Welcome back to Real Vision. I'm your

host Ash Bennington. Today I'm joined by

a true fan favorite Jim Carson, founder

and CIO of Kai Wealth. Jim, always great

to have you with us on Real Vision.

>> It's been a while. It's great to be

back.

>> It's been a minute. What a time in

markets. Uh, Jim, I know you're a big

picture guy. You look at the big

picture. You look at the details. What

are you watching right now? How do you

see these markets?

>> Well, I think uh, for the longest time

we've had two major pressures that, you

know, we've kind of talked about uh, and

that dominate kind of trying to predict

where things are going and how the world

is going, which have been,

you know, macro, like what are the big

picture kind of uh, forces that are

pressuring uh, the world. Uh, a lot of

these deal with kind of looking at

history and looking at, you know,

structural forces underneath the hood,

which we've talked about. And then

there's the flows, which are the

structural flows that are nothing really

to do uh, with uh, what what the macro

is doing or not. They're structural.

They happen day in, day out and have are

a little heavier in certain times than

others. So, these two forces, one more

kind of short-term and supply and demand

focused, one more kind of long-term

weighing machine, right?

But I think increasingly what's become

clear in the last year and a half is

there is another leg of the stool.

There's another major pressure. Um, it's

always been there, but never as

dominant. And I like to think of it as

playing poker, right? You can know the

odds uh, of your hand

and you can know how that the game works

and be a very good player, but then if

somebody comes on, you know, comes to

the table and starts playing very

differently, maybe not in line with

exactly what you think the incentives

are, you have to begin to psycholog-

psychologically [clears throat]

understand that person. That person is

government. It's the administration. We

have never in a uh, you know,

in in in the time that I've been in

markets, which is about 30 years, had an

administration that is so um, I guess

uh, what I would explain is proactive as

as particularly trying to move markets

in certain ways and trying to

force outcomes via the market channel

as we see now and that is so critical.

And so,

whereas there used to be a certain

reaction function to the Fed and the

Treasury that you could generally play

within

you no longer do that. And I think

that's really important. So, we've spent

a lot of time in the last 6 months

really diving into what are the

incentives, where are we heading, what

are the likely

moves by this administration, what are

they doing and what will they be doing?

And I think understanding that is so

critical to predicting where we are

going to be in the next 6 months, the

next year, even the next 10 years

because the level of what I would call

financial aggression

that is being deployed and the way it's

being deployed is different

than has ever been done before. So, I

think diving into that a little bit

today is I think important. There are

there are five massive pressures on the

system and they are coming to a head.

And I want to be clear why when I talk

about the administration, it's not just

this administration.

It is it is the forces being put upon

the American institutions that are

forcing

a reaction in general.

And so,

lots of forces out there.

The big ones that I think are critical

to understand is how aggressively debt

is

kind of growing in the system, right?

We've talked about this before, but you

know, 50% of all debt has been created

in the last

12 years. I mean, that's that's a pretty

crazy number.

In inflation, obviously, we've talked

about the drivers of that. That has

become

uh

they've been unable to keep that down

below their target nor do they really

think they want to, but we'll get into

that.

Populism, which we've talked about at

length here, which is driving a lot of

these outcomes, is accelerating and will

continue to build till 2035 because

millennials are becoming a politically

dominant force and baby boomers are

dying off, which is forcing a tax the

rich, uh you know, um

set of a set of forces.

China, we have a competi- we have a a

competitive landscape driven, uh

partially by this whole cycle we've

talked about at length, right? Which

which is where we've had a mon- a

monetary policy driven capital side

policy, which has driven globalization

expansion, built China, and now we're

rescinding, you know, moving away

uh from that, retracting with with

populism and protectionism, which is

driving a conflict. Um that conflict

between the number one and number two

economies in of in the world forces of

the world is about who will rule the

next 50 to 100 years, who will make the

rules, um uh who will have the

exorbitant privilege of currency, who

will who will make the rules at the UN

or whatever the next policy uh and the

laws will be. Um and so, you take all of

these forces, and then you put it in the

context of what? A market that has

become too big to fail.

We have 300 trillion dollars

of equity value that are driven off

these 150 trillion trillion dollars of

public

uh equities.

