The Money Behind The Us Economy Office Hours

TITLE: The Money Behind the U.S. Economy | Office Hours CHANNEL: Dr. Roy Casagranda DATE: 2026-04-23 ---TRANSCRIPT--- Hey, it’s so much

Is like the diet or just regular?

Regular. The regular now has, Mexico had already done it, they did it years ago. Fight obesity, I guess.

Oh interesting, not just because like sugar costs.

I think uh there could be a little bit of that. Also a lot of these things like sucralose and aspartame are actually addictive. So uh it can probably also drive up consumption.

Just put just put the cocaine back in the, in the Coke.

Yeah just put the cocaine back in, it’ll be healthier.

Or why not.

I mean aspartame is literally an excitotoxin. That’s how it’s classified.

That’s a, I didn’t know that. That’s what a cool name though.

Excitotoxin. I’m excited and dying.

Oh man. Uh you know they should actually, in all sodas they should just add a little fluoride too.

Did we already start? I feel like we already started.

We’re recording. Yeah this is uh hey everyone. Welcome to Office Hours. So uh hope you’re all doing great. Uh we started our class actually, so this does feel more like office hours. Uh embarrassingly enough, I didn’t realize that Roy could see me the entire time we were doing this live session with class. So you, you have these images of me just… So he told me afterwards.

Also laughing.

Yes, he would tell a joke and I would laugh. I didn’t think he could see anyone. And uh then he would respond and I’m like how does he, is my mic on? What’s going on? Anyway, Roy, how, how are you doing today?

Good. You know it’s, it’s been quite a few days since a missile has blown up near me so I’m kind of happy about that.

That’s good. That’s always, it’s always a good thing. Although I feel like I guess we’ll go ahead and get started with let’s, let’s talk about that situation. There’s, there was a blockade, a US blockade over the strait that was closed and then opened and then closed and then that was, now it’s, it’s open but closed and still closed? So what’s, what? Can you explain that please as best you can.

Okay. Yeah, best I can. So… the straight was open, Trump starts a war. Iran closes the strait. And then at some point a ceasefire is announced. Trump then announces he’s going to close the strait, which is shocking. You’re like, wait what? Why? And it’s like the petulant child, oh no you did it, well I’m gonna do it too. There’s like no strategy behind it because it’s like, what is that? Um, and of course the ceasefire was problematic to begin with because Israel didn’t uphold its end of the bargain. Initially the United States said that Israel would stop, would do a ceasefire in Lebanon. And then the United States said no we never agreed to that, so we really don’t know. Um… but considering how frequently Trump, Trump and the Trump administration lie and change their story, uh, it’s impossible to believe anything they say anyway. Um, so… so Iran was like wait a minute, you’re closing the strait? Okay. You’re doing our work for us. Now we really don’t have to. Um, and then some ships tried to pass through and actually a few of them got through. I forget what countries they were flagged for. I feel like one was a French ship. Um… I vaguely remember there being a ship from Qatar but I’m probably totally wrong about that. Anyway, maybe it was coming from Qatar. Uh… Oh yeah, it might have been an LNG shipment coming from Qatar. But in any case, a couple of ships got through. And then even with Iran and Trump blockading, so it’s unclear like what kind of blockade is this? Um, and then I guess a ship was damaged along the way. I’m hazy about what happened there. And then there was an Iranian ship, an Iranian flag ship that the United States seized. And so then Trump announced that the straight was open. And Iran went, no, no, we’re keeping it closed. We’re not opening the straight. So it’s, it’s unclear how this is supposed to unfold. The hilarious thing is, is of course Trump when he announced that the straight was open uh declared that that was a victory. But it was open before he attacked so then that makes you wonder like what kind of victory that is, you know. I broke a window but I fixed the window. Yeah but you didn’t end up ahead because you had to pay for the broken window. You actually ended up behind. It was a defeat. That’s not, that’s not what progress looks like. So um…

Yeah, isn’t he asking for $2 trillion now to, to rebuild up our military or something? I don’t know the exact number. This was told to me by someone who’s a conservative, who listens to conservative uh talk shows. So I, I don’t see how that is a win. I mean it sounds like a huge win for arms manufacturers. So…

Yeah.

Good job guys.

So in 2000, I was gonna add a year to it, but nope I just meant 2000. In the year 2000, the US military budget was $242 billion. And then uh George Bush Jr. pushed it to $700 billion. He basically almost tripled it. And then under the Obama administration they got it down a little bit. I think it was still $600 billion. Like it was an insignificant drop, well I guess it’s not insignificant but compared to the 242 that it was under the Clinton administration. Um and then under Trump it’s now a trillion dollars a year. And uh that’s apparently not enough which is fascinating to me. Uh especially because we’re adding more than a trillion dollars a year to the debt now. So uh I think we’re between $1.5 and $2 trillion a year to the debt. Um a lot of that is actually just us taking out loans to cover the interest payments. Because um, because you know we shouldn’t tax the rich because they’re such poor people. So it’s really important for us to you know make them pay like $5 a year. Uh so that they don’t suffer because it’s sad when you see rich people actually pay for all the stuff that they, they benefit from, you know, like the roads and the infrastructure and the electricity and…

They’ve worked so hard to make that money. So we have to protect it right?

Right.

Right.

That’s why it’s really important that they have the lowest tax rate in the United States and pay virtually nothing. Uh… and of course we don’t want to tax corporations either because why should they carry the load? Uh… we should just tax the hell out of the middle class. And of course the middle class is so stupid, it will continue to vote for the guys that have created a policy where the rich don’t pay taxes but the middle class is being taxed to death. So… I just want to say United States you deserve this. You created this, you deserve it. Keep going. It’s perfect.

Not, not the people who don’t know. That’s, that’s the trick in all this right, it’s the people that know who are taking advantage of the people that don’t know. Which, the people that don’t know tend to be the people who don’t have the, the money anyway. So it’s, it’s a pretty… I know, but there’s also the people that control the things that they know are addictive on that device that keep us from really looking at the helpful information. So after watching this episode send it to someone who you think might get a little bit of help uh from it. And then everyone sit down and look into how the United States economy works in its, in its darkest hour.

