James Altucher
speaker
316 appearances
3 recordings
2 series
first heard Jan 2025
last heard 1 Apr
James Altucher’s voice in public audio — every appearance, attributed to the second.
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Appearances
So all the revenues came from tariffs. And during that time, you know, we had the industrial revolution, like the US went from being small country to the basically just about the biggest economy in the world next to the UK. And then around World War I, which is right after we surpassed the UK, And I know this is a very different period than now. Nobody has to correct me on that.
Obviously, it's very different. But historically, tariffs was the main source of revenues, at least for early America. And there was zero inflation then. So tariffs are not really connected to inflation, despite... what people are saying and we can get to why in a second. But then federal income taxes started. It was a constitutional amendment.
I think it was the 16th amendment and Woodrow Wilson was the first president to introduce income taxes. And then slowly the US started shifting their revenues. Now almost all the revenues come from income taxes and very little comes from tariffs. But in 1929, which is a familiar day to people is the beginning of the great depression.
There was a tariff act passed, the Smoot-Hawley tariff, which put a huge, like a 60% tariff on everything, like everything imported. So Herbert Hoover, the president, he just did not want any foreign country to interfere with American industry. So he was completely a protectionist and isolationist. He didn't want trade. He only wanted us selling to other countries.
He didn't want anybody buying from other countries. So he put this huge tariff on everyone else, on every other country. And then every industry collapsed because there were no buyers. And all the other countries put big tariffs on the U.S. And there was a Great Depression.
Yeah. So first off, let's look at 2018. Trump was president before, as we all know. And he put pretty big tariffs on Chinese products in 2018, Mexico, Canada. Europe, he put a bunch of, if people remember, he put a lot of tariffs on many, many products and pretty big tariffs as well. In some cases, bigger than the tariffs he's putting on now. And what was the result? Well, inflation,
was around 1.7%. So it was inflation was almost deflation. I talked to a Federal Reserve governor around that time who told me that what worried them at night was not inflation, but deflation because they were trying really hard to create inflation. and there was none.
Yeah, so what happened was, is that 40% of all the money created since the beginning of the planet was printed by the United States in around early 2021 to do all these bailouts in 2020. Between 2020 and 2021, 40% of all the money created in history was printed by the US this one year, you know, for the pandemic bailouts. The year after, like 2022, is 9% inflation.
So money printing, just printing free money devalues the money. And that's when there's inflation. So you look at Germany in the 1920s, they had to pay all these war reparations. So they came up with this really brilliant idea. Well, here's one way to make money. Let's just print it and we'll give that to the Americans in the UK and so on. So they printed all this money.
Everyone realized, oh, my marks don't have any value anymore because there's so much of them. And so then there was hyperinflation. So that's what happens when you print money.
Because if there's a fixed supply of money, let's say you're not printing any money. Let's say all you have is $1,000. And let's say you buy food, oil, gas, a place to live, and books to read. I'm just making this up. And let's say... you know, gas, the price of gas goes up. Well, now you're gonna have to make a decision.
Maybe you move out of your apartment and get a cheaper apartment because you're gonna need gas to go to work. So you just have a thousand dollars. You have a fixed amount of money. So some prices go up, like gas goes up. Let's say there's a gas shortage for whatever reason. So some things go up, but then you have to take away money from other things. So the price of other things go down.
That's what happens with tariffs if there's fixed money. You could borrow money, but there's only so much you could borrow. Then you have to pay the money back. but printing money creates new money. And what they did was they printed money and they just gave it to people, which I'm not saying that was good or bad. Like people were struggling in the pandemic, but they just gave that to people.
And some people really needed it, but for some people it was just extra money. So these people just bought more things. And so then the prices of everything go up. It was just like, if suddenly everybody has like double the amount of money, then prices will double. So that's exactly what happened.
Like suddenly there was just all this extra free money for many people and they started buying more things. They were willing to pay more money for things. People recognize this. So suppliers charged more. That's almost, if you look at almost every time there's like periods of inflation, not just in the US, but in any country, it's when money, just free money happens to be around.
Yeah, so that's why I just wanted to take inflation off the table, because historically, tariffs don't cause inflation. We have the example of 2018, 2019, early 2020. We have the example of the entire 1800s. We have the example of Smoot-Hawley, where there was deflation instead of inflation. The worse the tariffs are, the more deflation there is, because industries go bad.
And that's why we're worried about a recession. I don't think anybody really is worried about hyperinflation right now. It's not like we have so much money, we got to take a wheelbarrow of dollars to buy a loaf of bread. We're really worried about a recession, which is kind of corresponds with deflation rather than inflation.
So inflation is just off the table, which is why I bring up that example. It never occurs because of tariffs. It didn't occur in 2018, didn't occur in 1929, didn't occur in the 1800s. Some prices do go up, but that means other prices go down. So that's that. But the problem is, could industry go bad if prices on steel go up because of 25% steel tariff on China?
people stop building things because it's too expensive to build things and will the housing industry collapse and people lose their jobs and then we have a recession and it's like a death spiral down. So it's not that I'm worried price will go up. The real worry is will there be a big recession? And even there, The answer is a solid no.
Like, everybody's worried, will there be another depression like what happened when the Smoot-Hawley tariff happened in 1929? And the main difference is the Smoot-Hawley tariff was a blanket tariff on everything, just like that 10% tariff Trump is doing now. That's a blanket tariff. Not the reciprocal ones, but the blanket 10% tariff that he announced. But...
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