Why Buffett Will Never Buy GE & Economist Dr. Lacy Hunt


Male: Broadcasting from Baltimore, Maryland
and New York City, you’re listening to the Stansberry Investor Hour. Tune in each Thursday on iTunes for the latest
episode of the Stansberry Investor Hour. Sign up for the free show archive at InvestorHour.com. Here are the hosts of your show, Buck Sexton
and Porter Stansberry. Buck Sexton: Hey everybody. Welcome back to another episode of the Stansberry
Investor Hour. I’m nationally syndicated radio host, former
CIA analyst, and semi-professional bacon chef Buck Sexton. With me here today, the founder of Stansberry
research, Mr. Porter Stansberry. Hello good sir. Porter Stansberry: Buck, and that reminds
me. We slaughtered two of our Berkshires and I
have some home-grown bacon that I would be happy to share with you. Buck Sexton: That sounds amazing and I would
like to thank Doc Eifrig from the last podcast for sending me his wine. This podcast, you’re sending me bacon. Hey, Country Club Guy, what do you got for
me? You got some good gin or something? Come on. Country Club Guy: Actually, I do. I have a lot of gin. Porter Stansberry: He’s got a new boat gin. Country Club Guy: Mm-hmm. The back of the bottle is flat so you can
lay it on the table and not worry about it falling over. That’s what I did last weekend. Porter Stansberry: Genius. Buck Sexton: Jamison may be named for whiskey
but I know he’s a gin drinker. I can tell when I see one. So anyway, let’s get into all the latest
here. Today in the show, we welcome from the great
state of Texas, Dr. Lacy Hunt. Dr. Hunt is an internationally-known economist
and Vice President of Hoisington Investment Management company, an Austin-based firm managing
nearly $6 billion for pension funds, endowments, and insurance companies. Lacy is the author of two books and his articles
appear in Barren’s, the Wall Street Journal, the Journal of Finance, and the Journal of
Portfolio Management. In our last episode, you heard Porter refer
to Dr. Hunt’s work discussing the effective concurrent, consumer, and corporate debt loads
on inflation and economic growth so we’re happy to have him here with us to talk with
us about his current view of the markets and economic environment. And with that, Mr. Porter, GE. Porter Stansberry: Yeah, let’s talk about
GE. The big rumor on the street is that Buffett’s
going to buy GE and I want to take this on because I think it’s really funny and it’s
the way that – Buck Sexton: Because he may have heard the
Buck bought some GE, like a few dozen shares of it. Porter Stansberry: [Laughs] Yes. Well, that was much earlier this year or … yes. Buck Sexton: That’s true. Porter Stansberry: Earlier this year or earlier
last year? Buck Sexton: Yeah. Earlier this year. Earlier this year. Yeah. Porter Stansberry: Oh, boy. Buck Sexton: I sold it. Porter Stansberry: Yes. Well, you should have read one of the dozens
of essays I’ve written about GE over the past 20 years warning folks that it was in
a debt-driven death spiral but you didn’t, Buck, and you learned a lesson. Buck Sexton: I did. I did. You burn your hand on the stove, once, it’s
not your fault. Porter Stansberry: So two things about this. First of all, let me just back up for one
second and tell everybody, the guest we have on the podcast today, Dr. Lacy Hunt is someone
who is incredibly important and whose ideas have been completely ignored by the major
mainstream macroeconomic community, but his ideas have become more and more influential
in the financial community. So this is not the kind of economist who writes
textbooks. This is the kind of economist who guides lots
of billions of dollars of investing and he has been very successful [laughs]. So one of the things you very rarely see is
a rich economist because as Buck points out, economists have an awfully hard time predicting
the future, but not this economist. So this economist manages $6 billion or $8
billion personally and advises hundreds of billions of dollars, maybe trillions of dollars
globally. So I would urge everybody to listen carefully
to this interview and I’ll give you a warning. I expect the conversation to be a little more
technical than I would wish. I’m going to try to keep it in terms that
everybody can understand but you’re dealing with a guy who spent his entire career studying
data and macroeconomic models. So it’s not going to be as plain English
as we would like. I hope that you will listen carefully and
try to get something from it. Now, about GE, I’ve written about GE for
so long and we had a great discussion on the podcast about GE recently. I forget what episode it was but I’m sure
someone can put a link into it. The problem with GE was really simple and
also magnificent because GE took every single accounting angle, every single game you could
play with debt and share count. They took it to the absolute largest extreme. So let me give you an example. One of the things that happens when you have
an economy like ours that’s based on paper money and where interest rates are set by
the central bank and manipulated heavily to the benefit of asset holders, you have a big
gap in the yield curve. And GE exploited that gap more so than any
other business in the world. So Buck, what is the largest scale, highest
interest rate lending environment that exists in our economy? Where do people borrow the most money at the
highest possible interest rate? Buck Sexton: Payday loans. Porter Stansberry: Oh, you got me. GE did not do payday loans. But there’s not a lot of volume there. I want to talk about large volume. $1 trillion in outstanding loans. Buck Sexton: Corporate debt? Porter Stansberry: No. Credit cards. Buck Sexton: Oh, okay. Close enough. Porter Stansberry: All right. So you’re talking about annual interest
rates on GE’s book of credit-card debt of around 20 percent. And nobody knew that GE was in the credit-card
business because they would have fronts. So they would buy the credit-card receivables
from Target, from other retailers. I happen to know Target because it was a big
particular credit-card deal I remember. Okay. So they had credit-card debt, high yield credit-card
debt they would buy. They would also buy a lot of subprime auto
loans and eventually, of course, they got into subprime mortgages as well and again,
they went to extremes. They’re not just doing subprime lending
in America. They’re doing it in Poland [laughs]. They’re issuing mortgages to Polish borrowers
on Polish property but they’re using the Swiss franc as the currency. What could possibly go wrong, Buck? Any ideas? So you just saw them take every financial
gain they could to an extreme. Meanwhile, on the funding side, where do they
get the capital? Well, again, they went to the extreme. They funded billions and billions and billions
of these investments using 30-, 60-, and 90-day loans that they had to constantly roll over. And this all was how they monetized their
triple-A rating. People thought that GE was in the business
of building light bulbs and dishwashers and plane engines. They weren’t. Those things existed to earn a triple-A credit
rating and all of the money they were making was coming from the exploitation of that triple-A
credit rating. And it was clear to anyone who bothered to
look at the business that all the money they were making came from finance. So that worked great from the early 1990s
all the way until about 2007 as that credit bubble built and built and built and then
burst. So by the year 2000, GE was the largest publicly
traded stock in the world, and had the largest market capitalization. But almost all of its profits were coming
from financial gimmicks, not because they really had great businesses. And this enormous increase in debt made a
hero out of Jack Welsh but all he did was borrow more and more and more money. And it worked great as long as that financial
bubble was building and the moment it crested and turned over, GE was cooked. So here’s an interesting question for you. If you looked at the ten largest sovereign
buyers in the world, so entire countries that have the power to tax, GE was number 10 – [Laughter] GE. Right? A publicly traded private business. Made no sense. And so they are still suffering the hangover
from this gross success and I would argue, as I did in 2010 and 2011 and 2012 and as
I warned about it starting as early as 2002, that there is no way this company is actually
solvent. It may be liquid still because they can still
borrow money to pay their bills but it is not solvent. If you were to liquidate the entire company,
what you would owe would be worth more than what you owned. And of course, their accounting did not reflect