The top one percent has the lowest effective tax rate.

Yeah, and it’s not, so what’s interesting is that the taxes tend to in the United States, they focus on income. Like labor income, not necessarily wealth generation. So…

And there are so many loopholes you can get out of the wealth generation.

There’s so many, so many loopholes. So if you’re making, if you’re doing really well and making $100,000, $200,000 a year you’re still probably working for that money. So that is taxable income. But if you have, if you have $10 million that’s invested you’re not getting taxed as if you were working. So that $10 million is generating you uh…

You’ll have to pay capital gains tax.

Capital gains, which I think is…

But you don’t have to pay income tax.

Right. Which is lower than income tax.

Isn’t it 15%?

Yeah it’s 15%. So but if you were making, if you were…

You’d definitely pay way more than that.

So if you make four percent off of that $10 million that’s what, $400,000 in income a year that’s taxed lower than if, if you were, you’re probably, you probably pay more if you were making $200,000 working as like a doctor or something. Anyway.

Oh, 100% you’ll pay more. Yeah.

So if you already have all that capital, you are paying the least amount of money. And the argument could be, you know well that’s you know that we worked really hard to get to that point. You know I don’t, a lot of it is…

Whatever. I worked really hard to inherit this money from my rich dad.

That, or the money came from, from somewhere else. It’s not always hard work. Work hard situation. Anyway we can, this is a… you can find a lot of podcasts that talk about this. This is a, this is an interesting uh conversation. Although there are a lot of philanthropists. Is that right? Sounds like it. Sounds like a setup. Weird word. Uh anyway, anyway.

You know what’d be better than having philanthropists? People who pay their damn taxes. That’d be better. Uh… compulsory philanthropy. Yeah. Why can’t we just have a fixed, a fixed percentage? Like not a set percentage but a progressive tax. So the, the top tax bracket pays 92% and then you know you drop it till, till the bottom tax bracket is paying like 1%. But then that’s it. There’s no loopholes. You just pay that.

I was gonna say we already have that but there’s too many loopholes.

Oh I invested in something and it went bust and I lost the money. No one cares, dude. Pay your stupid taxes. But that’s not the country we live in. Well I don’t live there anymore. You do.

I do. I do. And yeah I still have to pay taxes though. Filed taxes the other day. It’s always, always a fun adventure.

Expats get an extra two months so I get two more months to put, to procrastinate. Uh, yay! And then I pay for something I didn’t get anything when I lived there, and now I’m getting even less. Because now jackasses are firing missiles at me.

Hey, those jackasses, that’s taxpayer dollars Roy.

Yeah. So here’s the stupid thing. The GCC has been paying the United States billions of dollars a year so that it has bases to protect the GCC from attack. Right? So what does the United States do? It attacks Iran. So what does Iran do? It starts attacking the GCC. What does the United States do? Nothing. It didn’t lift a finger to protect any GCC state at all. So all that money was wasted. Every penny the GCC sent to the United States was… you might as well have set it on fire. And, and then France and Great Britain actually stepped in. And France has actually been, the French Air Force has actually been helping the UAE defend. And I think Great Britain went to Bahrain. Um… and so the irony is the people who stepped up weren’t the people who caused the problem and the people who caused the problem were the people who were being paid to step up, who didn’t step up.

I didn’t even think about that. That’s a profound moment in reality.

Yeah, because we have an Air Force base, I think there’s an Air Force base in Abu Dhabi. Not anymore. That thing is ruins. It has been pummeled. Missile after missile after missile.

But we didn’t launch attacks from there. We just… I don’t remember anything.

We didn’t do anything from there. We didn’t even try to defend UAE from there.

Interesting. Useless. But those Tomahawk and Javelin missiles, yeah million dollars a pop. That’s, that’s like our entire families combined plus some lifetime taxes per missile. Anyway. So yeah, that’s, that’s, yeah… So you sent me something, I think it was yesterday, that uh, I forget who it was a professor I think in the UAE, a scholar, someone, who was starting to suggest, I guess after this war seeing that the US didn’t actually do much, that now the UAE might be questioning why even have uh American military bases there? What’s the point?

Yeah, yeah. So this top scholar who’s linked to the government, so he has government ties, has come out and floated the idea of dumping the US bases. Um… I’ve, I’ve been criticizing the US bases since the attack last year on Qatar by Iran and Israel. Like you know what’s the point? The base is why Iran attacked Qatar. And then Israel of course uh killed uh Palestinians who were there to negotiate peace because right Israel, peace, theyre anathema, they can’t go together. So um… when you consider that Israel is, you know the US’s friend, then if you’re Qatar you have to be thinking, we gave you a 400 million dollar airplane and we’ve been giving the United States billions of dollars a year and we’re getting what? We’re getting, we’re getting missile strikes. And that was a, that was a serious fail. And uh it became time for the GCC to start reconsidering the US alliance and now they’re openly talking about it.

Yeah, so this is, this goes back to what we were talking about I think last, last time about the US, I think multiple times now the US starting to kind of fall from its, its podium, its position on the, on the world stage. Uh if multiple… NATO is having talks, Germany’s remilitarizing, Japan’s remilitarizing, uh French president is having conversations with foreign entities about getting ready for a world without the United States to be a participant. And now the UAE is doing the same thing. On a more realistic level, like hey this is, this is actually causing us some harm. I don’t know if this is worth it. I don’t know what the trade-off is like. There might be some things that we’re not privy to as to why they’re, why they’re there. Uh… but yeah that’s…

You mean why the US bases are here?

Right. Like I don’t know if there’s like an intelligence agreement or, or some other reason.

