He joins the show to discuss the accountability crisis in America — how it manifests across political life and, most importantly, what we can do to fix it.
I hope you enjoy this conversation as much as I did. We’ve shared some highlights below, together with links & a full transcript. As always, if you like what you hear/read, please leave a comment or drop us a review on your provider of choice.
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Highlights
Try and tell a supermarket shopper that inflation isn’t a problem
“When I get in a disagreement with some Fintwit guy, including some very prominent people, I say, "Well, you know what? On Fintwit I can hold my own, but why don't we go to a supermarket and you could tell everybody about how low inflation is.” And we've never had... I said, "Let's have a meeting in aisle nine and just put a table up and have people come walk by. We could do a podcast there," right? It's like ... I don't know. I mean, I try and stick up. I grew up very middle-class and so that's where my heart is and that's who I fight for because nobody fights for. You don't see anybody middle class on CNBC. Ever. “
It’s OK to disagree!
“I like that common ground. So there's people that follow me or I follow them and we agree on some huge Venn diagram of stuff, but they think I'm nuts on over here and I think they're nuts over there. But I choose not to pick on the part that I disagree with them. I might repost things that they posted I agree. As I have to tell people sometimes, it's like just because when I quote someone, I'm not endorsing every single thing they've ever said, written, or done. You know what I mean? But there are people, I mean, I've quoted Karl Marx before. I've quoted Lenin. I've quoted Lenin. Does that mean I support Lenin? No, but I mean sometimes people you disagree with can say things that are very pertinent. So I think people need to calm down, not have a litmus test of I won't do this podcast with you unless you and I agree on here's a hundred issues you have to agree with me on. I mean, I don't believe in that at all. If we agree on 10, I'm fine with that. Let's talk about those 10, and maybe if you want talk about a few of the others.”
Cluelessness everywhere!
“You talk about cluelessness. I've said before, I don't know that there's any group of people with less self-awareness than central bank officials and WEF guys are just like that. They live in their own rarefied world, but the St. Louis Fed or the New York Fed or even the Federal Reserve, or sometimes they'll have these tweets and they'll say things like, housing has increasingly become a problem for young people or something. Here, join, we're having a conference on this to discuss it. And I'm like, “Do you guys have any clue about what you did? Buying almost $3 trillion of MBS and its effect on the housing market?” Which they had zero in 2008. They still have $2.3 trillion. And no one, and this goes back to the media too, no one says, Hey, guys, could the Fed monetizing few trillion of MBS have affected the mortgage market at all? I don't know. Cluelessness is a big problem in our society, especially at our major institutions.”
Why politicians need term limits
“Term limits I think I would absolutely support now at all levels, and it can be some reasonable thing. I know maybe two terms for a senator and maybe, I don't know, five terms for a congressman or something like that, I don't know. But I'm just saying these career politicians is a problem because they're not beholden to you or I, or anybody. They're beholden to the people that give them millions of dollars. So it's corruption that I think… that's something like Washington and Madison and Monroe and everybody would agree on.”
Books Mentioned
Yellen: The Trailblazing Economist Who Navigated an Era of Upheaval; by Jon Hilsenrath
Deterring Democracy; by Noam Chomsky
The Rule of Nobody: Saving America from Dead Laws and Broken Government; by Philip K. Howard
Transcript
Jim O’Shaughnessy:
Well, hello everybody, it's Jim O'Shaughnessy with yet another Infinite Loops. Today's guest I have been waiting to talk to for a long time. He is very much in demand, both on the podcast circuit and elsewhere. My guest today is Rudy Havenstein. No, not the German head of the Reichsbank during the Weimar Republic of Germany that caused hyperinflation that basically collapsed the German economy, sowed unrest and instability in society and crushed the citizens' trusts in institutions like the political ones and the media ones. Gee, Rudy, that's sounding a little familiar, and also gave her eyes to our good friend Adolf Hitler. This Rudy is an American who set up a Twitter account in 2013 to warn us here in the United States and the rest of the west about the dangers of hyperinflation. Rudy, first off, welcome. I've been waiting to talk to you for a long time.
Rudy Havenstein:
Thank you. It's an honor to be talking to you. A pleasure. Thanks for having me.
Jim O’Shaughnessy:
We're roughly contemporaries, and my first question is, for people who don't think about this a lot, why don't we talk a little bit about hyperinflation? Because if you know the history of hyperinflation, of course the Weimar Republic in Germany was a classic case, but recently Venezuela had essentially 1,700,000% inflation between 2016 and 2018.
Zimbabwe. But when I talk to people, they always say, "Well, yeah, that's Zimbabwe or that's Venezuela. United States is the world's reserve currency. It's the biggest and most militarily powerful country in the world. That could never happen here." Explain why that might be wrong.
Rudy Havenstein:
Well, Germany wasn't a small backwater in the '20s either. It was a major European power even after losing World War I. I've been clear all along. I'm not calling for... I wrote post probably almost 10 years ago saying I'm not calling... I certainly don't think the United States is at imminent risk and I think it'll happen other places first obviously if it happens. But I'm just saying we have to be careful, that any nation that monetizes debt is putting itself on a dangerous path and we have monetized the debt. They say that they're tapering the balance sheet if you look at it on a semi-log scale, it's really not much. There's a lot of people expecting that they're going to have...
I can't tell you how many podcasts I've listened to recently where people say, "Well, they're going to have to monetize the debt." Tom Hoenig the other day was talking to somebody and he said, "There's going to be a lot of pressure on the Fed to monetize this debt." And people are talking about $20 trillion balance sheets or $30 trillion balance sheets if we don't get our house in order. But I'm not calling for it. And by the way, hyperinflation, I always make clear too, is not very high inflation. It's not like '70s inflation or the 9% we just had. It's a currency collapse. It's a different animal. I think very high inflations can lead to hyperinflations, but it's night and day. I'm not calling for it imminently, but I'm just saying we can't be... What's the Stein's law that what can't go on forever will stop?
Jim O’Shaughnessy:
Yeah.
Rudy Havenstein:
That's all. And I picked the guy because I always had an interest in that period of history and I have a bunch of contemporary accounts written by people who lived through it of the hyperinflation, particularly Germany. And you can see how, like you pointed out in your intro, that it absolutely destroys society in ways that I don't think we can appreciate. And my thing is if we ever go that route, and I really hope that it never does, and I'm not calling for it, but I'm just saying if we ever go that route with the world's reserve currency, it would destroy the United States and it would destroy probably the greatest political experiment we've ever had in the last couple hundred years in the history of the world. You just have to be careful. You can't just say, well, we're the United States so we can do whatever we want all the time.
And that's the thing I think we say in a lot of levels. Some country that we don't like, we'll invade them. We need to send money, we'll print it. Because we're Americans. I've said before, Americans generally don't put themselves in other people's shoes. Look at, and I can keep going, the sanctions and everything that they did. They told people like the Chinese and the Russians, "Hey, don't keep your money in US assets because one day we might be mad at you and confiscate your stuff." Without rule of law. That's dangerous too.
And as I say, my name, Rudy Havenstein, was intended as a warning, not as encouragement, but it seems like the warning part has been ignored by our leaders. But I also came on for stock market, other reasons too, because I've been telling people, I used to, and I still do, send emails for years to friends and stuff just with news articles and stuff like my Substack now. Because most people are too busy trying to survive or trying to make a living to pay attention to the vagaries of what goes on in the stock market or in politics. Anyway, it's dangerous. Just be aware, we're not some special country that can't make mistakes. I say that the FOMC now thinks they're so much smarter than the Reichsbank in 1923, and I don't think they are.
Jim O’Shaughnessy:
And I have been fascinated by things like currency collapses for a long time. I also write a lot of fiction stories. And way back when in the '80s I wrote one and someone, a friend of mine joked to me, the reason I started a publishing company was simply so I could publish all my own stuff. And that's a joke, of course.
Rudy Havenstein:
That's a good plan.
Jim O’Shaughnessy:
But now after selling O'Shaughnessy Asset Management and our new venture, we actually do have a publishing company. And one of the reasons why that we started that is we think that a lot of topics should be much more deeply explored. And back to the fiction idea, back in the '80s I wrote a treatment about the easiest way to destroy a country would be through destroying its currency. And that was because... It wasn't very good, I'll admit, I was in my early 20s. But the reason for that is currencies are stores of value.
One of the things that always confuses me, and I'd love your opinion on this, is the Bitcoin aficionados. Look, Bitcoin is a speculative asset and if you want to invent a speculative asset that you can trade, okay. But it's certainly not a store of value. And sometimes in my career in asset management, I was always struggling to get people to understand that, understand inflation and real returns. And I'll tell you, man, in a couple of my books I used real returns and real returns are those stripped of inflation. People just did not like it. Why do you think it's hard for many people to really grok the impact and effects of inflation?
Rudy Havenstein:
I was just posting on that on Real Returns. What you were saying about the best way to destroy a country is to destroy its currency, that's straight out of Lenin. There's a great quote from Keynes. Keynes quoting Lenin in his book, of course I posted on all this, that that is the best way to destroy a country. We have stealing, and of course it causes all sorts of ramifications. Why don't people? I don't know. I think everybody, if you ask them, I've done surveys, of course they're not scientific, but I get a couple thousand replies. What do you think is your cost of living increase? Is it two point, I said whatever the CPI was, or is it 10% or is it more? I think I listed 10% as the highest, and that one won by a good margin. And then a lot of people were replying that it's higher than that.