that as I showed for many years, and still doesn’t. But the truth of the matter is, they’ve
sold all of the stuff they can sell and what they’re stuck with is the problems. The idea that Buffett’s going to come into
that morass is crazy. GE can’t earn enough money right now to
pay its bills. It’s going to have to do another equity
financing. It’s going to have to dilute its current
shareholders. There is no way Buffett is going to buy this
stock. No way. 0 percent chance. Buck, that’s the company you bought. Smart decision. Buck Sexton: And sold, I will have you know. Now I just can’t think of the show, what
is it, 30 Rock the same way because they have a character based on Jack Welsh and he’s
supposed to be this finance genius guy but apparently not. Porter Stansberry: It’s interesting about
Jack Welsh. I really don’t know at the end of the day
if he really even understood what was happening because he wasn’t the guy who was running
GE capital. There was another guy and I can’t remember
his name right now. Country Club Guy I’m sure can pick it up
for us. But if you guys remember from the early 2000s,
the guy who ran GE capital was involved in a divorce and at the time, it was the most
expensive divorce in history. So when a guy working for you is paying $300
million to divorce his wife and you’re an executive at a publicly traded private business,
what the hell is going on? How did an employee make that much money? It’s just nuts. And the answer is because GE Capital was delivering
all of GE’s earnings and they were playing all kinds of games, which are now under SCC
investigation. But here’s what they would do, Buck. They would say to somebody, “Hey. We really want you to buy some of our airplane
engines,” and the guy would say, “Well, your airplane engines are really expensive
and Rolls Royce is over here in Europe and I was thinking I was going to buy their engines.” And GE would go, “No, no, no. Don’t do that. We’ll give you all the money that you need
to buy those engines.” “Well, what do you mean?” “Yeah. Well, we have this thing, GE Capital, and
so we go and borrow money in a 60-day paper market. We pay like a point and a half and we’ll
just give you all that money that you need and we’ll keep borrowing to make sure that
the loan doesn’t get called so you’ll be fine.” “Well, are you going to give me all the
money?” “Yeah. I’ll give you all the money.” “Well, then I’m going to buy your aircraft
engines.” “Okay. Great.” Now, those aircraft engines get sold and get
booked as a profit to GE but where did the money really come from? GE Capital. Okay, now how is that loan structured? Well, that’s where it gets tricky. It’s not structured as a loan. It’s structured as a long-term service agreement. “We’re going to provide service on those
engines for 20 years and that’s our price to do that. It’s just a loan to buy the engines.” All that stuff has been papered over and lied
about and I know about it because people at GE reached out to me when I was talking about
how much leverage they had, they said, “You don’t know the half of it. You have to look into these service contracts.” And do you know the regulator that finally
caught the real corruption at GE was a Kansas insurance regulator? Now, let me just point out to you that I don’t
think the sharpest minds in finance are working as a regulator at the Kansas insurance department. No offense to folks from Kansas. I’m just saying that that’s not where
all of the world’s hedge funds find their sharp minds. So my point to you is if it took a regulator
from Kansas’ insurance department to finally blow the whistle on GE, imagine how many people
in New York were in on this in some way or another. Either their banks were lending GE money or
they were financing these agreements or they were getting commissions on these sales. GE was the largest company in America and
its accounting is complete bullshit. Complete. How much did Jack Welsh know? I really don’t – I have no idea. I don’t know. The only time I ever had a conversation with
Jack Welsh was at a play or a musical, rather, in Manhattan many years ago. Almost 20 years ago now. Do you guys remember The Producers? It was the hot show in New York for a season
and – Buck Sexton: Matthew Broderick was in it. Yeah. Porter Stansberry: Matthew Broderick. Yes. And the heavyset gay singer and dancer. Nathan … Buck Sexton: Lane? Porter Stansberry: Nathan Lane. Yeah. It was a great show. Anyways, that was right around when I started
my own business and I had some cash in my pocket for the first time ever in my life
and so I took my wife for a fancy holiday weekend in New York and we saw the show and
I got us good seats. Anyways, Jack Welsh was sitting next to us
and so at intermission, we all got up to use the facilities and I ended up in line directly
behind him. And I don’t know if you guys have ever seen
him but he’s about 4 feet tall. [Laughs] I’m not kidding. And I’m not small. So I just felt like I was towering over this
guy and we’re crunched into this line in a bathroom and it’s a little awkward when
you’re going to the bathroom and you’re smashing sardines and everyone’s trying
to be polite but it’s too crowded and you keep bumping into the guy. And I finally, I’m basically knocking him
over because someone was pushing me from behind and I just looked at him and I said, “Jack. This must be one hell of a show if you’re
in line to pee,” and he said, “You got that right.” [Laughs] That’s the only reaction I ever
had with Jack Welsh. But just the idea that Buffett’s going to
step into this situation and buy it when it’s under FCC investigation and he knows it’s
accounting is a bunch of a bunk, there’s just no chance. Buck Sexton: You know he was tight with Obama,
right? I remember that. There were a few CEOs. I think Berk who was the head of Comcast. He was very tight with Obama and wasn’t
Jack tight with Obama too? Porter Stansberry: Yeah. We used to refer to GE as the for-profit wing
of the Democratic Party. Buck Sexton: Right. I just would wonder if you were to look back
at it now with more of the truth out there and more of a recognition of what really happened,
how much favoritism in terms of policy was doled out? Porter Stansberry: Oh, sure. Like I said, when the Kansas insurance department
is the guy who catches the $15 billion fraud at GE, which is only one of GE’s problems
[laughs] – that’s an enormous fraud. Think about this for a second. Right? Enron was the largest bankruptcy of the time. That was $60 billion. That’s a whole company going bankrupt. We’re talking about $15 billion in losses
and fraud from one insurance product at GE, which at one point, had $600 billion in financial
investments. The scope of what went on at GE, we are nowhere
near knowing. We may never know and how many investigations,
how many inquiries, how many problems got squashed because Immelt and Obama said, “Let’s
not bring that up now. We’re in the middle of a financial crisis. We need to sweep that under the rug.” I don’t know but I’m sure there was a
lot. And who knows? Maybe a subscriber or a podcast listener,
maybe someone’s out there. Because as you know, Buck – Buck Sexton: You remember when – Porter Stansberry: There’s no way to hold
this conspiracy in forever. Eventually, it unravels. It comes apart. Everyone starts pointing fingers. The truth comes out. Buck Sexton: GE has the 57,000-page tax return
back in 2011, right in the middle of the Obama administration, if you recall. 57,000-page tax return, zero taxes on $14
billion in profits. That’s pretty amazing. Porter Stansberry: That’s pretty amazing. They also had, if you recall [laughs] it wasn’t
enough for Immelt to fly around the world all the time on a gigantic Boeing corporate
jet. Right? He had to have another one behind him. Buck Sexton: That’s like Saudi royal family
stuff right there. That’s big time. Porter Stansberry: Well, there’s an extra
plane that follows me wherever I go just in case there’s a problem and I can’t be
delayed. Buck Sexton: Is it an F16 just in case things
get spicy up there? Porter Stansberry: I don’t know. I don’t think so. I think it was just some kind of another corporate
jet. I don’t know if it was another Boeing or another
Gulfstream. But just think about the imperial attitude
of these people. Do you think that anyone was thinking about
the shareholders at that company? Anyone? Did you find the name of the GE capital guy? Country Club Guy: George Wendt? Porter Stansberry: George Wendt. Yeah. Yeah. Country Club Guy: Well, do you find it ironic
what Jack is doing now? He’s Jack Welsh, Management Institute, MBA
program. You know what the slogans are? Become a great leader and help your company