There was. An intelligence agreement. There was also, the deal was we’ll put the bases there and we’ll set up an early warning system for missiles heading to Israel. So if you, if you want our protection we’re gonna protect Israel in the process. And you have to pay us. And so you know, this actually goes all the way back to January 1945. So Roosevelt met with the King of Saudi Arabia in the Suez Canal on a ship. And the reason was they wanted to talk about making sure that oil flowed for all perpetuity to the United States. Because the United States was the largest energy producer on the planet at the time, but FDR, this is gonna sound crazy, was thinking about the future. Something that clearly US politicians are incapable of doing now. And uh… and what he was thinking was at some point it looks like there’s enough oil in Saudi Arabia that at some point down the road they will out-produce us and they will have enormous influence over the flow of oil. So he wanted to strike a deal before Saudi Arabia became that country. And uh… they made Aramco and they agreed that the US would have a military base in Dhahran. Over the years Saudi Arabia kicked the US military base out. But then when Saddam Hussein invaded Kuwait all that changed. And you know we got the military base at Dhahran back and then we put bases in Bahrain and Qatar and the UAE. Um… we actually had under the Carter administration created the RDF, the Rapid Deployment Force. And it was a group of Marines in Diego Garcia, the British Indian Ocean Territory that they illegally stole from the Mauritius. And uh… by the way ethnically cleansed. There were people living there and they were just ejected from the, their islands and forced to move somewhere else so that the British could have this military base that it rents to the United States, that it leased to the United States. Um… so it sort of happened in stages. Right? First there was the Aramco deal and the Air Base and then the RDF moved to the, to BIOT, the British Indian Ocean Territory. And then the next thing you know Saddam Hussein is invading Kuwait, with US permission by the way. And April Glaspie, the US ambassador to Iraq gave Saddam Hussein permission to invade Kuwait. And then the next thing you know there are US bases full-fledged, all bases. Um… so then the question was well if the United States never does anything to protect you, why have them? You might as well uh not have them because they become a target.

Yeah I was going to say it’s, it’s the, the opposite right? Not just not protecting, now you’ve, now you’ve invited liability.

Yeah, exactly.

Huh, so that’s a good question. So besides the US uh bases, I think right before we started there was news that came out that now the UAE is considering moving away from the US dollar as well?

Right. To the yuan.

To the yuan. Which surprises me. I thought they would move to the euro.

Um, reason that surprises me is so UAE is a member of BRICS. Um so the yuan doesn’t, it’s not completely insane. The reason I would have wanted to stay away from the yuan is that the Chinese government regulates the, the price that the yuan is at. So you know, it’s not a free floating currency. And I think that lowers people’s confidence in it as a result. Um the UAE regulates its currency because it pegs it to the US dollar. So you know if anything happens to cause a fluctuation, the UAE either buys or sells dollars to, to keep the UAE dirham at 3.67. 3.67 dirhams is 1 dollar. That’s it. Always. So it’s really nice because you don’t have to remember, you just, you don’t have to look up the exchange rate. You know what the exchange rate is. Um and the UAE has that kind of economic power, is that kind of an economic power that it can do that and get away with it. Um, if you’re a poor country right, you might not have that ability. Um… in any case… they’re talking, they’re floating the idea of moving away from it. The US has played this interesting game of you have to use us. In fact that was part of the deal in 1945 was everybody on the planet would agree to make all oil transactions in US dollars.

I did not know that.

Yeah. Oh yeah. So I mean if you’re, if you’re uh… doing protection money, and you’re a mob boss, you need to make sure that some of the money flows to you, right, in the process, because you’re gonna take your share. You’re gonna take your percentage. So, you know, if you’re Korea and you’re buying uh oil from Kuwait, because you have to make the transaction in dollars, you have to convert your currency to dollars. And then the dollars arrive in Kuwait. And then Kuwait either keeps it as dollars or converts it back to their currency. That, in any case it means every time there’s a transaction, the US kind of gets a little piece because of the dollar exchange. Um, and it strengthens the dollar because instead of it being gold based, it’s oil based. One of the first countries to switch off the dollar and they switched to the euro was Iraq. And you saw what happened to them. So uh… lesson learned, not quite. Venezuela and Russia almost immediately afterwards also switched to the euro when uh Iraq did. So…

So is this, is this where the term petrodollar is actually like rooted in the US dollar because of the exchange in oil?

That’s part of the answer.

Okay.

There’s a, there’s a bigger part to the answer and it’s this. So… in 1967 Israel defeated Egypt, Jordan, and Syria in a horrible war called the Six Day War. If you hate Arabs, especially Egyptians, Syrians, and Jordanians, walk up to them and go, “Six Day War”, they’ll immediately begin to weep. Um… so… this was actually a really big problem for the planet because the Israelis stopped at the Suez Canal and they basically annexed the Sinai. Which meant nothing could go through the Suez Canal, especially because the Israelis during the Six Day War actually sank ships into the canal to block it. And so the result was that the Suez Canal was offline and if you were trading you had to go all the way around Africa. So the world, the whole planet kind of needed to get this somehow resolved. And Egypt especially because it made revenue off of ships using the Suez Canal. So… uh… from 67 to 73, for six years, Egypt built up its military and trained, and trained, and built up, and trained with the, with the goal of eventually doing a war to get the Sinai back. Because you have to remember right, Israel attacked every single time. In 48, Israel attacked. In 56 Israel, Great Britain, and France attacked. In 67, Israel attacked again. Now, you’ll say well it was a preemptive war cause we thought we were going to get attacked. Yeah, that’s the same excuse Hitler used too. So, great. Poland’s gonna attack us. Russia’s gonna attack us. Uh, I wouldn’t, I wouldn’t fall back on that. Anyway…

Isn’t that what the US just did with Iran?

Yeah. Iran’s going to attack us. It’s so weird. Anyway, uh if you’re the attacker you’re evil. End of story. Conversation’s over, unless you’re trying to get back your land or defend yourself. So, Egypt in 1973 attacked Israel to get back the Sinai. Syria attacked to get back the Golan Heights. Uh the Syria part of that war was a complete utter disaster. It ended in a just terrible failure. Part of the Syrian strategy is they had to capture a bridge at night and they couldn’t find it.

