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Capitalist Exploits Own Chris MacIntosh Talks 2020 Macro Environment | RCS 56

Rebel Capitalist Show

Chris, founder of Capitalist Exploits – one of our affiliate programs – provides fresh insights on the intense supply and demand destruction we’re experiencing, how inflation can come as a consequence to it, and the prevailing attitudes and narratives of our society. 

We discuss topics like communism vs socialism and capitalism, and what we'll likely experience as a society moving forward. Plus advice for staying ahead of it all. This interview is the second part of a two-hour session we had about the macroeconomic and investing landscape today. 

In this portion, we address great topics such as populism, globalization, inflation, and the many responses to the virus so far.

If you're a fan of Chris MacIntosh, would like more in-depth advice with respect to coronavirus investing strategy, then make sure to check out Capitalist Insider. is an affiliate and you can save 15% by signing up through our website. Click here to learn more.

Inflationary Effects After Supply Destruction 

George: I had an interview earlier today with a buddy of mine from YouTube. His YouTube handle is the Uneducated Economist.

Chris: Yeah, I just came across him. One of our clients, a gentleman in Sweden sent me a video of him talking about lumber?

George: Yeah. He works in a lumber yard. So you'll find the conversation I had with him probably pretty interesting. That will go up next week.

He's a good buddy of mine, I really like to get his take because he can see the housing market from in the trenches.

When we're talking about inflation, deflation, it's not just this pie in the sky macro stuff. He is there ringing people up as they're buying lumber, paint, or whatever. 

He is also the purchasing manager for the store, so he talks to the suppliers, whether they are in Canada or people in the lumber mills, it's a really fascinating take on what's going on.

He said that initially when the US went into lockdown mode, call it the beginning of March, the guy that owns the lumber yard, came and said, “Well we might have to lay some people off and we might have to reduce hours.”

And they were getting prepared for that. Then all of a sudden, about three or four weeks later when people started to get their stimulus checks from the government, he said business just started booming.

They had to actually bring on more people to manage all of the business they were doing, especially on the weekends because what happened is people were required to stay home.

Meanwhile, a lot of people that really didn't need the money got the money or are making more money than they were at their jobs because of the unemployment benefits plus the additional call it $600 a month or a week.

George: He said that what they were doing is they were just coming in to remodel their houses, they didn't have anything else better to do.

So they were coming in, buying lumber to build a new deck to barbecue or paint to repaint their kid's room or something like that.

So initially, he saw the prices of 2x4s go down pretty substantially, but recently he's seen prices really shoot up.

I saw the same thing in a video I did where we were talking about flights from Miami to LA,  looking back February, or let's call it January, they were $350 a flight.

When we went full force with the virus the prices just plummeted they Went down to like $100 a flight. 

But then what happened is all the airlines just started to park their planes on the runway and just take them out of service. 

So you had the supply actually go down faster than the demand.

Chris: Yeah. Everything is more expensive now.

George: Yeah, it's more expensive than it was back in January, but there are just a lot fewer flights. My buddy the Uneducated Economist saw the exact same thing playing out in his lumber yard.

Chris: What I'm seeing happening, George and it's not just in the airline industry or in the lumber industry or any of these things.

If you think about a typical recessionary type of period, let's say you're a large manufacturer and you go through a mild recession.

Typically what you're going to do is you will take the hit, you won't necessarily lay off and furlough staff but you wouldn't have capital expansion so you're not going to open a new store or take that holiday that you had planned for your wife.

So you hunker down for that period of time but what you don't normally do is decimate your own supply chains.

If you've got trucks that are running, let's say we're transporting goods around the country, we don't sell our trucks.

We might not be moving as many goods, but typically we don't sell those capital goods because we know it's a recession, probably in six, 12 months time it'll start picking up again.

Maybe it takes a year and a half or something, but you foresee that, you hunker down and nut on with it.


What we're seeing in this instance is that the demand destruction has been so intense that your ability to service anything that you have is massively curtailed, and it's not like you had revenue just being paid back. 

In certain instances they're into the zero, If you're in the airline industry it almost went to zero because you just couldn't do anything, certainly in the tourism industry.