Someone could show, well, look, we have this data series from the BLS and it's only 2%. But I know everybody's going... My auto insurance went up 41%, same everything. And people said, "Oh, mine was worse than that." Other people said, "Mine was 30." "Mine was..." It's not 2.7. Okay. I think everybody knows that. Now, why don't they think in terms of real? I don't know. I just posted a cartoon from a New York Fed comic book that they produced not that long ago. And it has a guy looking at his paycheck going, "What good is it if I make 3% more, if my costs went up 5%?" That's real, that's it. But so many people don't seem to understand that.
One of the favorites I see is retail sales. They announced that. That's not adjusted for inflation. I think the government has a huge incentive to understate inflation. That's it, first of all. And also all municipalities and all types of government, of course, they want things to be nominally more expensive because then they get more tax revenue, whether it's property taxes or anything. And the media, of course, as I was ranting yesterday, is completely in the pocket of the Fed and the government. Our mainstream financial media is just abysmal. Did you see the press conference yesterday with Powell?
Jim O’Shaughnessy:
I did not. No.
Rudy Havenstein:
There was a number of questions. There was one guy asked a question, I forget what it was, and I'm like, oh, that's a good question. Because I'm always going, oh, they never ask any good questions. He asked a good question. Powell goes, "I'm not going to discuss that." And there's no followup because if that guy gets aggressive and says, "Oh, hang on, Chairman Powell, you need to address this," that guy won't be invited to the next press conference. And they're all handpicked. It's always the same guy. Steve Liesman got the first question yesterday. If it's not him, it's Tim [inaudible] or one of the others. And Tim [inaudible] has written a book glorifying the Fed, as has Hilsenrath. Hilsenrath wrote a book called, he called it a love story about economics, and the title of the book was Yellen. We're not getting objective reporting out of our financial media.
And there's a great clip that this guy made of everybody on CNBC pumping SBF. Is he the new JP Morgan? Is he the new this, that, and the other thing. And it's hilarious. And it goes on for two and a half minutes, and all they're doing is just saying how he's the savior of crypto and everything. Anyway, I just got off on a tangent on the financial media, but people should read the Lenin quote about inflation as far as how it destroys society. And that's their stated mandate. Their legal mandate is stable prices, which would be zero, I think most people. But they've somehow come up with 2%. And there's a hilarious clip of Powell trying to explain 2%. And his argument is, well, basically everybody else is doing it, which a mom wouldn't accept that as an excuse, but Congress does because Congress loves... The way I put it as the Fed is Congress' drug dealer.
They're not going to stop anything. They love everything the Fed's doing because it enables them to keep printing. As Kevin Warsh, of all people, said, it was the Fed that got political when they decided to cut rates to zero and buy up all the bonds that Trump and Biden were creating, the debt. The Fed said, sure, there's no independence. They're part of the Treasury basically, except when they don't like the president. I'm sure they would've cut rates if Harris had won. I'm not big on that, but I think a lot of people who've worked there have said that... Like Joseph Wang or, I think Whalen, Chris Whalen said it the other day, that the Fed is a overwhelmingly democratic liberal institution. They're borderline socialists, but the socialism they do is for the rich. I had a tweet where I said, "I mostly make flippant comments about serious issues as opposed to the Fed, which transfers wealth upwards." That's my view of basically what they've done, the Kantian Effect over the last... At least post-Greenspan.
Jim O’Shaughnessy:
And that's an area of interest for me because as I was coming up, we all looked at Volcker as a hero for breaking the back of inflation by pushing interest rates up. When I bought my first house, when I got married when I was 22, I was thrilled that I got the owner to write a note to me because mortgage rates were so high it was just impossible to even-
Rudy Havenstein:
Oh, you did seller finance?
Jim O’Shaughnessy:
Yeah, I did. I think if I recall correctly, it was around 14% and I was like the cat that swallowed the canary. I just thought that was the greatest deal ever. And so one thing though that in my mind at least was a real tipping point, I'd like your view on it, and that is the great financial crisis. To give the prelude to that. There was a huge crisis in the late '80s, early '90s called the savings and loan crisis. And the government under George Bush, Sr. took it on. But after they took it on, 1,000 people were prosecuted, 800 were convicted, many spent time in jail and paid huge civil fines, they were barred from banking. In other words, they were like, "Guess what guys? You weren't playing by the rules and here are the consequences."
Go forward to the great financial crisis of 2008, one person went to jail, one person. The rest of it was entirely monetized. We socialized all of the fuck ups of both government and the industry. I'm not going to let one or the other off the hook here. And I remember, I keep journals and I went back before when I was getting ready to talk to you and I wrote, this is going to be very, very bad going forward, that nobody is being held accountable.
Rudy Havenstein:
I think it devastated the non-elite psyche in America to see that. I didn't lose a house, but there were people who did lose houses, and then they're watching Lloyd Blankfein become a billionaire. He was a failed hedge fund manager who somehow miraculously became a taxpayer backed Fed backed bank. That was huge. I think that was huge when you got this populist uprising. And populist, I said I'm taking back the word populist because it means basically you're advocating for what's best for the common people, for most people. And we've done the exact opposite, I think this entire century. And it's a problem.
I think Ken Lay was George W. Bush's great biggest donor and when Enron went down, he was actually sentenced to prison. I think he died before he went to prison. But that was-
Jim O’Shaughnessy:
Yeah, he did.
Rudy Havenstein:
What you say, I'm not a fan of George W. Bush, but his top donor, Kenny boy was going to go to prison. And under Obama and Holder, I think Holder was a bank lawyer who came in and created, I have a clip of this too, a too big to jail theory. No, he literally did. When I go through and listen to this later, I'll probably just post these things. Sometimes I annotate these things and say, "Here, this is what I'm talking about." And then when he left he went back to the same law firm to defend banks. Eric Holder. A lot of people think he's some sort of progressive great guy, but no, he's not. He works for the banks.
And Obama was the bank's best friend too. And I used to say that I used to listen to Obama's speeches until I found out they didn't mean anything. And I voted for him the first time because I was so angry at what the George W. Bush administration had done. But Bill Black is a guy, he was a bank examiner back when you were talking, during the savings loan crisis. And I think he said they had a couple thousand criminal referrals, so maybe 1,000 went to actually trial. It was a big deal. People went to jail, the CEOs and stuff. And you know the scene at the end of The Big Short where Steve Carell was just sitting there-
Jim O’Shaughnessy:
Yeah.
Rudy Havenstein:
... shaking his head on the phone going, "They knew it. They knew they were going to get bailed out." That's when I just like that period of time, because I'd followed the housing bubble all through the early 2000s, mid 2000s. Ever since Paul Krugman said, "We need a housing bubble to replace the .com bubble." And of course, Greenspan accommodated him. I watched the whole thing and the way they handled that, and they just... Geithner, who then went on to become, what, President of Warburg Pincus? When they did what they did or didn't do what they should have done, I think I was appalled, and of course I was very aware of what was going on. But I think even Joe Sixpack that just saw what was going on in his neighborhood or losing his job or the house's foreclosure, I think everyone had a sense that something was not right.
And you needed, and I've said before, if they would've prosecuted some top Wall Street guys who committed fraud. Ask Ben Hunt because he's talking about Lehman. Lehman was fraud, flat out fraud. Ben knows more about this than me, but he said they prosecuted all day long. It's no problem. If they would've done that, instead of giving these guys $500 million bonuses on their way out, I don't think you'd have Trump today. I think that now Trump, if you remember in 20... And I'm not a Trumper. In 2016 and 2015, he's starting to run for president. I think he did it. I didn't think he knew he was going to win, but he's talking about things... I have all thread on this where I talk about this. He's bashing the banks. He's bashing George W. Bush for the stupid wars. And if you look at my pinned tweet, that's all it is. It's the kleptocracy and the wars. That's my main focus now. Hyperinflation is a really minor thing now. But I have long threads on it and I touch base with it once in a while, but what you brought up... You asked, I was listening to your Eddie Elfenbein or whatever his name is. Nice guy.
Jim O’Shaughnessy:
Ed is a nice guy.
Rudy Havenstein:
His interview-
Jim O’Shaughnessy:
He is a nice guy. He is a good guy.
Rudy Havenstein:
At the end, you asked him, you said, "What's two things, or what's one thing that you think is very important now?" And what you just said about the difference between the savings and loan crisis and the 2008/2009 and the 2020 too, there was a lot of broad stuff going on there too, is accountability. I keep going back to accountability, whether it's for white collar bank criminals or for generals who lose wars my entire lifetime base, or most of it. When was the last war we won? There's no accountability. Where was the accountability for Afghanistan or for Iraq or for 2008, as you point out? There was none. Geithner should've have been run out of town on a rail, but Bernanke, they gave him a Nobel Prize. The guy was basically the captain of the Titanic when it hit an iceberg that everyone saw, many people. They love to say afterwards, "Nobody saw it coming." You know that's nonsense. A bunch of people saw it coming they were just ignored or fired or laughed at.
The people talking about the housing bubble in '06. '05/06 were brought on CNBC and laughed at. They'd bring them on and laugh at them. Here's a housing bear. And no accountability at all for anything that's gone on. The whole COVID thing where we basically, Australia's putting people in camps and where people are getting fired from their jobs because they didn't want to get an experimental vaccine, and there's no accountability. Everyone's pretending, oh, well, let's move beyond that. We don't want to... Well, we had a bunch of authoritarians running amok, and I think there should be accountability. But anyway, just to stop going off. But accountability is huge. People need to be held responsible.
