On this episode of The Impatient Investor podcast Andrew sits down with John Truman Wolfe, author of The Coming Financial Crisis: A Look Behind the Wizard’s Curtain. Enjoy!
“Beijing, Moscow, Washington, all now talking about national digital currencies. This is coming, and so I think it’s smart of people, if they’re not familiar with that world to get familiar with it, it’s not that complicated.”
– John Truman Wolfe
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Andrew: Hey everyone. My next guest is John Truman Wolfe who is the author of the number one Amazon bestseller, The Coming Financial Crisis: A Look Behind the Wizard’s Curtain. John’s a really interesting guy with a great background, and we talk about the upcoming global financial crisis. It’s always interesting to get a perspective from someone who studied economics and a background in finance on everything that’s happening in the economy right now and some future predictions. Enjoy.
Andrew: Hi, John. So happy to have you on the show and thrilled for you to be here. How are you doing today?
John: It’s my pleasure. My pleasure to join you. I’m doing well. Thanks.
Andrew: Excellent. So why don’t you tell us a little a bit about your latest release, The Coming Financial Crisis, A Look Behind The Wizard’s Curtain. Tell us a little bit about that if you would.
John: Well, that book exposed among other things who was really behind the financial crisis of 2008. It is a bank that most people had never heard of called the Bank for International Settlements, that bank is in Basel, Switzerland. It is the central bankers’ central bank. The term that I’ve applied to it as the godfather of the global financial mafia. The major central banks of the planet, 55 of them are members there, so members include the The Fed, the Bank of Canada, the Bank of Italy, the Bank of Japan, etc. And that bank I repeat, based in Basel, dictates to the central banks of the world and central banks is, I’m sure you know, and your listeners know basically determine the economic health of a country. So the book exposes the BIS at some length. This is interestingly a bank that has its own, Swiss law doesn’t effect it Andrew. Its employees are immune from prosecution, they have their own militia on the property. They are above the law, believe it or not. And that bank, when it issues directives are basically complied with around the planet.
Andrew: And I think you had mentioned it at some point that this, there was a, maybe it’s a theory or not, there was a central bank of central banks, right. There was one bank that was kind of leading the charge in all this, and that’s the bank you had just referenced.
John: Yes, that’s exactly right.
Andrew: Okay, great. Maybe talk a little bit about the bail-in procedures and how this all ties in for those who don’t know exactly what that is.
John: Well, it’s a good question. And following on the introduction of the BIS the bank for international settlements, the planet is awash with derivatives not to get too technical. A derivative is simply a security that has within it, something that generates value or income, like the infamous mortgage backed securities of 2008 were basically packages of mortgages. So it’s not the mortgages themselves, the mortgages generate income, but the package of mortgages is a derivative. There are 1.4 quadrillion dollars with the derivatives on the planet. The vast majority of those are what are called interest rates swaps, which is a mouthful, which basically means these are bets on the direction of interest rates. That’s it. B of A goes, I think Greek bonds interest rate, and Greek bonds is going up and Deutsche bank goes, no, no they’re going down, and they bet. And that bet becomes a security. And then people bet on those bets and people bet on those bets and there is this pyramid. So you have about, it varies a bit, but about 75%, 80% of those derivatives are these interest rates swaps, which are just basically Vegas style gambling. And the New York money center banks have got about 227 trillion. That’s with a T dollars worth of derivatives and the bank for international settlements, I repeat is kind of the godfather of this scene. They saw that these banks are pregnant with derivatives. In my opinion, somebody going to put a pin in this thing sooner or later. But they issued this policy called bail-ins to get back to your question, which basically says if a bank is troubled, they’re going under, they’re not doing well, they have the right and authority to take depositors money and convert it to bank stock without the depositors permission. Just take it. So that is, pardon me. That is bail-in policy. It is an official policy in the EU, in Canada and the Dodd-Frank legislation of a few years ago made it policy here. There’s actually an instruction online put together by the FDIC and the bank of England on how bail-in policy would work here. So this is onerous, most people don’t have a clue about bail-in policy or that their deposits are at risk.