If you had to shut up your shop and you were running a bar, which are all closed, you just had to actually go about destroying that infrastructure and supply.

You get rid of all your bar staff, you get rid of your waiters and many of those things.

What you have now is when any coming out of that takes place, there's nothing left. You're surveying this wasteland which is very different from any previous recession.

I feel like a lot of finance folks are looking in the rearview mirror at previous recessionary periods and saying well okay, how did those play out? That's a logical way to go but it's not the same, it's really not. 

The mental and psychology has been very different because of the necessity to literally decimate your supply of goods and services which we never had before. There's the demand side of things which has collapsed for this period of time. But we never have had supply destruction like that before.

It's always been that mental thing of “we're going through a rough period, we're going to pull back, we might not have cap expending it the same level etc.

If you're an airline industry, you might have run less flights. Let's say you were doing five a week, maybe you go to three a week, something like that, but you don't sell your airplane.

 And in this instance, we’ve just had it at a much, much greater level.


The supply side has been absolutely decimated, in certain sectors more than others.

But I think, and this is really what I wanted to talk to you about is, this whole globalization that took place post-Bretton Woods, was one of increasing that pie. And it's just a matter of scale of economies.

You get better services, the cost of those services and products go down because you have more participants. Anyone understands Economics 101.

If you have more buyers in a room to buy this pen, it’s going to go for more money. But if I have more pens, add more people then the whole cost of everything goes down because the ability to make the pen becomes cheaper because you have more participants.

You and I might go, we'll make a pen cheaper than that joker over there, so you have a lot of competition coming in.

That expansion of the pie has been one that we've been experiencing post-Bretton Woods, and it's been disinflationary in many goods and services.

What we're seeing now is a much a different environment whereby many of those producers of goods and services have gone away.

So, you come out with something whereby, those scale of economies are not what they used to be.

To your point of flight, the cost of the airplane is still the cost of the airplane.

If you don't fill the 300 seats on a plane and you can't run that plane literally backward and forwards all day long, you can only run in 50% of the time, you have to charge 50% more just to get to your breakeven.

So you have this inflation that comes through as a consequence of a relative lack of supply relative to the demand. We're seeing this in food, we're seeing it in travel and we're going to see it in energy.

George: Before we get into energy because I really want to take a deep dive into that, I want to run something by you really quickly.

For the viewers out there, if you ever see me do a video on something, a lot of times the only reason I'm doing it is because I'm trying to think through it myself, and doing a whiteboard video helps me do it.

Chris: That's one of the reasons I started writing.

George: Especially when I'm drawing things up on a whiteboard. 

A lot of people comment and say,  you must have a big staff that does all your research but actually I do all that, I draw all this stuff up on the whiteboard myself.

When It Comes To Inflation, Correlation Is Not Necessarily Causation 

George: My point is I went back to look at inflation and deflation in the United States since the 1800s, and what you see from 1800 to the middle of the 1930s is inflation and deflation back and forth.

From 1800 to 1900 prices actually went down over that 100 year period and I think if you were to take it out from 1800 to call it 1930, especially with 1931, 1932, prices would have gone down for the whole span of the 130 years.

Then what happened in the mid-1930s instead of just seeing inflation and deflation back and forth, you pretty much just saw inflation.

Every once in a while you see a tick down as we got in 2008 but other than that, it's pretty much inflation the whole way through.

I had a discussion with Jim Rogers the other day and I was trying to get his framework and really understand it because he's my favorite investor.

He said what he used to do in his classes in Columbia is he'd have his students look at a chart going as far back as they could.

Whether it was the price of cotton, commodities, stocks, and they'd look for an anomaly in the chart and try to ask themselves, what created this?

George: I was looking at this chart and I saw that at the beginning of the 1930s yes, we had substantial deflation in prices, but what was surprising is after about, 1934 to 1940 we actually had pretty substantial inflation in the United States.

So most people think the 1930s was this massive depression and prices just kept going down further which led to more unemployment and more destruction of credit and money supply and all these things, It's actually not true.

My point is, what happened in 1934 or in the late 1930s?

I'm not trying to say correlation is causation but it is interesting that in 1935, they passed the act which brought us unemployment benefits and social security.