win. He’s teaching others. I’ll sign up tomorrow. Buck Sexton: I also think that GE, probably,
Porter, was able to get away with a lot more of the stuff you’re talking about for a
long time because it’s GE. People think of it like – Porter Stansberry: Good things come to life. Buck Sexton: They’re a bunch of guys – Porter Stansberry: What I liked was that my
buddy Jim Grant, fantastic newsletter writer, he pointed out that for many years, GE’s
corporate slogan was, “Imagination at work,” and he was like, “Well, at least in the
accounting department.” [Laughter] So here’s another thing I want to point
out to you guys. This is a little controversial and I think
there’s a lot of people out there who would argue that this is not the right way to think
about things. But it’s always occurred to me that if a
guy can’t be honest with his wife or if a guy’s personal life is sort of always
in shambles, that he may not be the person you want running your company. I understand – I’m going to argue that
there’s no real difference between public ethics and private ethics. And Jack Welsh, just the stories of him interviewing
that woman and cheating on his wife and all that drama right when he was putting out that
book From the Gut, all that stuff – Country Club Guy: Well, it’s OK because
he ended up marrying her. Porter Stansberry: I don’t know if it’s
OK or not. It just occurs to me that a lot of times,
people that have a hard time managing their private lives also have a hard time managing
fiduciary obligations. That’s my only point. And listen, you’re never inside someone
else’s marriage. You can’t know what’s really going on. But when you’ve had four of them [laughs]
let’s just say the odds are the problem wasn’t with the woman. Just a thought. Buck Sexton: This week on the Stansberry Investor
Hour we are joined by Dr. Lacy Hunt. Dr. Hunt is an internationally known economist
and executive vice president of the Hoisington Investment Management Company, an Austin-based
firm managing nearly $6 billion for pension funds, endowments, and insurance companies. Lacy is the author of two books and his articles
appear in Barron’s, the Wall Street Journal, the Journal of Finance, and the Journal of
Portfolio Management, just to name a few. He also spent time as chief U.S. economist
for the HSBC group, one of the world’s largest banks and is an honorary life trustee of Temple
University. A native Texan, Dr. Hunt has served as senior
economist for the Federal Reserve Bank of Dallas. Please welcome to the Stansberry Investor
Hour, Dr. Lacy Hunt. Porter Stansberry: Dr. Hunt, Porter Stansberry
here. Thank you so much for joining us. I want to introduce you to our audience by
telling a story that’s weak in details about your general investment philosophy, so please
forgive the quick summary. I know I’m skipping over lots of nuances. But folks, the reason why Dr. Hunt grabbed
my attention is he has had a long-term bet and a huge investment in the very long end
of the sovereign credit yield curve. So for decades, he and his investment firm
have been very well known for owning the longest-term U.S. debt that you can buy and they have ridden
that investment all the way from when yields were very high. Dr. Hunt will have to fill in the details
about this but over 10% annually to where they are now and I – again, Dr. Hunt will
have to forgive me for not knowing the exact details – but where these yields and long-term
debts got down to around 2%. So those are enormous gains. He’s done very well for investors and he’s
done so in probably the most contrarian way I can imagine by developing an economic theory
that says that as economies become over-leveraged and over-indebted, that additional stimulus,
that his additional government debts do not actually provide further economic growth. They retard it. And that has allowed him to confidently stay
at the far end of the yield curve where any outbreak of a large inflation would be devastating
to his investments. Dr. Hunt, can you please, in the most easy
and least technical way possible, tell our audience about how you became convinced that
long-term interest rates and long-term inflation was going to decline and how you’ve been
right and why you stuck with it for so long even till today? Lacy Hunt: Well, I’ve been trained. I was trained in classical, neo-classical
economics and long ago, I was introduced to the Ricardian equivalence theorem. David Ricardo was one of the great minds in
economics. Probably did more to establish economics as
a profession than even Adam Smith. But Ricardo was asked back in the 1820s whether
it would have been better to finance the British wars with Napoleon by raising taxes or borrowing,
issuing debt to cover it. And Ricardo thought the matter through and
he concluded that they were the equivalent. Either way, you either tax the funds from
the private sector or you borrow the funds from the private sector. Now, Ricardo was candid enough to say that
he didn’t know and there was no way that we could empirically test whether Ricardo’s
proposition was right. The economics profession follows Ricardo all
the way to 1936 when J.M. Keynes reverses Ricardo and he advocates that there is a significant
multiplier, that if we engage in deficit financing to both tax cuts or expenditures, that we
will have this multiplier where $1 of deficits will boost GDP $4 or $5. Keynes was not candid to say that he didn’t
really know and he could not answer the question, because at the time, we didn’t have the
statistical techniques and a computer capacity that we do today. But as a result of ability to create long-running
statistical theories, analyze them very quickly, and test them using sophisticated methods,
in my opinion, the academic research is unequivocally clear that Ricardo is right and Keynes is
wrong, that there is basically no benefit engaged in deficit spending or financing of
other government activities with tax cuts. And in fact, I myself have published information
that shows that if you are late per capita changes in GDP to per capita changes in federal
debt, that basically what you have is essentially a flat line. Actually, the line is slightly negative. In other words, we lose something by engaging
in the process, but essentially Ricardo is right. And so the other side to this question is
that not only is there no benefit other than for perhaps, a very fleeting period of time,
a buildup of debt has to meet very stringent tests. Debt is an increase in current spending in
exchange for the client and future spending. Now, the debt can be successful and be profitable
to those that engage in it, to the economy as a whole, but it has to generate an income
stream to repay principal and interest. And if debt does not do that, as you move
to higher and higher levels of debt, you will produce weaker and weaker economic growth
and that’s another consequence that we have – the academic studies show that when debt
rises, when government debt rises above 90% of GDP for more than five years, that the
economies lose about one third of their trend rate of growth. Well, we moved about 90% a long time ago. We’re currently at 107% before the end of
the next decade because of the debt finance tax cuts and this mammoth budget that was
just this mammoth bipartisan budget that was just enacted, our government that is going
to be approximately 120% substantially higher than it is today. The academic research indicates that when
you’re at these high levels, economies lose about one third of their trend rate of growth. From 1790 through 1990 when we moved into
these high-debt zones, the per capita GDP growth was about 2.1%. We should have moved down to a trend rate
of growth of 1.4. However, we’ve dropped even more than that. The trend rate of growth now is only about
1.1%, but there was an outstanding academic study led by Dr. Phillip Rother, who’s head
of the fiscal affairs department of the European Central Bank, that when government debt moves
into these high zones above 80 to 90% of GDP, that the effect becomes non-linear, that you
lose growth at an even faster pace. So debt is very detrimental. There’s little, if any gain, over the near
term, and the buildup of debt cuts into economic performance. Now, in just the past several months, I thought
of another way and a simpler way of expressing the problem, and that is to use the law of
diminishing returns, which you start with an economy’s production function and production
is a function of the factors of production or inputs that would be labor capital natural
resources. And what the law of diminishing returns says
is that if you increase one of the factors, let’s say debt capital, substantially, in