Andrew: So a little further to that you wrote a book called the 99 strongest banks in America and why it matters. So for people that have, there’s obviously an FDIC insurance, that’s up to $250,000 for individuals. When people are looking to invest, whether it’s in a large bank or a small bank, what really should consumers be looking for? Because you’re right. I don’t think many people know about this. What do you recommend for consumers?
John: It’s a great question. Bail-in policy applies to banks with $50 billion in assets or more. So I recommend to people to, if they’ve got significant amounts of money in the New York money center banks, B of A, Wells, or Citi bank, JP Morgan chase, to move the bulk of that money to a smaller regional independent bank. Doesn’t have to be a little teeny bank, but ensure that your bank has got deposits, I mean assets rather of 50 billion or under 50 billion, in which case Bail-in policy does not apply, at least the way the regulations are written now. So I encourage people to move into smaller regional banks and it takes their deposits out of the target range for bail-ins.
Andrew: Got it. And I’m sure it’s very complicated. I mean how does FDIC insurance fail? And is that part of this up and coming this crisis that’s potentially happening in the future?
John: Really, really, really critical question. I have not been able to get the FDIC to say whether or not their insurance applies in a Bail-in situation. I’ve talked to a Federal Reserve Bank in the issue that is online written by the FDIC and the bank of England talking about the procedure of a bail-in, there is no insurance mentioned whatsoever. So I’ll be dead frank with you. I don’t know if it will apply or not, well I hope so. But the federal government has been, the fed in particular has been closed mouth about that.
John: Let’s talk about diat currency a little bit. So when I was just doing a little research and I think I had looked into this years ago. The lifespan of diat currency typically is 27 years. Is that your understanding basically when the currency is pulled from gold, like in our case, in the US it’s when Nixon took it, took it off gold in 71, right. Is that your understanding about 27 years?
John: I haven’t heard that figure before. So I don’t know if 27 years is a number. You’re talking about at what point the diat currency begins to deteriorate?
Andrew: Yeah, I think it was average life span of about 27 years.
John: That figure doesn’t surprise me. I don’t know any, I don’t have any hard data on that, but look, we’re going through a major, major financial restructuring. We’re kind of at the beginning of it. If I go back in my mind may be a couple of years or maybe two, three years, and now people talking about Bitcoin, I just kind of blew it off, that this is some kind of made up something, but I’ll tell you, digital currencies are here to stay. They’re not going away. Bitcoin is extremely strong. There are thousands of digital currencies, most of which are just junk, but there are digital currencies that represent real value and real production. Ripple is an example which has a facility to enable banks to make transfers internationally outside of the Swiss system very well. Ethereum, the company that provides a software for blockchains. And I’m no expert in that, but blockchains are basically the software devices that enable people to transfer currency or other assets. Anyway, Ethereum has value. So some of these things have real value. Some of them are just based on emotion, but this is changing Andrew. And in my opinion it won’t be that long, certainly in your lifetime, there will be no more cash. Bank accounts will be zeros and ones. The international monetary fund is fond of the digital currencies. China has developed a national digital currency, which they’re testing in one of their provinces, Moscow is developing one. There are two articles I recently read from people on the fed. It wasn’t from the chairman, but it was from a couple of fed governors that talked about we’ve got to look into digital currency. So this is coming, this is going to be in the future without a doubt in my mind.
Andrew: So, interesting thing, we’ve got a lot of real estate listeners and a lot of folks that’s their core business. Some of the numbers now are pretty staggering. I just saw that there was about two and a half million mortgages in the United States that are 90 days late or more, which is a pretty massive number. How do you think, we’ve got an inventory issue, very low inventory and residential rates are obviously at an all-time low. Some of the, just some of the data that’s coming out saying that malls are going to be closed down in the next two or three years, and obviously retail is getting hammered pretty hard right now. What do you, how does these historically low interest rates affect the world markets or affect the US specifically? I mean, how long, I think that they’ve said that the rates are going to stay pretty low for another few years, but how do you think that affects either the US or just the world markets?
