Washington, DC -- (ReleaseWire) -- 12/20/2016 --DAWN BENNETT: John Rubino publishes the financial news site dollarcollapse.com, and is the author of five books with the most recent in 2014 titled The Money Bubble. It's a great book, you need to get it. Recently though, John published two articles that I took a tremendous amount of interest in. The first one is titled 'Another Election Year, Another Bunch of Fake Numbers' and the second one is titled 'Why We're Ungovernable'. Both are the perfect place to begin. John, welcome to Financial Myth Busting.
JOHN RUBINO: Hey, Dawn, good to talk to you again.
BENNETT: I love this article, 'Why We're Ungovernable'. Would you mind just touching a little bit on that so we start there with our listeners?
RUBINO: Sure. You know, the point of that series is that when you borrow too much money, if you're a country or an individual or a family, it kind of plays out the same way. Your life becomes unmanageable. And for a country, what that means is that the old ways of buying votes for constituencies stop working because you've used up all the money that you have to play with so you can't provide good jobs for people and elections become harder and harder to run, and that's what we're seeing around the world right now, whereas what used to be slam dunk election. Like Brexit – Brexit wasn't supposed to pass in Great Britain; they weren't supposed to leave the European Union. And yet they did, even though the polls right up until the end said that they would stay. And then Donald Trump wasn't supposed to win here. It's like that around the world, and the reason is that people no longer trust the big systems to work for their benefit. Workers in the U.S., for instance, see all these free trade deals being passed and at the same time they see their factory jobs being moved to Mexico or China. So free trade is not a good deal for them. They see interest rates being cut in an ostensible attempt to make the economy grow faster but what that really does is it evaporates the interest income from your bank account. You know, if you're a regular person without a ton of savings probably most of your money is in a bank account, which means you can't save for the future anymore, you can't put your money to work because it doesn't earn you anything. So your life gets harder and harder and you then are open to voting for people who point that out. Donald Trump stood up there and said 'The systems don't work for you anymore. It's rigged, and I'm going to fix that.' And he said a lot of crazy things after that but people just heard the first part so they voted for him. And that's the world we're moving into now where these big systems don't work and every election is this major cultural upheaval, so we're headed that way fast and it's only going to get worse. There's a long series of elections scheduled for 2017, possibly the biggest of which might install an anti-Euro, anti-EU administration in France and also possibly in Italy. So, yeah, turmoil as far as the eye can see which will feed back into the financial side of life and cause financial problems which in turn will cause political problems. We've got a system that's spinning out of control at this point.
BENNETT: Speaking about Italy, last week Italy voted in the latest Brexit-style revolt to throw out their EU-aligned government and its plans for consolidating power. The Prime Minister Matteo Renzi has since resigned. Since then we've seen the euro falling against the dollar although so far it seems like the massive crash forecasters predicted hasn't arrived. Were they wrong or is this really a significant financial event for us here in America?
RUBINO: Yeah, the spinning out of control of the Eurozone and the European Union is a very big deal for us because the European Union is the biggest economic entity in the world and if it sees more and more countries leave, which is what it's looking like now, you know, the next administration in Italy is probably going to be anti-EU and anti-euro and then the one in France may also be, if that starts to happen that means, for instance, to take just one possible outcome, trillions of dollars of supposedly high-grade bonds are denominated in euros but for instance, the Italian part of that bond market would have to go back to lira if they left the European Union and the Eurozone and then those bonds would be devalued really dramatically because they'd be paying in a weaker currency, so the big banks and hedge funds on those bonds would have to report massive losses and that would possibly screw up the financial system of Europe which in turn would screw up the U.S. and so on around the world. It's all interconnected and when a big entity runs into trouble all the other big entities also run into trouble. So, yeah, the trouble in the Eurozone in 2017 might be the main story in the global financial system.