the beginning there will be increasing returns to scale or output will rise very rapidly. But as you continue to make disproportionate
use of debt capital, the returns will start diminishing. Then they will flatten out and then they will
go negative. And I believe that this is the more comprehensive
way to now look at the problem, and what it suggests is that we’re on the path to economic
decline. It will occur gradually and there may be some
cyclical interruptions, but the trend is not a healthy one at all. Porter Stansberry: Dr. Hunt, I’ve got to
ask you the obvious question. Because when I first heard you explain this
thesis and show this data, I was really off struck and shocked by it and it makes so much
sense [laughs] and the data is so convincing that immediately, I begin to wonder why haven’t
more people thought of this before? And for me, the big breakthrough came after
the enormous monetary stimulus of 2009 when I saw that the Fed was buying up huge amounts
of Treasury notes and bills and bonds, I, like so many other people thought, “Oh,
my lord. This is going to be very inflationary.” And I expected to see negative returns in
the bond markets and as you know, that’s not what happened. The long bond has rallied considerably since
wherever the highs were and yields maybe in 2012 or so. And then you saw yields go to new all-time
lows since, and I imagine that you were still along those instruments and have done very
well with your investments. But the question I have for you is: What is
the difference between the kind of financing that we have engaged in in America and the
kind of financing that they have engaged in in Zimbabwe or in Venezuela? Why has the increasing amount of government
debts and the monetization of those debts through the central bank not resulted in a
loss of confidence in the currency and in runaway inflation? Lacy Hunt: Well, that’s an excellent question. There is an outstanding model, which is used
in all of the leading macroeconomic textbooks of money supply determination, bank credit
determination. It was developed by the late economists Karl
Brunner and Allan Meltzer. And what they were able to show is that the
money stock M2 is equal to the monetary base, which the Fed controls, times the money multiplier. Now, the Fed does not control the money multiplier. The money multiplier is dependent upon an
algebraic set of known determinants: the excess reserve ratio, the currency ratio, the time
deposit ratio, and the Treasury deposit ratio. And what happened, the Fed expanded the balance
sheet by four times but the money multiplier, which is an equal partner with the monetary
base in the money and credit determination process, fell from roughly nine to three and
money supply growth did not accelerate. We saw this same pattern in the Great Depression. The Fed can inject the excess reserves into
the system but the banks have to have the capital and you have to have the unleveraged
balance sheets in this household and business sector to be able to absorb more debt. And so the base quadrupled but money supply
growth basically remained around the trend rate of growth from 1900, which is around
just slightly below 7%. There were few times when they were able to
get it up a little bit but then it fell below trend and so money supply growth did not accelerate. But money supply itself does not determine
GDP. You have to take into account what – the
speed at which money turns over, the velocity of money. Keeping in mind that the money multiplier
and the velocity of money are different concepts. And so money supply growth was basically at
trend in this expansion but the velocity of money fell to basically the lowest level since
the 1940s and velocity is not a very well understood concept and there are many, many
factors that influence it. But the overriding one is the productivity
of the debt. In other words, if the loan is made to someone
and the loan generates the income stream to repay principal and interest, then the velocity
of money will be stable or will rise. But the decline, the massive decline and the
velocity of money was another consequence of the fact that we were extremely over indebted. And so the – when you become extremely over
indebted, not only do the debt policies not work other than for a very brief period of
time and then they create this longer term drag but highly leverage economies, monetary
policy become asymmetric. When the Fed tightens, as they are now, in
fact, the extreme leverage facilitates the damage that the Fed can do to the economy
and I think we’re going to see that as this year plays out. But when the Fed is trying – the Fed’s
tools are extremely ineffective, extremely ineffective in the current situation. And that will remain the case, unless, of
course, we revoke the Federal Reserve Act of 1937. The Federal Reserve does not have the ability
to print money. They do not have the techniques to print money. They do not have the mechanisms to print money. They can increase the monetary base at will
but that’s not tantamount to increasing the money supply. Their skills, however, are still intact. And in fact, their skills are intensified
whenever they are engaging in a tightening process. And the reason their skills are intensified
is that when an economy is heavily […], a small increase in interest rates results in
a substantial increase in interest expense. So the indebtedness has many consequences
and as time goes by, the extreme over indebtedness results in some longer term problems. The growth rate comes down. Family formation, population growth, the birth
rate are all very sensitive to economic growth. So we see historically in Japan and other
cases that the growth rate comes down in the face of too much debt. Then, you get a baby bust, a household formation
bust, a population growth and that serves to reinforce the weakness. Another consequence, another symptom of the
extreme over indebtedness is that the productivity falls. And that’s happened. If you go back to 1950 when the quarterly
data start, the productivity has grown by about 2.1% per annum. The latest five years is the lowest five years
of productivity growth since 1952 when the data originates. And then the weakness in productivity then
undermines the standard of living, which is a real disposable per capita income. And if you look at the 10- year rate of growth
there, it’s now under 1%. It’s historically been 2.1% per capita terms. So the standard of living erodes and then
that reinforces the negative demographics and the economy goes into a long-term funk. And so this expansion, it was a long-running
one but it was the least satisfactory to people, to their hopes, their aspirations. And the debt was the center part of the problem. Porter Stansberry: Dr. Hunt, I want to get
to one other big idea big topic besides the negative money multiplier and the likelihood
of weaker economic growth going forward. And that is, I want to explore two topics
that are related. I want to know what role you think paper money
as opposed to a gold back system has played, if any, and the widening of the wealth gap
in America and I want to know your thoughts on the likelihood or risks of a debt jubilee
in America. And I think those two ideas are fundamentally
related. So the first question is, do you think our
central banking system, our monetary system that has been in place at various degrees
since 1913 but in a full paper way since the ’71, I believe. Do you think that has contributed to the collapse
and correlation between productivity and wages in our economy and in the resulting wealth
gap? Lacy Hunt: Well, the most critical step – and
this is an excellent question, Porter – was really 1971 when Richard Nixon was undertaking
the new economic program to close the gold standard. And I will tell you in all candidness, as
I was two years out of my PhD program, I supported that. I thought it was a great thing. I believe in free markets and I wanted the
currency markets to fluctuate like everything else. Unfortunately, when we were taking off the
gold reserve standard, it put the fluctuations in the dollar on the back pages of the newspapers. And so it then freed Congress and the monetary
authorities to really make bad decisions. Because up until that time when bad decisions
were made, the dollar fell and the policymakers took note of it. And so one of the unintended consequences
of closing the gold window was that it resulted in increasingly poor monetary and fiscal policy
decisions, something that I didn’t anticipate. Neither did Professor Friedman. In other words, the one rudder, the one barometer
of sound or unsound policies was gone and so I think that the floating exchange rate
