are more than just a currency they're actually like an entire business platform and so it's pretty easy even for an amateur like myself to look ahead and go gosh well that that's the future right is um is a cryptocurrency the super cryptocurrency or Bitcoin two or whatever we'll call it will integrate into a whole business platform and that will enable not only faster transactions but different kinds of tracks act transactions such as smart contracts that Syrians trying to implement well certainly having like a known promoter and and founder I've always thought you know I talked with a you know baby boomers or even Gen Xers I mean if it was a Microsoft digital currency or amazon digital currency or Apple or whatever they would adopt it in a second but because it's so mysterious and so on the outskirts you know it's it's very difficult for many people to to even give it a try right right and um the other thing about bitcoin is yeah those those flaws you mentioned are part of its appeal actually is that it's decentralized and it's um it's under the control of these Bitcoin miners who are just basically it's a decentralized thing that some people are have come to dominate that process so it may be that we that we see that crypto currencies subdivide out to serve a variety of needs in other words Bitcoin may survive if the if it doesn't hard fork another split into two camps it can remain slow and awkward but it still may have a store of value because there's only 21 million bitcoins can be created and I think we're up to about 17 and a half million now and so it may it may serve a role as sort of a cryptocurrency that you can count on to hold its value because it's um has a scarcity value well the other newer currencies will be more the ones you use for your actual business transactions and you mentioned the big technology companies and it just a couple of weeks ago they announced a number of these i think it was google and microsoft announced a collaboration on the etherium platform oh so they sort of picked etherium as the most likely winner here and of course that their IAM quickly went from like ten / token 230 or something so it's it's it's early days though and somebody there could be a currency that comes out of nowhere and if it if it functions without the limitations of all the other currencies it could be the winner and I know some some of my software contacts that know a lot more about it than I do they favored ash and i can't really i'm not an expert so i can't really tell you y dash is better than the etherium but i think i can say that each of these crypto currencies may serve a slightly different audience and needs and so it may be that we have a half dozen major crypto currencies each serving a slightly different need and that would be fine as long as we can convert easily between them and our fiat currencies that may be the wave of the future sure and the dollar is to a certain extent already a digital currency would you agree with that yeah absolutely I mean I what's the total money supply and then how much is in cash I think total cash is a trillion globally and the money supply of dollars is is an order of magnitude above that oh yeah that's interesting you know just there's so much resistance to some of these new innovative ideas but really people don't realize they're sitting on digital currency anyway already when it comes to the banks and the both the central banks and the larger banks like JPMorgan do you think that they will pretty much reject this for as long as they can or do you think they'll you know in the near term if I probably had adopt the digital currencies because they see that it is the way of the future especially with the Millennials yeah I think I think you're right and at least anecdotally die I don't know if this is actually true but there was a new some time ago that Goldman Sachs it supposedly pulled some patent applications on their own version of the blockchain I think the smart money globally is realizing that that the banking industry is going to be disrupted at least at the margins by by the crypto currencies in the blockchain so it's either embrace embrace that or die and the question is what can the banks do to generate a transactional revenue because that's the beauty of the crypto currencies is like I myself I paid some some people that were translating and editing my book in South America i paid them with Bitcoin and the transaction costs are negligible compared to going through the banking system where you've got a $35 fee for this and then you know another fee for that and and so there I don't think I think the banks are going to lose a lot of transactional income and their I'm not quite sure what they're going to do to compensate for that because the whole idea of the block chain and crypto currencies is it lowers those transactional costs tremendously a last question for you sir on any time we talk about the economy or crypto currencies investments come come up you know people with or the 401k right now perhaps the company gives them a match do you have any suggestions or non license advice so everybody knows that you're not a financial advisor giving them individual advice but do you have any broad suggestions for people who are looking to either perhaps change their investing that they have currently or make new investments uh that that would prosper in the new economy yeah I think I think that's an excellent question um Daniel in that I I would answer it like this I would frame it in this fashion we all know that assets classes like stocks bonds and real estate have all been tremendously under the influence of these central bank policies of quantitative easing and purchased direct purchases of assets and lowering interest rates to near zero and so that if you believe leave that that's sustainable forever and ever then you can kind of stay in those bubbly assets but if you foresee the potential that that's that's not a trend that's sustainable forever and ever then you're going to start looking at asset classes as what's exposed to a reset what's exposed to a a price discovery when the central bank's either withdraw this kind of support or it reaches the point of diminishing returns where as the markets no longer responding to this kind of stimulus and that reset of course would probably mean repricing downwards because we're a lot of these assets are priced to perfection and so let's say for instance inflation kicks up not to two percent but to five or ten percent which is now considered impossible well that's going to have a dramatically negative impact on stocks bonds and real estate all these assets that are near their price to perfection so I would say I personally and this is not advice just what my strategy is I'm looking around for passive investments that are have lower exposure to this kind of repricing or resetting evaluations once the central bank's either withdraw stimulus or no longer works and so you go well what is that and you go well that's that's a question everybody has to answer for themselves but obviously if you own an orchard and it produces X amount of fruit and it has a certain market value then you may not be able to control the value of that underlying land right it could bubble up or it could crash but you're still going to have a product that you can sell in the market that there's a need for that so that's kind of way approach you know by the income stream and don't worry about the asset if you're relying on the asset price for your wealth that's that's an iffy proposition but if you're fueling an income stream that that's in demand and you don't really care so much about what the valuation set by the market is at anyway one moment it's a great point great advice Charles Hugh Smith of two minds calm thank you so much for your time I really appreciate it hope to have you back on the show again soon sir I'd love to and I really value your questions very insightful easy to answer thanks thank you [Music]
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