BENNETT: And even here in America. Something we've been discussing on Financial Myth Busting is whether Trump, even if he brings all the right people aboard, can actually stop the market crash we've been forecasting for some time now. I mean, basic economics would suggest Trump doesn't have the power to stop an economic crisis so many years in the making. I feel like we're going through a great melt-up. It's just odd to watch on a day-to-day basis.
RUBINO: Okay, two parts to what you just said there. Yeah, Trump cannot fix what's coming because we've already borrowed the money that's going to cause us nightmares in the future. You know, we can't pay back our current debts so it doesn't really matter if we borrow more and try to grow the economy in the future, which is Trump's strategy. You can't fix excessive debt with more debt. So that crisis that's heading our way is baked in the cake already. What's happening now in the financial market is just a typical political honeymoon. We're seeing the potential benefits of new stuff and we love new things, the human mind is designed to focus on new stuff, so for a little while the new stuff is what we focus on but the negative side of future policies will only become apparent with time. Sometime in 2017 I think there's going to be a reckoning in which it becomes clear that the system is broken and nothing that Donald Trump or anybody else around the world is doing will fix it and then at that point you get this massive panic. That's what's out there, you know, everybody heading for the exits.
BENNETT: It does almost feel like they're setting Trump up, the marketers.
RUBINO: It could be, because he's going to be blamed for what happens and it's—you know, leaving aside whether you think he's a good person or not, what's coming is not his fault because we created the conditions for it to happen before he got here. But the person in charge, for better or worse, gets the credit and blame for what happens. It's completely possible that the system doesn't like Trump. You know, the deep state is not a fan of Donald Trump and he's a threat to it so they're engineering a blow-off stage of the bubble right now so that the minute he walks into the White House door and sets up shop they're going to pull it apart. That could happen.
BENNETT: Exactly. You talked about America's massive national debt, which is on pace to expand about $2 trillion this year alone. I think it's creating an economic crisis, as you stated, regardless of who's in Washington. But, of course, Trump will be blamed for it. How can something so structurally unsound continue as long as it has?
RUBINO: Well, that's the nature of financial bubbles. They always go longer than you think they should. The tech stock bubble in the 1990s went several years longer beyond historically high stock market valuations. The housing bubble in the U.S. – you know, home prices should never have gotten to the point where they got but they got there. And this is the biggest bubble of all time, what we're living through right now, because it's global. You know, it's the world's money that's being blown up. So it shouldn't be a surprise that we're going further into the twilight zone in part of this process than you would think based on just rational analysis. But bubbles always end the same way. The imbalances become untenable and they blow up. That will happen this time around. We can't say when exactly but we know that the dynamic of a bubble is pretty much etched in stone, you know, it expands and then it pops. So when it pops it's going to be unlike anything we've seen in our lifetime certainly because we've never had this kind of an imbalance. Therefore the bursting of this bubble will be bigger than anything that's come before.
BENNETT: It's going to be another shock to the system. You've written that in the aftermath of Trump's victory which, of course, was a major shock to the U.S. system and I think the world system. The elites who voters rebelled against never fully appreciated what happened, much like what happened with Brexit, where the elites are fighting Brexit in court. So instead, elites are pointing fingers confident this is merely a passing fad. But do you think this is only the beginning of the process?
RUBINO: Oh, absolutely. This is going to go on for quite a while because, as you said, the guys in charge don't really get why it's happening because to them this is a great world. You know, if you're a well-educated simple manipulator free trade is great for you because it means you can sell your stuff everywhere in the world. And if you're a factory owner or just a generally rich person open borders are great for you because it means cheap nannies and cheap factory labor. So for most of the people free trade and open border are not necessarily a great thing and they're willing to vote against you but you don't get that because all your friends are like you if you're part of the elite. You know, they all see the world rewarding them for their brilliance and it's hard to say that's a bad world when it's rewarding everything you do. So they don't get it and they won't get it until we have kind of a French Revolution type event where figuratively speaking we take the one percent out and decapitate them. Not physically, hopefully, but they just get kicked out of their cushy little spots in the global economy. And that started in the U.S. That did spook people, I've got to say. When Trump got elected you got the elites around the world thinking 'God, if that can happen, what can happen here? Could Beppe Grillo be the next prime minister of Italy or Marine Le Pen be running France by this time next year?' So they are spooked now but they still don't understand why because they don't see it firsthand.
