Why the World Has Less Trust in the Dollar, and How Trump Can Change That: Carol Roth

[RUSH TRANSCRIPT BELOW] “We do need to shrink our spending and we need to get a hold on the debt, but it needs to be done in a way that you have the growth go first. Otherwise, you’re going to end up with less revenue, which means you’re going to actually widen the deficit and create a worse problem—a ‘no good deed goes unpunished’ type of scenario.”

As part of our special series on the U.S. presidential transition period, I’m sitting down with Carol Roth, a former investment banker and author of several books—most recently, “You Will Own Nothing: Your War with a New Financial World Order and How to Fight Back.”

In this episode, we discuss the biggest financial challenges facing the incoming administration and how best to navigate them.

Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

*Big thanks to our sponsor for this episode Patriot Gold Group. Check them out here: https://ept.ms/3sr5LhH

RUSH TRANSCRIPT

Jan Jekielek:
Carol Roth, such a pleasure to have you on American Thought Leaders.

Carol Roth:
So great to be here. I’ve been looking forward to this discussion.

Mr. Jekielek:
You have written a fascinating book talking about a new financial world order. And we’ve seen a lot of changes to the financial world order in recent times. And I think we’re in for another big change. So tell me what you’re seeing.

Ms. Roth:
Yes. Straight out of my book, You Will Own Nothing, we have a country with 120 % debt to GDP, 7% deficits to GDP. We have a global order where the biggest central banks in the world are no longer buying our treasuries and now they’re transactioning and settling in gold and looking to move away. Jan, everything is moving and shaking, so we are just at the precipice of this big change.

The way I would articulate where we are today is the US at the center of the global financial order, being the world’s reserve currency, being the currency, holding the currency that is used in most of the trade around the
globe. And we have been in that position for about 80 years. Prior to us, it was Great Britain. Prior to them, it was the Dutch. So this is something that cycles on a pretty regular basis. Sometimes there are smaller cycles, sometimes there are bigger cycles.The bigger cycles are usually preceded by a war.

I like to say that not every war leads to a new financial world order, but every major new financial world order, at least in modern times, has been preceded by war. So where we are today, we are in a situation where the U.S.’s grasp on being that center of the financial universe is getting a little bit slippery. And it is really nobody else’s fault, but the U.S.’s fault.
We are supposed to be holding via the Fed, the world’s reserve currency, steady, not only on the international stage, but also domestically. Sometimes those are at odds with each other. And so as things have slipped internationally, strangely enough, they’ve also slipped domestically, and the Fed’s done a terrible job of keeping our currency stable at all. We’ve also seen the weaponization of the U.S. dollar. And so between that and our fiscal foundation being very rocky, these are the kinds of things that are shifting what’s happening on the global fiscal front.

Mr. Jekielek:
There’s also a reason why people would want to use the U.S. dollar to settle deals, right? Because it is just much more predictable than anything else. You wouldn’t want to do it with renminbi [RMB], for example, right?

Ms. Roth:
That was the thought. Whether you call it the RMBs, the yuan, or the trade in China, the reality is that a lot of the countries that are aligned, now known as the BRICS nations; Brazil, Russia, India, China, Saudi Arabia. South Africa is also in there. These nations are actually starting to engage in trade in their local currencies. And what the Chinese have done is said, maybe you don’t want to take the renminbi and you don’t want to take the yuan. We’re going to offer settlement in gold. Countries around the world who used to hold lots and lots of U. S. dollars via our Treasuries as reserves. They have been lightening up on those reserves.

In fact in the last 10 years, central banks around the world have been net sellers of Treasuries, not net buyers. But what has been replacing that currency in their reserves is not another currency. They’re not going to the Euro or something else. What has been replacing it has been gold, a neutral reserve asset. And so I think that speaks to not only the U.S.’s issue
with its fiat currency not holding that stable, doing the kinds of things that precede a shift in the global financial order, but these countries sort of being on the other side of that.

And what you have to understand is, again, it’s not really their fault. When you have energy, when you have food and other commodities that are priced in U.S. dollars, and now all of a sudden it’s going to take many more U.S. dollars for you to afford those things, that becomes a national security issue for your country. It means that your country may end up having food issues. So we can kind of understand why those things are happening.

Also, as I talked about the weaponization of the dollar, what we chose to freeze Russia’s reserve assets, who wants to hold the U.S. dollar in reserve if at any point in time the U.S. can go, no, just kidding, we’re going to put a freeze on those so again it’s been sort of our behaviors that are dictating these changes and these other countries who you know maybe have found it easier in the past and there’s been less friction there’s been more reason to use the dollars are now saying for a whole host of reasons we need to find another way to do this doesn’t mean the U.S. dollar is going away. It doesn’t even mean that it’s going to not be the most used currency in terms of settlements. But given its huge dominant position, even changing the reserves or changing the trade just a little bit has major implications for our own standard of living here in the United States.

