Transcript: Peter St. Onge: Revenge of the Blue Collars

Marty Bent [0:02] Ex's professor is back. The the econ professor Professor Peter Saint Ange. Welcome back to the show, sir.

Peter St. Onge [0:09] Yeah, it's good to be back, Marty.

Marty Bent [0:11] Good to have you. I mean, AI is so hot right now. I mean, you you DM or you texted me this morning saying I really want to talk about AI today. I said, Hey, I'm more than willing to talk about AI. You you notice that we've been leaning into more AI content before we just hit record. And I said, Why don't we just hit record and I'll tell you why? It's because we've been using AI. We've built basically a company brain and an agentic system that all of our employees can interact with that has allowed us to really expand. the breadth of content that we can cover, which has been a a very cool process.

Marty Bent ⋮ And you were also mentioning that it seems like a lot of the number go up people are focused on AI right now, which is true. And I'm trying to bridge that gap, which is like I'm still full, fully dedicated to Bitcoin, never been more bullish, despite the fact that we're back in the fifty eight thousand dollar range right now.

Peter St. Onge [0:51] Mm-hmm. Yeah, and that's something that's something, what was it like buck twenty a couple months ago? Right before the war? Yeah, fifty-eight. That's insane. But yeah, I think you're right. I think that, you know, a lot of the number go up crowd. they, you know, the sort of hot money, they're partying in AI at the moment. AI has longer legs than AMC or some of the stonks from a couple years ago. So that'll probably hold their attention for a while here, is my biggest guess.

Marty Bent [1:08] Yeah. Yeah.

Peter St. Onge [1:31] You know, I think the underlying argument for Bitcoin is unchanged. but you know, a lot of people talk about Bitcoin like it's stable money, but then in the back of their mind, they really think it's money that's gonna go up a bunch. And, you know, like welcome to maturity in Bitcoin, you know, in it it yes, there'll be a huge jump, you know, if it takes market share from gold and from fiat, you know, there obviously be the massive step jump where it goes up 10x or 50x or whatever. however, you know, I think that this current sort of crab walk, I mean, that's what gold's been going through for 50 years.

Peter St. Onge ⋮ You know, sometimes gold will triple, sometimes it'll drop in half, threefold. you know, I think it has nothing to do with the sort of fundamental thesis of Bitcoin. In fact, you you know, if you just s sort of step out and look at gold. Like if you didn't know the history of the world, then you would look at gold and you would say, No way can gold be a currency, because look, you can't have a currency that doubles and drops in half in the course of a year. Right. And, you know, of course, the reason is because if it's not the main money, then it's a much thinner market.

Peter St. Onge ⋮ And so, you know, speculation and you know, it's its value is gonna be derived based on interest rates and this and that. And it it's gonna be much more volatile than the main currency will be. So, you know, what we're seeing in Bitcoin right now, this this sort of boring crab walk that we've been in for I think over a year more or less. I think that's that's it it you know, probably gonna continue as long as AI is sucking all the sort of hype oxygen out of the room. but even after that, you know, I'm not sure that that you know we're gonna see this sort of halving, you know, process where like, you know, you have these huge run-ups in prices every single time.

Peter St. Onge ⋮ I think those those days. I think for the moment they're gone unless we get some major step up in adoption. at which point, you know, of course, you know, if we take a big share from gold, if we take a big share from fiat, then you'll see another step.

Marty Bent [3:37] Yeah. No, I haven't been in this for twelve years. It's it's just another bear market to me. It's and it is each bear market is unique. twenty fifteen. Like this is probably the worst sentiment since twenty fifteen, where it's been I've been in this for thirteen years now, which is hard to believe. twenty fifteen. People legitimately thought Bitcoin was gonna die.

Peter St. Onge [3:44] Yeah. Yeah. We we we haven't had Yeah, we haven't had a real competing investment story, I think, since Bitcoin was born. Like the closest that you could say was maybe the rebound from the 2008 crisis, you know, March of of 2009. we saw, you know, we had and that was Fed or anyway, it was just a rebound. and then you had a Fed-induced bubble going into COVID where they just dumped out all the liquidity that caused the inflation. So, you know, you had two periods where you had like broad equity strength, which, you know, on the margin draws out some of the demand out of Bitcoin.

Peter St. Onge ⋮ But I don't think we've really had a like like a real stonk story like AI since since dot com. So like I'm not surprised at the sucking all of the number go up oxygen out of the room for the moment. But yeah, you know, I think you're right. I mean, Bitcoin goes through winter, summer, you know. and you know, the fundamentals are unaffected. I don't understand the quantum, but I do understand that, you know, there's a lot of people who are much smarter than me who are not worried about it. And so I don't think there's any legs to that. I think this is simply the number go up, people are currently distracted.

Peter St. Onge ⋮ They're partying down the street.

Marty Bent [5:15] Well, I mean, you messaged me. What what how are you reading what's going on in AI? Are you bullish on it? Do you think there's a mania going on? a what i irrational exuberance? Is that what we're exhibit what we're seeing? Or is this truly like a step function improvement on on technology?

Peter St. Onge [5:24] Yeah. Yeah, I think it's both. Yeah, I think it's both. So I cut my investment teeth on dot com and I got into it because there was an interview with Paul Krugman where he said, he said, this thing's a giant bubble. Well, no, no, no, no, no. Earlier than that, I read an article in Wired magazine. It was an interview with Yahoo's CEO, Terry Siegel, I think it was at the time. And that was 1996. And everybody said the internet is this giant bubble. Don't invest in it because you're just gonna lose your money. I bought Yahoo at 60 bucks a share. Everybody told me I was an idiot.

Peter St. Onge ⋮ But I'm 24, I don't have any kids, you know, I make more money than I spend. Like, what am I gonna do with the money? So what the hell? Gamble it. and of course, split adjusted, you know, Yahoo went to like a thousand dollars. I retired at twenty-five. I went partied around the world. I did, you know, kind of the crypto thing before it was cool. and then lost it all because it eventually collapsed. but the moral of the story is that in 1996, everybody knew that dot com was a bubble. Okay, why? Because the idiots at the Wall Street Journal look at a stock price, and if it went up a whole bunch, they say it's a bubble.

Peter St. Onge ⋮ Okay, they don't go any deeper than that. They say, What? It was a dollar last year, now it's five dollars, it's a bubble. And it doesn't occur to them that, okay, yes, it's a bubble, but guess what? Bubbles don't pump just because you called it a bubble, right? Bubbles can keep going. there's a study, in fact. I can't remember the guy's name. There's a guy out of Columbia University who does some really good empirical work on stock behavior. His name will probably come to me after the interview's over. and what he found is that the main determinant of a bubble, it's not price multiples. Okay, it's not, you know, price to earnings, price to sales, it's not how much it went up.

Peter St. Onge ⋮ Okay, it's none of those things. It's not magnitude, it's just time. Time passes, eventually the bubble goes out. There is no other Determinant. So my take home on that is that, you know, if you're looking at AI, okay, did it go up a lot compared to two years ago? Yes, all of it did. Nvidia, Broadcom, whatever. What's the one now? Marvel, Micron, okay. You know, you keep having this rotating cast of guys who go up 10X, exactly like dot com. Okay. and but then, you know, so did it go up a lot? Yes, it's a bubble in that sense. However,

Peter St. Onge [7:56] Number one, if you look at the valuations compared to dot com, they are far lower. I mean, we'd have to go up probably two to four X from here to even get close to dot com, because in dot com it was all vapor. All right, if you look at the actual earnings, like NVIDIA is minting profits, like profits you put in your pocket. Okay, this is not eyeballs, this is not you y you know, the kind of hokey metrics that they come up with dot com because nobody was turning a profit. In fact, I think internet stocks as a group did not. Earn a single dollar throughout the entire 1990s, right?