>> Well, Jim, it's so interesting and I I

appreciate the simplification of the

framework because there really are three

parts uh whenever we talk and you've

made them quite clear and quite explicit

at the outset here, which I think is a

good lens to help frame this or maybe

three different lenses uh in which to

see the world. Uh you mentioned first

and foremost, of course, macro, which is

most of what you hear about here on Real

Vision, the traditional news cycle macro

stories. Uh the structural component,

which is all the flows, uh and

particularly the derivatives component

that you and I have spent so much time

uh talking about. And then you've made

very clear this this third lens, this

third leg of the stool, which is uh

what's happening from a policy and

government perspective. And look, we

should say uh you know, I recently had

the opportunity to go see the Secretary

of Treasury in person deliver his his

speech here at the Economic Club of New

York. And this administration has made

very clear uh that they are interested

in driving a series of outcomes for the

United States from the perspective of

the economy, from the perspective of

manufacturing, uh labor markets, et

cetera, et cetera. This administration

has a very clear view of what it is that

they want to do. And the policy levers

and mechanisms that they're interested

uh in in in in in working with uh to

achieve those outcomes. So, it's a it's

a very complex and complicated system

that we're talking about here. Um where

would you like to begin? What's the most

salient part of that? I know it's a it's

a big picture, but I think it's

important to frame it for our viewers

and our listeners so that they

understand how you see the world.

>> Yeah, I know. I think look, these five

pressures, which I which I mentioned,

which is uh you know, inflation, you

have structural inflation, populism, uh

a market that is too big to fail, a

an intractable uh conflict with China

that we are we are we have entered it

and we must uh must fight. Um and uh

and again, the uh the populism of um you

know, that that we are we are facing.

These pressures are all coming to a

head. The debt is unsustainable. Uh you

know, the market is too big to fail as I

mentioned. The China thing has to be

dealt with and is accelerating. And and

the populism is coming to a head as

well.

Those things are a witches' brew for a

lack of a better term. They are going to

uh force their tectonic plates that are

going to force a a a pressure and an

outcome which

is what the fourth turnings are about.

This is what leads to the these

generational turns. The populism is a

function of of that and is forcing the

protectionism and all these things.

When we hit this moment though, you do

have [clears throat]

an administration or a government that

has the ability to look back just like

we are,

has tools that are better than ever in

AI and other

other tools, right? To say how are we

going to try and navigate this?

And when I sit down with these five

pressures and say, "Look, you make me

treasure treasury secretary, what do I

do in this scenario?" There's only one

way out.

There's only one way out for the US

right now. To avoid a massive crisis.

And that is quite frankly lean all over

the exorbitant privilege of the US

dollar.

Right?

Protect that at all costs, which is

what's happening in Iran. We'll get into

that later.

But

protect that, draw a motor on it, and

then lean all over it because that's

your golden goose. You can print money

at this point.

You can only monetize the debt, which is

unsustainable, through printing money.

And now the key is there's a second part

of this, buy equities. Because if you

print money, you're going to drive

exorbitant inflation, you're going to

you're going to cause a debt reset,

which is what you want. Right?

But if you do it in a way that where

you're buying equities and you're

sending it to strategic assets, what do

you do?

Solve two problems. One,

you compete with China, which China's

been doing something similar for over a

decade, which is driving direct

investment to strategic businesses, not

for a profit, but because they're

strategic.

You support the equity market in that

process. But you solve some of the

popular you you begin the gateway to UBI

by buying stocks on behalf of the

people.

This is what Norway's sovereign wealth

fund is about, right? They have they

fund 85%

of the uh the actual um

uh

social services.

Right? Through their sovereign wealth

fund, $3 trillion. If Norway's uh you

know, if Norway could have a $3 trillion

sovereign wealth fund, which mind you is

about 4% to 4 and 1/2% of the S&P 500,

how big do you think the US's sovereign

wealth fund is going to be?

It is not a coincidence that we've

launched a sovereign wealth fund. It is

not a coincidence that we have these

Trump accounts. We are laying the

infrastructure for short-circuiting

populism, not by taxing the rich and

giving to the poor, but by

forcing everybody in to the equity

market both to support it and to drive

equity investment. I call this whereas

China maybe 20 years ago call started to

call its free markets

air quotes, right? Um free markets with

Chinese characteristics.

This is socialism

with you American characteristics. We're

meeting in the middle. We're using the

free market channel

to pick winners and pick losers.