Mr. Jekielek:
Okay. There is the other side of things, which is basically the Fed’s balance sheet, which is north of $9 trillion now.

Ms. Roth:
Yes, so I think the Fed’s balance sheet has come down a little bit. Certainly that was the impetus for shifting what we have seen in our fiscal foundation, disrupting risk in the market, being a catalyst to allow the government to spend money that they didn’t have, and frankly, to create massive inflation in the lives of Americans. And it’s something that has had sort of a dual path. If you are an asset holder, if you hold stocks, if you have a house, if you have other tangible assets that are valuable, you’ve seen
that asset printing. And so those people who are asset holders have said, wow, this is great. I have so much more equity in my house. My 401k balance is the highest that it’s ever been. This is fantastic.
But for the have-nots, the people who are not in a position to have many assets, then that trickled down into cost of living inflation. And so not only are they struggling to afford food and afford rent, but there’s a bigger chasm now that has been created between, you know, can I become an asset holder in the future? Can I afford this house? Can I get, you know, involved in the markets in a meaningful way and have the same kinds of returns and play catch up?

Unfortunately, that’s really manifested in more and more young people being concerned that they’re not going to be able to seize the American dream. So that has been enabled purely by Fed monetary policy and government fiscal policy. And it’s enabled to be shifted over time. But the reality is that the most likely outcome, given the political will, is that we will probably see a continuation of that inflation in order to have this huge debt load that has to be”managed” by our politicians.

Mr. Jekielek:
Carol, you mentioned this idea of this fiscal foundation and we talked about one element of it, which is a lot of the printing of money and corresponding inflation. We talked about this other aspect, the international context of less trust in the dollar, which contributes to changes in this fiscal foundation. What is the overall picture of how you view it? What is this fiscal foundation? What are the elements, aside from the two we just discussed?

Ms. Roth:
One of them is the overall debt. As we’re recording this, this $36 trillion, in another 100 days, will be at $37 trillion and will continue to grow. That number is so big that people can’t really get their heads wrapped around it. So I look at it as it relates to the GDP, because that’s sort of how a lot of economists and financial people measure it. So we are at a level that is more than 120 percent debt to GDP. Our debt exceeds the output on a yearly basis of the country.

So if you look at the IMF and the Treasury and a lot of the other major organizations, they normally say that a country gets into trouble, that the debt becomes unsustainable on an unsustainable path, unwieldy at around 70 to 80 percent. So really, we need to cut the debt to GDP in about half. If we were not that world reserve currency that we talked about, if we were not the leading trading currency, we would have a sovereign debt crisis. But because today people need dollars that we have been able to avoid. But everybody has identified, you know, every major organization, all the major names in finance have identified that this is something that is a massive problem.

In addition to looking at just the overall debt to GDP, we also look at the deficits to GDP. And on a historic basis, again, about 3.4% is sort of an average deficit, which isn’t great, but becomes even less great when we have a lot of debt and we have a lot of interest expense. Right now, the country is running deficits that are 7% deficit to the country, a lot of that has been done based on taking on these massive deficits, which need to be financed. And that’s a huge problem because that means if Trump wants to cut the deficit, he has to make sure that we’re growing at the same time.

Because if you purely just cut spending that’s been pushing 2% GDP without growth, then all of a sudden you’re taking in even less money each year in terms of GDP and then taxes and the like, and that could create a recession and create a whole other set of problems. When we were looking at Ronald Reagan, that was a situation where the debt to GDP was like 30%. So the tools, the things that they could do at that point in time to try to right the ship are very different from what it is today and frankly are quite limited.

The other thing that we have going on is that we have a lot of foreign investments in the United States, which is great until we do something that causes them to need to raise dollars. And then again, they have to sell dollars in order to be able to pay for their own food and oil. And that could create another financial loop. So we really have this very delicate situation that requires perfect choreography.

Unfortunately, there are just a lot of things at odds. So we do need to shrink our spending and we need to get a hold on the debt. But it needs to be done in a way that you have the growth go first. Otherwise, you’re going to end up with less revenue, which means you’re going to actually widen the deficit and create a worse problem, a no-good-deed-goes-unpunished-type of scenario.

Mr. Jekielek:
We have to increase the pie while simultaneously cutting the pie.

Ms. Roth:
Exactly. That’s a really great way to think about it is that we need that pie to expand. We need to get much, much larger so that, you know, when they take their little piece off, it actually does what it says that it’s going to do. Because if we don’t have the growth and then we end up cutting too much of the pie, then you end up having sort of the opposite impact. And that is something that I don’t think enough people appreciate. And when you hear things like, oh, the economy is doing fine or the economy is doing great, again, you have to say it’s being driven by a wartime deficit. And that is really like window dressing.