Then in call it 1938 or so, they came in with the minimum wage.

I thought wait a minute, all of a sudden when we go into a recession, the people out on the street, and I'm not saying this is good or bad, now have money in their pocket where they otherwise wouldn't have had.

George: There's a transfer mechanism for the government to take debt and get it into the back pocket of the average Joe and Jane, and you combine that with the minimum wage.

So thinking back through what we just were discussing with the airlines as an example.

When they first get that demand shock they can say okay we'll put some planes on the runway, we'll run fewer flights, we'll do all these things.

But if there wasn't a minimum wage, especially going through the entire supply chain of the country, first, they could lower wages.

If they lower wages, then they wouldn't necessarily have to decrease supply as fast as they otherwise would have.

So I thought maybe that's why we haven't seen inflation-deflation, inflation-deflation. And I'd love to get your thoughts on that.


The short answer in my way of thinking is actually that we as humans like to try and make things black and white.

We go okay, is it going to be inflationary? Is it going to be deflationary? I used to think about that when I was 20 because you want a fairly simplistic view of the world.

But the problem with that is that economy and finance and everything that we're talking about here is this giant ecosystem, and it all interacts in various shapes and forms. That comment that you made about correlation is not necessarily causation is really true.

There are many factors that can contribute to a certain outcome. It's not just one thing that causes another thing necessarily.

If I pushed against you, that's a force and I could say well that's going to make you fall over. But if at the same time you're bracing for that, then there's another force.

Then if you've got something behind you that I can't even see, you've got another force. And then I might have slippery shoes. Do you know what I mean?

The Prevailing Attitudes And Narratives Of Society As Decision Drivers

Chris: There's a lot of different things that can come in, that can affect. My pushing is probably the major one.

My slippery shoes is less of a thing but then the floor might be extra slippery or it could have a lot of traction.

There's a lot of different elements that you could add to anyone’s little picture if you will. The economy is like that and each service sector, product sector are all like that.

When you bring in the minimum wage and when you bring in subsidies, tariffs all these sorts of things they have an impact.

I guess the answer is it makes it very difficult to actually ascertain it.

One of the things that I have spent over the years more time on than I would have in my younger days, is trying to look at major trends that are taking place at I guess a societal level.

In other words, what is society moving towards? What are the prevailing narratives? What are the prevailing attitudes of that society?

Because those attitudes and those narratives typically drive the responses whether they be economic in terms of how people allocate their capital but certainly in terms of how governments choose to “manage” any particular situation or any industry.

At least in the democratic world that has been the case. If you come up with all sorts of policies that hurt people and they don't like it, the odds are that you're going to get voted out of power and so on and so forth.

There is a dynamic there. In that space when I'm looking at what's taking place now, and this is really one of the things that I wanted to talk about today.

Because we can talk about all the finance stuff and what the Fed is doing and what the ECB is doing and all these things. They are all important.

But I've been spending the last few weeks or months just trying to make sure that I've got the right picture or at least a sufficient amount of the right picture on a longer-term basis going forward.

Because I think it's really going to be critical. If you just think about what our lives look like a few months ago we were in a completely different situation.

And here we are, we're locked down, depending on where we are, who we are and where we're living.

We can't even get on an airplane and go somewhere else. We would go, I've had enough of this, I want to go somewhere else. We can't even do that. You can be a phenomenally wealthy person, you still can't do it.

That should be a big wake up call and a shock, and it has been something that I've spent a lot of time thinking about.

Globalization Effect On The US GDP Expansion

Here's how I am thinking about it, George. Where have we come from? We've come from this world, we have this massive globalization trend.

If you look at the various globalizations that we've had, the 15th to the 18th century. At that point in time, it was raw materials, basic goods that were being traded.

And on an international basis, global exports as a percentage of GDP,  we’re somewhere around 5% or less.

George: What year, what time frame was that, Chris?

Chris: 15th to the 18th century. Then you go to the 19th century through to 1914, we all know what happened then. That had grown, that was an additional globalization.

Things like textiles, industrial goods were exported and imported all around the world. Exports as a percentage of global GDP went to around 14, high of 14%. So from 5%, that was a phenomenal period of time.