Now, if you're a guy and you screw up at work and you get fired or you get reprimanded, that's what people know. They know, hey, I screwed up. They see these guys. Look at Yellen, she's been around for 50 years almost at the Fed, off and on, and her other gigs. I think she's been appalling. Her record is appalling for most Americans. Now she's set for life. She's already loaded and she can go make 300 or 400 or $500,000 for a speech now, which normal people can't do that. And we're getting back to inflation. Inflation is theft. Bernanke said inflation is a tax. And he said it's too high to Ron Paul. And when he said it, inflation was around 2%. He also said, "We're never going to allow inflation to rise above 2%. We could hike rates." Remember he said that on 60 Minutes? He goes, "We could stop that in 15 minutes." Well, we're now on 44 months in a row with CPI over 2%, and I think their mandate is 0%, but I'm a crank, right? They failed on all levels.
There's a great quote from, again, I posted on the Fed Minutes in the '90s, where Greenspan's talking and Yellen asked him, "What do you think the official rate should be, the target?" And I think it was Greenspan says, "Well, it should be zero." I think it was '96. Zero. And Yellen goes, "No, I think it should be 2%." As Jim Grant says, "If work is heartbeats, then when you take away someone's income through inflation, you're stealing from them." You really are. He calls it monetary shoplifting. And there's another great quote from the minutes where Greenspan's talking about, "Well, we could increase productivity or we could monkey with the CPI numbers to get them lower." Then there's laughter. I always love when the Fed Minutes have laughter in them because usually it means something bad's going on.
But he literally joked about that in a Fed Minute meeting, "Why don't we just monkey with the CPI?" And of course, as Grant Williams, the great Grant Williams points out, every adjustment to CPI is always to lower it. They have a massive, massive incentive to understate inflation. I think they do, and I think they do by a huge amount. And I think that's a big reason for why people are upset when you have the greatest economy ever. Everyone was telling us until Trump got elected. Remember? Biden, Harris, all the newspapers.
Did you see the quote from... Oh gosh, was it the Wall Street Journal? "The economy's great, the people are wrong."
Jim O’Shaughnessy:
Yeah. I did.
Rudy Havenstein:
Or Johnathan Chait said that, "Paul Krugman is right on the economy and you're wrong." Imagine the hubris and the arrogance of these people. And I always joke that they don't have people who aren't millionaires on CNBC to talk about inflation. You know what I mean? When I get in a disagreement with some Fintwit guy, including some very prominent people, I say, "Well, you know what? On Fintwit I can hold my own, but why don't we go to a supermarket and you could tell everybody about how low inflation is. And we've never had them. I said, "Let's have a meeting in aisle nine and just put a table up and have people come walk by. We could do a podcast there," right? It's like ... I don't know. I mean, I try and stick up. I grew up very middle-class and so that's where my heart is and that's who I fight for because nobody fights for. You don't see anybody middle class on CNBC. Ever. Ever.
Jim O’Shaughnessy:
Yeah. Yeah. One of my big things, I am not a big fan of politicians on either side of the aisle. But my big deal is if I have anything that defines me politically, it is that I am fiercely anti-authoritarian. And one of the things that worried me, for example, you mentioned the 2006 period. I was one of those people. I was at Bear Stearns at the time and I was walking around telling anyone who would listen to me, "If I could short my house, I would." But they had a CDO hedge fund that was doing really well. So I was told to, and I'll use the polite version, "O'Shaughnessy, shut the fuck up." Because I believe passionately that the playing field should be level and that if you've got a level playing field and accountability, things work much, much better than when you have this two tier system.
And one of the things, for example, all of the asset management companies that I formed have my name in them. And I did that because I was talking to my wife when I was founding my first one when I was in my 20s. This is in the '80s, and everyone had cool names. And so I was trying to think of a really cool name for this new asset management company. And my wife looked at me and she goes, "Weren't you just telling me about how JP Morgan, the man, solved the 1907 crisis because of the authority that he held over others? And also then you continued," I tend to go on tirades, "you continued by telling me that banking worked a hell of a lot better when the partners had to actually put their names on the firm and actually make good for any losses. And so I'm like, "You know what? You're right. I am going to name it after myself."
And one of the reasons for that is literally talking about putting skin in the game, you're putting your entire reputation in the game.
Rudy Havenstein:
That's right.
Jim O’Shaughnessy:
To me, those things are just so incredibly straightforward that watching the machinations of like, well, yeah, or your note of the laughter during the Fed Minutes, it's like I do find myself, something you talk about a lot, like President Eisenhower warned us about this in his farewell address. Basically he said, "To wear the military industrial complex, that leads to forever wars, that leads to us paying basically the full freight of our Western allies defense budgets," because that seemed like a good idea during the Cold War. Do you see a path back towards accountability, towards a level playing field?
Rudy Havenstein:
I hope so. I mean, you've got some semblance of it now with Trump. I mean, of course if you don't like Trump, then this is all horrible. But I think he's trying to hold some people accountable, close down some programs, maybe fire some people. You've got, hey, whether you like it or not, you got a new sheriff in town like the DOD, and I hope Tulsi Gabbard gets in. I hope. I actually hope R.F.K Junior gets in because people are like, "Oh my God, he has this view and that view." And I'm like, "Well, you know what? What we've had is not working." You know what I mean? And I think, I listened to his podcast for years and he does a great job. I mean, I like the guy.
Do I agree with everything? Absolutely not. Do I agree with everything Tulsi Gabbard has done or said? Absolutely not. But I still think they're better perhaps than the alternative. I'm very suspicious of Donald Trump and the people surrounding him. But I'm quite happy that Kamala Harris lost.
We need common ground. That's why I like guys like Ron Paul who's just amazing guy. And then Dennis Kucinich who's the probably opposite Ron Paul on 80% of issues, but they're friends and they did legislature together because they agree on some things. They agree on, for example, being anti-stupid wars. You know? What I call my somme rule, S-O-M-M-E, don't get into stupid wars. But I like that common ground.
So there's people that follow me and I follow them and we agree on some huge Venn diagram of stuff, but they think I'm nuts on over here and I think they're nuts over there. But I choose not to pick on the part that I disagree with them. I might repost things that they posted I agree.
As I have to tell people sometimes, it's like just because when I quote someone, I'm not endorsing every single thing they've ever said, written, or done. You know what I mean? But there are people, I mean, I've quoted Karl Marx before. I've quoted Lenin. I've quoted Lenin. Does that mean I support Lenin? No, but I mean sometimes people you disagree with can say things that are very pertinent.
So I think people need to calm down, not have a litmus test of I won't do this podcast with you unless you and I agree on here's a hundred issues you have to agree with me on. I mean, I don't believe in that at all. If we agree on 10, I'm fine with that. Let's talk about those 10, and maybe if you want talk about a few of the others.
Yeah, so common ground is very important to me. That's how I try to operate with people. And some people you can't reach, but the ones you can, it's worth it.
Jim O’Shaughnessy:
Yeah. And that's another thing we actually agree on. I definitely, I often say that if you think that you can know all of my political or social views by simply seeing one of them, then you are captive of an ideology that is going to be really hard for you to break out of.
And I definitely, I think it would be great to find a coherent way in which people who, even people or institutions that vehemently disagree with one another on many, many things. Why don't we experiment with putting them in a room, putting them in front of a jury system and having them debate things and having the jury say, "Okay, who's more compelling? Or this idea ... " Not who. See, even I fuck it up. Not who is more compelling. What idea is more compelling? And they did an experiment, I can't remember when, it was probably more than 10 years ago, where they took a very, very conservative political think tank and they put them in a room with a very liberal political think tank. And they said, "Don't come out of here until you guys can come up with 10 ideas that both of you agree with." And it took a lot of time, but it worked. And they did come out with those 10 ideas.
Now, did any of them get enacted? Probably not. But the idea that the isolation that we've seen develop in these private echo chambers comes I think very easily because confirmation bias, the minute we believe something, we are literally almost blinded to any information that disagrees with what our beliefs are. And so we tend to cocoon in our little bubble of information and literally cannot or will not understand the points that people who disagree with us are making. And at least obviously to me, that is horrible for society. You need cognitive diversity.
With all of the talk about diversity, all that kind of stuff, hey, I totally agree that we need cognitive diversity. But what did it end up being? It ended up being about surface appearances, like what color you are, what religion you are, what group do you belong to? And then saying, "Well, if you are this color or this sex or this sexual preference, then you must agree with all of these things." To me, that is one of the worst outcomes.
Cognitive diversity on the other hand, is very, very useful because I'm sure I'm wrong about a ton of things. And so how do I get less wrong? I get less wrong by allowing error correction in the way I think about the world. And the way you error correct is you see some compelling arguments that differ with the ideas that you're holding. And one of my things that I'm very bullish about AI is it's really good at steel manning arguments.
And so one of the things that I do is I'll take arguments that I fundamentally disagree with, and then I will put them into a large language model and have them steel man that argument. And you know what? It steals from you the ability to say, "Oh, all those guys are idiots and those ideas are worthless." Because you know what? Some of them aren't. And one of the things that we do when we attach ideas to a specific individual is it just makes it so easy for the ad hominem type of argument.
Like you mentioned, Kennedy, very, very easy. If you look at those hearings that are going on, he's done a lot of things that are pretty easy to attack, right?
Rudy Havenstein:
Yeah.