I’m going to cave-, I want to caveat something you said real quick. If you’re an attacker trying to get back your land, let’s… that was just taken, I’ll say. Not taken 50, 20, 100 years ago. So like if you’re Putin hearing this, don’t, disregard what Roy just said. Cause like, that’s not what we’re talking about here. We’re not talking about land that was taken… Khrushchev gifted Crimea to Ukraine uh… in was it 1954? Yeah 1954. Uh… Khrushchev gifted Crimea to Ukraine. So it wasn’t taken, it was a gift. Um… but anyway, I honestly think Putin had a little bit of an argument. I don’t think he should have done the Luhansk, Donetsk part. I don’t think he should have invaded, but after he grabbed Crimea it was like well, you have a little bit of an argument. Can we stop there? If we stop there I think we can, everybody can call it a day and walk… No? No, I need it all? So I guess greed got the best of him. I didn’t mean to totally derail you. I just…

No, it’s fine. I just…

Or, or you know other areas. Taiwan. Anyone who’s using the same argument, like this is, this belongs to us. This is ours. And it’s like, no, that was… that was a while ago.

Yeah. There is, it’s complicated, is the answer. Anyway, uh… Egypt went to Saudi Arabia. And said, we would like, if you would help us out, one month of your oil revenue. If you give us one month of your oil revenue we can complete building out our military. And Saudi Arabia went no. Now, I think the real reason Saudi Arabia said no was they were nervous what happens if Egypt becomes even stronger militarily than it is, what’s to stop Egypt from grabbing Saudi Arabia? So, there’s no answer, might not have been completely unjustified, just, just so we’re clear. But what, what ended up happening was, I believe… no, I know it was US oil executives, but I, I don’t want to mention the name of a company in case I’m wrong about it. I have the name of a company in my head but I could be wrong about it. US oil executives went to the Saudis and said… instead of giving Egypt that money so they can buy weapons that they might use on you later… we have a better idea. Why don’t you boycott the United States? Don’t… just do an oil embargo and refuse to sell oil to the United States. So here’s the stupidity of that. From a, not, not on the Saudi part, on, on the part of the buyers. So let’s say there’s an oil tanker leaving Saudi Arabia full of oil that the United States wanted to bid on but can’t now because Saudi Arabia refuses to sell. Well… somebody else will buy that oil on that oil tanker. Well, that… because they bought that oil, then they didn’t buy oil on an oil tanker from Venezuela or from Norway. In other words, it shouldn’t have made a difference. It would have just shifted the market around. But capitalism’s irrational filled with irrational actors. And so it caused this catastrophic spike in oil prices. And it, and it, you know, the 1973 oil shock. And then of course when Iran had the revolution in 79, it created another catastrophic oil shock. And it’s again because the, the actors involved are irrational. How much oil did the United States even buy from Iran? Maybe it was five percent of the entire supply. They could have easily shifted the five percent to somebody else. But no. No, it’s time to have panic buying and shoot the price of oil up because it’s, they’re all irrational.

I don’t know why, but this just reminds me of Covid toilet paper.

Yes. Yes. Or bullets. Oh my god, did I have a hard time finding bullets during Covid. You know and I was only buying for two firearms.

I was gonna say that you were even looking is sort of surprising to me.

Well I needed to stock up because what if somebody broke into my house to steal my toilet paper?

You didn’t have your toilet paper in a safe? You could’ve just locked it up.

You can get through safes.

Also they don’t know that I have my toilet paper in a safe.

You know what I mean, like… So I pulled my firearms out of the safe and put them under my pillow. Boy it’s hard sleeping on a 12 gauge shotgun just for the record. Uh, you’d think it’d be easy, but it’s, it’s not as easy as you think.

Everyone, everyone started getting into reloading. That’s, that’s what…

Yeah. Recycle, reuse, and recycle.

Yeah.

And there’s something to be said for that. Uh… but anyway, I did find this amazing website that, that did have what I needed. So I stocked up.

That sounds so suspicious.

I mean I thought it was weird. You mean I could just buy ammo by the boxes? And it comes in the mail? How is that okay? But sure it worked.

I mean that sounds sort of like, the United States, yes.

I mean, you know, it was a little weird because when you wanted to click the 12 gauge shotgun box, you had to press a swastika. But if you could just look past the KKK symbols all over that website, it was… I’m kidding about the swastika and the KKK symbols.

We, we have a lot of hunting here. I think, what is it, Texas, I think Texas is one of the states where you can go to a, a gun show… when I say a gun show not a, not one of these gun shows. Sorry.

Uh no, this is a, it’s, it’s like a… it’s a trade show. What, is that the word right, in case you wanna know.

Yeah yeah. No, but the, the, people who don’t live in the United States might not know what a gun show is. It is where a group of people come together to buy and sell guns that is not, they’re not official vendors or whatnot. And uh I don’t think you need to show any ID, you can just hand your cash over and then buy a weapon. Um…

Yeah. There’s no background check.

That’s the, that’s the gun show loophole. That so many people are like, please let’s close this thing so that people who are not eligible to buy weapons can’t go to the gun shows and buy the weapons.

Or that or private sales, so like you know you have a neighbor who’s like, “I’m trying to get rid of this, this nine mil. Um, do you know anyone?” You’re like, “Oh yeah, I know a guy who loves to buy nine millimeters.”

Yeah. He’s on 13 different medications. It should be fine though.

Should be, should be good, should be good.

So oil. We were talking about oil.

Oil.