standard did not work well for us, did not work well for us at all. And what was the second question again, Porter? Porter Stansberry: Well, I wonder about that,
specific about a feature of the failure of the system in my mind has been the strange
and amazing collapse between correlations – between the tight correlation between
the productivity and wages. So you’ve had now, a 40-year period where
wages in real terms haven’t increased at all. Flatlined for four decades. But productivity has – maybe not at the
former pace, as you pointed out – but productivity has continued to grow. It’s been a very, very strange gap in the
way that our economy used to work. To give you an example, I would make the point
that what resulted in the end of slavery around the world was not really morality but economics. But as productivity increased, people couldn’t
afford to have slaves anymore [laughs] because slaves were the least productive of the workers
and the other workers were too valuable, so we had to free them so that they could be
productive. And so this increasing human productivity
has played a huge role in human history, development, economic growth, wealth. It’s the source of all these things and
our wages no longer transmit that growth equally or fairly among all wage earners. And I see that – that break in that correlation
– in the early 1970s, and I don’t believe it’s a coincidence. Lacy Hunt: Well, here – you make a sound
case. There is clearly a link between the ability
of firms to pay higher wages and the rate of growth in productivity. And I have estimated a lot of those functions
myself, and I was trained in econometric model building and built large-scale models for
more than a decade. My career, my doctoral dissertation was a
large-scale econometric model. The key factor is the rate of change in productivity. It’s not whether it’s going up or down
but it’s the speed at which it’s going up or down. And if we have some time, I’ll sit down
with you and show you some of this work. And as we’ve come down from rates of gain
that were well above 2.1% in the ’50s and ’60s to where we are today running .9%, that
tends over time to limit the real wage gains. It’s not the only factor. There’s a lot of moving parts. Lot of moving parts. But in more recent years, there is the impact
of the aggregate supply and aggregate demand model. Now, aggregate supply curves like all supply
curves are upward sloping. Firms are going to provide more goods and
services the higher the price, the aggregate demand curve is downward sloping. Aggregate demand equals GDP but GDP also equals
money times velocity. And so algebraically in the final analysis,
that aggregate demand curve is whether it shifts outward and produces higher inflation
including higher wages or whether it shifts inward, ultimately is going to be determined
by what happens to the rate of growth in the money supply and velocity. It’s just the same thing. And in fact, if you were to look at one of
the leading texts in macroeconomics by former chairman, Ben Bernanke and Professor Abel
at Wharton, when they draw the downward sloping demand curve, they algebraically show that
in the final analysis, it’s equal to money times velocity. Porter Stansberry: Well, I have to admit,
Dr. Hunt, [laughs] you’re way above my head. Lacy Hunt: But it’s a point that everyone
needs to understand, and so what’s happening is that money supply is not above trend. It’s not well below trend because of the
tightening process but the velocity of money is declining – which means that over time,
the aggregate demand curve is shifting inward and all prices will rise at a slower rate
including wages. In other words, the weakness in wages is another
symptom of the extreme over-indebtedness. Porter Stansberry: I have a simpler way of
understanding it. I’m sure that if you drew a bunch of algebra
around what I’m saying and curves, we’d end up at the same idea. But it seems to me that when – in our economy,
when things happen like companies taking on huge amounts of additional leverage to buy
their own shares, that the benefits of those decisions in the real world accrue to asset
owners. And that asset inflation is enabled by the
paper standard because credit can grow way in excess of savings because of that. But those same benefits, even if they’re
temporary, do not accrue to the average wage earner. And I’m sure, like I said, if you were to
map all that out economically or econometrically, we’d end up at the same place. But the real point to me – Lacy Hunt: I think we’re on the same wavelength. I absolutely do. [Laughter] Porter Stansberry: Thank you. But the real crux of this issue is the second
point of my question – which I wanted to give you time to respond to – and that is
that I know there is a growing sense in our country that the social construct in America
is not fair, that people see some folks, the digerati, if you will, and the financial leaders
of our country and the CEOs just enjoying unprecedented prosperity and wealth. Hell, they’ve got cars that can drive themselves
and solar panels on their roof. But the average worker, the 60% of America,
if you will –because I don’t believe in the 1%, 99%. That’s nonsense. But the 60% of America has seen its standard
of living decline for 40 years. And the question I have for you is these policies,
whether you think fundamentally, they’re triggered by central bank policy– or whether
they’re triggered by just over-indebtedness regardless of who’s responsible. Those have real political and social consequences,
and the question I have for you is in your studies about over leveraged economies, what
role, if any, does a debt jubilee play? And that idea, I’m sure you’re familiar
with it is that maybe you can reset the economy just by allowing certain borrowers for their
debts to be completely forgiven. And do you think that is something that could
ever happen in America? Lacy Hunt: I do not. Unequivocally, I do not because you would
collapse the baking system because the baking system, the insurance financial institutions
all own, have issues the debt and it would not be – it would be a chaotic situation. Now if you go back and look at, say, you look
at the Mesopotamian and Roman empires and some other smaller dictators. These economies basically were very great,
very flourishing world empires at the time, but they collapsed under debt. Now, as they were building the debt up, there
were instances in those cases where there were debt jubilees and some cases, we didn’t
have banks in those days but we had moneylenders. We had moneylenders and what the emperors
did, or the dictators or the kings or what have you did in some cases is they were building
up the debt. They would kill the moneylenders or the equivalent
or force them to do these changes. But as time went by, no one would lend to
them in the future. And let me just give you a more recent example. We’ve had earlier periods of extreme over-indebtedness
in the United States. We had a massive buildup in debt in 1820s
and 1830s. The panic year was 1838. Martin Van Buren was president. He had no idea what hit him. We had another massive buildup of debt in
the 1860s and 1870s. It started with building the transcontinental
railroads and then the industries that fed them. Was over speculation, over consumption much
as we see today, just exactly the situation you described. There was extreme inequality. The panic year was 1873. Grant is president. He has no more of an idea of what hit him
than Van Buren did in 1838. And a lot of the debt was actually underwritten
by state and local governments to participate in the railroad boom and so forth. And just has had the canal building and the
building of the original steamship lines and railroad in the 1820s and 1830s. And a lot of state and local governments failed. Federal government did not fail but state
and local governments failed. And as a consequence, several things happened. Number one, the state and local governments
had to rewrite their constitutions and agree to operate with a balanced budget. But even with that, credit was denied to them
for many years. Creditors’ memories are very, very long and
eventually, we forgot that experience. But in my view, given the complexities and
the wealth laws and the undermining of the financial intermediaries and even the corporate
sector which were all job providers, that that’s simply not a viable solution. Porter Stansberry: Well, I don’t know if it
is viable or not and I certainly hope that it doesn’t occur. But I think you’re going to see more and
more political demands for it. Lacy Hunt: I think you will because the social
fabric is fraying. No question that it’s fraying. Porter Stansberry: And you have – Lacy Hunt: And we’re seeing a major divergence