When you pull down the facade, you can see what’s behind that curtain. And now you’re seeing what the Wizard of Oz looks like. And it’s not great.And so Trump has been left with a veritable mess here. And that’s something that he’s going to have to work very delicately. The best news possible is that he has a very smart Treasury Secretary pick in Scott Bessent. And this is somebody who is going to understand this choreography and probably be thinking out of the box versus an academic like Janet Yellen, who helped to create the situation to begin.

Mr. Jekielek:
There is the whole Doge initiative, with Elon Musk and Vivek Ramaswamy at the helm, identifying cuts. If you were going to be helping them identify cuts, where would you go first?

Ms. Roth:
I have my own pet project, which is talking about this Corporate Transparency Act, Beneficial Ownership Information Rule [CTA-BOI] that impacts small businesses, treats them like financial criminals, makes them put their names and information like driver’s licenses into a database to stop the cartels. Like I’m sure the cartels are all going to sign up to do that. They have crazy penalties like jail time, almost $600 a day in fines. The courts have already found this unconstitutional.

Even though it’s working its way up the court system, it’s been appealed. Everybody’s sort of like, hey, we at the timing of that and this choreography I keep talking about is that they really probably first should start with some of the deregulation and the efficiencies that are going to create drive growth first, and then figure out a way to phase in these cuts as we’re seeing that growth.

Because I can see them looking at this like a business and just saying, we’re going to do what Elon did when he bought Twitter, now X, and we’re just going to cut the staff, which again, if we were in 1980, or even if we were 10 or 15 years ago, would have been a really great idea, but it has so many other things attached to it now. The other thing is that within the executive branch, there’s so much bureaucracy that, frankly, isn’t the way the government’s supposed to work, but also is going to be easier for them to touch because it’s not going to need congressional approval.

When you start moving outside of that, there are things that are probably going to butt up against Congress. And that’s where we may see some of the barriers. So the things that they can directly impact, the things that get rid of the regulations that unleash growth first, and then the timeline for that spending so that it neatly kind of folds in, I think will put us on a really good path. I wish we could do it the Argentina way. I wish we could do it a different way. But we’re really in a tough position right now, which I cannot underestimate.

Mr. Jekielek:
Tell me more about small business, because during COVID small business took a massive hit. Small business has traditionally been the engine of growth of America, so please comment on that. Also, there’s this law that you want to axe that is restricting small business growth. But overall, how do we unleash small business once again?

Ms. Roth:
Small business has been a passion of mine for a long time. I cover what happened during COVID in my book called The War on Small Business. So this is something that’s definitely in my wheelhouse. And what was done there was really draconian because we were fed this lie that we were all in this together, but we were very much not all in this together. It really depended on who you were.

So the very first thing financially that happened during COVID was that there was support for the stock market. So Wall Street got its support straight out of the gate. The next thing that happened were these closures that happened at the state and local level. And what they said was if you were a small business, you had to close. But if you were a big business, you could stay open.

So if I had a dog, I could get their fur trimmed and I could get their nails done at a big box retailer. But if I wanted to get my hair done or my nails done at a small business salon, that was off the table. Again, this wasn’t really based on any data or science. It was based on political clout and connection. If Wall Street hadn’t been supported, if Amazon had not been able to deliver, your grocery store closed, your Walmart’s closed, these big companies that have a lot of clout and power would have made a big deal and the entire COVID sham would have gone away in about two weeks.
If it lasted even that long, we would have gone straight to a mitigation strategy.

But because those companies were benefiting from staying open and frankly, in many cases, benefiting more because people couldn’t go to these other businesses. And so they could only spend their money with these big companies. You know, we saw the stock market hit an all time high in early June of that year. Yet they continue to tell us that we needed more support for the market. It really was this very ugly scenario.

Yes, there was the PPP program. The point of that was because of eminent domain. The whole reason behind that was because these businesses were taken. They couldn’t work because of the, quote, unquote, public good. And so they were owed due compensation. And frankly, the amount that they got vs. what they lost was a fraction. And then they gave it to all these other businesses and the like that really didn’t need it. So it was a really poorly administered program.

Then coming out of that, then you had all the after-impacts. You had the messed up supply chains. You had the messed up labor markets. Again, all these things that really hurt small businesses more than the big businesses that had more money, that had been open this whole time, had more flexibility in terms of how they did business. And then you get into the Biden administration and then you have this massive inflation.

And so they’ve just been hit from one direction to the other. And they are the backbone, 34 million plus small businesses in this country versus about 21 plus thousand big businesses. They account for about half the private economy. They account for about half the jobs, but more than half of the new jobs. And they really are the engine for people to be entrepreneurs. If you layer in things like independent work and gig work, you get up to a figure of almost 70 million people. So this was really kind of the way that people are pursuing work in the world.