Obviously, it was over a longer period of time, It was the 19th century. Then if we go from 1945 through to 1990 which was the period of time that most people can conceive.

That industrial output was factory production, things like that. And we ramped right up to 15% of global exports.

Then the period that really makes sense to us because of our ages was 1989, 1990 period of time through to I'll call it 2008.

That really was this global supply chain that we had. That was the Bretton Woods period.

And that really amped things up. It had all of these partners that came into that global marketplace, near the tail end of it, it became all Asian groups, it became China.

A lot of that was disinflationary because we were bringing in so many low-cost laboring into that workforce. But it brought goods and services that made our lives wonderful, and everybody or many people could afford them.

Chris: Now there's a financial side behind all of that, we know that the trade balances in the West had gone negative during that period of time.

But in that period we ramped up to the point now where the global trade today is roughly 46% Of global GDP.

And that's what, an $86 trillion global economy? This has been a phenomenal expansion. With that, there were things like NAFTA which is the largest free trade agreement in the world.

It was all these various trade agreements even within Asian countries, within European countries. Within that period of time, we saw the EU come into play.

Again, this massive expansion of the pie. I'm not saying it's good or bad, it's not my job here. The point is it happened and there were positives and negatives to it.


One of those critical things to understand is that it was severely disinflationary. It has been also one of the key drivers behind the offshoring of certainly American jobs, but Western jobs.

To Vietnam, Bangladesh, China, etc. In return, we got super cheap consumer goods.

What's interesting, talking about inflation and deflation is that if you look at the goods and services that you could not offshore, things like healthcare and education, have been severely inflationary.

Then if we look at cellphones, T-shirts, software, and manufactured goods, they have all been super deflationary. When you look at that context, you can understand why that is.

I try not to get caught up in the is it deflationary, inflationary? And everybody is yelling at each other, It's a mess.

But just stop to look at say okay, what are some of these drivers? And then look at some of these individual goods and services.

Why is it that healthcare is more expensive? Why is it that higher education is more expensive? Why is it that childcare is more expensive? And why is it that your cellphone is cheaper?

They are easy questions to answer when you just bring them down to an individual level but that also created a lot of inequality.

I remember writing an article probably about two years ago where I was mentioning why we were likely to start getting more populism in the world.

I pointed to Trump, there's many I could have pointed to but he was one, and I said this is why he's going to win. At the time I think he had a 5% chance of winning or something according to the polls.

But if you look at a lot of these forces that were taking place and you looked at who was impacted negatively and positively, you could see.

Look, Brexit was the same thing or had elements of the same components that were creating those social issues if you will.

What we got now is a kind of tail-end. That expansionary process was already coming under pressure before we went into this virus scenario.

We saw it with trade agreements coming under pressure, and with the US pulling back from NATO.

From a lot of these trade agreements where they were saying hang on a second, this isn't working for us anymore.

I don't want to get too deep into why that is, we've written about it plenty. That was already in place.

Chris: What this has brought is an accelerant to that, at a super large scale. Where there's this question of do those relationships still work for us? And if so, how?

That's going to become an even greater problem given that people are going to be out of work and looking for a solution.

Mentally, it's a retrenchment. If you think about what people are doing when they have either lost their job or their incomes are being impaired, you pull back.

Mentally, there's a whole pullback and it's not just in terms of individuals. It's in terms of countries and it's in terms of societies that are retrenching from that hey, let's make this pie bigger.

Shutting Down Bordes Is A Tribal Response To The Virus


On a political basis, if we look at history, what that typically engenders is a how do we divide the pie. Not how do we expand the pie. How do we expand the pie is a capitalist view. How do we divide the pie is largely a socialist or communist view.

That's what concerns me more than anything else. When I look at it in that light, the siren call of socialism is a very strong one.

Even if you fundamentally know that it hasn't worked before, if you've lost your job and you've got to feed yourself and somebody is going to come and give you something or promise to give you something, it's a very powerful call.

Coupled with that, there's this almost threat of plan, and we're seeing it with racism.

A buddy of mine sent me through something, in the states where particular states are shutting their borders to other states to stop the virus.