between the standard of living in the top quintile and the upper portion of the second
quintile compared to all the rest. And that’s not only evident in what they’re
earning but also in what they’re saving. The saving rate currently is just slightly
above 3% since 1900. It’s averaged around 8.5%, which is bad
enough in its own right, but the evidence indicates that all of the saving, all of the
3.3, 3.4% of saving is in the top quintile. No net saving in the lower four. Porter Stansberry: So then all of this, Dr.
Hunt, leads me to my ultimate question and I know this is something you must think about
quite a bit. We have this economy that is unsustainable
and that has a nugget of multiplier. Therefore, as the trendline extends, it’s
heading to crisis. And at what point do you therefore abandon
your long -held investment and the sovereign long bonds? Lacy Hunt: Well, it’s conceivable. This process of debt decline is very, very
long and the … remember that the element that would destabilize it would be a protracted
weakness in the dollar. But the dollar is a funny animal and the way
the dollar is viewed. And although our situation with regard to
debt is much worse than it’s been historically, we are not even close to being the most over-indebted
country in the world. Our public and private debt in the non-financial
sector is about 250%. But China has surged above us. It’s at 300%. Porter Stansberry: Yeah. The debt growth in China in the last decade
has just been maybe unprecedented in history. Have you ever seen anything like it? Lacy Hunt: No, and by the way, if I’m correct,
the law of diminishing returns applies to the buildup of debt and the increasingly weaker
and weaker returns to GDP. Then it does not matter that the Chinese owe
the debt largely to themselves or that they have the command and control economy. The results are going to be weaker. And then debt in Europe is higher than it
is in China and the debt in Japan is the highest of all. And this terrible choice, when investors look
around the world, these fundamentally longer-term trends, there is not a compelling case to
be made for selling the dollar. Now, it would become compelling if the U.S.
economy became more highly leveraged than the others and the dollar could then go into
a tailspin. And that could lead to what has been referred
to as the bang point and that would be inflationary. I would just give you one little quote from
a pretty smart fellow. His name was David Hume. My professor said that the enlightenment could
not have happened without David Hume. Hume was mentor to Adam Smith. Smith, who was a smart fellow, said that Hume
had the greatest intellect of anyone that he met. And Hume knew Benjamin Franklin. He knew Voltaire. He knew all the other figures of the enlightenment. It was Hume that Albert Einstein gave credit
for the inspiration to the theory of relativity. Hume was not just a political scientist economist,
but Hume knew everything there was to know in the world. His father had insisted that he be this type
of person. And in 1752, Hume wrote two papers, which
you can easily obtain. One called Of Money. The other called Of Public Finance and Of
Money, he gave us the equation of exchange. He didn’t write the equation of exchange
down, which says that GDP equals money times velocity, but he clearly understood the concept. Fisher wrote the equation down in 1909. But he also wrote a companion piece to Of
Public Finance, and he looked at all of these great examples of extreme over-indebtedness,
particularly at Mesopotamia and Rome, as well, as a number of lesser-known cases that none
of us remember exactly. And toward the end of Public Finance, Hume
left us with a summary conclusion and this is what he said. It’s a very precise statement: “When a state has mortgaged all of its future
revenues,” that’s, to me, a pretty clear statement, indication of a sharp mind, “When
a state has leverage all of its future revenues, the state, by necessity lapses into tranquility,
languor, and impotence,” which is consistent with, of course, the evidence that we’re
receiving today using much more modern techniques. It’s one of decline. And at the very end of the process, you can
have a bang point in rising inflation but in the current international settlement, in
the current international situation, the dollar is a least – the U.S. economy has a least
worrisome debt situation than China, Europe, and Japan. Porter Stansberry: So we’re relatively less
broke than everybody else. Lacy Hunt: That’s correct. There are smaller countries that are better
off but they’re not in the position to absorb the flows. Porter Stansberry: I’m going to go ahead
and say that Dr. Hunt is by far the most intelligent guest we’ve had on the podcast to date and
you’ve – Lacy Hunt: You’re too kind [laughs]. You’re too kind. Porter Stansberry: You’ve given us much
to think about. Maybe in the future, someone will say … what’s
the current version of the enlightenment? The technological revolution would not have
been possible without the thinking of Dr. Lacy Hunt. Sincerely, thanks very much for your time
today. Lacy Hunt: I don’t know when I’ve been asked
better questions and more thoughtful questions. Porter Stansberry: I’m flattered and I’m
looking very much forward to having you at our conference and being able to introduce
you to our audience and person. So thanks again for joining us. Lacy Hunt: I’m looking forward to it as
well. Porter Stansberry: All right. Thanks again, Dr. Lacy. Buck Sexton: Thanks everybody for writing
to us this week in the mailbag, filling up our inbox with useful feedback. People like Mike L, John W, Steven W, Blain
B, CJ, and Dennis H, keep the comments and questions coming, please. We love to hear from you. [email protected] and we’ve even
got some other ideas to get some other ways of hearing from all of you. We should set up a Stansberry Facebook account,
by the way, Porter. We should get that going. So Larry from Maryland is coming into the
mix here. He writes, “Porter, you have been a student
of Buffett for some time and produced some insightful analysis. What is your prediction for Berkshire when
Buffett and Monger leave? Will they break it up? Pay out a large dividend? Thoughts would be appreciated.” Porter Stansberry: When they leave, they’re
going out in a box, I’m pretty sure. Monger’s 94. Buffett’s 87. I don’t know what their life expectancy is
but they’ve probably each got a 10 percent chance of dying at any year. That’s the normal mortality for those kinds
of ages. By the way, I don’t wish them death. I think they’re both very nice people. I just think that they have made some very
important mistakes on how they’ve allocated capital. And I think the solution’s very simple. I don’t know what will happen because I don’t
have any insight to the board members at Berkshire and I know that Buffett would prefer the company
not be broken up. But I think you can make a very compelling
case. It would be much better for shareholders if
Berkshire were split into two businesses. One is an industrial conglomerate essentially
at an unleveraged General Electric. So they own railroads. They own car manufacturing. They own … what do they own? They make all kinds of stuff. I don’t want to get into the details. They own industrial businesses and that probably
is worth something like $150 billion, something like that. Well, they’ve got the big energy company
too. So that’s a very highly capital intensive,
very secure business that you could load responsibly, not like GE did. You could load responsibly with long-duration
fixed-rate debt. So you could leverage that business 75% to
equity so then you would have very good business. Because yes, it has maybe a 5% return on investment
capital and it has maybe a 10% or 12% return on equity because of the leverage so it’s
a nice, very stable business that’s growing alongside GDP and pays a big dividend. So it’s the kind of business you’d want
to own if you were retired and you needed safe income. Fine. On the other hand, their Ferrari is their
insurance companies and their best-in-class consumer brands businesses. And those businesses are typically owned as
equities, not directly, although See’s Candies is under – there’s exceptions. But basically, you’re talking about your
American Express, your Coke, your Apple Stock, all that stuff, and your insurance companies. And that company, you can’t leverage at
all because it has to have all that insurance float ready in case of a catastrophic insurance
claim. And so that business would be very difference. That business will be very volatile and it