So… yeah, so what ends up happening is the price of oil spikes. When that happened, all of a sudden every oil producing country on the planet, Norway, Indonesia, Algeria, Venezuela, like everybody. Not, not just Saudi Arabia, the whole, even the United States, all of a sudden had all this cash. And it was a huge boon for the Texas economy. Like this was amazing. It was totally irrational and made no sense whatsoever. But nothing in capitalism makes sense, it’s all pure irrationality. And so, um… what ends up happening then is what do you do with this cash? It’s not like you can stuff it under your pillow. You know? It’s billions. Billions upon billions of dollars. And so what ended up happening was everybody asked the question, what’s the safest thing you can do? And it’s, it’s already in dollars, because the transactions were all literally all made in dollars. Why not just take your dollars and drop them into a US bank? So once that happens now, the banks have a rule. They can give out loans, but the loans have to be backed. Now, they don’t have to be backed dollar for dollar. I forget what the ratio is. It might be for every dollar you have in your bank, you can give six dollars out in loan or something stupid like that, which makes no sense to me. I would think it should be backed dollar for dollar. Um, but it’s not. Um, but that meant now if, if, if all of a sudden there’s $100 billion in the US banks, that the, those US banks can now give out $600 billion in loans. And so that actually had a knock-on positive effect for every government on the planet. Because it meant if you had a good enough credit rating, you could go to a US bank, if you’re Germany or, or the UK or the United States, and you could take out a loan. And in the 70s everybody was like, “Okay.” And they were doing it in moderate amounts. There was nothing crazy going on. And in fact uh… the Vietnam War had really wrecked the US economy. And the Vietnam War was already winding down by 73 so it was too late to use that for the Vietnam War. Reagan comes along. And he believed that the United States had been, had become too socialist. And that this had, this had interfered with the American’s ability to love Jesus and love capitalism and love warfare. And so he believed the only way to fix this… yeah it was, Reagan was special. He also believed he was supposed to trigger Armageddon, just for the record. And he thought Armageddon was going to be a nuclear war with the Soviet Union. Fortunately James A. Baker, the second, his uh White House Chief of Staff talked him off the ledge. And said why don’t we negotiate with Gorbachev instead? And you could be remembered for all eternity as the guy who made peace. Instead of not remembered at all cause we were, our species is extinct. And he went, “Oh.” And you know, James A. Baker managed to appeal to his narcissism and saved us. So every night before I go to bed I say a prayer for, for Baker. Cause…

Do we, do we have any people like that in the administration now?

No. No, no. Trump fired everybody in his first term that would have done that. Uh… so that and he made sure to have nobody in his second term. So we’re screwed. Yeah.

So what Reagan did was he thought if he ran up a psychotic debt, the American people would freak out. And they would insist that the government slash funding for the social programs. So like Social Security and Medicare and uh school funded lunches, uh government funded school lunches. All those programs would, would be eviscerated. So what he did was he ramped up military spending. And he couldn’t cut the social stuff because Congress wouldn’t let him. And then of course what that did then was it, oh and then he cut taxes for the rich. So he ramped up military spending, cut taxes for the rich, left the social spending where it was. And then watched the debt skyrocket. How could this debt skyrocket? Petrodollars in the banks allowed the banks the ability to fund the US government’s uh irresponsible spending spree. And the American public went, “I see no consequence for this,” and they left it alone. They wanted their cake and they ate it too. And now we have a $39 trillion debt. As long as everybody has confidence in the US dollar, they’ll keep banking their petrodollars in US banks. As soon as they stop banking their petrodollars in US banks, I don’t know how we service the US debt because there wouldn’t be enough money in those banks. So, so you know, China and Japan bought bonds, US bonds. Treasury bonds. The GCC buys bonds too, but its real thing that it does is it put, it had put money in the banks. Um… and so now I think were going to be seeing, we’ve already seen China sell its bonds. It used to be the number one bondholder. Now Japan is number one because China sold so many of its bonds.

So it sounds like similar situation as the, the housing mortgage market because mortgages are very similar in that the bank is just kind of, here’s some money, just like it’s not a, US banking is weird. It’s just like, here’s some numbers, power money.

We calculated it and we’re not even sure how.

It’s not coming from anything. But then those, so when, if you buy a house, if you’re a fortunate soul, a millennial or younger who can has finally saved up for that down payment and you get a mortgage, uh if you’ve done that, you’ll immediately notice that that mortgage is sold within a week to another company.

Within. It’s lightning fast.

And so another mortgage holding company holds these mortgages that you’re paying interest on, which is an amount that was created out of thin air. Uh… so I think that’s a lot of this is people who defaulted because they couldn’t actually afford the mortgages in the mortgage crisis and all these things kind of fall apart.

Are you talking about 2008?

Yes, so I’m wondering if the petrodollars somehow similar in that like if it’s not backed.

Oh no, no. What happened in 2008 was uh… pure insanity. Uh… I’ll give, I’ll try to do the short version.

I’m just, I’m just wondering if if they’re how they how they compare, or if they compare at all. Like how the…

They don’t. So what happened in 2008 was the banks lost their minds. But they’re, but it’s capitalism which is just pure insane irrationality. So uh what happened was in the 90s Exxon ran a oil tanker aground in Alaska. The ship was named after the town Valdez, Alaska because the Spanish had reached Alaska so they named, there’s a Cortez, Alaska, Valdez, Alaska. But of course Americans can’t pronounce anything so they say Valdez. So the Exxon Valdez ran aground because the captain was drunk. And uh dumped like a billion dollars, I don’t think it was a full billion, a huge amount of damage was done to the Alaska coastline. Um, and it had to be cleaned up. So the federal government charged Exxon for the cleanup in the hundreds of millions of dollars. Exxon didn’t have a hundred million dollars worth of, hundreds of millions of dollars worth of assets in liquid form. Like they didn’t have a bank account with that money. So that meant they had to sell assets. But when you sell assets in a circumstance like that, right, it’s capitalism. So everybody buying is going to screw the hell out of you. So you know, I don’t remember the amount of money, let’s say it was $600 million that Exxon had to come up with. Well they ended up selling like $1.5 billion worth of assets to come up with the $600 million. So they were furious. And they had to sell it to their competitors, right? So it was like, we’re losing these assets and we’re selling them at a fire sale but to our competitors. They were bitter. So afterwards they went to JP Morgan and they said look, we want to, we want to open up a bank account where we just keep a billion dollars in it. And you gotta remember in the 90s a billion dollars was worth a lot more than it is today. So uh… it’s probably, I’m guessing 5 billion dollars in today’s dollars. Um, we want a billion dollars in a bank account. And JP Morgan said you’re a fantastic client, we are happy to uh give you this account. Here are different deals and these are the different interest rates you would get. And Exxon went, no, no, no, no, you don’t understand. If we give you the billion dollars and then you go give out 6 billion dollars worth of loans, then when we need that money and we come to you and we want a billion dollars in cash, you’ll say, “Oh, we don’t have a billion dollars laying around, we gave it out in loans.” And we’ll be in the same position we’re in now. We don’t want to give you the billion dollars so that you can give loans on it, we want you to hold a billion dollars of our cash. So that when we need it, it’s instantly liquid and we can just access it immediately. And JP Morgan went, we will do it for you, but it drove them nuts. Right? Because they’re a bank. Banks are money farmers. The money just sort of magically falls from the sky. There’s interest, but the interest compounds. And you’re like, what is that? It’s interest on top of interest I’m being charged interest for. Like, the guy that came up with that was a freaking genius. It’s amazing.