It's like, you're from a different state, you can't enter here, that's tribal, It's absolutely tribal in nature and that's happening globally.

Countries have shut their borders to other countries, you're out, we're New Zealanders, we're Americans, we're Singaporeans whatever it is. Everybody else out. It's a completely tribal reaction.

It's clan, it's looking after the clan and even within communities, the same thing is taking place. Like I said in the states, you've got particular communities where they are like “you can't enter here.”

You could go, I'm an American, I'm like you and they are like fuck off. It's interesting to evaluate what that means on a much more global scale, and then what are the reactions to it.

What's troubling is that in that environment there is an overly large probability of getting an authoritarian type of rule. It is the very environment that allows for that to take place.

There was a fantastic podcast I listened to the other day with one of the ruling lawmakers in the House of Lords in the UK, Lord Sumption.

He talks about how dangerous what is taking place is because you've got a police state coming into power.

He talks about how police states and authoritarian setups typically take place not because of some overwhelming enemy that comes in and rules over.

George: No, it's bottoms up.

Chris: It's bottoms up.

People literally give up their rights under some context of fear. When you drive enough fear into their hearts, they just willingly give up their rights.

He's laying it out and does a brilliant job of it.


Security over freedom.

Chris: Yeah, exactly. When I look at some of the problems on a social basis. We know there are financial problems and look, everybody's got them.

On the emerging market side of things that's because of the shortage of dollars out there.

But If you think about a social construct in various countries, largely in the West, let's talk about the US, I know a lot of your viewers are American based.

What is happening in the US to a certain extent is quite similar to what is taking place in Europe and other western democratic countries.

Massive pension problems. The funding for these pensions is wholly inadequate. I think Medicare and Medicaid are about $70 trillion underfunded, It's not possible to pay that back.

The solution that they have used and that they are continuing to use is not the solution for pensions. But what they are doing is they are mucking around with the cost of capital.

You can't screw with the cost of capital because that affects every single asset class on the planet. That's what they are doing, and they are going to continue to do that.

Chris: It means that pensions for example are just not going to be resolved and then how do you resolve them? Well, you could bail them out like a literal massive bailout. And that's probable at some level.

When I look at what's going on in the states at the moment, a lot of states are going bankrupt and looking for bailouts

I suspect it's likely that they are going to look for a big enough bailout to be able to cover their pensions schemes.

Even though they fucked them up for years, they will turn around and blame it on the virus when that's not at all what the problem was.

George: It's actually a great excuse for them, defer blame from the politicians on the virus.

Chris: It's the best thing that they could ask for. And people will be too dumb and stupid to even go, “well hang on a second, you were massively underfunded before you went into this thing.”

So a lot of that actually just drives us towards what we believe is going to take place which is stagflation, and that's fine.

We're positioned for that. But what's taking place at the same time is that society is being destroyed as a consequence of these actions that are taken.

For example, In the Soviet Union, you had some bureaucrat in the Kremlin who decided how much wheat got grown, where, by who, and so on and so forth.

They decide who got a motor car, who was important enough to get a motor car.

All of those goods and services that would normally move around an economy were just massively halted. And what did you have? We didn't have deflation. There was no deflation there. It was just a massively expensive cost of goods.

To get a car was fucking expensive as hell, no one could afford a car, it was only the bureaucrats. No one could afford food, you ate what you could and the cost of it was extremely extraordinarily high.


  • Were the prices stable though, Chris?

See I've never researched a communist country, their economy. How does that work? Because they control everything.

  • Are prices gradually going up or they are just always high?

Chris: That's where you get two markets. So they had set prices of a bushel of wheat would be so many rubles, but there was no availability of the bushel of wheat.

George: A black market.

Chris: So you're like well wheat is cheap, everybody can afford wheat. But you go to the store and there isn't any fucking wheat.

The only way you could get to wheat is to find out who had it, and then they weren't going to take that price so you had to pay them five times the price so you have the black market.

In real terms, you had massive inflation. To get anything was very expensive.

Destruction Of Supply after Governments Decree


Think about it today, the governments of the world, and this is mind-boggling to me because it's not isolated, have largely said who is “essential” and who is not.