Jim O’Shaughnessy:
But that doesn't determine whether he would be a good choice for health and human services. But as you pointed out, given what's happened, it hasn't worked. And when things don't work, you should fix them in my opinion. Call me a crazy radical. But if things are not working, you should work towards solutions. Working towards solutions for things that are really catastrophically not working, should be inclusive, not just one group over another.
Do you think, is this just a pipe dream?
Rudy Havenstein:
I think people need to do some introspection, I think the Democratic Party and the media in particular. And I'm not a fan of the Republican Party, so you have to explain that, too. If I say something about one, they have done no introspection. The Democratic Party in 2016 should have said, "Wait a minute." I mean The Washington Post said Trump had 0% chance of winning a couple weeks 41. And they should have said, "Wait minute." People, God obviously for this guy to win, this maniac, this time he was Hitler. And I think last time he was Hitler too. Our message, there must be, we must, something. But you think they'd say, "Wow, we must have done something wrong." No. Immediately, and of course Hillary echoed this, too. She was an election denier for years. She said, they said, "Oh no, it's Russia." They went with Russia, Russia, Russia, Russia, Russia.
So they basically, and for four years it was not my president, the Russians stole the election, he's not a legitimate president, resist, blah, blah, blah. Then in 2020, you got the flip side. Trump loses. I know a lot of people question that, but people question every election. And then the Republicans are saying the election was stolen and the Democrats were all up in arms. "Oh my God, how dare you question the integrity of our electoral system." Well, and I'm like, "Hang on. Didn't you guys just spend four years questioning the integrity electoral system?" So there's no self-awareness, there's no introspection.
Remember, the night Trump won just a few weeks ago, or what was it in November, I'm watching MNBC, which I broke my rule of never watching cable news, which I've had for eight years now, I think, and they're all in there. Oh, it was misogynist Mexicans and anti ... misogynist Black guys that elected Trump. I mean, I'm looking at them going, "Are you guys going to be this clueless again?"
People need to have some introspection. The other thing is, I grew up, years ago I learned, I could argue with you, Jim, about some issue, could be a very touchy issue. And then when we're done yelling at each other, we'll go, "Screw it. Let's go have a beer." And I totally, totally I still can do that now. What you especially learned in the last, since 2016, is a lot of people can't do that. I found out that you disagree with me on this issue, I hate you, I can never be your friend, I'm not inviting you to Thanksgiving. I mean, it's tragic.
Look at the celebrities. Who was the one from The View or whatever, telling people not to go to not have Thanksgiving with their family if they voted for Trump or something. I mean, it's so absurd. Neither Trump, nor Harris is worth losing friends over or family over. Okay? Honestly, come on guys. Let's just have a little perspective here. So that's one thing people have to know. You could disagree on something and you don't need to hate that person.
I've been convinced over years. I was probably initially pro-Iraq war because I'm thinking, "Well, hell, they've got smallpox. He's got nukes." And I had friends telling me, "No, this is BS, man." And they were right. And I quickly, when I saw, I think it was within a week of the invasion that there were people like looting hospitals of nuclear equipment and all that. You know what I mean? Radios and stuff. And our soldiers are just standing there watching. I'm like, "What the hell is going on here?" We're there for ... These guys could make dirty bombs theoretically.
But I remember them saying, not only Condoleezza Rice saying it's going to be a mushroom cloud, this is going to be our first warning of Saddam. But they were talking about anthrax and they were talking about smallpox, and they were talking about all sorts of things. And then there's a whole side story about how the Patriot Act got passed with the anthrax attacks, which were from America.
But the other thing, I make a point to follow people who I disagree probably 90% about with, and they probably, and may disagree with me with 90%, but we have common ground on some issue. And they, like me, don't have a litmus test. They're willing to follow me in spite of all the stupid stuff that I'm wrong on. But I do that.
So I was looking through. I do lists on Twitter to make it a little more readable. And there's a couple ... I'm reading all these really far right and far left retweets and posts, and I'm thinking, "Ah, should I unfollow or should I?" And I'm like, "No, no, just leave it," because I want to see. I really do.
When I was back in college, for a year I subscribed to the National Review, which is people don't know, it's very conservative and the Nation, which is considered to be liberal. And I subscribed to both for a year. And the way I put it is I read them cover to cover, and I haven't since, but I did at that time. And I remember thinking with each of them, about a third of it I agreed with. I thought, "Yeah, that's right." And then about a third of it, of each, I said, "Eh, I disagree, but I understand where they're coming from." And then the remaining third was, "This is batshit crazy. This is nuts."
So I found that on the left and the right. So I found that very useful to at least people should be aware. I tell people I posted before about Chris Hedges, who I think is talk about anti-authoritarian. And do I agree with him on every? Absolutely not. But I think it's important for ... He'd be considered a very left-wing guy in America by American standards. I think I've posted conservatives should read this guy. You may be all upset and angry and everything, but you should read him just to kind of get an idea.
As I pointed out, grew up as a Cold War hawk, and I read a book by Noam Chomsky called Deterring Democracy. And again, I have a lot of problems with Chomsky, but as you point out, let's talk about the ideas, not the person. His book Deterring Democracy, which is basically about the, I think it was the first Iraq war in the '90s was he explained a lot of American foreign policy to me that never made sense. Why is Batista a good guy and Castro is bad? Or why Saudi Arabia is wonderful and Iran's bad? I didn't understand that. And the way Chomsky, maybe I'm not doing him justice, but the way he phrased it is, are you friendly to US business interests, then you're an ally. And if you're not, you're not. Human rights means nothing. Democracy means nothing. That's what we say. I don't know if it was Berenson, whoever said that when Victoria Nuland used to go around talking about freedom and democracy all around the world, he said, "That's only for American audiences." He goes, "Nobody outside the US believes any of this, that we really care about freedom and democracy." I mean, one of our best allies all these years has been Saudi Arabia.
And if you can remember back before his first term, Trump was saying they were the guys that did 9/11. I mean, he was bashing the Saudis. And then the problem is, so remember I was saying he was bashing the banks, he's bashing the wars, he's bashing the Saudis. Remember, he was making fun of Ted Cruz for taking money from Goldman. And then when he gets selected in 2016, he puts Goldman in charge of his administration, basically replacing Obama's Citigroup guys. And his first visit was to Saudi Arabia where he gets a little medal put around his neck. And as far as I think white collar crime prosecutions declined to the lowest on record under Trump. So all this bank bashing and ...
Now on wars to his, I mean, we still killed a lot of people in countries most people couldn't find on a map, but he didn't start any new ones really, has been too common among presidents lately. So on that alone, I think he's less of a mouth breathing warmonger than we're used to, Trump. So I will give him credit for that, and I hope it continues. Although he's made some decisions that make me question that. But like I said, I'm suspicious, but I'm willing to take the good things. I think arresting illegal immigrants who commit crimes is a good thing. I think not having a porous open border is a good thing. Like I said, I'm very suspicious of Trump, and I'm sure glad Harris didn't win.
Jim O’Shaughnessy:
I was having a conversation with a friend the other day, and I was talking about Orwell's 1984, and I said, "The really terrifying thing about that book was Newspeak." And my friend was like, "What?" And I went, "If you really," and I've read the book several times.
Rudy Havenstein:
So applicable today.
Jim O’Shaughnessy:
Yeah. And it is, and that terrifies me, because the objective of Newspeak was to make it impossible for the " citizens" of these totalitarian societies to even conceive of an idea that differed with the party's policies, right? And when you think about that, and then you kind of, look. I like you, I stopped watching cable TV news of all sorts, probably now 15 years ago.
Rudy Havenstein:
Good for you.
Jim O’Shaughnessy:
And one of the reasons I did it was just I was seeing the beginnings of that kind of hypnotic propaganda. And by the way, what's really funny is I would bring it up. Now, listen, I live in the bluest of blue areas. I'm in Connecticut and New York. So most of my friends are very liberal. So I would bring this thesis up with them and they would say, "You know what? You are absolutely right. Fox News is nothing but propaganda." And then I would say, "Yeah, yeah, I agree, but I'm also saying that MSNBC is nothing but propaganda." And they would pause and they'd say, "Well, I don't know. I think that they're mostly straight news."
And then I would have the conversation with a conservative friend and they would immediately say, "Well, of course MSNBC is pure propaganda, but you can get pretty good news." And I never really ... A couple, I convinced a couple friends that it's all propaganda. It's this. This is a different flavor over here than the flavor over here. And it's one of the reasons why at our new company, we have all these new media efforts.
I definitely sense that the old models, in fact, we have a series on it called The Great Reshuffle, the old playbooks don't work anymore. I tease the World Economic Forum all the time on Twitter because when I watch their clips, it's kind of like, are you so tone-deaf that you literally think that this is going to convince someone to back your proposals? And the answer is, yeah, they really are that tone-deaf.
Rudy Havenstein:
The Fed's the same way.
Jim O’Shaughnessy:
Yeah. And so again, I always try to look for things to root for as opposed to root against, right? Because it's pretty easy to be against a bunch of shit. I mean, obviously there are horrible things happening in the world all the time. And of course, we could have an entire five-hour conversation about all that's wrong with the world. But if that's all we do, what are we doing? We're just propagating that meme, if you will, to make people feel terrible.
Do you see any green shoots where ... Well, you mentioned Trump not getting into as many wars, something I absolutely support. In other words, don't get into foreign wars if anyone needs me to clarify that. But do you see other, specifically on the financial side, do you see any green shoots that is something that we could collectively root for?