Peter St. Onge ⋮ They all lost money. And they were all like, no, no, no, we to reinvest because we got the the eyeballs are coming. Okay, but they didn't make any money, right? If you look at the actual profits on these AI semis, and really it's the semis we're talking about, right? It's not the actual AI models. We'll we'll talk about that separate, but they don't have any pricing power, I think, and their stocks are reflecting it. it's the AI semis, the pics and shovels, right? The equivalent of Cisco during dot com. Okay, and those guys are absolutely minting money from memory. Like if you look at NVIDIA's PE right now, I don't think it's even that high.

Peter St. Onge ⋮ I think it's like 30 or something. Like it's it's not astronomically high. It's not a thousand, right? This is not the dot com. So my takeaway on it is that number one, is it a bubble? Well, yes, it went up a whole bunch. And I would not be shocked if it dropped in half at some point here. Okay, so in that sense, yes, it's exhibiting bubble behavior. but in any bubble, the question is how long will the bubble go? Right? Are you in the first 10% of the bubble? Are you in the last 10% of the bubble? Are you somewhere in between? So if you overlay the AI semi-bubble just day for day, the reason you're doing day for day is remember that study, right?

Peter St. Onge ⋮ It's just time, it's nothing else. Okay, if you lay it day for day on the dot com, you know, you gotta decide when you need to start them. So call it Netscape IPO versus ChatGPT release. Okay, if you overlay those, we're probably 98. Arguably early ninety nine. I think we've got another year or a year and a half of free money. Watch it blow up tomorrow. But anyway, I think most likely, if I had a gun to my head and I had to guess, we got another year, year and a half of free money. Probably scale out gradually because otherwise you're gonna lose all the money like I did when I was young.

Peter St. Onge ⋮ so scale out gradually over time. But you know, so to answer the question cleanly, I think yes, it's a bubble, but it's got another year, year and a half to go.

Marty Bent [10:23] And what do you take of the technology and its effects on the the economy?

Peter St. Onge [10:26] The the the technology it's blown me away. Just absolutely. I thought dot-com was once in a lifetime thing. All right, if you look at the world before the internet and after the internet, I I thought we were never gonna see something like that in our lifetimes. And AI is 10x that it has absolutely blown me away. so the areas that I know about, right? Because you know, I don't know anything about coding. programming. There's a lot of crap I don't know about. I'm not qualified to comment how good it is. The stuff that I know about, which is economics, economic history, I it it I mean, you can, it is like having Murray Rothbard in your pocket.

Peter St. Onge ⋮ It is like having the Nobel committee, not the socialist politicized one, the real one. It's like having them in your pocket. I am absolutely blown away by the quality. people used to ask me these kind of science fiction questions, you know, like I don't know, what if GDP growth went to 50% a year? Or, you know, what if we had immortality and then people stopped dying? All right, so people used to ask me these sci-fi questions, and I mean it's fascinating as an economist. You say, well, that's really interesting. Let me think about, you know, you have the human capital erosion. Okay, now people don't ask me anymore because they go to AI.

Peter St. Onge ⋮ And guess what? I go to AI too. I wouldn't ask me either. All right, just just go, yeah, you know, it's like the old line when somebody would ask something, you'd say, just Google it, okay? Just just go ask rock, ask GPT. Ask a couple models, average out the answer, because they do make stuff up make make stuff up. But fundamentally, like a a combination of AIs is it's better than you know, I've asked medical questions. my my wife has dysautonomia, like with blood pressure, all of our doctors were idiots. They like, maybe we just change the dose. I don't really know what it is.

Peter St. Onge ⋮ We asked the AIs, they were like, hey, look into this. We went, I mean, just it it is literally like having the top experts on earth. In your pocket on any topic, right? Health, economics, everything in between. I am absolutely blown away by AI. And remember, we're just at the chatbot stage, right? Like when you zoom out to what the AI potential is, this is like the first 1%, right? This is just like the joke, little goofy stuff that you show off to your friends. I mean, you look at the stuff down the pipe. So already, a AI, not AI specifically, but a this stupid speaking of.

Peter St. Onge [12:48] the thumbs up. Apple used to program intelligently. The the you know what is it 2024 Chemistry Nobel was won by a prize you or was won by a team using AI, right? Google's, what is it, Deep Seek or something. That's the Nobel. Okay, you know, Yeah, you know, people love to trash AI. They're like, you know, this is goofy, what can you do? Put bikinis on, you know, rabbits. No, no, no, dude, like already, okay, protein.

Marty Bent [13:05] Mm. Deep mind, yeah.

Peter St. Onge [13:18] So that was for protein folding. Protein folding, again, I'm an idiot on science, but anyway, is approximately how your genes translate into actually doing stuff in your body. Okay, that is one of the holy grails in medicine. there's like a half dozen other, I mean, foundational stuff that AI is just solving trivially. So I am, you know, number one, blown away by how impressive AI is. Yes, it makes crap up. So, you know, if it's an important question, run it through two, three AIs. But what I'm really excited about is, you know, what's coming next in materials research, medical research. I think AI stands a very good chance of giving us quasi mortality, in other words, an end to aging within 10 years.

Peter St. Onge ⋮ I think that we're gonna see absolutely revolutionary materials that will make things possible you know, we we haven't yet imagined. Jeff Bezos, I wanna say 10 billion. Anyway, he put us a chunk of change into. a new AI startup that's specifically doing that. So it looks like new materials, right? And so you know, you can have insulating or superconducting or you know all kinds of interesting things. So I am absolutely blown away by AI. I think it is 10x the impact that the internet had in terms of not just the economy, but potentially of you know health, of longevity, politics. You know, people can discover truths that used to be guarded by the gatekeepers.

Peter St. Onge ⋮ I think it's very exciting. I think it's literally for me, you know, having cut my teeth on the dot com, I think this is much, much bigger than that.

Marty Bent [14:51] Yeah, I would agree. And again, it's because again, C touch feel. That's right. Anybody who's naysaying AI right now. I'm like, have you actually used this? Like, yeah, I've you I've used Chat GPT's bot before. It's like not that impressive. It's like, well, you're not actually using it. I mean you are to an extent, but there's so much more that you can do with it. And like bring this back to the bubble conversation. I keep grappling with this in my head, and I'm sure you've heard the likes of

Peter St. Onge [15:06] Yeah. Yep.

Marty Bent [15:16] Gavin Baker from a Treaties and others talk about this, but the analog to dot com. Many would argue, and I think myself included that the that there are things that really don't comport to what was going on in the dot com era, particularly like the the dark fiber, like laying of the broadband. There was there was actually no monetizable businesses in the dot com era or very few, outside of Amazon and Google before they f to

Peter St. Onge [15:46] Well yeah.