If you and I were running a supermarket chain, we're essential. On the other hand, if we were running a butcher store, we're not essential, we're shut down.

Think about that. So now the butcher doesn't have any ability to sell his meat. If you move down that supply chain, the farmers that supply anybody other than the supermarkets have lost their business.

There are farmers going out of business right now when you think hang on a second, everybody still needs food.

It doesn't matter. They were not designated, or part of their supply chain was not designated to be essential, and so they are not essential.

So they are pouring milk down the drain and they are slaughtering the herds and they are plowing their food back into the ground. I'm just using agriculture as an example.

George: Yeah, meanwhile prices are going up in food.

Chris: So that's supply destruction. Think about retail. If you and I had a retail store in Ohio and we were selling shirts, we're stuffed. We have to shut down.

And there are many stores throughout the states and anywhere around the world frankly which have been forced to close down.

And yet Amazon is not, Amazon is set up for this. So who benefits? Who captures 100% of that market? Amazon.

You used to run an events service right? An events company. If you and I were doing that now we're screwed because we can't run an events company.

However, Zoom can. Zoom is now actually an events company largely because people are running events on Zoom.


You have this massive distortion that is taking place because government decree has said you're essential, you're not essential. That creates more inequality in the society, even more than we had going in, and we had a lot going in because of lobbyist groups and all this kleptocracy that we've had.

Now, what I've been looking at is pulling back and saying, what's happening in the world? What are these social constructs that we're dealing with?

Who is doing what and why, and how are they dealing with this pandemic, and how are they likely to deal with it on a go-forward basis?

Because I think that gives us a playing field to understand,in a longer-term, who are likely to be the winners and who are likely to be the relative losers.

And when I look at what's taking place there, it's phenomenal. It's very much a West, East type of structure.

In the West, we have these increasing socialist governments. They are talking about UBI, universal based income for your listeners if they're not sure what UBI is.

Very much you're essential, you're not essential and then they are tackling the crisis with handouts which is increasing their debt load.

That means that you have an increasing percentage of the population that is now dependent upon the government.

Not only do they necessarily think that that's how it should be, but they are also asking for more of it.

There was a report out, I'm sure you probably came across it where many of the people who are now on government-subsidized wage programs don't want to go back to work because they are earning more money from the government than if they were going back to work.

George: Yeah, then they get pissed off if their employer does bring them back because it's a pay decrease.


Without productivity, debt won’t be paid, I was trying to explain this to my son. What is money? Money is a unit of productivity. That's all it is. So you add units without any productivity, the whole mechanism breaks down.

So what we're doing largely in the West is we are adding units of productivity with no productivity. In fact, we are paying people not to be productive.

How do you get people out of a debt situation? Productivity and paying down the debt. That's how you get yourself out of a debt debacle.

So not only did we go into this with a debt debacle, we're accelerating that like we've never done before. Just obscenely so. But not only that, people are championing it, people are cheering for it, and what they are cheering for is more authoritarianism.

It's been a long time since I've been an employee, a very long time. But I do recall having to do what my boss told me to do because I knew if I didn't, I'm fresh out of luck. That's part of the equation.

Are you going to turn around and tell your government not to do something when you're reliant on them? When you're wholly reliant on them?

That whole ability to look after yourself is just being shattered. Psychologically, that is very, very bad for any society.

So you've got this dead laden economy. That really can only do a few things, It can just remain moribund. We've also got more and larger monopolies.

Your Amazon, your Google, your Netflix. Anything that's on the tech base. In fact, we can see this in the S&P.

If you just look at the S&P at the moment, the top five companies, you've got Facebook, Amazon, Google, Microsoft, Apple, and Nvidia.

I was looking at it last night. Their market capital just hit fresh highs at about six trillion dollars. That's equal to the combined GDP of Germany and Italy.

We're having this extraordinary wealth distribution taking place. The losers, the people who can't participate in that because look most people are not shareholders of Microsoft or Amazon.

They are just trying to run their barbershop or do whatever it is that they do. Maybe they are plumbers, maybe they are salesmen for roof tiles, I don't know.

But they are not participating in this and they have been shut down, they have been told that they are no longer useful, and they are now reliant on the government. That's all very much a recipe for authoritarianism.