Rudy Havenstein:
Well, I've noted that in the 2016 and 2020 GOP and Democratic Party platforms, they called for the bringing back Glass-Steagall. And Trump is on record as supporting the return of Glass-Steagall, which if you remember was I think ...
Jim O’Shaughnessy:
I do remember.
Rudy Havenstein:
'90. Oh yeah, of course you remember. But I mean the audience, 1999 was it, I think under Clinton signed it, but it was very bipartisan, probably more GOP than Democrat. And it basically took away all of the protections we had from banks being publicly backed gambling casinos since 1933. I mean, they learned a lesson in the Great Depression that then passed this law that we didn't have these bank failures with a rare occasion until they repealed Glass-Steagall. And then of course, within a few years, we have Great Depression II, or GMC, but I call it Great Depression II, because I think for half of America it really was and still is.
Yeah, that's something that they could do. So let's bring back Glass-Steagall. Let's have what ... I said the other day, there's a great site that escapes me right now that does a list of all the financial crimes and the fines and everything. Bank America's at the top, and you're talking like 57 billion in fines or something in the last not many years. And JP Morgan's up there too. And of course the Citigroup, all the usual suspects, Goldman. But I say, hey, why is it that the ... It's always the shareholders and the brick and mortar of these banks that are committing all these crimes, including felonies. I think JP Morgan's been convicted of five felonies, but apparently these felonies are not done by any executives or any individuals at the bank. They're done by shareholders because they pay the fines. It's like an income thing for the DOJ.
So maybe if we started prosecuting white collar crime, again, like I said, under Trump last time, it hit all time low. And I don't know if it would be any better under Biden. I don't know if he would've been aware if it was any better under him or not. But they need to start doing that because then people say, "Okay, I feel like the ship is being righted." You need to boost people's morale.
And I pointed out in prior interviews that I think most Americans feel like that our leaders, and this includes not just the president, but the Senate and the Congress care more about pharma lobbyists, or care more about people in Ukraine or people in Israel than they do about Americans. I mean, there's a great article from a couple years ago about Scranton, and it says, "People in Scranton, Ukraine is a very small issue for them. They're worried about there's something wrong with the American dream. There's a malaise. It's almost like a Carter era type feeling." So instead of Reagan, you get Trump this time, but because I think people wanted a change and I hope that they're going to see a change, and I hope Trump takes advantage of these four years and the Republican Congress take advantage of this so they don't get voted out and we go back to, I don't know, Gavin Newsom or something. And as someone in the People's Republic of California, that's not a good thing, but it would get... Hey, actually I support him running for president because it would get him the hell out of California, but maybe Karen Bass will be his running mate. But, yeah, there's things like we can do accountability. Accountability, I keep coming back to that and people that need to see, because if you notice when they were in California, all over the country really, but in California especially, they'd have these guys just go in and just take whatever they want and run out of the store.
And a lot of times you'd have videos of this, people would film it and security guard would be standing there twiddling his thumbs because he doesn't want to get fired because they tell adults don't stop anybody. And you'd actually see patrons, patrons going out and grabbing the stuff out of the cart and throwing it and fighting with these thieves, these felons. And because there they're like, wait a minute, this is wrong. I played by the rules. I don't break the law, I don't steal. Why is this guy getting away with it? So they see it on a small scale and they get upset. I think on a large scale they see it too. How the hell is John Mack and Lloyd Blankfein billionaires today? That's not right. Most people have no idea who those guys are, but I'm saying someone like me, that angers me in the same way that it angers me if I see a shoplifter running out with a TV or something. It's like, Hey buddy, I'd love to have some fancy new TV too, but I'm going to work and pay for it.
And people have a sense of justice and right and wrong, your average guy. And I think they see that there's no justice and no right and wrong once you get above a certain level, particularly if you're at a large financial institution. Because as Eric Holder said, well, we can't. It might hurt the economy if we prosecute JP Morgan or if we prosecute Citigroup. Citigroup should not exist, but neither should a lot of these banks. But this goes back to Glass-Steagall. Let's say I'm dictator, which I'd love to be. Tomorrow first item of legislation. No, let's say I'm president. First item of legislation is re-enact Glass-Steagall, break up these big banks. I think even Kevin Warsh was just saying that, and he's a Fed insider, he loves the Fed, but at least he's got more common sense than most of these Fed guys, I think from over the years listening to him.
I think he has an understanding. You talk about cluelessness. I've said before, I don't know that there's any group of people with less self-awareness than central bank officials and WEF guys are just like that. They live in their own rarefied world, but the St. Louis Fed or the New York Fed or even the Fed, or sometimes they'll have these tweets and they'll say things like, housing has increasingly become a problem for young people or something. Here, join, we're a conference on this to discuss it. And I'm like, do you guys have any clue about what you did? Buying almost $3 trillion of MBS and its effect on the housing market? Which they had zero in 2008. They still have 2.3 trillion. And no one, and this goes back to the media too, no says, Hey, gosh, could the Fed monetizing few trillion of MBS have affected the mortgage market at all? I don't know. Cluelessness is a big problem in our society, especially at our major institutions.
There's no accountability going back too, like the Fed conference yesterday, I was talking to you, I think maybe before we started recording, there's no accountability. As Joseph Wang, who's from the New York Fed is a guy you might be familiar with on Twitter. He says, all the people that said inflation was transitory and no big deal. All the people who fought for that average inflation targeting, they had insane policy that they adopted in around 2020. All those people are still there. They still have their jobs. And this is a guy that used to work at the New York Fed as a trader, and he says, there's no incentive to care.
They don't care if inflation is 20%. They don't care if we have to have a recession to... They're not going to lose their job. In fact, I think the only people that ever lost their job at the Fed were people who got fired for not getting the vaccine at the Minneapolis Fed. And I've asked Neel Kashkari if he's reinstated those people with back pay yet. Not that I think they were doing anything productive, but they fired him. And that was probably the only time people at the Fed were ever fired. They're certainly never fired for making bad decisions, otherwise Janet Yellen would've been out of a job decades ago.
Jim O’Shaughnessy:
I agree on accountability, and I'm always trying to figure out, okay, so if we restored accountability, if we restored some litmus rule of law where you're either above that bright line or you're below that bright line. I remember when I was coming up in the industry in the eighties and early nineties, our council would literally rewrite commentaries that I would write because he used to joke, Jim, you write like a [inaudible] bam. And he would say, I love it, but this is puffery. And I'm like, puffery. And he goes... And I was looking at other things that I really thought were bothering, but those rules were in place and we knew there was a bright line. Here's what you can do as an asset manager and here's what you can't do. But also the idea of I was bound by the fiduciary rule. In other words, when you're a fiduciary, you have to put your client's interests ahead of your own. And I take that shit really seriously. So for example, at all of our companies, our employees, including me, could only invest our equity investments in our own strategies.
We believed very deeply that the cook should eat their own cooking. And to me, that was just table stakes. And so it was with just increasing confusion as I saw all of that go by the wayside. And it's just like literally when you remove accountability, you're fucked basically, I think. And so, okay Glass-Steagall, what other kind of ideas would you have to right the ship? Because you also make the very good point that what we've seen is, when I was growing up, I was transfixed by the... Okay, I'm outing myself as an uber nerd here, but I was 13 years old during the Watergate hearings and that summer, that's all I did was watch those because I was so transfixed by, and this sounds silly, but the American system worked. You had Nixon committing these crimes trying to do the cover-up. The Senate was like, yeah, that's not going to fly, man. And he was forced to resign because they would've impeached him.
And so it's like there's this confluence of events where you see the media. You mentioned taking publications, and it was funny because I also did the same as you, except I took National Review and Mother Jones.
Rudy Havenstein:
Sure.
Jim O’Shaughnessy:
I don't even know if Mother Jones is still around, but Mother Jones back then was the most left wing magazine that you could read. And I would read them... In other words, I would read them together and try to learn, okay, so is there any synthesis here? And by the way, as you found no doubt, similar, yeah, it might've only been 15 or 20%, but there was a synthesis of those types that you could say, get behind. My challenge is how do you, other than through the market, and again, I'm a huge fan of actual free markets, not rigged markets, not regulatory capture markets, but free markets where if you fuck up, guess what? You go bankrupt, you lose your company, you've got to roll your sleeves up and try again. What other things could we look to root for staying with that theme that might be helpful with the overall lack of accountability of all of our institutions basically?
Rudy Havenstein:
Yeah, I've been convinced now of term limits. For years, I said, well, we have term limits, every two years in Congress and every six years in the Senate. But Paul Immacro on Twitter, who I was talking with recently, he made a great point that the one thing that our founders who wrote the Constitution never considered, never conceived of was that there would be people who would want to do politics as a career or the people who would expect to be paid for doing this. And I don't think he can imagine the kind of senators we have going after RFK who if they, as people have listed their pharma contributions, you can directly see a correlation between the ferocity of the attack and the political contributions. So I think term limits now, could they pass? I don't know. But term limits I think I would absolutely support now at all levels, and it can be some reasonable thing.
I know maybe two terms for a senator and maybe, I don't know, five terms for a congressman or something like that, I don't know. But I'm just saying these career politicians is a problem because they're not beholden to you or I, or anybody. They're beholden to the people that give them millions of dollars. So it's corruption that I think that's something like Washington and Madison and Monroe and everybody would agree on. They never foresaw somebody like Nancy Pelosi trading stocks and being... Or a Feinstein basically until she drops dead in the Senate. So that's a problem, and I think that's one solution. I think we need to bring back moral hazard too. You know what? It's okay if the stock market... In January when we already knew a pandemic was coming if you were paying attention 2020. There was great... The market was down in January 15%.