And so to have all of these additional regulations, these nuances, the bureaucracies, small businesses don’t have departments and lawyers and money and time to be able to deal with all that. So the best thing you could do for small businesses is just leave them alone. If you could just roll back some of these ridiculous regulations and stop making them party to these new regulations, something like CTA-BOI, they exempted the big businesses, not the small businesses.

Like who’s ever even heard of that? It’s insane. But we’re seeing that happen more and more first with COVID and then with CTA-BOI. So that’s really, you know, what needs to happen here. And it needs to happen on the flexible work front. It needs to happen with these different rules and regulations. Small businesses don’t want a hand out or a hand up. They just want to be left alone and not be bothered by the federal government or state or local government at every turn. That is what is going to help.

Mr. Jekielek:
For the benefit of our viewers, please clarify what CTA-BOI is.

Ms. Roth:
Yes, so that’s what we talked about earlier in the program, the Corporate Transparency Act Beneficial Ownership Information Rule, where the Financial Crimes Division asks small businesses with entities like LLCs to go and register with FinCEN. As we noted, there is an injunction in place right now, so you don’t have to do it. But if we don’t get some clarity on that, the penalties can go back on the table at any point in time.

Mr. Jekielek:
Carol, is that 70 million number is still current today despite these record closures during the COVID years?

Ms. Roth:
So the interesting thing about the COVID closures, I’ve done the math, probably about a million businesses that closed. But on a net basis, you don’t see it because there were so many businesses that were opened during that time. People who couldn’t go to work started side hustles and started selling on Etsy and the like. But I’ve seen numbers saying like, oh, a third of small businesses closed. They may have closed down temporarily, but they were resilient and they opened back up. Not to say a million businesses isn’t significant because it’s atrocious.

And as I said, we only have 21,000 big businesses. So that is a big, big number, but it’s not as big of a number as sometimes is portrayed. And it does get obfuscated by the fact that there were so many businesses that were created over that time. And at this point in time, as I said, the number of net small businesses businesses continues to climb and we’re at 34 million plus and counting plus all of our independent contractors

Mr. Jekielek:
This is the fabled American entrepreneurship at work. That’s what you’re saying here

Ms. Roth:
Absolutely. You have to be an optimist and be willing to slug it out if you’re going to be an entrepreneur. It is not for the faint of heart. It is not an easy thing to do, but people pursue it because they want to work flexibly. They want to be their own boss. They have something that they’re passionate about. They want to bring value to their community. They want to come up with new technology, all sorts of reasons. And that is the American way. And it’s frankly part of the American dream. It’s what attracts people here from all over the world.

In fact, immigrants are really a huge percentage of the entrepreneurs in the United States because they see what is going on in other parts of the world
and they want to come here for that opportunity to explore entrepreneurship. And I think it’s a big surprise sometimes when they come here, all of the rules and regulations and barriers that the government are putting up in a place which is supposed to stand for that freedom and for the entrepreneur.

Mr. Jekielek:
Carol, one of the things we haven’t talked a lot about on this show is actually the impact on the smaller banks. We often think of you, think of Chase, all these sort of large Merrill, all these large banks, but actually quite a vibrant part of the economy is also these smaller banks. And I’m wondering if you could speak to where they’re at right now.

Ms. Roth:
This goes back to the Great Recession financial crisis. And it’s just another frustrating tale of no good deed goes unpunished. And the people who do the bad things don’t really get what’s coming to them and everyone else bears the costs of what they do. So during that time, you had banks and other financial service organizations who took on a crazy amount of risk and it didn’t pay off and everybody had to bail them out. And so what was Congress to do? But what politicians do, oh, we have to come in with regulation. We’re going to come up with the Dodd-Frank Act and all of these other rules and regulations and make it more stringent to ensure this doesn’t happen again.

What ended up happening as a result of those regulations was not that these big businesses really paid any sort of price. They ended up doing, frankly, more business, but that community and local banks ended up being the ones who were hurt. We saw many shut down. We saw the formation of community banks basically grind to almost a halt because they couldn’t, again, afford or didn’t have the right amount of staff. It just, you know, it was just too much of a task for them to comply with all these new rules and regulations. And so that meant that the places that small businesses
go to get their loans now were smaller in numbers and it ended up shrinking lending to the small business community while the big banks ended up doing more and more business.

It’s just another one of these examples of when the government gets involved, especially if they’re not thinking through all the issues. They frankly don’t care about the small guy, they only care about these big banks that are giving them the lobbying dollars. Frankly, many of them own the Fed. Who owns the Fed? The banks do, and that ends up hurting the little guy. It’s just a repeatable theme. That’s really been a challenge for those who wanted to have a small community bank, and for the lending and capital availability to small businesses.

Mr. Jekielek:
What is the role of these small banks? We don’t think of them as credit unions. We don’t think as much of them as we did at one point.