Money farming is probably the best term I’ve, I’ve heard in a while.

I have, I don’t, I lost contact with him, but I had a friend who was a banker, and he was like, “You’re such an idiot for going into academia. You could have been like me, a money farmer.” And and I’m like, “Yeah.” The money literally just comes out of nowhere. It’s so weird. So um… JP Morgan, there was a, a low-level manager, fresh out of college, that was working at JP Morgan. They had one of those conventions where bankers get together in Florida, and you know, like they’re, they’re drunk and doing cocaine and jumping naked into a swimming pool. And in the middle of this, this woman, young, fresh out of, fairly fresh out of college, I want to say she was just a few years out of college, jumps out of the swimming pool. She’s like, “I got it.” And she goes and she sets up an instrument, she talks to Deutsche Bank, the German bank, she talks them into buying the risk of Exxon having another oil spill. Now you’re like, “What does that mean?” I don’t know, I don’t think Deutsche Bank knew, and I don’t even know if this woman working for JP Morgan knew. But the idea was that in the event there was a disaster, Deutsche Bank would be on the hook for it, not JP Morgan. So effectively it freed up the billion dollars so that JP Morgan could start giving out loans on it and make crazy money off of it. Because right as it was, it was just a billion dollars that was slowly losing value to inflation. Nobody was making any money off of it. And if you’re a money farmer, that’s like having a field that you could be growing you know, tobacco on. And or, or uh cocaine, or, or opium. Like I mean why would you leave that field fallow? It’s horrible, it would drive you crazy, like all the people that could be addicted right now. It must be so infuriating. So they do this. And then that woman goes back to JP Morgan and she goes, “They’ve like, she’s like the employee of the year,” right? She’s like this super genius who figured out this really cool trick and earned JP Morgan crazy money. She goes back to the, she gets a promotion, she has an office with a window and you know with a nameplate on the door. She goes back to JP Morgan and went, “Let’s never do that again.” And they went, “Wait what?” And she goes, “I’ve thought this through, this was actually really dumb. I made us a bunch of money but the risk was really, really high.” And they go, “Well you’re the architect of this. If you’re telling us never to do it again, we have to believe you. If you’re the genius who came up with it and you’re the person telling us no, we won’t do it.” And so JP Morgan gets to go down in history as one of the smartest banks of the 21st, the 20th and 21st centuries because they walked away from this. It’s a derivative. Is what she created. So a derivative is gambling. That’s all it is. It’s Las Vegas introduced into the marketplace. We used to allow derivatives for the futures markets because we needed information in the, in the futures markets. So let’s say you’re a rich person, you’re bored, you don’t know what to do with your life. But you want to make some money. So you could go into the futures market. And you could make a, a bet. On the price of a, of a good. So you could do a bunch of research, figure out what you think oil is gonna be in 20 years. And instead of buying oil in 20 years, you would make a bet on what the price of oil what you think will be in 20 years. And if there’s a thousand people doing this, you can look at the bell curve on what they thought the price was. And if you’re a corporation that’s gonna actually buy the oil, you can pick the middle point and go, “I think this is what the price of oil is gonna be in 20 years.” And if you’re something like Southwest Airlines, then you could do the math and you could go, “Wait a minute, aviation fuel… everybody has it pegged at the wrong amount, we think it’s going to be a lot more expensive. This is really cheap, let’s buy a bunch.” And then 20 years later, around the year 2000, Southwest Airlines has all this oil that they bought on the futures mark-, all this aviation fuel that they bought on the futures market, and they’re running around selling it to the other airlines and making crazy money off of it because they bought it at a fraction of the price. The other airlines are going bankrupt. Southwest Airlines gets to go down in history as a genius for having bought all this aviation fuel on the futures markets. So we wanted those derivatives so that people could get the information from them. But they were illegal everywhere else because it’s Las Vegas gambling just with dealing with real life goods. The Reagan administration hated that they were illegal and tried to break the, the law around it. They failed. Bush Senior appointed a woman to be in charge of derivatives who refused to actually execute the law. So derivatives started to float into the economy. And then Clinton of course, cause he was basically Bush Senior’s clone, kept that policy going until finally they basically got rid of all the regulation during the Clinton administration on derivatives. So by the time JP Morgan creates this derivative off of Exxon’s oil spill money, it was, it was okay, they didn’t do anything wrong. They walk away from it. And then the other banks, like Bank of America and just you name it, Citi, Citigroup, all these nonsensical, irrational banks that deserve to burn in hell realize, “Oh my God! We’re gonna make so much money off of this.” And what they did was… Okay, you go into the bank. You’ve done all the math, you went to mortgage.com or whatever is your bankrate.com and you typed in your income and you figured out, and you found, and you even went with a realtor and found a house that you thought you could buy. And let’s say I’m, you know, just to make the numbers easy, you had a $30,000 saved up and you figure you can buy a $100,000 house, $30,000 down payment. Uh… and you’re, you’re good to go. Because let’s say the, the website you went to said you could afford a $70,000 mortgage. You go to the bank. You show the banker everything you’ve done cause you’ve done your research and you’re proud and you even have a house in mind. And the banker goes, “You know hold on just a moment. I’m going to go talk to my manager.” So you’re like okay. Banker comes back and goes, “My manager and I have talked about this, and you know what? You’ve really lowballed this. We can get you into a much nicer house.” And you’re like, “Wait, what?” “Yeah. Absolutely. You know, we’ve decided that the math is there that you could do a $300,000 house. Maybe even a $400,000 house. Go back with your realtor and go find us, go find one and come back and we’ll, we’ll pre-approve you.” And you’re thinking, “This is impossible, but oh my god, I could be in a three or four hundred thousand dollar home. This is amazing. This is a dream come true. How is this gonna work?” And you’re thinking, “That guy’s a professional. They know what they’re doing. There’s no way they’re screwing me up here.” And you don’t read the fine print. The payments in the first few years was total, were totally affordable. The problem was, to make it work cause you don’t have the money, the payments start to increase. And then you end up with a balloon payment at the end. So somewhere around year 10 or 15, you’re going to go bankrupt because you can’t afford the payments anymore. And when, and even if you did read the fine print you’re thinking, “You know what, I’ll have gotten a raise by then, or a better job. I’m going to take the chance. And even if I don’t I could just turn around and sell the house.” That’s what you’re thinking. You’re going to make it make sense in your head because you’re going to go to cognitive dissonance land, because you’re thinking of all the parties you’re gonna be throwing in your $300,000 home. That $300,000 home today is, you know, worth 1.2 million. So you’re thinking, it’ll only increase, it’ll only appreciate in value. This is fantastic. I can’t believe how good my luck is. And you can’t wait to bring that aunt who’s always thumbing her nose at you over, and, and you’re gonna barbecue for her and show her the beautiful house you’re in.