Marty Bent ⋮ when they found their their ad revenue model. But like with to your point, like Nvidia, Micron, Marvel, these guys are all printing, printing cash, making profits. And then like even on the frontier models, I mean, I saw a headline earlier today. Obviously Anthropic's not public yet, but they're they're in the process of going public. And it seems like they're producing free cash flow. And so that that's like the question and like there's inherent utility out of the box. Not that there wasn't for the internet for the individual, but I think particularly for businesses out of the box today. I think TFTC being one of those examples, like we're able to use it, spend money on it, productively, efficiently and profitably to to expand what we're doing.

Marty Bent ⋮ And so like when people talk about we're in a bubble, it's like, yeah, we could be in parts of the market. And to your point about time dilation, like how like this I I feel like this could go on longer than the dot com bubble. Like that that's what I would be interested to dive into that study and to see if there is like a set amount of time that he that the the the individual wrote that basically decided like, yeah, bubbles typically last X amount of time or depending on the the magnitude of the bubble, the the time scale changes a bit.

Peter St. Onge [17:04] I'm just length of bubbles. Yeah, well, you made a great point on the dark fiber, right? So the issue, if you're just zeroing in on the picks and shovels, right? So the issue for companies like Cisco, Lucent, you know, the kind of picks and shovel the the internet, the issue there was the dark fiber that you just mentioned, right? Which was that the internet, you know, all these people are you know, traffic was exploding, and so they built these highways out of fiber optics. The problem is that the price Of building a highway with 10,000 lanes is approximately the same as building a highway with four lanes.

Peter St. Onge ⋮ And so you may as well make 10,000. But of course, the issue is that it took a while for the internet to grow into those 10,000 lanes, like a further decade. All right, that is a completely different beast than we're seeing with with AI at the moment, which is that companies are like they will take all the compute they can possibly get their hands on. Right. So I can't remember the company. They blew through their AI budget of like $500 million without noticing. I guess there's rumors that it's Uber or somebody like that. There you go. I mean, it there is unlimited appetite because think about it, right?

Peter St. Onge ⋮ This is not a highway with 10,000 lanes, okay? This is processing, and the companies are doing stuff with that processing. You know, so you know, you take I don't know, 40 bucks worth of tokens and you replace three weeks of a Goldman Sachs analyst times a billion people.

Marty Bent [18:10] It was Uber, yeah.

Peter St. Onge [18:33] And it's not just the people you're replacing, right? The vast majority of the stuff you're doing was not being done before. Okay, so now, you know, you can have like a like a mom and pop ta taco shack that can go to AI and you know, they can they can analyze their their shoppers. So, you know, which part of the you know, week should I buy certain type of stuff? can you make me a logo? Can you make me a slogan? Can you make me, you know, can you program me a website so I can take over? Like these are things that it's not that somebody was doing it before that was replaced.

Peter St. Onge ⋮ Right? It's that it was so expensive that nobody did it. Right. And so now, because AI is, I mean, for you know, outside of corporate applications, it's it's pretty much free for individuals and for small businesses. you know, the vast majority of the things that that they're able to do now couldn't be done before, right? So you put that together with the corporates, you know, who are actively replacing extremely expensive people. You put those together and there is Pretty close to unlimited demand for compute. They can certainly use up everything that anybody can build, including the Chinese.

Marty Bent [19:41] Yeah. And there's another interesting part of this AI story too, like tying it to the bubble as well. So it's pretty clear that the Trump administration has recognized and deemed this AI infrastructure build-out and I think just broad reindustrialization, even outside of AI, is in national security rests of view, the the race to AGI as existential, particularly as juxtaposed. To China and so you you're seeing like a quasi nationalization of certain parts of the market. What are your thoughts on this as a free market guy?

Peter St. Onge [20:17] Yeah, so it's tricky. Okay. first the good, which is that Biden and Kamala, I mean it's not really them, it's their handlers. You know, they were very hostile to AI. they were trying to turn it into a government pet. you know, essentially the social media censorship model, but this time y you know, turning it into Big Brother. I think that was existentially dangerous because at the moment For a lot of people, AI is truth, right? And it you know, they need to verify, they need to check with multiple AIs, of which one should always be grok. but you know, even that's kind of unhealthy. But if government were actively, like if you had a political commissar of the Communist Party sitting at Anthropic, literally checking things, which is approximately how it was with social media, that was extremely dangerous, right?

Peter St. Onge ⋮ So I'm I'm very pleased that Trump is so pro-AI in the abstract. You know, we were very, very lucky with dot com that we had Bill Clinton. I'm not a huge fan in general, but God bless Bill Clinton because he was hands-off. He was certainly hands-off on content. and it took W, I think was the first one who started with I can't remember the chain of events. Kamala, by the way, pushed on, I think it was Sosta or Sesta or something. Anyway, the internet got captured gradually, but God bless Bill Clinton. And you know, so I was very happy when Trump won, partially for that, because I think he's a lot closer to Clinton.

Peter St. Onge ⋮ Just promote the tech, see where it goes, don't strangle the baby in the crib. Having said, I think that, you know, the idea of government partnering with these companies or owning shares, that puts us right back to, you know, maybe not under Trump. You know, maybe Trump has David Sachs and he's got smart people who aren't going to abuse that. But he's not going to be president forever. I mean, you know, he's. He's got two years, and you know, he keeps building these structures in government as if he's gonna be president forever. And all all of those things are going to be delivered on a silver platter with a bow tied on them to Gavin Newsom or the you know Zoran Mamdani or whoever the hell's next.

Peter St. Onge ⋮ That's what makes me nervous. So I love that Trump is so pro-AI. I don't think he personally has strong opinions about AI, but he listens to people who tell him it's cool and so good to go.

Peter St. Onge [22:41] but yes, I am not a huge fan of this idea of government owning things or partnering. I think there should be a separation of church and state when it comes to business in general, but certainly when it comes to technologies that can influence how voters think. Right? Because if government is tied up, whether it's social media or internet censorship or AI, okay, if government is controlling how voters think, the voters are not sovereign anymore. The government is a self-licking ice cream cone. It runs itself. That is a tyranny. So I'm not a huge fan of that part.

Marty Bent [23:13] No, I mean the silver platter, I mean you mentioned Zovron Mamdani, but the election the primary elections in New York. I mean you have I mean he's the mayor of New York, he's an overt socialist, but looks like the state legislator and I think the senator primary, like three three spots went to overt socialist who want to who want to seize the means of production and distribute wealth and confiscate wealth and distribute it. You have Sam Piker.

Peter St. Onge [23:23] He's Yeah.

Marty Bent [23:42] riding pretty high on his own supply right now. And you d you do have this this growing unabashed socialist part of the Democratic Party really taking hold. And you can imagine I mean I think one of the memes that's been growing in strength over the last six months is is elections moving forward are gonna be communism versus nationalism. And the Democratic Party, I I think the the zealots who are overtly socialist and communistic are are beginning to take it over. And to your point.

Peter St. Onge [24:15] They've got the fire. I mean, look, look at the rest of their bench. You know, you got Slimy Newsom, who's dirty. Nobody likes him. I mean, he's not popular. You know, you know, people aren't excited to go work for him. He's he's like an instrumental you know, you use him, I I guess, as a stepping stone of the Democratic Party. There's no fire in there, right? He he's not even Bernie Sanders. Forget Zoran. Who else you got? Pete Buttigieg? I mean it's a it's a thin bench. So you know, ALC gets floated as a pres she's you know, again, she doesn't have a large constituency for her ideas.