The other thing in terms of structurally trying to get these countries out of this set up financially.

Again, productivity is being destroyed. In order to correct this, like in a normal recession, you have businesses going out of the bust and you gave creative destruction.

Maybe they've got factory plant machinery. Somebody goes and picks it up. Some business go bust, you and I come in and go “oh man, wow, we can get a bunch of diggers for half price.”


Yeah, prices going down are the cure for a recession, because that's what creates the fundamental demand.

Chris: And within the prices going down, one of those prices is labor costs.

You have to let labor costs set at the market, and that's what the West is not going to do. That's why we got UBI coming through, minimum wage policies, and all of this.

So that's fixed, it's rigid. What you get there is the public sector crowds out the private.

Because you and I trying to run a business, we go wow, we can get these diggers for half price and we need to get people to drive them. Fuck, we got to pay them how much per hour?

You do the numbers you go, God damn.

George: One more thing I want to mention to layer on top of your point is now we have a situation where these smaller businesses, not the Amazons and the Googles of the world, are asking themselves, okay let's just say things open back up.

We get rid of the lockdown, we're good to go. But now all of a sudden we have all these increased government regulations from a standpoint of health.

So as an example, I've got a small restaurant. Now I need to put up plexiglass between all of the tables, or now my insurance costs go from $1000 a month.

My liability, up to $5000 a month because let's say some 80-year-old person comes in and gets the virus and unfortunately passes then the family, especially in the United States is so litigious.

That family is going to go after the restaurant owner. The insurance companies know that.

So then as a small business owner, you're thinking okay I'm going to have all these regulations come down on me from the government.

I've got to make sure people are this far apart, I'm only allowing this many people in the bathroom at one time and maybe setting up a line outside of my restaurant and all of these things.

When you add on the additional cost, then they are thinking to themselves, do I really want to do this? This just doesn't sound as good.

Chris: George. It's just more supply destruction. One of the things that we, as humans do, is we look at our recent rearview mirror to figure out what might transpire in the future.

The last major problem that we have had in terms of inflation, there was demand-led growth. It was emerging market growth.

So everybody has been saying okay, where is the growth going to come from? Wow, the world is turning to shit where there is no growth therefore we can't have any inflation.

But if you go back far enough and if you look at history, you realize that inflation can come from supply destruction too.

The oil embargo, there was tons of oil around and all the oil went through the roof. Why? It was the access to the oil that was impeded.

So that was an access problem in terms of moving that oil. It wasn't necessarily that there was any deficiency in supply or deficiency in demand.

That has an inflationary impact throughout the economy because energy is used in everything. You want to make bread, you need energy. So it's dangerous, coming back to what we talked about before.

The world is an ecosystem that has many moving parts. I don't pretend to have all the answers but it's important to try and understand and think about it like that.

But coming back to these things that are taking place in the West. When I look and I go okay, what is happening elsewhere in the world?

And I talk to people all over the world day in and day out, how are they tackling this? I'm broadly going to talk about the East because broadly in the East, they are tackling it with hardship.

They are going it sucks and sort it out. Debts get written off, markets clear. There is no minimum wage so labor costs get readjusted to whatever the market is prepared to pay for those labor costs.

That public-private sector structure has remained relatively the same.

In the West, the private-public sector has changed dramatically whereby is getting decimated and the public sector is just getting larger and taking on more liabilities.

And people are cheering it going yeah, I need help.

That lack of pain that people are taking where they know I get a handout from the government is going to create such pain in the future that they have no idea how painful that can be.

That's our working hypothesis.

But in many of these other countries, you're getting the economic foundations for future growth.

Right now I don’t long those countries, but as this plays out I think it's important to watch what's taking place because I do feel that the supply and demand, the labor costs, all those sorts of things are being left alone more so than in the western democratic world.

The government is not determining one thing or the other to the same extent. So there's just less intervention.

Then when you look at trade balances, I always spend a bunch of time looking at trade balances. Because if you think about it as a business.

It's how much do you make, how much do you not make really. And it's phenomenal. Across the Western world, you have massive, massive trade imbalances whereby they are broke. They are all in the red.