Ms. Roth:
I think it depends. It’s like everything else in this country. It depends on where you live. Do you live in a blue area in a big city or do you live in a red
area in a more rural area? For people who are in smaller communities and redder areas, they love doing their business with a bank who understands them, who they feel like is aligned with their goals and their values that isn’t pushing nonsense like ESG and the like. So they do play a very important role.

I also think if you think of banking as a system and you think about spreading out risk, that if you have more touch points in your system, if you have more banks in your system, yes, you may have a higher number of things that go wrong, but there’s less of a concentration. So any one thing going wrong doesn’t necessarily create this massive event. When you start getting the consolidation and you only have a few players left, that’s when you end up with a scenario where there is more exposure to failure.

Funny enough, if you look back two years ago when we had the bank failures, Dodd-Frank did nothing to stop the failures of these larger banks, the ones that were at risk. One of the authors of the Dodd-Frank bill, Mr. Frank, was actually on the board of one of these banks that went down. Actually, the San Francisco Fed chair was overseeing one of the other ones. It goes to show you that a lot of this is meant to be lip service and to maybe have some regulatory capture and other elements. But does it actually really make things better, particularly for Main Street, and particularly for the average American?

No. And I think that’s one of the reasons, frankly, why Trump was elected, because the Democratic Party really had become that party that was supporting the elites, the haves, and not thinking about what’s going on on Main Street and how the things that he’s doing are going to impact the average American weighing into these decisions because he has a visionary team. He’s got disruptors. He’s got a lot of smart people. But what’s really missing is that Main Street representation. And again, that is the backbone of this country. And if Main Street doesn’t thrive, the United States doesn’t thrive.

Mr. Jekielek:
One place that will be developed is the Small Business Administration [SBA]. What role do you see that playing? Do you feel like there needs to be more than to engage with Main Street?

Ms. Roth:
Kelly Loeffler has been appointed, if she’s confirmed, to be head of the SBA. And this is not meant to be a dig at her, but, background is growing big businesses. She had a company that she helped with her husband to grow that is publicly traded. And not that she isn’t a fan of the entrepreneur, but I don’t know that she spent the time to really dig into all the issues to be able to say, hey, SBA has kind of been out here to the side. We really need a seat at the table weighing in on these things.

There’s room in the administration, because SBA is very much focused on lending in the small business community, but kind of not a whole lot of other things. There needs to be more policy advisory that’s focused, that comes from a small business council perspective, even if that’s volunteer, even if it’s less official. They just say, we didn’t really think about how this is going to impact small businesses. Part of the reason is that small businesses are so diverse. We’re talking about 34 million businesses. They’re across all kinds of geographies. There’s all kinds of demographics of the owners. There are all kinds of industries that have their unique issues that are all put under this one umbrella.

Again, that’s not necessarily always thought of in that way. So they don’t have they don’t have necessarily the right voices. But there are a lot of great organizations that hopefully Trump could tap and expand just like he did with the tech. With DOGE, he’s innovating, he’s creating new opportunities, and getting some more small business and Main Street representation on the team.

Mr. Jekielek:
DOGE could play a very significant role looking at what regulation to remove to unleash that small business growth.

Ms. Roth:
Absolutely.

Mr. Jekielek:
Take us back to that fiscal foundation. Please remind us of the elements of that and where we need to focus. Let’s do a quick recap.

Ms. Roth:
So if you think about how the government looks from an income statement perspective and a balance sheet perspective and the like, first you go, okay, how are they getting revenue? They’re taking that revenue in
terms of taxes from us. And they took in about $5 trillion last year. So it’s just an insane amount of money that they have to spend. And then they have to spend it in certain ways. And they have to spend it on entitlements, which are getting bigger and bigger.

Right now, they have to spend it on a lot of interest because on our balance sheet we have all of this debt and then they have to spend it on defense and whatever other your courts and you know some of the nonsense that they spend it on so when they go to spend it they overspend on a regular basis and right now the overspending is running about seven percent of gdp which is about double the historic average it’s something you would not normally see outside of the time of us engaged in the middle of a massive war. The spending that the government is doing is crowding out private investment. It’s propping up what looks like growth, but it’s doing it at a huge expense that we have to finance at the same time that interest rates are going up.

When they come in and look and say, well, what is it if we have debt to GDP that’s too high, what is it that we can do, right? So we have debt on top and GDP on the bottom. Well, we could grow the GDP. And so that’s something that I think everyone agrees we need to do. We have to find ways through deregulation, through hopefully some lower taxes and putting more hands or more money into the hands of productive people to continue to grow the GDP.

But there’s probably some limit to that. We don’t have some sort of miracle growth element that’s going to make it grow too, too high from year over year. But we want to continue to grow that. Then we want to make sure that as we’re growing that, that the debt doesn’t keep pace or that, you know, maybe it stays in place. Be great if we could shrink it. But that’s probably not going to happen for a while because of the deficit. And so what we need to do is we need to get down that deficit.