Peter St. Onge ⋮ no, I think Zoran or somebody like him is a future to the Democrat Party without a doubt. on the Republican side, I think that Trump or somebody like that is the future. So, you know, the old parties that we grew up with, right? When I was a kid, the Democrat Party was working class union guys, you know, very patriotic. kind of racist, to be honest. you know, they were kind of the deplorables, as Clinton put it. Okay, that was the Democrat Party. The Republican Party was a bunch of rich guys like Monty, you know, what is it, Mr. Burns out of The Simpsons, yeah, who just wanted lower taxes.

Peter St. Onge ⋮ And other than that, you know, they they you know, didn't really have strong opinions. They were like, whatever, you do what you gotta do, invade this country, you know, whatever. That was pretty much all they cared about was

Marty Bent [25:24] The sentence.

Peter St. Onge [25:39] big business thriving either through lower taxes or through you know government partnership. so that was kind of the the fault lines. And you know, Trump broke the Republican Party, I think amazingly fast. You know, if you consider that in 2012 we had Mitt Romney, who was like 100% a tool of the old machine. You know, he had there was nothing about him that was against orthodoxy in the Monty Burns party. And then four years later, just bam, right? It completely transformed. And I think that's where we're going with the Democrat Party as well. So, you know, if I had to guess, I I I think there's a very good chance that their nominee for what is it, twenty-eight, could actually be Zoran.

Marty Bent [26:20] Could it be? He wasn't born in the United States. They changed the rules.

Peter St. Onge [26:24] Very good question. Let me see where I was born. By the way, the guy from NYU. It's NYU. His name is Andrew Lowe. L O. And he's done a lot of empirical research on stocks. worth a read. You can find all the stuff by going to Chat GPT, which is which is who gave me his name too. All right, Zoran Mom Dani Bourne. all right, let's see if. Kampala Uganda. The Republic is saved. Right, but but it's gonna be one of his acolytes who are born here. I think that's a like there's there's no fire. The party abandoned the blue-collar union guys. That's who Trump picked up, right?

Peter St. Onge ⋮ That's like his whole shtick is appealing to the old Democrats. the party then got captured, or the people who who who evicted those union guys were Basically faculty, professor types, you know, so like people who use Letinsk. and but there's no fire for them, there's no passion for them, right? Like after this last election, they're you know, post-ops were all, you know, we gotta learn how to talk to real people. And I mean that there's just like d I don't think there's any future with the whole professor shtick. you know, s but but this this new group, whether it's Piker, Mamdani, I think that that's what's capturing the fire in the Democrat Party.

Peter St. Onge ⋮ and so, you know, as a party, they could choose. I think the professors aren't going anywhere. So they can either go back to the old school union guys or they can go to these new sort of fiery, call it over educated, underemployed revolutionaries. And, you know, the union guys don't really organize. so I think most likely they're gonna get captured by the call it the Piker mem danny wing.

Marty Bent [28:17] Yeah, and oftentimes the Pikerman wait, mean, they they might have a short bench there too, 'cause I I don't think a lot of them are native foreign. like even Hassan Piker, I'm pretty sure he was born in Turkey.

Peter St. Onge [28:24] They'll they'll have some Italian candidate who they insert some some pawn, some American born pawn.

Marty Bent [28:33] Yeah. No, it is crazy times. I mean and then on top of all that, going back to sort of overreach and and maybe this isn't overreach actually I think some people could view it as refreshing 'cause you're just admitting what's been happening for for some time, but the the sort of nomination and the sort of nomination and the sort of accepting of that nomination of Kevin Warsh joining the Fed him sort of shifting gears, no longer doing forward guidance, but I think more explicitly signaling that the Treasury and the Federal Reserve are g are going to be acting incompatico as they they try to reindustrialize and reorient the economy. And I I think that's a whole other can of worms we should jump down. Like what what are your thoughts on on Kevin Walsh as Fed governor and and his first F O C meeting and what he plans on doing?

Peter St. Onge [29:29] Yeah, so he's been interesting. if you look back at his history, you could argue that he's a hard money guy. you know, during the 2008 crisis, we had from memory, we had something like eight percent unemployment and you know the economy was doing terrible. And he was like, No, no, no, we have to hike, we have to hike interest rates. I you know, which is I mean that's based, right? That's like old school, that's nineteen twenties style, you know, when the economy's in bad shape, you know, the reason is because you had all this irrational exuberance, malinvestments in Austria. and you just gotta purge all the junk.

Peter St. Onge ⋮ And you know, so I love him for that. You know, it's very vulcar adjacent. However, you know, and then there was this kind of accusation that he had had a foxhole conversion because he wanted to get the job from Trump. So he flipped to easy money and starting to push for rates to come down. But he had actually been pushing that for, I think 2014 is when he started pushing it. And his argument was that we have new technologies coming that are gonna make the economy much more. productive, and so that lowers prices. And if so, then you have room to lower rates without it showing up as inflation.

Peter St. Onge ⋮ now, and and he reiterated that I think even before he was on Trump's radar, he was talking about AI specifically, that that was going to be a massively deflationary. I think he said something like the greatest deflationary technology of our lifetimes. I mean, he was out there. so you know, I think that the the The idea that he's just mouthing the words about rate cuts, but he but his heart's not in it. I know I think he's had an evolution since 2008 where you know he's he's learned to love rate cuts. Now his shtick immediately before he came in, he was calling it Robin Hood policy or Robin Hood monetary policy, where the idea was that okay, so normally the way that the Fed controls inflation.

Peter St. Onge [31:31] is that it can, you know, raise interest rates in order to reduce inflation, right? But there's a second way that the Fed really picked up starting the 2008 crisis, which is that the the Fed just goes out and buys crap. So, you know, they go down to the basement, they type a bunch of zeros, then they say this is money, and then they go and buy stuff. So this is called quantitative easing. And what's happened since 2008 is that the going out and buying stuff kind of kind of took over. to the point where the Fed has, I think, currently about seven trillion dollars of assets that are built up on a balance sheet.

Peter St. Onge ⋮ Now, seven trillion, okay, the entire money supply is something like twenty twenty-one trillion or something. Anyway, it's ballparked three to four times that. So put differently, the Fed has printed approximately twenty-five to thirty percent inflation, and it's parked it like a battery on its balance sheet. Meaning that anytime the Fed wants, the Fed could just go and pawn all that garbage, right? It could sell off all those assets that it bought. and it bought them in financial crises or the so-called tapered hand show. There's basically whenever something goes bad, the Fed goes out and buys crap. So it could pawn all that stuff and it could immediately lower prices by 20-25%.

Peter St. Onge ⋮ And you would not hurt the economy. You would hurt Wall Street because Wall Street owns all that stuff. They own the treasury bonds, the mortgage-backed securities, they own all the crap that the Fed bought. The point is that you can immediately lower inflation just by selling off the Fed's stash, and it doesn't hurt the economy, right? Because the alternative is that you raise interest rates to fight inflation, and that strangles the economy. Because now, you know, loans are more expensive. you know, mom and pop factories on Wall Street can't finance their inventory. Okay, so that that that costs jobs. Whereas pawning the Fed's garbage doesn't cost jobs.

Peter St. Onge ⋮ It just causes profits on Wall Street. So that was his shtick immediately before he came on board, was that that Robin Hood, right? So take from Wall Street, give to the people. now, unfortunately, he's coming in after the war, right? So the Iran war at the moment is screwing up the numbers. you know, you've got, I think in the first month, inflation was running at annualized 10%, then it was like six percent, and so on. So, because of the war, oil prices went up. Now, interestingly, so far.