would revolve around insurance underwriting and investment returns. But that business is the one to own. That business is the one that can really double
your capital every five years if they’re managing it well. And they did for years and years and years. I know someone can do that again for them. But that company can’t deliver growth to
investors as long as it’s shoehorned alongside that big, giant anchor of those industrial
businesses. Buck Sexton: Next up, we’ve got James, which
fun fact, is actually my first name as well. “Hello Porter and Buck, I can’t remember
which guest it was that mentioned Boeing but it was Porter himself that brought up Facebook
in a recent episode, in particular, that its correction provides a good opportunity to
buy more shares of a capital-efficient company.” “Here’s the rub. I get the impression that Porter is somewhat
libertarian. Many libertarians condemn war and the military-industrial
complex. As they do, Big Brother style’s surveillance. Boeing and Facebook are prime examples of
what libertarians seem to be against. So how does Porter approach this subject? Is investing a politically and morally neutral
sphere of your life? I’m not passing judgment. I just want to hear your thoughts. Keep up the great work. James.” Porter Stansberry: That’s a great question,
James. I will tell you that I don’t perceive Facebook
as doing anything immoral whatsoever. Facebook certainly doesn’t make any weapons
and it doesn’t force anyone to agree to its terms of service. So if you choose to allow yourself to be monitored,
then that’s not surveillance. That’s just participating in a marketing
company. And I actually appreciate Facebook tracking
me and watching what I’m clicking on and understanding what my friends like and knowing
what demographic I’m in because they can serve me ads that I’m going to find more
attractive and more useful. And I don’t object to any of that advertising
on Facebook. I never have. It seems totally innocuous to me. People believe that Facebook is going to manipulate
my political views. That’s just nonsense, I don’t buy into
that at all. I’ve had the same political views since
I was 24 years old and I can’t imagine them ever changing. Maybe they will but it won’t be Facebook
that does it. It’ll be a book that I read or a person
that I meet or a place that I go. In regards to Boeing, I think you make a much
better point and I don’t have any defensive investing in Boeing. I personally probably would never own Boeing
because I would have a lot of moral qualms about owning a business that designs weapons
that are used for aggression. And I can imagine the folks who are military
folks in America going crazy [laughs]. If, and this is a big if, if we lived in a
different kind of country where we armed our citizens and we defended ourselves and we
didn’t attack other countries and we weren’t militarily aggressive, I think you’d be
much more comfortable to own Boeing. And then so then there’s a third thing,
which is that nobody pays me for my morality or my ethics. They pay me for my financial research. So as a professional, I leave all that stuff
aside and I tell people what stocks I think are going to go up the most. It’s that simple and then I leave the ethics
and the morality up to the reader. Just kind of like I would about gin. I like alcohol. I drink gin. Not every day, but when I drink, I’ll have
a gin. But I don’t smoke marijuana. I can’t defend it. It’s just what broke down to me. It’s what made sense to me. I liked this drug and I didn’t like that
drug and I’m not pretending that they’re any different or that one’s better than
the other. It’s just my choice. But if I was writing a spirits guide, I wouldn’t
worry about the ethics of whether you smoke pot or you drink gin. I’m just providing a guide and that’s
what I do in publishing. I provide a guide to finance. How you use that, whether you do so ethically
or morally and how you set up those rules for yourself, that’s just none of my concern. Buck Sexton: All right. Last one for this week. Brian writes in, “Buck, Porter, and Bill
Shaw, Bill was featured on your podcast sharing what he witnesses in subprime auto-loan markets
in Baltimore. What caught my attention was that most, if
not all vehicles being pounded due to loan defaults were junk cars with over 100,000
mileage. Maybe the used cars with relatively much lower
mileage are being bought by legitimately qualified consumers and that the banks or the lenders
already factor this into their strategy. Your input will be appreciated, especially
at this time when the stocks like car, C-A-R, HTZ, F are climbing up fast. Porter Stansberry: You lost me on the stock
symbols. You mean Ford? F? And CAR is Hertz or Avis? Avis. Male: Hertz is HTZ. Porter Stansberry: And Hertz is HTZ. Yeah. Okay. So it’s a very, very interesting observation
and I would tell you that the reason why most of the cars that are repossessed have over
100,000 miles or are old or both is because that entire business is just a giant fraud. It’s not a real business. Those are not real buyers and those are not
real cars and this is a whole game of what people called predatorial lending. Now, I don’t believe in predatory lending. So I know I’m now talking out of both sides
of my mouth. What I’m saying is that this business has
no functional economic redeeming value. It’s not helping the lender. It’s not really helping the borrower. It’s kind of like the payday loan business. Right? It only exists because people are desperate. They’re not making any kind of sensible
financial decision. They need a car this month, period. They don’t expect to keep it. Same thing with the rent-to-own furniture
places. It’s a kind of business that we don’t
really understand because we’ve never been that financially desperate. Do I think people should have the freedom
to engage in these transactions? Yes, I certainly do. You should be responsible for yourself and
if you want to borrow money at 600% interest rates, knock yourself out. If you are dumb enough to lend to people on
those terms, you’re going to spend the rest of your life chasing them. And that’s what these people do. It is a business and it’s part of a free
society but I think it’s abhorrent for both people. I think it’s a waste of time so I don’t
invest in these kind of companies because they never last. As I like to say, guys, “shit doesn’t scale.” Can you make a lot of money with a payday
lending operation or a subprime auto operation? Yeah, if you’re a local business and you
really keep your costs down, yeah, you can. You can make a lot of money doing it. Can you scale that to a national chain? Can you become the Starbucks of payday lending? No. It doesn’t scale. You end up just having all kinds of problems
because you’re dealing with the worst kinds of people, both your employees and your customers. So my advice to you is the same advice that
Ayn Rand gave on the Donahue show many years ago. Phil Donahue, famous talk show guy, Buck,
way before your time, asked Ayn Rand – she was explaining her philosophy of freedom and
objectivism and Phil said, “Well, what about the poor?” And Ayn said, “Don’t be one of them. The poor have always been with us. They will always be with us but you don’t
have to be one of them.” And that’s the advice I have to tell you
about subprime borrowing and subprime lending. Buck Sexton: Well, that’s going to be it
for the mailbag this week, everybody. Keep your feedback coming. Write to us. [email protected] We use your question, we will send you some
goodies courtesy of Stansberry research. Love us or hate us. Just don’t ignore us. Thank you for listening. Mr. Porter, thank you, sir. Porter Stansberry: Mr. Buck, it was always
a pleasure and guys, thanks for listening to Lacy Hunt. We probably won’t have many economists on
[laughs] but I hope that you’ll think deeply about what he’s saying in general about
the way that debt is forcing our economy into a death spiral and take heed of that advice
and think about it and use it in your investing. That is all. Buck Sexton: And with that cheery note, we
will see you all next time. Male: Thank you for listening to the Stansberry
Investor Hour. To access today’s notes and receive notice
of upcoming episodes, go to investorhour.com and enter your email. Have a question for Porter and Buck? Send them an email at [email protected] If we use your question on air, we’ll send
you one of our studio mugs. This broadcast is provided for entertainment
purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments
involves risk. You should not make any investment decision
based solely on what you hear. Stansberry Investor Hour is produced by Stansberry
Research and is copyrighted by the Stansberry Radio Network. [End of Audio]