But again, because the deficit is creating growth and that growth is what gives us the tax revenue, that if we end up cutting spending too much and we then cut the growth, then we have less taxes, we have more of a deficit, and that debt to GDP situation gets worse, our deficit gets worse, and then ultimately we end up in a massive financial crisis.

So that is the delicate balance that the Trump administration has to deal with. They’ve been handed a mess. And, you know, it’s going to take some very smart people showing a lot of restraint and knowledge and great choreography for us to do this. I think the focus is probably going to be slower than some people might want to see happen. But again, we are turning around this massive ship. So if you’re not seeing the results overnight, it doesn’t mean that it’s not moving in that direction.

Mr. Jekielek:
President Trump has been threatening to place tariffs on countries that are taking steps to de-dollarize. He’s very keen on seeing the dollar remain as the reserve currency.

Ms. Roth:
He is. There are a lot of things with tariffs and foreign exchange and dollar policy that are all very sort of wonky. But some of the things that he’s talking about actually stand at odds with each other, given where we stand in our fiscal foundation. So my take is that tariffs are very much kind of art of the deal, that he’s using them for leverage to bring people to the table for conversations. I don’t think that we will have widespread tariffs of 100 percent across the board on some of these countries. I think that would be devastating to the United States for various reasons. Everything kind of flows through and that would strengthen the dollar and do things that impact sort of this delicate balance we were talking about.

I’m at this point in time looking at it as a way to sort of talk big, get people to the table, and find other ways around it. You saw President Trump extend a hand and the invitation is meant to show reverence. That is something that could potentially bring China to the table. As we’re thinking about this global shift in the financial order, I would be prepared for something very different and interesting to happen, probably within the next four years.

Mr. Jekielek:
Is this being driven by the Trump administration?

Ms. Roth:
Yes. It’s going to be driven by the Trump administration out of necessity because we don’t have a lot of really great options. And as we are going to have to continue to run some level of deficits and our debt will continue to grow as he tries to get that under speed, we have to find people to buy that debt. And you have to remember that there’s also, I think it’s just over $7 trillion of existing debt that’s maturing and needs to be refinanced.

So we need to go out into the market and find buyers for all this debt. And if there aren’t enough buyers, what does that do? That raises the interest rates, and we don’t want to see that happen either. Given all of these things, central banks around the world have not been buying Treasuries. They’ve been net sellers and buying gold that the foreign community may, you know, particularly given the strength of the dollar, be sellers, not buyers. They’re going to be some different things that are on the table here.

And so I would be prepared for that. And I would also be prepared for a return to inflation. Again, this path is not going to be easy. We’re already starting to see signs of that kicking up a bit. But in this choreography to try to get the ship turned around, there’s going to be some bumps, there’s going to be some rough waters. This is part of what it’s going to take if we’re going to be able to save the path that we’re on financially.

Mr. Jekielek:
The value of gold has increased quite substantially over the last year, and gold is a safe haven. People are wondering where they should keep their money. With your prediction that inflation is going to be going up, they don’t want to keep it as cash, but at the same time, you need to live. How do you see this?

Ms. Roth:
You stole my line. I was going to say, we know the one place you don’t want to keep it is in your mattress, because it’s going to continue to be worth less and less, particularly vs. a bag of groceries or vs. your rent, which is what you really care about here in the United States. This is not financial advice. Everybody should go talk to their own financial advisors. It depends on your risk, depends on your objective.

But a principle that makes sense in any time, but just maybe has a little bit more urgency today, is that you need to have investments in hard assets, things that are going to hold their value and appreciate in value, and you need to be diversified. There are a lot of different paths that some of these crazy ideas that are going to be required in order to make sure that we keep a handle on all this debt that we have are going to take, and we don’t know which one that is going to be.

Having a diversified portfolio makes sense. That means if you think that Wall Street is going to be taken care of and that that’s going to continue to inflate, then yes, you want to have stocks, even though right now stocks are very, very highly valued. But you want to have diversification, something like gold, or for the people who are into things like Bitcoin, those are being used as insurance policies, as hedges. I would never tell anyone to go put all of your money into a hedge or to an insurance policy, but maybe up to 5% of your portfolio, it makes sense to have an array of alternative assets that can kind of hedge against these other things that are going on.

Depending on what area of the country you’re in, to the extent that you can own your home, that can be another place where you can really tend to accumulate equity. Homes are the largest asset on balance sheets of people in the United States across the country. So diversification is key. And I know that this is challenging because for a lot of people, they’re just struggling to meet their daily needs and don’t really have the money to make investments but to the extent that you can have some personal austerity maybe you forego that you know Disney World trip this year maybe you cut back in certain areas and just put some money away and put it to work for you so that you’re trying to keep pace with inflation. The other piece is making sure that your wages keep pace, making sure that you’re able to have a raise or have more productivity so that you can keep pace from a work standpoint, then it doesn’t hit you quite as hard.