And at this point I don’t feel like we had much distrust towards the banking industry, right? Like these are, these are professionals who are just, who are just going by the numbers, right?

Right. We should have because of the savings and loan scandal in 1990, but no, uh we have no memory. We have the memory of a goldfish. Um, you know there were John Glenn, the astronaut was entangled in that savings and loan scandal. Neil Bush, as in Junior’s brother was entangled in that savings and loan scandal. Like there were people that should have known better, who should have been better than this. Uh, Glenn was uh was he he was a senator from Ohio right? Like he should, was he a representative? I don’t even remember. It was too long ago. Was that 35 years ago? Yeah he ended up in Congress and ended up getting a little dirty.

No, I didn’t know the, I didn’t know the dirty part. I have a, I have a signature framed when he splashed down from his, the first…

He’s still my hero, just. Politics corrupts people. And he may not have even been fully aware, who knows. Uh, I have a lot of research to do. He got his hand slapped. They slapped his hand. Uh… and then let him go back into space later. And then they made a movie about it. It was okay. Anybody can be rejuvenated. It’s, it’s just a matter of willpower. If, if someone goes hey I was wrong, uh I didn’t, I’m, I’m gonna do better. I think that’s the right direction. Some people don’t get there. Some people just don’t, you’re wrong.

Alternative facts. Fake news. I’m not dirty. You’re dirty. The system and everyone else is dirty. I’m a drain the swamp.

I’m not Jesus, I’m a doctor. I’m a doctor.

Well, doctors famously dress like that. Uh I was, I just saw a doctor today. And she definitely wasn’t wearing what Trump was wearing. No nobody in the hospital was. Uh… like not a single person and I’m in an Arab country. So let’s, let’s finish, let’s finish the, we went on a crazy uh money tangent.

No, but this is important stuff.

Yes, this is important. So so uh the banks are hoodwinking people into taking out much larger mortgages than they actually need or can afford. So so what, what happens after that?

So then what they do is they take these mortgages and they go to the stock market and create derivatives out of these mortgages. If you did one mortgage, people would look at it and go this is dirty. They wouldn’t take, they wouldn’t buy the derivatives. So what they did was they stacked hundreds of thousands of mortgages into a single instrument and then they would sell the derivatives on the stock market. And at that point all you need to see is the size of the mortgages. So in other words, if they were gonna make let’s say the interest rate on a mortgage was six percent. So they’re gonna make six percent on a $70,000 loan. Well on the derivative markets they’re gonna make 16 percent. So if I give you a $300,000 loan instead of a $70,000 loan I’m now making 16 percent instead of six percent. So the banks are going nuts, producing as many bad loans as they can so they can make these insane instruments, with the assumption nobody will ever read them because there’s a hundred thousand mortgages in each instrument. And of course there’s a movie about this, but The Big Short, where a group of investors actually go through and read the, these instruments and realize they’re trash. And they short them and they make crazy money as the, the entire global economy comes apart at the seams. But here’s the real tragedy. After the banks do this to the, to the housing industry, they turn around and convince European countries to do this. And that’s how Italy, and Portugal, and Spain, and Ireland got into the Eurozone. Those countries should have never been allowed to get into the euro because they never reached any of the criteria to do this. So what the banks would do is they would go to Italy. Look, I’m Italian. I love Italy. But there is no way Italy ever qualified for the euro. So they went to the Italians and they go, look. If we give you a loan, it’ll show it’ll increase your debt. And then to be, to qualify to enter the Eurozone, you have to have a debt to GDP ratio that’s low. And so we can’t do that. But, but the only way you’ll qualify is if you get your inflation under control and lower your debt. Well how do you do that? So what the banks did was they said, we’ll sell you a derivative. You don’t have to call it a loan. And then you take that money and you inject it into the economy and make a bunch of government jobs. The government jobs will get rid of your unemployment. You buy a bunch of your Italian worthless lira and just destroy it. That gets your inflation under control. And you pay off a bunch of your bank loans. And then Italy’s like, oh, okay, cool. What is this going to cost me? Twenty percent. Now Italy was already junk, junk status for its loans so it was already paying in the teens anyway. So 20% wasn’t much worse than 15%. So Italy’s like okay, sure. And the next thing you know they’re, everything is balanced out and they qualify and they enter the euro. And it’s a miracle. Nobody can understand how Greece is in the Eurozone. Right? The only countries that qualified for the Eurozone were in Scandinavia, Germany, the Netherlands. Uh, you know, maybe the UK but they were never going to give up the euro anyway, so that didn’t matter. Uh… there was, France even probably shouldn’t have qualified for the euro. They, they were on the edge, they were on the border. Belgium was on the border. Um, Luxembourg definitely could have done it. Austria could have done it. But that was it. So what do you think all the countries that have the euro here realize what these US banks did. They did so much business in Europe they actually moved their headquarters to London. And New York no longer was the global financial headquarters, it actually became London. Then they moved back to New York. Because they went they realized, oh my God, let’s do this to counties and states in the United States. And the next thing you know, 2008 comes and trillions of dollars disappear from the global economy. Just poof. And when you think about it, when a dollar disappears, what that means? A dollar represents your energy times your time. So if you made, if you make 10 dollars an hour, which is 20 thousand dollars a year if you work 40 hours a week. That’s what that ten dollars represents to you. Every time you spend ten dollars that’s one hour of your life. If you make a thousand dollars an hour, then every time you spend a thousand dollars it’s one hour of your life. So when you take and lose trillions of dollars from the global economy, you’ve lost trillions of hours of human labor. Just poof. Because the rich are reckless. And then, and that’s why the 2008 uh global crisis happened. It was just…