And I remember Steve Liesman was on TV going, the Fed needs to step in and act now. And I replied to him, I said, not that he ever replies to me, but I said, hang on a second. I go, young people that are starting careers and at 401k plans are something that stocks are now 15% cheaper than they were. So what we do is we pick winners and losers and as what we've done is overwhelmingly reward people like you and me. And we get rewarded, but certainly people like John Mack and Jamie Dimon get rewarded on infinitely... David Tepper and everybody on infinitely higher level, but at the expense of young people.
The metaphor I use, or analogy I use, I always get those confused, is that where you and I take all our grandkids and family out to dinner at fancy place, tell them to order whatever they want, and then we leave, we skip out. So I think we need to bring back moral hazard, which I think Volcker's quoted as saying that he thinks, I think Russell Napier said this, that Volcker told him that when he thinks that when the Fed jumped the shark was with long-term capital management in '98. There's a chancellor's book. He talks about how Warren Buffett actually had a higher offer for, he would buy up the remains of long-term capital, but if that had happened, they wouldn't have all gotten their bonuses or whatever. They wouldn't have all gotten their money back eventually. So they didn't take his higher offer. I think that was, in Volcker's eyes apparently, that was the beginning of the real corruption.
Of course, 2008 was just corruption in spades. And you know what? In March 2020, I said, the sound you hear right now is the Gini ratio exploding, going up because all those programs there, now everybody got, Hey, here's your check for $1,200 Jim. And I was actually... Remember all those Fed programs they set up? I just saw a list of them the other day. There was a dozen, and I went in, I said, I want to see who's getting these a hundred, $200 million loans at 0.5% interest. And it was LLC set up in the Cayman Islands like a week before. It was the biggest feeding frenzy. I think 2020 the theft upwards was even overwhelmed 2008, 2009. If you remember with, well, when I say if you remember, I know you remember, but TARP for example, that was a big bait and switch. The only reason it passed is because on the second vote was that they said they told Congress it would be to help the homeowners.
And also because between the first vote, it was three pages and then by the time they voted on the second TARP, it was 450 pages. But immediately, Paulson and Geithner and Kashkari said, no, no, we're not going to help. They wanted to help the banks, and that's what it was all about. And I keep pointing out in the same year that these banks were going bankrupt, they handed themselves out tens of billions of dollars of bonuses. And that kind of thing, when I point that out to people, and of course I'm aware of this because I have the freedom to pay attention to this. When I point this out to people over the years, they're like, are you kidding me? No way. They gave how many? They gave a thousand bonuses. Goldman gave a thousand bonuses over a million dollars in 2008. They're like, they can't believe it, but there it is. So we need to bring back moral hazard. It's okay if the stock market drops. We survived 50% index drops in '01 to '03 and '08, '09. And so what?
I remember Bush's thing on TARP. He gave a speech and he said, if TARP doesn't pass, more banks will close. The stock market will fall. Well, as I point out in speech, every single thing he said happened anyway, and the market went down 40% or something after TARP passed. So you didn't save anything. And frankly, what is it? 93% of stocks are owned by 10% of the people or something like that. For most people, stocks are like coffee table talk or something, and half of America owns no stocks in any form as Warsh is one of those good at pointing that out too. So that's one thing. Common ground on certain issues I keep bringing up. Here's a no brainer I think for far left and far right, civil forfeiture. They pull you over in a car gym and you've got $3,000 cash. Well, where'd you get the cash? Well, I sold a lawnmower and this and that.
No, well, we're going to confiscate this. We think this was from drug proceeds. It's fine if they want to take you to court and charge you and prove that you were in the drug business, but that's not what's happening. And I've heard horror stories about people who don't have the resources to hire a lawyer and they may have just sold a car or something and they're driving cross country and they get pulled over somewhere in the south and they say, Hey, what's this five grand of cash we found. You could spend... One of the cases was, Hey, they have two kids or something. Hey, you can spend the weekend in jail until the judge comes on Monday and we'll send your kids to foster care, or you can give up the $5,000.
So that's something, let's talk about common ground that we should be, but who's the advocate for that in Congress? Who's going to be the advocate in Congress for term limits? How does that happen? Because none of them want term limits. The same thing with the two party system too. I was really happy to see, I'm happy to see Marianne Williamson and RFK, and there was all these other candidates. Of course, the Democrats completely shut down the primary process to defend a senile candidate, which was really criminal when you think about it. And as someone pointed out the other day, all these pardons and things that were done, was Joe even aware of them? Who was running the administration the last four years? Nobody really knows. I don't know if we'll... I guess maybe in 10 years someone will spill the beans, but we just need to have more accountability. I keep going back to that and term limits would be great. Glass-Steagall would be great. Let's have some white collar prosecutions would be great. When people start seeing accountability.
I don't know what else. I don't even pay attention much to the stock market anymore because why? It's like it's Mike Green's passive machine, just money in and then they buy. It's price insensitive investing. So I don't know what we could do to fix that. I know Mike probably has some ideas about a lot of legal things that just force people to be into these same old things and someday maybe that's going to end badly. I don't know. Withdraw from... It seems like every time we bomb a country, we end up creating more enemies. Maybe stop doing that. Maybe instead of building schools in Ukraine or Afghanistan or sending aid, we're still sending aid to Afghanistan. Maybe we could send aid to some American cities out here, North Carolina could use some help. California could use some help too.
I don't know. You say you're surrounded by a bunch of liberals in Connecticut. I live in a deep, deep, deep blue state. But I'm wondering all those people in Pacific Palisades and Pasadena, two very liberal areas. I wonder when they start having to deal with the coastal commission and the permitting and the city and all that, I wonder if they're going to maybe move a little bit more to the center. That would be good.
Jim O’Shaughnessy:
Yeah. It wasn't that one of Milton Friedman's jokes that a conservative is a liberal who got mugged.
Rudy Havenstein:
Yeah. Yeah. Yeah, well, those people I think are good. If they haven't gotten mugged yet, I think they're going to be mugged. I think it was Gunlock yesterday who lives up there apparently was saying on CMBC, you have no idea how bad it is. And that's what I've seen. It's so bad we don't even begin to know the ramifications of these fires as far as rebuilding. I don't even know how they're going to be able to do it. There's so much that has to be done. They're saying it's going to take a year and a half more to clear, just clear the garbage out, toxins and everything. So I think the ramifications of those fires are going to be just massive on, what? The seventh largest economy in the world.
I don't know if they're going to be good or bad. I guess by Krugman's logic, if you burn all the houses down, that's good for GDP because you build them back up. But I think, I don't know, I guess if you're a construction worker, you've probably got a job for the next 10 years. But that's if they let you build. One of the things I'm thinking is maybe they zone it all multifamily and they put up a hundred thousand apartments or something instead of the old Pacific Palisades. That's what Karen Bass and Gavin Newsom want to do. So I don't know. I don't know. It'd be interesting, but I think that's another huge issue.
Jim O’Shaughnessy:
So lots to drill down on there, but you did remind me when you talked about burning down the houses being good for the economy, of one of my favorite philosophers who masquerades as a science fiction writer, Douglas Adams. Remember the story where the guy, the consultants come in and they tell the planet that what they need to do is use tree leaves as their currency. And then they have an emergency meeting two weeks later with the consultant saying, so after converting tree leaves to our currency, we have all become immensely rich. However, inflation seems to be a problem. And so rather than not use tree leaves as the currency, we suggest that we immediately engage in a planet wide deforestation project where we burn all of the trees to the ground.
Rudy Havenstein:
That's how they think. That's how the economists think. I'm always making fun of him. Bill Dudley actually said some years back after some major hurricane, he says, hurricanes are going to be good in the long run because they'll bring all this rebuilding. This is how they think. Just like if you go to someone in the store and you say, Hey, if prices go up 5% is that bad? And they probably would say, God, I wish they would only go 5%. But if you ask Paul Krugman, is 5% inflation bad? He'd go, no, I think it's what we need. So they just completely, they don't think normal people. Host many examples of that is an ongoing fun thing to do.
Jim O’Shaughnessy:
But then back to the solutions. My friend Philip Howard has written several books about a lot of this decoupling happened when we stopped holding people accountable and created a law or a rule. And so he's got a good book called The Rule of Nobody, because basically what he articulates in his book is in the old days, a teacher in a public school system was left to make up their own decision on how to react to any number of things going wrong in the classroom or what have you. And that now literally the rules governing, and I think he used New York's public school system, are thicker than an old phone book. And that literally, it takes any option away from the individual teacher who is there when the incident is occurring. And then he goes on to say, same thing for judges.
In the old days, the judge was given wide discretion over the sentencing of somebody or dismissing something. And then we created laws that took all of that authority and ability to use discretion away from people in authority, making accountability, because accountability is obviously at the individual level. And making that much, much more difficult. So I think I might add to your list of things, bringing moral hazard back term limits, et cetera, would be a sunset provision for laws whereby a law exists for 10 years and then sunsets and there's no longer a law unless the then Congress reenacts it. Because I think that that would clear out a lot of laws that just accumulate and nobody... As you mentioned, by the time they pass, the version of the TP-
Rudy Havenstein:
TARP, TARP.
Jim O’Shaughnessy:
TARP, TARP. Thank you. It was 500 pages. The original one was three pages.
