2 MINS AGO! "The Housing Market Is Going to EXPLODE - Here's Why" - Jim Rickards

Indiziert: 2026-05-18

[00:00:00]There were a trillion dollars of subprime mortgages. These are mortgages that, you know, no documentation, don't have to prove your income, very non-credit worthy, but there was a there was a bubble mentality of frenzy and everyone, "Hey, buy a house and borrow money, fix it up, sell it for twice as much, walk away with rich, you know."

[00:00:18]And everybody was doing it. Mortgage default rates rarely get above 5%. 5% is really high in the mortgage market. So, people were saying, you know, smart people like Ben Stein, the financial analyst, but the central bank and others were like, "Well, okay, let's get crazy.

[00:00:31]Let's assume a 20% default rate, which is which is never happened, but let's assume that's true.

[00:00:36]On a trillion dollars of subprime mortgages, a 20% default rate would be a $200 billion loss, which was only slightly higher than the S&L crisis of the 1980s. You [music] know, adjust it for inflation, it would have been a comparable loss. And the attitude was, "Well, we survived the '80s, we'll survive this. Yeah, it's bad, banks will take losses, stock prices go down a little bit, but we'll survive." What they missed is, yes, there was $1 trillion of subprime mortgages, but there were $6 trillion of derivatives. That was invisible. [music] So, all of a sudden, 20% of that was 1.2 trillion. So, you create derivatives out of thin air >> Yeah. and there's no limit on how many you can have. They're off-balance sheet, meaning give me the balance sheet of the company, I won't see them. You have to read the footnotes and then the the information behind the footnotes. So, non-transparent, unregulated, no limit on size. So, the the crisis was actually much worse than anyone realized. And then when it started to collapse, the contagion spread throughout the financial system. My point about 2008 is because we did not learn the lessons of 1998, and we flew right into 2008. But once again, we have not learned the lessons of 2008, and we're going to fly right into the next storm. In 1998, Wall Street got together and bailed out a hedge fund.

[00:01:54]In 2008, the central banks got together and bailed out Wall Who's going to bail out the Central banks? And that was the point is each crisis is bigger than the one before.

[00:02:03]The intervention gets elevated, larger dollar amounts, and are we now at the point where there's no one left to bail us out?

[00:02:10]>> [music] >> And one of the questions I'm asked most frequently is, "Okay, Jim, I kind of follow your analysis on how risk works and how complexity theory and capital markets, how that works, >> [music] >> but where's the crisis coming from?

[00:02:21]What's going to be the catalyst?" It's actually a long list. Now, student loans, they're 1.6 trillion dollars worth of student loans. So, this will go and kind of gets to your point, Francis, you know, how does the how do capital markets and and money markets and Fed policy kind of leech into to debt and deficits.

[00:02:41]So, when you know, a lender, credit union, or anybody, or university makes a loan to a student and the Treasury guarantees that loan, which they do, it's off budget. Again, it's it's it's not strictly a derivative, but it is non-transparent. So, then the student defaults and the credit the lender simply turns the Treasury said, "Here's here's your loan file, pay me." And the Treasury pays the lender cuz they've guaranteed the loan. And now it's on the Treasury, but until that point, that loss is not on the books of the U.S. government.

[00:03:15]That loss is not part of the deficit, but when the Treasury writes [music] the check to make good on the guarantee, it does go into the deficit. So, we think deficits are high now, but there's this >> [music] >> you know, trillion dollar tsunami of student loan losses that's going to pile on top of the structural deficits and make it even worse. So, all these things are, you know, I'm [music] I spend all my time analyzing these things. I see them all.

[00:03:38]I can describe them. I can see how they're going to converge into a worse crisis, but in the short run, people either ignore them or they just don't know anything about them. Why But why would Bernie Sanders even suggest that?

[00:03:49]By the way, he's not alone. I think the other candidates have, you know, Elizabeth Warren and Joe Biden and Kamala Harris, one way or another, have suggested that they would do something similar that we need student loan relief and that ends up going on to the budget and on to the taxpayers.

[00:04:06]Uh but there's a school of economics, and I talked about this in um in chapter five of my book.