So it is different than the petrodollar.

Yeah, very different. Cause the petrodollar’s real.

Yeah, yes. Okay, okay. It’s not a scam.

So the petrodollar is real, it’s just, it’s inflated by the amount that the loans are given out. So it’s, there’s a, there’s a… a different rate I guess. But yeah, the 2008 thing was it just, it was just a scam. It was just madness.

Yeah. Okay. What about the, what about the bailout? Because like those human hours that were lost from all these people and then the banks didn’t actually, I think… there were a few bankers that were held accountable, I think, what, what’s his name from…

Oh, you’re thinking of uh… Fuld. Lehman Brothers. Fuld. His name was Fuld. The CEO of Lehman Brothers where they brought him up in front of Congress and drilled and grilled him.

I think I was thinking Fannie, Fannie Mac.

Oh okay, yeah, they did also bring them up in front of… Fannie Mae, Fannie Mac. Yeah I think, I guess someone someone was imprisoned for life, life in prison. I kept…

No, that’s Iceland. Somebody was imprisoned for, in Iceland. I’m pretty sure no US executive faced any prison time. Tell, check it while we’re talking. Cause I need to know if they did. That would be shocking. Iceland, the bankers went to prison because Iceland decided that what they did was essentially a felony level uh… conspiracy and embezzlement. And uh… Fuld, when they brought him in front of Congress uh he was basically told point blank by members of Congress that the reason why Lehman Brothers wasn’t being bailed out was because they hadn’t contributed enough money to their, their political campaigns. Uh, it was a representative from Florida who kept spinning his ring while uh… I can’t think of his name, but he was like well I just want you to know the reason that you’re up here and why Lehman Brothers is going to go bankrupt is you didn’t send us enough money. It was like wow. I can’t believe you’re talking like this. It’s so open. Um by the way, Fuld, belonged to the Slow Speakers of America. That had to be the hardest testimony I’ve ever watched in my life. That’s how he talked. And it was like why? Why, why are you talking like this? Are you, does he have a teleprompter and he’s really bad at reading? What is happening here? He’s like sounding out each word.

You’re still looking?

Yeah, I can’t actually find anything quickly enough. It looked like there was, I thought it was a life sentence but there was, I think it was some federal prison time. I saw contradictory things, like 16, 15 months. I thought I thought there was something else that had happened but I might be wrong. I couldn’t find anything within the time that I was looking.

We should look this up because it’d be important to know. Um… so okay, one more story. So, Bank of, Bank of America. By the way, I have a bank account with Bank of America. Uh, so they’re probably, they’re gonna close my bank account cause I’m trashing them.

Change it, go to go somewhere else. I’m gonna go to JP Morgan. They deserve my money.

Bank of America realized what they were doing was awful. Like, not, not awful immoral, like awful as in it was gonna blow up in their faces and they were gonna lose all this money. So they did a, they, they created a spin-off bank called Countrywide. They took all their toxic assets and gave it to Countrywide and just walked away. And they went we’re not selling it to anybody, it’s just a separate company, we’re spinning it off. Good luck. And they broke a champagne bottle on the side of the building and ran. Right? A few years later, Bank of America executives were so caught up in the insanity of what they were doing, they had apparently forgotten what they had done. And they actually bought Countrywide. They purchased it back. And absorbed it into their company. So when everything came apart, they were holding on to all these stupid toxic assets. And you’re like, oh my God, how stupid are you people?

Alright, well thanks everyone for watching. Um if you want to join us uh class classes every every Monday 9:00 a.m. Central Standard Time, we do it live and then uh I I will get the recorded version up. So to join that you have to become a member of the channel specifically as a student member. Um I don’t have a YouTube doesn’t give me a link so I can’t post it. You just have to click the Join button underneath this video wherever I am. Uh it should be next to the Subscribe button. You can go to the channel main page. If you’re on an iOS phone I think you might have to click the three dots, sorry that this is more complicated than it should be. Um but yeah you can join us live. And right now we’re going through the US Civil War. This semester I think is just six classes. And uh should be fun. It’s a little bit different. And I think the anniversary of the start of the Civil War was just like last week so…

We missed it. We should have… completely didn’t even notice it. Anyway, thank you Roy for hanging out during office hours. See you next time.

Thanks Jeremy, bye.

Bye everyone.