John: Well, I’ll confess right off, I’ve been surprised at how strongly the real estate market in this country has held up. Certainly I’m in the general Southern California area. It’s strong here. I’ve talked to folks across the state. You would know this better than I, but in general, the real estate market’s seems strong during all this pandemic noise and so forth. And at least the reason that makes sense to me are these rates, as you mentioned, back in another life, I was a banker in San Francisco, and I remember making mortgage loans. Six percent loan was really, really good. So here, I’ve got a mortgage broker, a friend of mine, and he says, he’s making these loans at 2.5% all day long. He said he made a 15 year fixed at 1.99%. So these numbers, as I repeat you know better than I, I mean this is unheard of. So at what point does that steam run out? I’m not sure. I mean, Powell has said, he’s going to keep rates at zero until the end of 2021. So, at least there’s that period of time in which it’s going to stay low, how does this affect the world markets? With all our warts, we’re still the leading economy in the world. We’re still the place where foreign investors like to put their money. And again, you’re kind of the real estate expert from, but from my opinion, I think those markets will stay strong for at least another year or so, how that affects foreign investors, as the US goes, so does the investors in China and Japan and the EU go. We’re still leading the charge. Beijing is trying to catch up. Some years ago, a friend of mine sent the book that you mentioned to some people in Beijing, a friend of mine in Taiwan, he sent me an email and he said, the Chinese government would like to talk to you about the solutions in the book. And I thought it was a joke. I said, have them fly me over business class and put me up in this particular hotel in Beijing, which I happen to know is a nice hotel. And he sent me an email back and went, they’ll fly however you want, they’ll put you up wherever you want. So I flew to Beijing, the CCP, Chinese Communist Party flew me there. I spent a week talking to some reasonably well positioned people and that’s a long story, but among other things Andrew, I had dinner with the president of China gold, which is the largest gold mining consortium in the world. This guy has got 40,000 employees and he was buying up gold mines around the planet like Pac-Man. And China continues to focus on Gold. I write a financial newsletter and the last issue was on the war between the US and China on the subject of gold. And so there is a focus now, if you look at the precious metals markets, they’re doing very, very well as are the digital currency markets. Today there was some downdraft, but Bitcoin, Ripple, Ethereum, these things are booming as is gold and silver. So that seems to be an area where people are putting money in addition to real estate. And I know talking to, I guess a mutual friend of ours, Jason Hartman, this is still a booming market. So I’m waiting for something to turn, but right now across the boards, real estate is going well, the stock markets near its all-time high, precious metals are doing well, digital currencies are doing well. And we’ve got what 20 million people out of work? And the GDP is falling like a rock off a tall building, so something doesn’t fit there.
Andrew: Right. Right. Yeah and I think over the last, I think we’re five months into Covid at this point. And the last numbers I saw, I think we’re close to 55 million jobless claims. And some of those folks are back to work and some industries, the entertainment industry, the concert business, sports are just decimated and wiped out. What do you think? It’s pretty interesting through the subprime crash companies like Uber were started and Airbnb, and so there’s obviously all kinds of problems that are happening right now that didn’t exist six months ago. If you’re married with a couple of kids and everyone’s at home now homeschooling and you’d give your left arm for another office, or another bedroom in the home and back to the 55 billion jobless claims, I mean, what do you think this looks like in the next 6 to 12 years, just as far as the job market and specifically in the U.S. do you have any thoughts on that?