Rudy Havenstein:
PORK.
Jim O’Shaughnessy:
Yeah, PORK. Exactly. And another thing that I think might be helpful is now that we have generally pretty useful large language models, all laws should be put through an AI and put into English, in my opinion.
Rudy Havenstein:
Oh, that's a great idea. Like the Patriot Act. I should ask, in fact, I'll ask that later. I'll ask, can you summarize the Patriot Act? Because nobody read it.
Jim O’Shaughnessy:
No.
Rudy Havenstein:
There's a great quote from Dennis Kucinich, He says, "Why did I vote against the Patriot Act? Because I read it." He's probably the only one who read it. And another reason I like that guy. What you were talking about just now is, it's like zero tolerance. Remember when that got into school? Zero tolerance. So they literally, if you brought a nail clipper to school or a nail file or I grew up, every boy had a pocket knife in his pocket. Every boy. No one ever pulled... And there was fights, and nobody ever pulled a knife in a fight. Just back then you just didn't do that. But nowadays, if you bring a pocket knife, or not a pocket knife, well, if you brought a pocket knife to school, you'd probably go to GITMO. But if you brought a nail... They actually have people, like a kid with a little nail clipper or something, treat it as if you brought an Uzi. You know what I mean? Because zero tolerance. Anything that could be a weapon.
So that's the kind of zero thinking, zero tolerance is zero thinking. And I know these judges sometimes, you're right, they're put under mandatory sentencing and they're not allowed to consider that, mitigating circumstances, I guess in many cases, that's another issue. And when I'm dictator I'm going to fix all of these things.
Jim O’Shaughnessy:
Well, I also think that you also have to walk the walk and set an example. Well, I was still with OSAM as an asset manager when they offered those loans. If you were just purely rational and you said, wait a minute, they're offering me a loan that is forgivable. In other words, they're offering me a bunch of money. And so I had some people on the team, particularly on the financial side, we should apply for this. And I went, I don't yell, I don't shout, but I was like, absolutely not. And they looked at me like, what's wrong with you? You're saying no to free money. And I'm like, money is never free, and we don't need that. So if we take that, we are taking that money from somebody who might really, truly, truly need it. And so other things, like I do believe you've got to walk the walk. You got to not take that free money. You've got another solution for inequity, I shouldn't get social security. I would be entirely in favor of a litmus test where people above a certain net worth or income level just don't get Social Security. And yet, that seems very non-controversial to me.
Rudy Havenstein:
Yeah.
Jim O’Shaughnessy:
And yet, even I've had very, very liberal friends say, "I understand why you are saying that, but Jim, you don't get it. If we put a litmus test in, then people will stop seeing it as a social benefit for everyone and then it'll be easier to argue against." And I'm like, "Okay, but we have a real problem here and these are simple things that we could do to," is it going to get rid of the problem? Absolutely not. But will it ameliorate it to a certain extent? I think so. And same kind of thing on immigration and all of those things. There are simple, straightforward ways that you can make rational, intentional immigration policies that are good for the country, good for people wanting to come here, I mean the whole deal, and yet, it just always devolves into these screaming matches to the point where just no unanimity and also the idea of seeing the person on the other side of the aisle as your sworn enemy.
You mentioned earlier in our conversation about we could go at it hammer and tongs and then go have a beer together. That actually happened when Reagan was president and Tip O'Neill was Speaker of the House. Those guys used to eviscerate each other on news and when they were having conferences and things, but then they'd have a drink together in the Oval Office at the end of the day.
Rudy Havenstein:
They're both Irish, weren't they?
Jim O’Shaughnessy:
Yeah, they were.
Rudy Havenstein:
Yeah, the Irish could do that. I'm a big fan, big fan of the Irish. Yeah, no, that's what we need to get back to. And I think, of course Trump will call, I think Trump does that secretly, he'll call someone the worst names in the book and then you'll see them later at a party hanging out or something. So I think maybe people understand that it's kind of a game or it's all part of a... What is it? Kayfabe? Is that the expression-
Jim O’Shaughnessy:
Yeah, yeah.
Rudy Havenstein:
Where they're like the wrestlers. And Yeah, it's funny, just brief aside on that Social Security, Greenspan told Congress in the mid-nineties, he says, "Oh, we can guarantee all the Social Security benefits you want as far out as you want." He goes, "But I cannot guarantee their purchasing power."
Jim O’Shaughnessy:
Right.
Rudy Havenstein:
Hence, the incentive for higher inflation. Just to go off again, as they say, as I've said at the Fed, they all want higher inflation, they all want it, they can't acknowledge that they want higher inflation, so they have to have all the hedonics and all the other little tricks and everything. But yeah, that's the way out, I think, for them. And Social Security would be another one. I do think they'll try stuff like what you said first, they'll put maybe an income limit on it. At some point, they're going to have to. And maybe they'll raise the age.
And I've always come from the assumption that I'm never going to see a penny from it, so I'm not really that worried about it. But other people, it's what they need to survive. But I think that money was already spent. How many wars do we have this century that we put on the credit card? And I think inflation is the way that most people see that they're going to get out of that. And as I like to say, yeah, you know what? I hear that a lot, but I never hear it from poor or middle-class people, I always hear it from very well-off people that inflation is the answer. So the Bill Ackmans and the Barry Sternlicht and everybody else. So anyway, just getting back to my nom de guerre.
Jim O’Shaughnessy:
But the idea that there are a set of solutions and we've discussed several of them here that have kind of "low cost" in terms of enacting them, like a limit on Social Security, bringing back moral hazard, that kind of stuff.
Rudy Havenstein:
Term limits.
Jim O’Shaughnessy:
But, term limits, thank you, that have sunset of laws, et cetera, that have big impact tied to reasonably implementable costs. And I just wonder given the current environment, how do we change that? For example, investigative journalism, I used to say I would probably look very favorably on a proposal to start a new company or journalism concern where literally, where their mandate was, "we're going to go after every grift, every political malfeasance and keep it." And here's the part where maybe, my mom used to say if wishes were horses, beggars would ride.
Rudy Havenstein:
Yes, there are other versions to that.
Jim O’Shaughnessy:
Yeah. But the idea, keep it completely nonpartisan and like, "Here's a scandal, well, let's go get them." Do you think something like that's possible? Do you think that could even get funded these days?
Rudy Havenstein:
It would have to be some billionaire that just really was a good guy that was not, wanted it to be nonpartisan. You're not going to get any, nobody's going to advertise with these people.
Jim O’Shaughnessy:
Right.
Rudy Havenstein:
It's tough. There's no money in it, really. And other than the self, the substack people, I guess the top ones make a ton of money. But yeah, no, that would be wonderful. I would love to see that. And I like to think that if I was a billionaire, when I win the lottery, I'll fund somebody. Just go investigate. And of course, you got to have a huge legal team because you're fighting against the most powerful, wealthiest people in the world because a lot of the corruption is trickle down. I always try to punch up. That's one thing I say is I'm always going after people way more powerful and wealthy than me because I see the corruption and I see that they get away with it and it bugs me. I don't know. I just hope... You know what we need? I've talked about this before with Reagan, comparing Reagan. Now Reagan, remember, they called Reagan Hitler.
Jim O’Shaughnessy:
Right.
Rudy Havenstein:
Reagan was a stupid actor who was a TV game show host. A lot of the same things. And I'm not saying Trump is Reagan, but Reagan, as you pointed out, came in and he had enemies, real enemies who really hated him and yet, he in many cases could go, they didn't hate him, but they really didn't like his policies, but he could go and hang out with them afterwards. And I think, I've mentioned this before with Trump, if Trump can be, a lot of times in his first administration, I felt like he went out of his way to just antagonize, really go after his opponents and sometimes it's justified, but after a while, it just gets old.
Jim O’Shaughnessy:
Yeah.
Rudy Havenstein:
And I think that turned off a lot of independents in the meantime. And then of course, you had the next administration, which was so awful that I think a lot of people who didn't vote, who voted for Biden the first time, voted for Trump the second time because they said, "I'll give this guy a chance. It wasn't that bad." But I think what he needs to do is try and get common ground that we've been talking about. I think he needs to meet with an Adam Schiffer or whatever or try to, they're going to grandstand and everything.
But I don't know if Trump has, I think he does have it in him because he's used to being friends with all these people. There's pictures of him with the Clintons at the wedding, him and Melania standing right next to Bill and Hillary smiling away. There's plenty of pictures of Trump hanging out with people who are now his "political enemy." But I guarantee you, behind the scenes, when no one's around and there's no cameras, I bet a lot of them are still making, cracking jokes and everything. Look at Trump, was it Carter's funeral?
Jim O’Shaughnessy:
Yeah.
Rudy Havenstein:
Just joking with Obama, he's joking with everybody. And somebody made a very great quote. Trump is sitting there joking with Obama, who a few weeks before had been basically saying that Trump was Hitler. Right?
Jim O’Shaughnessy:
Right.
Rudy Havenstein:
In front of cameras. And they're joking and laughing. And the guy, whoever posted this made a great comment, he says, "Imagine writing off your family or friends because of one of these two guys." You know what I mean? Getting so attached to Obama or so attached to Trump that you think that they are fighting for you. I think it's all kind of like a kayfabe. That's a great word. It's kind of an act. And I think if Trump can tone his act to be a little more conciliatory because he's getting his way on a lot of things now, there's no need to rub it in the liberals faces and stuff, try and win a few more over or something.