But it’s a very challenging time. Again, for the people who don’t have assets and don’t have the ability to invest in assets, it really has felt like that American dream is slipping away. Hopefully, we can get this settled over the next few years so that that American dream can feel more attainable and be more attainable for a broad swath of Americans.

Mr. Jekielek:
We have a piece today in The Epoch Times talking about the state of the economy. One of the key points is that inflation is exceeding wage growth. This is a huge problem because you’re making less in this climate. Consumer spending is keeping things up, but then the credit card debt is expanding dramatically. It’s a little bit of a false picture, isn’t it?

Ms. Roth:
It is. It is the window dressing. Unfortunately, just like the United States government is using debt to fuel growth, the consumer is using debt to fuel growth. And we do have record household debt, record credit card debt, record car debt down the line. And, you know, people are dipping into their savings more. Now, the good news is that people must feel secure in their jobs because if they felt like they weren’t secure in their jobs, they wouldn’t be going in and making these decisions.

But we don’t like to see Americans using too much debt to fuel spending because we know that that’s not sustainable on an ongoing basis. And when you look at averages, it doesn’t really tell the story because, again, it’s the people who are really hurting the most, the middle and working class, the people who are more poor, who are footing that, while the people who are doing well have just been killing it again in the stock market and their home values. So we really, again, need to have a very strong focus on what is going to strengthen Main Street, because if you have the haves and have nots, you’re going to have social unrest.

We saw that, unfortunately, play out a couple of weeks ago in the healthcare space. And people are feeling very resentful that there are some people who are doing well, not even based on merit, but based on decisions that are being driven by Fed policy and monetary policy. And if that continues, that’s just not healthy for society. We need everybody to participate.

Mr. Jekielek:
One of the consequences of these decades of very cheap money and low interest rates has been the financialization economy. People who have access to that money, which is not Main Street typically, can make huge amounts of money by not doing anything but manipulating money, which isn’t particularly productive for the country, but it looks good on balance sheets. Can you speak to this?

Ms. Roth:
Yes. The perfect example, and I apologize, but this is the name of it, this meme cryptocurrency called Fartcoin. And Fartcoin has a market cap right now that is higher than most companies in the S&P 500. It’s ridiculous. So people are just throwing their money on something that is a meme or a joke, trying to make a few bucks. That is not the hallmark of a healthy society. That’s what happens when there’s too much money in the system, when there’s a bubble, when things are out of whack.

Unfortunately, that is the scenario that has been created, because there is this chasm between the people who have assets and don’t, you have people who should be making conservative bets, trying and educated bets, making very risky bets to try to catch up. And we all know, we’ve seen this movie before. We all know how that ends. It doesn’t end well at some point in time. We just don’t know what that timeframe is. And so that is not healthy for the system.

We want to go back to a system that works where people can actually come up with some valuation metrics to be able to make their investments based on where we have debt levels that make sense, where everybody’s not going into crazy amounts of debt to just keep pace. It’s just not a sustainable path. And I think that’s what so many organizations and individuals have been warning about, that everything that has happened, which has come out of 15 years, as you said, of zero or near zero interest rate policy that we went through, the disrupted risk that shifted the amount of cash in the system, that you did all of these crazy things that let people make these crazy bets and saw things just go up and up and up, at least on a nominal basis, maybe not on an inflation adjusted basis. But that is just not healthy or sustainable.

And so we need to get back to some degree of normalcy and reality. Again, I think that the election was very much a vote on normalcy and reality.
They’re trying to get rid of all the people who are disconnected from reality. But again, they left a giant mess in their wake, and it’s been going on for more than just the last four years. And so we need to have the patience
and the stomach to be able to get through it because it’s not going to be a pretty process along the way. And it hasn’t been pretty.

Mr. Jekielek:
Let’s say you’re the average person, and you don’t have a ton of money to invest. Again, I understand we’re not doing investment advice. I keep hearing people say, you need to diversify, but diversifying is very complicated. It might be simpler to just be like, why don’t I just put it all in gold? Why not just do that?

Ms. Roth:
In stocks, you can do the S&P 500. So that’s a diversified index of stocks and it’s not picking one or two stocks. You can have some stocks, maybe you have some treasuries, maybe you have a little bit of gold and crypto if you like it. So things that give you different exposure and certainly to the extent that you can get a financial advisor or even they have these robo advisors online that use models that say, how conservative are you? And they’ll come up with some allocations and you can take it as a suggestion. You can follow it or not.

But the very first thing, if you’re just starting out and your company has a 401k program or you’re a business that can set up some sort of a 401k and double down, that’s what you want to do. If they have a matching program that means you get money that is being put in not just by you but by your company, because every dollar that you get in, if they match dollar for dollar, ends up being $2 that’s being invested on your behalf.