BENNETT: Let's talk about somebody who I think doesn't understand – Janet Yellen. She recently testified that among other things she's likely to go forward with a rate hike this month, although we haven't seen it. Many are forecasting that it's going to be the pin that pops the bubble that the Fed's been inflating since the housing crash in 2007. She likely knew this risk which is why she postponed it until after the election. Again, this is back to my thought are they trying to set Trump up. Do you think she'll raise rates this month? And if she does, will that spark another recession? Is that going to pop the market bubble?
RUBINO: Well, everybody thinks Fed's going to raise rates. And maybe they are but you can't read anything coherent into what federal governors say or do. They don't know what they're doing now. Their models don't work anymore so they're bereft. You know, they're academics who've devoted their lives to a given model and the model doesn't work. So they're completely lost, and you get that from what they say. You know, they send all this talking heads out from the Fed to say things and what the Fed talking heads say is completely incoherent. They contradict each other and they don't make any sense in the first place. So whatever they do is not going to be part of a coherent plan with some reasonable outcome out there in the future. You know, they're just winging it. They've been trying to get through to the next election cycle in the U.S. for the last year. And now who knows what they're doing. I guess they're going to try to keep their jobs, probably. They'd like to be reappointed by Donald Trump but it's not clear they know how to do that. So don't expect anything from the Fed that makes sense. The system is way, way beyond making any kind of sense. We're just in the 'spinning out of control' part of this process and the people making decisions are going to make almost random decisions going forward because they just have no idea why what's happening is happening.
BENNETT: If we go into another recession or depression unlike we've ever seen in our lifetime or maybe even worse than the Great Depression, do you think that would inspire Trump to get rid of the Federal Reserve altogether?
RUBINO: Well, you know, trying to predict what Donald Trump is harder than predicting what the Fed is going to do because I don't think he came into this necessarily expecting to win. He's like the dog that catches a car that he was chasing—
BENNETT: Accidentally.
RUBINO: Yes. What do you with it after you catch it? So who knows what he'll do? It's anybody's guess and, again, it really doesn't matter. He could kick everybody out of the Fed or order them to raise rates or order them to lower rates or who knows. It doesn't really matter at this point because in the end we've already borrowed too much money and we have to pay the piper for our past mistakes. It's going to be very serious when it happens because—these imbalances, you know. Speaking of the Great Depression, the financial imbalances in this system are vastly bigger than they were in 1929. So if that's the relationship or in other words the imbalance gets to a certain point and then you have a commensurately bad experience after that then our experience of the next few years should be worse than the Great Depression. I really don't know. We've never been here before. This is bigger than anything we've ever seen so you can't say for sure how it's going to play out but you can say with a high degree of certainty that it will be chaotic and it will be scary and bad for most people. You just can't say exactly what will happen in any kind of detail.
BENNETT: John, I'm going to thank you for being on Financial Myth Busting. And to everybody out there, it's John Rubino. You need to go to dollarcollapse.com. It's a great column. And you put a new column out every week. Is that correct?
RUBINO: I put it out several times a week. I publish something new. You know, I'll sit down after we get off and do something else today probably. But it doesn't have a regular schedule so you can get on the mailing list by going to dollarcollapse.com and then they'll just come whenever I put them out.
BENNETT: Thanks, John.
For over a quarter century, Dawn Bennett has been successfully guiding clients through the complexities of wealth management. Her unique vision and insight into market trends makes Bennett a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to her highly regarded weekly talk radio program - Financial Mythbusting. Through prudent and thoughtful advice, Dawn Bennett has strived to consistently provide the highest quality of guidance.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.