Peter St. Onge [33:51] what are we, four months into the war? The inflation has not bled outside of energy. It's only in energy. In other words, companies are not raising prices. Right. So he could, what I hope he'll do is simply ignore the current inflation. I hope that he'll stick with that Robin Hood thing and, you know, continue pawning off the Fed's assets, bring inflation back down using that, not using interest rates. but the problem is that historically the Fed tends to panic. So You know, when when inflation jumps, that gets the plebs upset. If the plebs are upset, they call their congressmen, then their congressmen call the Fed, and there's always the threat that the Fed could lose power based on bad headlines.

Peter St. Onge ⋮ So the Fed historically panics on headline inflation. I think that's been the concern at the moment. So if you you know, if you put that together, Kevin Warsh, I think fundamentally is a hard money guy, just kind of a mini vulker. He has gradually come over to You know, favoring to being easy money on interest rates and then making up the difference by taking it out of Wall Street. but at the moment, I think that he's he's kind of trying to navigate some tricky space. You know, he's only one vote out of I think 13 on the Fed board. And a lot of those guys are Biden appointees.

Peter St. Onge ⋮ some of them probably just want to see Trump fail anyway. You know, to hell with the million jobs that are lost in the process. so he's only one vote of thirteen, and so he's kinda gotta herd the cats. And I think that instinctively what he wants to do is ignore the current war-driven inflation. The war's gonna be over soon enough. Trump is trying everything he can to get out of it. I think he he understands it was a mistake, even though he'll never say it. but anyway, one way or the other, the war's gonna be over soon. The impact on oil price is gonna be over.

Peter St. Onge ⋮ so I think that, you know, Wars is thinking the way that I am, in other words, just let it go and continue doing the Robin Hood thing. which is good for the economy broadly. My concern is that he's gonna be forced into a Fed panic where they hike rates. That then that hits everything, right? It hits investments, it hits jobs, it hits the Trump boom that that we've been counting on.

Marty Bent [36:02] It's already hitting housing in s certainly in parts of parts of the market across the country, right?

Peter St. Onge [36:09] It it's hitting housing just the way it is, with rates, you know, not that particularly high. So, you know, if you if you hike another point or you know, another half point or point from here, then yeah, it's gonna even worse. And, you know, of course, the problem in housing is that the Fed yo-yoed rates, right? So you had essentially zero interest rates during COVID, in order to finance the lockdowns, the totalitarian lockdowns, that then lock all these people in their house where you know they can afford their current house at a three percent mortgage. They cannot afford it. A seven percent mortgage because the payment more than doubles.

Peter St. Onge ⋮ Right. And so all of these people, they don't necessarily d you know, like maybe their kids moved out, they got a six-bedroom house outside of, you know, Boston. Normally they would sell that, put it back into circulation. Now a family can live in a house, they go down to Florida, everybody's happy. But in this case, they're stuck with it because the new mortgage would be seven percent. So yeah, the the housing market is completely screwed up. I you know, it's like a pendulum where you know we smash into and it's gonna go one way too it's gonna go the other way too far, over and over.

Peter St. Onge ⋮ Which kind of captures what the Fed does anyway to pretty much every industry it touches.

Marty Bent [37:15] Yeah, I hope they keep them higher. I hope they keep the rates higher. It seems like the AI infrastructure build out for at least some of the companies, the return on invested capital is making the the cost of capital maintainable. And then for the housing market, I mean I locked in a six seven five mortgage in February. And yeah, my monthly payment is not great. I think we got I think we got our house like twenty percent under market. Luckily we had some

Peter St. Onge [37:32] Yeah.

Marty Bent [37:42] The the previous owners wanted to give it to a young growing family. And so I think they were very amenable on on price negotiations. But I think broadly speaking, if you're looking at housing affordability, I guess it's pretty clear that the the the sort of sticker price of the houses are too high for for any millennial or endeavoring Gen Zier to to actually afford a down payment. And so maybe

Peter St. Onge [37:46] That's awesome. Yeah.

Marty Bent [38:09] Prices coming down with mortgage rates at six, seven, five, seven, seven twenty five. Maybe it's not a bad thing. I mean, what were mortgage rates in the eighties, weren't they? Like in the teens?

Peter St. Onge [38:19] Yeah, well, they were really high in the early 80s. Yeah, that was like an overhang from the 70s. but if you look at a healthy housing market like in the 90s, they were pretty much where they are now. Like the rates, so the problem right now isn't necessarily that rates are astronomically high. The problem is that they were low for, I think, a two or three year period. And so tons of people refinanced, which they were smart to do, but the end result is that now they're they're they're kind of stuck. they have these relatively cheap houses, and if they try to switch out, then they're gonna lose it.

Peter St. Onge ⋮ And you know, there is some help on the way. Like there's regulation you could do that could that could probably drop the price of new construction by fifty, even a hundred thousand. There's a lot of stuff you can do with, you know, environmental mandates and zoning and and rent control could help bring more supply online. There's different regulatory things that you can do. the other moving levers, of course, wages. You know, so if real wages are growing, then maybe house prices don't come down. but wages can grow into it so that millennials can actually get into it. And that brings us to the question, you know, which is kind of the other aspect of AI, which is what's gonna happen to wages and jobs.

Peter St. Onge ⋮ And, you know, I think one of the most fascinating things there, just kind of watching AI's impact on the economy evolve, is that the so far, and I think for the next couple of years, the main impact on AI is that it It is going to reduce wages for college educated generalists, particularly young ones. Okay, in other words, people who have credentials but no skills. Those people are gonna get absolutely savage, right? so somebody who graduates, like if you're graduating this year with a psychology degree or an economics degree, okay, a a general degree where the purpose of the degree was basically an IQ test.

Peter St. Onge ⋮ Okay, you don't actually like companies don't hire economists because they're gonna take over a country, right? Like Like or companies don't like like what are you gonna do with an economist, right? Realistically. a psychologist, right? The vast majority of psychologists go and work cubicle jobs at like, you know, aircraft parts makers. I mean, like, what the hell is a psychology degree? Those people are gonna get absolutely shafted. Like at this point, the only reason to go to college is to get a concrete skill. Engineering, programming, health, anything related to health, okay? It's gotta be a concrete skill. If you're not getting that, then you are paying $150,000 for an IQ test.

Peter St. Onge [40:41] they're gonna get hurt. The people who are gonna get helped, what I think is fascinating, is blue collars. So we're already seeing that now, right? We've got some of the strongest blue-collar wage growth in 60 years. Price Waterhouse estimated that 4.7 million construction jobs are coming for AI data centers. All right. Everybody forgets, right? They talk about the AI data centers as if they were dropped out of like alien spaceships to come eat our jobs. They yeah, but somebody built this.

Marty Bent [41:06] Yeah.

Peter St. Onge [41:09] And it was not HR directors with psychology degrees, right? 7 of which they estimate one in five are gonna be permanent, because you gotta maintain the crap. And it's not just a data center, it's the you know, it's the energy and the water, and you got all this infrastructure related to it. Okay, so you've got a lot more stuff. And what I think is fun is that effectively the blue collars are taking the jobs from the white collars, right? The blue collars are getting paid more. Which is fitting, right? Because for 50 years now, the blue collars have been sold down the river. They were the main victims of China, right?