[00:04:12]Um it's called modern monetary theory, MMT for short. Everyday viewers, everyday people to know anything about it, but more to the point, economists don't know anything about it. This is a new school of economics, if you want to think of it that way. So, there is this modern monetary theory, but the leading scholar of modern monetary theory is a lady named Stephanie Kelton, who's a professor of the State University of New York, but she's the financial advisor to Bernie [music] Sanders. What modern monetary theory says is that actually there's no limit on the amount [music] you can spend. You can spend as much as you want, uh and the market will either buy the debt, or if they balk, the federal will monetize the debt. So, how much debt >> [music] >> is there relative to the size of the economy? The This is called the debt-to-GDP ratio. But the way It's a simple fraction you learn in the fifth grade. How much debt divided by the size of the economy. So, in a simple example, if you had >> [music] >> uh $5 trillion of debt and a $10 trillion economy, that fraction would be 1/2. So, you would say the debt-to-GDP ratio is 1/2 or 50%. Today, the debt is larger than the economy. That ratio is over 100%. We have, round numbers, about $23 trillion of debt and about a $22 trillion economy. So, the the ratio is about 105%, highest since World War II. That troubles me. It troubles other economists. But my friend Stephanie says, "What's the problem? You could take it to 150%, 200%, 250%."

[00:05:47]By the way, that's where Japan is.

[00:05:49]Japan's at 250%. [music] Greece is 175% or so. Italy's 135%.

[00:05:56]They're all still standing. If you go to the Ginza, you know, it looks like Times Square. So, you don't see visible signs of stress.

[00:06:02]And >> [music] >> here's the irony. Ben Bernanke would absolutely not agree with this theory and he said so publicly. But Professor Kelton says to Bernanke, [music] you proved our point. You were the one who took the Fed's balance sheet and quadrupled it from 800 billion to 4.5 trillion or so. You proved that you can print trillions of dollars of money without causing inflation, without causing high interest rates, without causing a run on the bank. So, all we're saying is, you know, you did it to prop up Jamie Dimon's bonus. We want it to do it to forgive student loans. We may have We may have different policy objectives, but the process is the same. What's the problem? Now, of all the things I've debated I've for years I was I was dragged into Bitcoin versus gold debates which I thought were silly. I mean, I don't like Bitcoin. I do like gold, but it's like fish versus bicycles. I mean, the debate never made sense to me even though I did a lot of them.

[00:06:56]Of all the things I've had to rebut, this was actually the most difficult because it's superficially [music] appealing. First of all, legally it is true that the Fed can take their balance sheet as high as they want. There's no legal limit on the Fed's ability to print money. It is true that Japan has a much higher >> [music] >> debt to GDP ratio and they're still standing.

[00:07:14]It is true that the the Treasury can borrow as much as they want subject to periodic increases in the debt ceiling which have never been denied.

[00:07:22]>> [music] >> And the Fed can monetize the debt. So, all the elements of the thesis are actually correct. So, how do you refute it? And [music] the the answer is that legally it can be done. And if your goal is to print a lot of money and you forgive student loans or give a guaranteed job or guaranteed basic income whatever it is in theory you could do that but there is an invisible psychological boundary and this is what the modern monetary theorists don't understand and I don't think Ben Bernanke understands it. There comes a time when people wake up and they say you know I don't know what's going on here I don't have a PhD but get me out of the dollar it doesn't so you know I'll I'll buy gold I'll buy silver land oil natural resource I'll buy a new car buy a house get me out of the dollar into something tangible because I no longer trust the monetary authorities I no longer trust the Congress I can't believe that you're going to spend this much money without ceiling without limit without causing inflation my inflationary expectations will go up and the way to deal with that is to buy hard assets starting with gold but not exclusively gold there as I say land real estate natural resources they're all good they're all good substitutes at that point interest rates will skyrocket all of a sudden the bond market will have difficulty selling it the the you know the president and Congress could take away some of the Fed's independence all these assumptions could come crashing down >> [music] >> very quickly very unexpectedly and that's the problem with the theory.