I think Reagan did win some people over. He was getting the blue collar Democrat vote back then, remember? And I think kind like Trump, Trump got more Hispanic and black votes than I think any Republican has ever. So they need to keep that up. Don't alienate these people that are now reaching for him. Help them. They need economic help. Everybody needs economic help. And they need to know that they matter and he needs to emphasize that you matter. He needs to emphasize it, not just to Israel and Ukraine and the hangers on around him, the billionaires, but he needs to emphasize it to the people in Scranton and the people in California and the people all over the country that you matter, you're an American.
Besides 2008, '09, what really disillusioned me and the Iraq war, which was meant huge once I saw how that was handled, but also Hurricane Katrina. I watched that for a week, I was home and I had it on. And it was amazing to me the difference between what was being shown on the ground and what was being shown in Washington. Chertoff and Bush were like, "Everything's great, everything." And on the ground, you're seeing people who, 80-year-old people who've been on a roof for four days. And I'm like this is America, this is not right. I don't care that these people are Democrats and black because Bush was president, Republican. I'm like, "These are American citizens. What's the delay?" And eventually, Americans did. What Americans do. They go in and they do whatever it takes. They had the Coast Guard right here, went in and did a bang up job.
I had a buddy who was there the next day, a fireman, he's one of the guy who's going around the boats, spray-painting on the walls how many people are dead inside. And so Americans eventually do the right thing often without leadership. Look at the people in North Carolina now. Someone said in a post, of course, I don't know what is propaganda, what isn't because I didn't verify, I didn't check it, but about a ton, a whole bunch of dump trucks that are headed in North Carolina. The assumption was, "Well, it's happening under Trump. It didn't happen under Biden." I'm like, well, if it is happening, I'm glad it's happening, but why didn't it happen under Biden? These were labeled as Republican, Democrat, most people are neither, I think, and independent. I'm not. I'm neither. I don't care. I've got huge problems with both parties.
And I think we need to think again about that, we're Americans, we disagree on some issues, but let's go have a beer afterwards or let's go help out these people in North Carolina, let's help out the people in Altadena. Whether they agree with you politically or not, they're Americans. So I think we need to get back to that. You're an American. And you're not a gay American and you're not an Irish American or a Hispanic American, you're an American first. You really are. And so we need to start thinking like that and our leaders need to start thinking like that. And so I really hope for Trump's administration that he comes through for the non-billionaires and reaches out to these new groups that voted for him and doesn't let them down. I think if he does that, that'd be great.
Jim O’Shaughnessy:
Yeah. And the point you're making that I really agree with is the average American is actually a pretty awesome person.
Rudy Havenstein:
Hundred percent.
Jim O’Shaughnessy:
And let's strip away all these artificial things that try to label people and put them in a category so that we can hate them or love them. A lot of European friends who will come here and like to say, "Oh my God, you guys are at each other's throats and everything." And I would say, "Do you ever go anywhere but here in New York or in California?" And they're like, "No." And I'm like, "What you should do is you should go to any of the towns that are not New York and not LA or San Francisco and drive around." What you'll find is that the average American, no matter what, it's not contingent on what color they are, what sex they are, what their sexual orientation is, none of those things. If your car breaks down and you're in what I call real America, you will probably within 20 minutes have a car stop and offer to help you.
Rudy Havenstein:
Hundred percent.
Jim O’Shaughnessy:
And that is America. And the more we allow this, what I view as artificial kind of Potemkin villages being built of this is right wing, this is left wing, that isn't what America is all about. And so I completely agree that when you're talking to your average American, they're kind of go along to get along, they're offer their help immediately. When the towers came down, we volunteered to just go down and help out. And they were like, "Absolutely." And so they assigned us a slot and basically we were giving water to the first responders, firemen, cops, et cetera. And I cannot describe to you the feeling of camaraderie, of horror, obviously, because these guys are coming in and I don't know if you've run into too many New York firefighters or cops, but they don't cry easily.
Rudy Havenstein:
Yeah, yeah.
Jim O’Shaughnessy:
And they were literally in tears. And that's the American spirit that I think we need to try to reinstate. And then you're talking about Reagan, it also makes the points that you've made about what's a good leader, right? A good leader connects with actual citizens. They're pragmatic over ideological. They understand history. And they hold themselves accountable. Like Harry S. Truman, "The buck stops here." These are in the American DNA. And it doesn't mean that we have to go back to them exactly, but just starting with accountability, starting with your political opponent is not your enemy, recognizing what... The other brilliant thing I always thought that Reagan did, he was the one who started the American heroes. Whenever he gave the State of the Union address, he would always have sitting with his wife, Nancy, a group of almost always a nurse, a firefighter, a cop. And he called them American heroes, right?
Rudy Havenstein:
Yeah.
Jim O’Shaughnessy:
This nurse saved this many lives and went out of her way, worked five shifts. Again, when all of you, there's a great quote from Robert Anton Wilson that goes, "The happy man lives in a happy world. The sad man lives in a sad world. The dark man lives in a dark world." In other words, if we are just being fed poison and awful thing after awful thing after awful thing, that's going to affect the national zeitgeist. And so I'm not saying that we should be pollyannish, I'm not saying that we should not face the problems of which there are many, I'm saying that again, back to my things to root for, let's root for accountability, let's root for an understanding of history, let's root for what your average American is actually like as opposed to the caricatures of both sides, the extreme sides of the political spectrum and we might make some progress.
Rudy Havenstein:
Yeah. I just mentioned real quick, there was a woman I knew who was traveling in the south of France with a couple other people and her car broke down. And this was not a real touristy area, just rural southern France. And they had, for a variety of reasons, it took days to get another car. And in the meantime, they had some of the locals there came along when the police were of no use, they just said get off the road. But locals came by, "Oh, I know a mechanic. Here, let me take you to his house. Let me take you," so these are white women and these guys were just wonderful, they had families, they fixed the car. I mean they gave them money, but they were going to do it, they didn't charge me anything. They couldn't have been more gentlemanly and nice to these women, these American strangers, and they were all French Muslims. They were all, you know.
And if you think a lot of people think, I don't think this way, but some people think, "Oh, Muslims and white women in southern France, it's going to be," no, these guys were wonderful. And that was great to hear. And I think that Muslims and Christians and Jews and Hindu, your average guy, not just Americans, you average human being is a good person. And it is our leaders, I think a lot of times, whether they're religious or whether they're political, who get people riled up over our differences, I think. So it was very good to hear about what happened to them in France, that it was just these guys were just wonderful and their families were wonderful.
Jim O’Shaughnessy:
[inaudible 01:39:50].
Rudy Havenstein:
I think that's a lot year round, I mean world round, there's good people and we need to maybe try and kill a few less of them.
Jim O’Shaughnessy:
Yeah.
Rudy Havenstein:
Because every time we drop a bomb, maybe we're killing one bad guy, but we might be killing some wedding party or something. It's not right.
Jim O’Shaughnessy:
Yeah, yeah. No, I agree. And I think that's a good place for us to end because I'm about to make you the emperor of the world. And you're only going to get two though, Rudy. I know you have more than two. But before we get to that final question, I just think if we think, if we can concede that people are not our enemies because they have a different belief than we do, if we can concede and understand that by turning our views and our friendships and our family relationships into a Draconian, "If you do this or support this person, I'm going to cut you out of my life," I think everyone, and certainly all of my listeners and viewers, I hope, agree, just getting rid of that, then we can start those small steps back towards these things to root for, like accountability, like term limits, like sunsetting of laws, all of the above.
And keeping in mind, and you bring the point out well, it's not just the average American who's a good person, basically, most people in the world are good people. And if we can figure out ways to harness that goodwill, we'll have better tomorrows than we have had yesterdays. So Rudy, it's been really fun chatting with you about this. Now, I am making you emperor of the world. However, you can't kill anyone. You can't put anyone in a reeducation camp. But what you can do is we're going to hand you a magic microphone and you can say two things into it that are going to incept the entire population of the world, all eight billion, they're going to wake up whenever their morning is the next day and say, "I just had two of the greatest ideas and unlike all the other times, I'm actually going to act on both of these ideas starting today and going forward." What two things are you going to incept?
Rudy Havenstein:
I wish I would've thought more about this, but I'll go with go do something nice for no reason to someone who can't help you in any way. You know what I mean? Just go do that every day. And the second one, because I guess this would, I get three this way, go to my pinned tweet and that's really what I've been all about is mainly, besides making jokes and stuff, is the wars that Washington and Eisenhower warned us about in their farewell addresses and also what I call the kleptocracy and we've talked about it in this interview, accountability, white-collar crime should be prosecuted, people need to see that. And I think that would make a big step, getting rid of the stupid wars and getting rid of the unaccountable financial class, the Kantian effect, I think that would be a big step towards what America and the world needs. So hey, man, great talking to you, Jim.
Jim O’Shaughnessy:
Great talking to you too. And your first one, by the way, is also a great filter to use for hiring somebody. When I was at OSAM, I would always end somebody's interview process and everything by taking them to lunch. And anybody who treated the waiter or waitress poorly, I just would not hire because-
Rudy Havenstein:
Oh yeah, that's a good one.
Jim O’Shaughnessy:
... that was punch down behavior and I think you should only punch up. And I know you agree with that.
Rudy Havenstein:
Of course.
Jim O’Shaughnessy:
Rudy, thank you so much for joining me. This has been really fun.
Rudy Havenstein:
Yeah, it's been great. Thanks, Jim.
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