Peter St. Onge ⋮ So China opening to the world was if Kevin Wars thinks AI was the biggest deflationary technology this century, China was number two. Right? China was massively deflationary. Like when I was a kid, all this stuff, you know, you couldn't go out and buy a pool table for 70 bucks. You're on drugs, right? You can buy like a toaster for $18. That's 18, 20, 26 dollars. Right. When I was a kid, like a crappy microwave oven was like fifty bucks. That was nineteen seventy you know seven. What is that, like a thousand dollars today? China has been astounding, which is great if you're a consumer. It sucks if you're a blue collar, right?

Peter St. Onge ⋮ So blue collars got absolutely wiped out. Now this is like revenge, you know, it's not revenge of the nerves, it's like revenge of the r roughnecks or something. It's all coming back around. you know, people worry about robots, like You know, whenever you say this is a blue-collar renaissance, they say, Yeah, but the robots are coming in. Okay, to put that in perspective, right? So you need one AI to serve eight billion people. Okay? You need three or maybe six robots for every McDonald's. Okay, the robots goes much, much slower than the AI. For perspective, the first factory in America that electrified, right? Before then it was like steam power and coal.

Peter St. Onge ⋮ All right, so the first factory to electrify was something like 1870. All right, it took 80 years for half of the factories to electrify. Okay. Capital goes much, much slower than anything. And the reason is that the assembly line in Guangzhou, wherever it is, maybe some of them in America, the assembly line is already amortized. It's already there. It's functioning. Okay.

Peter St. Onge [43:24] So you're gonna run that thing into the ground before you go out and buy a whole bunch of robots. So I think what we're looking at is the next 10 years or so, generalist white collars are gonna get gutted. The vast majority of them are, by the way, women. I think Brookings said 84% of the people who are on the front lines for AI displacement are women because women get generalized college degrees. They don't have concrete skills, they're just c they're they're cubicle people, not all women. I'm married to woman, women are fantastic. However, cubicle people are overwhelmingly women. So people work in governments, they work in big companies, they work in administrative positions.

Peter St. Onge ⋮ Those are getting gutted. and what they're getting replaced by is the blue is the blue collar. So you have that pattern for call the next 10, 20 years. And then maybe at that point the robots start coming in. Now, when the robots start coming in, no problem. Because again, number one, there's a certain amount of human, it's it's infrastructure. And you know, once you have physical objects, you know, you've got more things to go wrong, and so you you need somebody to make decisions like should we fix this first or should we fix that first? a lot of that has to do with you know human interaction, valuing.

Peter St. Onge ⋮ The other part of it is that if you look at the history of massive technological waves, so so if we imagine a future where AI and robot robots have taken all the jobs, okay, that happened, and it's called the Industrial Revolution. Right, so in the industrial revolution, you lost something like 80% of jobs, depending on how you count them, 80 to 90 percent. You lost every job except for the merchants, doctors, which were, you know, there were very few of them back then. They generally just killed you faster. Okay, that like almost every job i imaginable was wiped out in the industrial revolution. And here's what happened.

Peter St. Onge ⋮ So the new jobs, yes, it redistributed. Okay, so relatively speaking.

Marty Bent [45:04] Ha.

Peter St. Onge [45:19] white collars did much better out of the Industrial Revolution than than blue collars did. Right? So before the Industrial Revolution, the wage of a white collar, so like service employment, I don't know, a tradesman, might be two or three times out of a blue-collar worker. When the smoke cleared, you're talking more like five, seven times. Okay, so yes, white collars did much better. However, so I was walking around New York a couple years ago, there were two guys moving cinder blocks out of a truck, and they're New Yorkers, so they're loud. And one of them is telling the other guy how he went to vacation in Brazil.

Peter St. Onge ⋮ Sitting there thinking, your job is moving rocks. All right, that is that is the bottom of the barrel. That's as bad as it gets. That is the lowest skilled job conceivable. And you're vacationing in Brazil. Right? Blue collars today, so in other words, the losers of the Industrial Revolution, blue collars, men who work with their muscles, they are unimaginably richer than the blue collars were before the Industrial Revolution. Right? Just to give a sense. So a house painter in America makes about nine times more than a house painter in India. Okay, if you're painting a house about $200 a day in India, it's about $11 or $20, $22.

Peter St. Onge ⋮ Okay? and okay, both like neither were automated. Okay, a house painter in the US for the most part is is is doing it by hand. There's not much automation. So that's a you know massive difference. And India is not pre-industrial. I mean, it's got electricity. You know, they have cell phones. Like, all right, if you actually compared what a house painter makes today in terms of like what you can afford with it, right? You can get a Netflix subscription, you can have a cell phone, you you know, house painters live fine. They have like, you know, nice pickup trucks and they live in houses just like the rest of us.

Peter St. Onge ⋮ They don't actually sleep on the street. If you compare that to what life was like for a house painter in, you know, pre-industrial America, it's inconsistent. I you're talking 50x, right? So when people get excited about the AI, the robots are gonna take all the jobs. We've seen this script before. In fact, technological automation is thousands of years old. The ancient Greeks, I think it was Socrates, who worried that oxen were gonna replace all the farm workers, you'd have too many men left over, and so you'd have to start wars to get rid of the men. In medieval Europe, they worried about water wheels, right?

Peter St. Onge ⋮ Water wheels were replacing the millers, and so again, you were gonna have all these people who had nothing to do. What are you gonna do with all these unemployed people? Technologic, it's been around for a very long time.

Peter St. Onge [47:45] And guess what happens? Humans have an hierarchy of needs. And whenever you have the humans freed up, you know, people step down, it's like on an escalator, they step down to the next job. But the automation itself is making you richer. So that escalator is going up and up. When the smoke clears, if you look at the industrial revolution, the absolute worst, the people who move rocks for a living, the people who were in the absolute bullseye of the industrial revolution, make 50 times more than they did. So, you know, if if the AI, if the robots, if they come and take all the jobs, we're talking 20, 30 years down the line, great, dog walking will pay a hundred bucks an hour.

Peter St. Onge ⋮ Why? Because the vast majority of people won't be working. If they work, it'll be like salmon, you know, people who work on salmon boats. Like they'll work for like three months and they'll go party in, you know, Thailand for six months or whatever. People won't be working, and so in order to get somebody off their butt to come and walk your dog, it'll cost you a hundred bucks. So, you know, the people who worry about it. Yes, you have transition pain, right? You have these psychology majors freshly minted from Yale who can't find a job. Yes, that is in the here and now. That's absolutely gonna happen.

Peter St. Onge ⋮ You're gonna have a transition period. A lot of those people are too good to work blue-collar jobs, so they're gonna they're gonna hold out. You know, if if you look at it today, for example, an adjunct professor in the humanities makes about twenty to twenty-five dollars an hour. Right? That's with a PhD. Okay, a babysitter. There was just a study. A babysitter makes $20, $25 an hour. Many of them are 16 years old. Okay, so yes, you're gonna have a holdout like that where the professor is like, screw that. I'm not gonna, I'm not, I'm not working at Panera, man. But eventually they're gonna give it up.

Peter St. Onge ⋮ And you know, I'm sure it's gonna be very traumatic for them. but yes, you're gonna have you know, people have difficulty adjusting, but when the smoke clears on the other side, it's gonna be absolutely amazing.