17 comments on “Why Buffett Will Never Buy GE & Economist Dr. Lacy Hunt”

  1. Jordan Araujo says:

    Brilliant. Thank you.

  2. Kurt St. Angelo says:

    All of Stansberry Radio Hour shows are very good. This one is outstanding. Listen, learn and share.

  3. var1328 says:

    The guys name is Lacy? lol

  4. Steven Upton says:

    dave ramsey in long form big words lol

  5. Dennis says:

    Great show, Dr Lacy best i ever heard. just brilliant

  6. Henk Wijk, van der says:

    Precious info from dr. Hunt! Thank you.

  7. Bill Spagnut says:

    Wonderful discussion on the consequences of debt ! and it's ultimate outcome !

  8. michael s says:

    Everyone should hear this interview. I wish I could force feed it to the Federal Reserve, Congress, and the White House.

  9. Michael Fisher says:

    Great show. I'm still learning & listening to all of your shows. Keep up the great work you do.

  10. mary smith says:

    SHOCK, Portly Porter thinks Fakebook isn't doing anything wrong. Hey, everybody who uses FB knows their being surveilled. Typically superficial. Here are a few of the unethical practices at FB:

    1. FB is a creature of the intelligence agencies. Look up In-Q-tel. Essentially, the spooks run FB, gathering all your info, building profiles of you, and they do this without the inconvenience of legal and constitutional prohibitions because, hey, you're too uninformed to know that they are funded and run by the govt.

    2. They censor. But wait, they're a private business, They're allowed to decide what goes on their webpage. Really? First, go back and read #1. This, just like the wholesale buying of the journalism profession–Operation Mocking Bird–is an end run around the first amendment. Further, social media companies are similar to phone companies. What would be the public reaction to the phone companies censoring and blocking phone calls? And what would be the reaction if the phone companies were funded and controlled by the govt while censoring phone calls?

    3. FB is running complex psychology experiments on their customers without permission or disclosure. Everyone should be very concerned about this. The information they are learning will no doubt be put to good use by the spooks to secretly control the population even more effectively than they already dos.

    4. They gather information about people who are not FB users–your friends you refer to, or non customer viewers of their pages. You can't get access to what they know about you or demand that they remove the info if you're not a customer.

    And these are just the things we know about that have been admitted and reported in the media. Oh yeah, they're a great company, with a congenital liar with a bowl cut at the helm who also happens to be a fake, a cardboard cut out. What a great American business.

  11. Robert Terlaak says:

    Funny thing was a came across the name Jack Welch a couple of weeks ago and looked him up. I got the impression he was a brilliant entrepreneur. Listening to Porter I now know why. Just another scumbag who played the game perfectly like the banks are doing for over a 100 years now. Steal as much money as you can from the taxpayers and get away with it. That's why Lacy Hunt got a point that there won't be a jubilee. Or maybe there will be but the banks are not going to take any losses that's for sure.

  12. Scott says:

    The Horror story of Credit. Then Congress comes up with the term Crypton currency. Trying to hide the BitCoin, coin conversion! Then, is it possible for them to change the Standard Stamping?!! WTF! Treasury Printer break?!!

  13. Scott says:

    money muiltiplier – appropreation acts – Again! Congress! 🙁

  14. Scott says:

    Algebra 🙁 no one relixed the reality of a stagnate stock pile equals a flat line…(boxed in)? Blockchain, Cap? S***, domino law void needs/is, disregarded? to allow quicker asset re-valuing. Then IRS [buisness standard policy/practices] review checked and passed on to- SBA-Schools-etc? Should we be wasting tech, on social networking and stealing!!! The wall may just buy you time and block out interferance from without/cut off. Anyone aware, IRS has no functioning (valid) foundation. Yea, like no -wall/control. What does Buffet do again?

  15. Scott says:

    Dang. More like Professer, Lacy Hunt. Were did you find him. Thats a backround needed, duplicated. University?

  16. THAT RANDOM CHANNEL says:

    This is amazing. How many more GEs are in America just sitting there waiting to be exposed.

  17. zbikenut says:

    Wow amazing dr. Hume please write more books

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