To push

the poor into where the rich is, where

the rich already are. This we've also

started to do and show we've we've with

with the stakes and Intel and MP and all

the other companies that we're starting

to do with. Those are the first steps,

but you ain't seen nothing yet. This is

becoming industrial policy.

Okay? And the more we do this,

the more

the

the more you're going to find that this

is actually the right solution. Now,

it's not without lots of risk and to be

clear as a free market guy, I don't like

it.

But we're not here to say I like it, I

don't like it. It is what it is and

we're here to determine and understand

what this means for outcomes.

But the reality is not only if you put

into an AI model is this the only way

out,

right?

But it is actually if you can protect

the incumbency of the US dollar, protect

exorbitant privilege of the dollar, it

is a likely scenario

to win.

>> I've got I've got so much to ask here,

Jim.

This is this is so interesting. So, I'm

I'm going to focus on two two of the I

believe the five pressures that you

mentioned. Uh the first is I'm curious

about how this thesis intersects with

the idea of markets being too big to

fail. I I assume what you're talking

about here is the degree to which the

American economy has become

financialized uh and the extent to which

uh the extent to which, for example, the

the correlation between uh the S&P and

employment has been uh become uh so

tightly intertwined on the one hand. And

then also, what that exorbitant

privilege means. I know that that's a

phrase that's got a lot of history. Uh

maybe you can unpack that, talk a little

bit about what that means uh

specifically in the context that you

intend it.

>> Yeah, absolutely. The first one, let's

put some numbers on. We've mentioned

this before, but I the the one thing

that almost everybody misses with

markets, which should be the one thing

that everybody knows

about markets, is that they are massive.

US equities are 300 trillion I'm sorry,

global equities about 300 trillion

dollars, about 150 public and about 150

trillion private. And the private runs

off the public numbers.

Okay?

300 trillion. When we had a 20% rally in

2 months from March to June,

what did we see? A 20% increase, which

means 50 trillion dollars

of new collateral.

50 trillion dollars of new collateral.

We just lose ourselves in these numbers.

Trillions are billions or what's the

difference?

The total amount of QE done

during

the COVID period was less than 10

trillion.

The total fiscal spending

10 years out passed during COVID, which

was rivaled the New Deal.

Was about 10 trillion.

We made $50 trillion of collateral in 2

months

by the market just going up

20%.

Markets are by far the most dominant

force of liquidity in the world now, and

it wasn't always this way.

The market has become so big. We have

become so financialized that it's all

that matters. It dwarfs everything else.

It drives CAPEX, which drives all the

income

income growth. If you get a decrease, by

the way, of 20%, you lose $50 trillion

of collateral.

So, when I say it's too big to fail, I

quite simply mean in dollars and cents,

it is just too big to fail. This is not

a general term, "Oh, it's too big to

fail."

$50 trillion of removal of collateral

the system, especially given the amount

of leverage on top of that,

on a two-quarter basis, would create a

much bigger crisis at this point.

And the administration knows it. Not

just this administration, government

understands this. This is why you have

Mnuchin, a hedge fund manager, in as the

Treasury Secretary. It's why you now

have a Treasury Secretary for the first

time in as

Sorry, as a

hedge fund manager in as the head of the

Federal Reserve.

If you're If you're aligning the dots,

they come from the same sphere.

They know each other. They're both

Druckenmiller disciples.

Yes, we can do good cop, bad cop all day

long with Oh, this guy's the the uh

hedge fund manager that is fiscally

responsible, and this one is the one

that's going to print the money.

No. No, that's not how it works. It's

good cop, bad cop, and there's one goal

for the administration,

which is they have to monetize the debt.

It's unsustainable, because we're not

going to go to austerity, if it hasn't

become clear yet.

Right?

>> And we And we've seen the risks of that

approach, for example, in the United

United Kingdom.

>> Yes, but we're not the United Kingdom.

The way we are different and this

transitions us to the point that you

were asking about is the exorbitant

privilege of the US dollar.

>> Yes.

>> We have

the golden goose.

We can print the dollars.

Other countries cannot.

>> Before you go, that was just the

preview. The full conversation goes much

deeper, what's really driving markets,

where the risks are, and how the best

investors are positioning. That's what

we do at Real Vision. We connect the

dots before they become obvious. So,

don't stop here. Watch the full episode

now and more on Real Vision.