Marty Bent [49:41] Yeah, we're gonna have to have these cubicle white collar women who make up go down to the dive bar, find your blue collar hubby, you know, get the fertility rate back up.

Peter St. Onge [49:49] Yeah. That's what's happening. You know, there was a recent study that found that, you know, normally women do not marry below their education. Because women are high hyp hypergamous and they can't stand the idea of a man being with them as dumb. But what's happening now is that you have all these women who have, you know, master's degrees and they're hooking up with like electricians, because the electricians are making like 150, right? So, you know, you know, they can either party with the philosophy major who's between jobs at the moment, or the electrician. So No, it's beautiful. It's Revenge of the Blue Collars.

Marty Bent [50:25] Yeah. So I I feel like we've been weaving in and out of incredibly bullish and somewhat cautious commentary here. What what are what's your overall view of of the economy, state of America right now?

Peter St. Onge [50:40] Yeah, I think the economy itself, so I came into twenty twenty six thinking that it was gonna be really strong. I think the war's in the way at the moment, but you know, I think the war's gonna bounce off. I think the fundamentals are really strong in the economy. And the fundamentals are taxes, regulation. those are kind of the two big moving parts where the government can have an impact anyway. And on both of those, Trump's instincts are very good. you know, Republicans in Congress haven't done as much as I hope. They haven't done as much as they promised, they never do. However, at least they're not causing new problems the way that you know, Joe Biden might have.

Peter St. Onge ⋮ So, you know, we've got little bits of deregulation here and there. I think there was actually about 450 major deregulations last year, which is the best in history. that allows you know investment to come in and offer new products. That's a big deal. taxes, extending Trump's tax cuts was big. He particularly had a part in there for accelerated depreciation, which sounds boring, but it's very important because what that means is that, so like if you go out and buy a business, like if you buy a laundromat, or by the way, if you buy a Bitcoin rig, you can expense the entire amount against your income.

Peter St. Onge ⋮ So it's almost like a 401k. So, like, literally, you know, you can make 200,000, you can go out and buy a bunch of Bitcoin rigs or a cafe, you know, whatever, something that creates jobs. and you could literally pay no taxes. So that's a very, very big deal. that's you know rocket fuel to investment. even the tariffs, you know, broadly speaking, tariffs are taxes, they're not great. However, the way that Trump's been using these tariffs is to put pressure on other countries. He's basically been saying, look, you can buy your way out of the tariffs if you invest in America. So Taiwan semiconductor, I think, put a hundred billion dollar factory in Arizona.

Peter St. Onge ⋮ It's a whole bunch of semiconductors, German auto parts makers are moving to America. There's all these companies that are coming in, they're investing. You're not seeing the jobs yet because it takes time, right? Like the Taiwan semiconductor, I think it was like five years between blueprint and actually employing somebody on assembly line. So these things take time. You know, Democrats keep pounding away. We're still losing manufacturing jobs. Now, if you look at what's in the pipeline between the deregulation, the taxes, the accelerated, you know, beautiful things are coming. So I'm very optimistic about that. the Fed is a risk, it always is. the main concern there is that it panics.

Peter St. Onge [53:02] hikes rates. General rule of thumb is that every point you hike rates costs about a million jobs. Okay, so the Fed could absolutely strangle the economy. hopefully it doesn't. I don't think you know Warsh wants to. the other I mean, those are really the only meteors on the horizon. you know, in the war, I mean Iran's trying to get all kinds of stuff. Frankly, the kinds of things that Iran wants, I don't think like for me being a mega guy. I don't care. Like, I don't care if Iran controls the Hormuz. That's not my problem. That's somebody's problem, but it's not my problem. so you know, I don't think the war is gonna end up leaving any lasting damage.

Peter St. Onge ⋮ So I think the rest of the world, I'm I'm pretty optim or the rest of this year, I'm pretty optimistic. You know, if you look at inflation before the war, Trueflation is a private sector alternative to the government statistics. 4 million numbers. And they look at the real numbers. Like they go to Zillow and they say, okay, what are our houses actually selling for? Right? They don't have these you know BLS models, BS models. 7% annualized inflation. You can't get any lower than that. Like, literally, if you try to get lower than that, the Fed's gonna come in and and and print money on purpose because it's an inflation machine, right?

Peter St. Onge ⋮ So that's literally as good as it gets. So, you know, between the pre-war inflation numbers, the jobs numbers, which again, you know, we've had a lot of strength in jobs. It's muddled because we got rid of three million migrants who were being counted as jobs. we got rid of what's the number? 300,000 plus federal workers. Again, those are counted by jobs, even though they're parasites. So, you know, we need control for those things, good jobs numbers, good inflation numbers, I think very good growth numbers. So I'm actually very optimistic. And you know, I think going back to the AI thing, so we're seeing this massive bubble in AI.

Peter St. Onge ⋮ Normally in Austrian business cycle theory, you expect to see those stupid bubbles during, you know, when rates are too low. Okay, rates are not particularly low. Rates are probably neutral at this point. in other words, if the Fed didn't exist, interest rates would probably be roughly where they are right now. So to see a dot-com style, you know, explosion, it it's not the Fed. It's not that the Fed make money made made money too cheap. That's certainly what they did in in early COVID.

Peter St. Onge [55:23] Right, that's why everything went up in COVID, even though half the economy was shut. but at the moment it doesn't even look like that. so yeah, you know, without a doubt, there will come a day when you know, AI stocks will drop by 30 to 50 percent. Okay, the question is, you know, do they go from 200 to a thousand back to five hundred? So that that's my expectation. The question is just when is that gonna happen? But in terms of the broader economy, I think we're a actually in a very good spot right now.

Marty Bent [55:54] Well, actually, bringing this back to Warsh, I had a conversation about this yesterday on the show. another sort of policy position that he's put out there is that he doesn't want to do bailouts anymore. Like hi his what was his definition of a recession is his business is failing due to their own their own volition. If they get overextended on debt and they can't pay it back, they

Peter St. Onge [56:08] Beautiful. Yeah. Yeah.

Marty Bent [56:18] deserve to fail and to your point, like do they overreact one way or the other with interest rates? I'm very interested to see if he holds that line as well, because I I think that's desperately needed is this ability to let companies fail.

Peter St. Onge [56:31] Yeah, I'm cautiously optimistic about Walsh. it feels like he read James Grant's book, The Forgotten Depression, which any listeners, if you haven't read that, very strongly recommend. he talks about the last time we had a recession that the government did not try to fix. it's an amazing read. But and you know, the the the punchline is you know, let all the losers who created the recession get wiped out. That's capitalism, suck it up. you know, that's what should have happened in 2008. Warren Buffett was ready to buy all those banks out of bankruptcy. Like, if Citibank goes bankrupt, it's not that like the whole thing vanishes.

Peter St. Onge ⋮ Like, you know, i it's not like a nuclear weapon just explodes. Okay, everything's still there. The bank's there, the employees are there, the whole thing's there, the deposit. It just gets bought by somebody else and shareholders get wiped out. So that's what should happen every time, you know, purge the stuff that everybody used to understand that. but anyway, yeah, it it feels like Walsh is familiar with that history and he's familiar with the way that you actually do fix economic weakness, which is government gets the hell out of the way.

Marty Bent [57:35] What was that nineteen nineteen? Nineteen eighteen?