John: Well, I can’t think other than it’s going to be rough as hell if I can say that. My son lives up in San Francisco and among other things manages his wife’s beauty salon, a very kind of prestigious beauty salon there in the San Francisco East Bay. They’re closed down. I mean, he’s got two kids, they tried to open up and Governor Newsom shut them down again. And he is not atypical, I’ve got friends they’re just out of work, they think they have no job. So I don’t like being pessimistic, but I don’t think this ends well. I think this catches up with you. I think the, I’m not to get partisan about it, but I think the president is doing a good job of trying to restore things. And in general, the stats are up Andrew. I mean in general, seem to be climbing out of that V on the right side of that V. But I think with this many people out of work and companies exactly, like you say, Uber, Airbnb, they’re decimated, they’re just decimated. So I think it’s going to be, I think everybody’s talking about how nice 2021 is going to be. I have my doubts. I think it’s going to be rough, even if people dig out of this mess they’re out of work for three, four or five months, you’ve got to catch up on their bills and their mortgages and their, as I’m sure, a lot of the mortgage lenders are being somewhat accommodating by letting folks defer mortgage payments for a few months, but that’ll go on only so long.
Andrew: Yeah, absolutely. So for some of the listeners, what are some key takeaways you’ve got, which we’ll leave in the show notes. You’ve got a podcast that you do, you’ve got a financial newsletter. We’re big on education in general. What are some takeaways for the listeners? Like what do you recommend? I mean there’s so much bad information out there, and back to what you said I really don’t think a lot of this is going to end well. I mean the courts haven’t been open for months and months, and months, and probably backlogged on processing mortgages, and just a massive amount of mortgage failures. And so what do you recommend, what would you tell the listeners just as far as how to be prepared and really just on the educational side?
John: Well I’ve got, I don’t want to sound like a used car salesman, but I just finished last night at like three in the morning most recent newsletter, which gets into that exact subject, which is okay, good what do you invest in? And I kind of detail that in some, like, if you’ve got some extra bread I would put it in precious metals and I would put it in digital currencies, I specify those in the newsletters. I won’t get into it here, but if you’re not an owner of some gold and silver, I would buy some. You don’t have to go nuts with that. But it’s climbing now whether or not it’s the pandemic that is driving the prices of gold and silver up or not is another question. But if you’ve got a little extra money in your reserves, but buy some gold and silver, I’m a big fan of silver because it’s much less expensive.
I mean, if things really hit the fan, you have a hard time buying groceries with announce a goal, which is around two grand, as opposed to an ounce of silver, which is 30 bucks or so today. So I’m a fan of silver. There are all kinds of bullion dealers across the country that sell these things. And I would stick my toe, if you’re not, stick my toe into the digital currency market, because this area has matured and is expanding. And with the major governments on the planet, I repeat Beijing, Moscow, Washington, all now talking about national digital currencies. This is coming. And so I think it’s smart of people, if they’re not familiar with that world to get familiar with it, it’s not that complicated. And, investment wise stick their toe in that water.
Andrew: That’s great. Well really appreciate you having you on the show today. And so why don’t you just let listeners know maybe the podcast, website and then the financial newsletter and we will put everything in the show notes as well.
John: Sure. Well, the financial newsletter is kind of where I gush things and which is most important. It’s a bit of a mouthful, Strategic Financial Intelligence. So it’s www.strategicfinancialintelligence.com, and you can get the newsletter there with a discounted the price during the crisis from $249, a year to 99 bucks a year, it is 2 bucks a week. If I can’t make ya 100 bucks with this news newsletter, I’m doing something wrong. So strategic financial intelligence John Truman Wolfe podcast, you can check. And yeah, I mean, there are specific recommendations in the issue that’s just about to be published. I would encourage folks if they want to take a look. I named some specific gold stocks and some precious and some digital currency. So I would encourage people to sign up and read and get educated.
Andrew: Perfect. Well, thanks again, John. Great to have you on and good luck with everything in the future.
John: Thanks. Same to you. Thanks for having me.