Peter St. Onge [57:38] yeah, it was it was like it it was right after World War One. so you know you had the what guns going back to butter. Okay, so there was a bunch of adjustments to that. And it's basically stretched over about a three year three, four-year period, of which I think only about six to nine months were were proper depression. And the government essentially just let it rip. They said, Look, you know, you gotta purge all this crap. W Murray Rothbard is a great example or a great metaphor. He says, Okay, imagine that you had an industry of locust. Fighters. All right. So you have all these guys, and whenever the locusts come, these guys go out and fight the locusts.

Peter St. Onge ⋮ But you only use them one out of seven years, right? So, you know, every seven years you've got this explosion in the locust industry, and then you have a locust recession. So what do you do? Right? Do you give them free money? You know, do you give them money to tie them over the six years until the locusts go? No, you it it you let them go, liquidate it. You know, they'll they'll sell the locust fighting equipment at a l at at at a loss, but that's fine because they made profits when the sun was shining. You just let it be. And you know, that's when you had like an actual legitimate temporary industry.

Peter St. Onge ⋮ Right. com? No, of course not, right? That's obvious to everybody. Well, then why are you bailing out Citibank?

Marty Bent [58:56] Yeah. I mean a lot of these private credit funds too, private equity funds dealing with the private credit funds.

Peter St. Onge [59:01] For sure. That you know, that's why part of me is actually okay with this whole shadow banking thing, because the beautiful thing about shadow banking or or or even shit coins for that matter is that there's no chance they're gonna get bailed out. You know? When Wall Street makes a mistake, they you know, they essentially they apparently get the r get the right to check on your credit. you know, the rest of these guys, the you know, private equity, the blue owl, the You know, Solana, when when the you know when these guys wipe out, they wipe out alone. It's beautiful.

Marty Bent [59:36] Yeah. We need more of that. We need more.

Peter St. Onge [59:38] Yeah, absolutely. So, you know, there's only a couple industries that have guaranteed bailouts. So cut those strings. if Kevin Warsh is amenable to that, then you know that that that'd be fantastic. Now we need Congress to get on board and Trump. Unfortunately I'm not Trump is mixed when it comes to helping corporations, unfortunately. but yeah, I would love to to cut those strings.

Marty Bent [1:00:02] Anything else on your mind that we didn't touch on before we wrap up here?

Peter St. Onge [1:00:05] let's see, we covered everything. did we get the politically incorrect what was it? Yeah, yeah, no, yeah, I think we we covered pretty much everything. yeah, AI boyfriends and girlfriends. Apparently spending on AI companions is now higher than it is on traditional dating apps. So that's what's coming.

Marty Bent [1:00:28] Waifus are here.

Peter St. Onge [1:00:30] The wifus and the husbandos, yes.

Marty Bent [1:00:35] that's depressing. I mean that's

Peter St. Onge [1:00:37] I mean it was always gonna happen.

Marty Bent [1:00:39] I mean Japan Japan foretold foretold that trend coming. I mean Japan was a a leading indicator of that.

Peter St. Onge [1:00:43] I I I d you know, young people are such a mixed bag, man. Like if I were like twenty right now, like on the one hand you have so much opportunity. On the other hand, you know, you have so many falling boulders. It's it's a tricky time to be young.

Marty Bent [1:01:00] Tricky times and a lot of opportunity though. No, Gen Z, in my view, it's like half tradh, like crazy right wing, and then half like nihilistic streamers that are that are just trying to party.

Peter St. Onge [1:01:16] Gen Z, okay, so that's the question. So Gen Z already looks significantly more based than millennials. you know, like each generation sort of echo, like you know, it's like a reaction against their parents, right? So, you know, the boomers are communists, Gen X are based, millennials are communists again. So that's my question for Gen Z. On honestly, I'm kind of optimistic. You know, I just saw my own kids who are they're they're right at the tail end of Gen Z. They're they're 15 and 17. And, you know, they cut their teeth or they learned about the world when before the censorship went in. Right. So you could say, you know, you could say racist shit, you could say just the craziest out of control stuff that came to mind in on on YouTube really up until what, twenty sixteen, seventeen.

Peter St. Onge ⋮ that They grew up, so they got it all. And I mean, they are freaking out there, man. They're like more extreme than I am, just in terms of, you know, like they have no respect for, you know, any of like what they're told for the establishment. If they hear it from an official source, like their their knee-jerk reaction is bullshit, and then they'll go look it up themselves. So I'm I'm very optimistic for Gen Z. Now having said, you know, the vast majority of them, they went through the socialist school system. You know, that's sixteen years of brainwashing, if they went on to college. So, I mean, yeah, a lot of them are we're gonna have to pull them out of the matrix one by one.

Peter St. Onge ⋮ But broadly speaking, I'm I'm pr I'm I'm much more excited about Gen Z than I was about millennials.

Marty Bent [1:02:56] You love to see it. I mean as a millennial and I feel like I'm an outlier in the millennial millennial demographic, but you love to see Gen Z taking the reins and distrusting authority. We need more of that these days.

Peter St. Onge [1:03:09] We absolut and you know, if they're like this currently, when they're like still in the matrix, you know, like they're literally still in school, right? They have to, you know, parrot the you know, BS their professor set. So if they're already kind of based when they're still literally mid brainwash, I mean, you know, I think they're gonna be nuts.

Marty Bent [1:03:28] Yeah. Well we'll see. This is this has been a great catch up. Yeah, that was

Peter St. Onge [1:03:33] Yeah, always man. It's great it's great talking to you, man. Should do this more often.

Marty Bent [1:03:36] It was a good it was a good amount of time between the last one and this one, so there's a lot to catch up on. The AI thing really took over over the last year and I'm I'm bullish right now. It's it's gonna be chaotic, like you said. It's gonna be a lot of change, drastic change, but that is life. That is the arc of human history, is constant change up and to the right.

Peter St. Onge [1:03:56] To put it in perspective, so the average person changes jobs, I want to say every three or four years. They change careers about every 10 years. Okay? So even if the AI job losses are all career changes, that's about a 10% difference. Okay. It's not that big a deal. Like, I I so I'm 53, I've I've changed careers four times. I mean, like, and each time it was kind of fun. I mean, for me personally, it was fun. And you know, I I I I kind of like the blue-collar jobs better than the white-collar jobs. But anyway, I mean it's it's part of life. It's been happening forever.

Peter St. Onge ⋮ You know, people act as if number one, cubicle jobs are like amazing. Everybody hates cubicle jobs. Yeah, I mean it's you know, have you ever seen the money the the the movie office space, right? He's working in a cubicle jobs, it's soul crushing. You know, he's gotta do the TPS reports, and the movie ends with him, you know, with the sun in his eyes digging a hole. Okay, that's AI.

Marty Bent [1:04:39] Right. Right.

Peter St. Onge [1:04:55] But the kicker is that digging the hole pays pays twice what the cubicle did. Like future generations are gonna be like, Why did you guys why were you, you know, mourning the loss of cubicle jobs? No, I think it's I think it's good stuff that's that's coming down the pike.

Marty Bent [1:05:13] as well. I do as well. Well Peter, it's been a pleasure. And maybe we don't wait like a year or however long we waited to do it again. We should catch up catch up this fall.

Peter St. Onge [1:05:22] Put it on a calendar. All right, Marty. All right, Marty. Be good.

Marty Bent [1:05:28] Alright, peace and love freaks.