It’s doing these behaviors, even in small ways, consistently, because again, it may seem like a few pennies here, a few pennies there, but pennies add up to dollars. Individual dollars add up to hundreds of dollars. When we’re in a scenario where we are probably facing ongoing sticky inflation, maybe rearing up a little bit over time, a couple of times during the course of this administration and after, you are going to want to be able to keep your purchasing power as much as humanly possible.

Mr. Jekielek:
You seem to be bullish on Scott Bessant as Treasury Secretary.
A number of people on the show have been as well, notably Kyle Bass, very publicly. Why do you think he will do such a great job? You mentioned that he understands this international architecture.

Ms. Roth:
First of all, if you pulled somebody out of the phone book, they’re going to do a better job than what we’ve had at the Treasury. We’ve had a big, big mess at the Treasury over the last few years, so we’re going to be welcoming a change. But Scott Bessant is very sophisticated in his knowledge of everything from currency to central banks around the world to macroeconomics and how all of these pieces are interconnected. And in finance, you usually have people who have one area of expertise, and it doesn’t always translate sort of across the broad needs. And we need somebody who has that sophisticated background.

Early in his career, he started under the tutelage of one of my favorite investors and somebody who is known as a hero on Wall Street, Stan Druckenmiller. And that was that famous bet against the British pound in the early 1980s, very early on, really understanding the currencies. By the way, Stanley Druckenmiller has nothing but great things to say about Bessant. The issue for people is where they worked, and they worked for George Soros.

As I’ve said at many points in time, George Soros, you have to approach in a sort of different way if you’re in finance, because as an activist, he is reprehensible, but as an investor, he is brilliant. And so a lot of the very brilliant minds on Wall Street have all come out of working with George Soros. From what I understand, and this has been reported, although Soros Funds deny this, there was a period of time when there were a bunch of activists that were coming to the Soros fund and saying things like, we want you to divest from Israel, for example.

Scott Bessant got a bunch of people together and reportedly went into Soros’ office and said, if you do this, I’m going to resign. And so I think this is somebody with a strong moral compass who’s been willing to stand up to Soros, the activist. He himself has said that, you know, when he started his fund, even though he took money from Soros to begin with, he actually returned it and they have not talked in or spoken in many years. He is somebody who has been a Trump supporter since 2016, so this isn’t a new hanger on or a plant that’s going into the organization. This is somebody who has been a confidant of Trump and his family for quite some
time.

I completely understand if you’re not familiar with that background, that when you say, oh, no, Soros, that that would be a scary thing. But this is clearly somebody who has benefited from Soros, the investor, and stood up to Soros, the activist. He has just incredible intelligence and smarts to deal with that and has already floated some creative ideas. Some of them are a little out there, but I think we’re going to need that creativity to manage where we are today. Along with Tom Holman, that’s actually one of the strongest picks that Trump has made.

Mr. Jekielek:
What is the biggest challenge that the Treasury will have?

Ms. Roth:
It’s financing the United States without breaking the entire global Treasury market. The U.S. Treasury market is the benchmark for the world. We have to have something that is very stable. And when we’re in a situation where I think he’s going to have $13 trillion to finance, the $7 trillion that’s rolling over, plus probably another $6 trillion in deficit spending that he’s going to have to finance over the next year, I think that’s going to be a giant challenge. And he’s going to probably have to come up with some unique things. And then just on an ongoing basis, working with Trump and the other people on the teams to find and navigate a way out of this is equally as challenging. So he’s got a lot of work ahead of him.

Mr. Jekielek:
Carol, if people want to hear more about your thoughts about small business and macroeconomics, where can they go?

Ms. Roth:
I have a free newsletter. We cover things like economics. Throw in some humor there at carolroth.com slash news is the sign up. It comes out usually a couple times a month. I’m on all social platforms, but mostly active on X at @caroljsroth. And of course, I have multiple books out. The most recent is You Will Own Nothing. So some of the topics that are interesting, as we talked about this new financial world order, what’s been going on with the Fed or why we’re in this financial position, I do more of a deep dive in some of the books. So those are my main touch points.

Mr. Jekielek:
Any final thoughts as we finish up?

Ms. Roth:
I want to underscore one more time that there are things that sound simple to do, like we should just cut spending. That would be simple at any other point in time, but we’re at a very precarious point financially. And so some of the things that sound easy are actually incredibly complicated. So certainly keep that in mind. An overarching theme is that the most important thing as this country gets back on track is that we need everybody participating in the growth, in the American dream, and in the future.

As we make America great again, it has to be great for everybody. And so I hope that as policies come out, to the extent there are things that don’t really make sense for everyone, that people use their voices to push back. because we are seeing that, especially with social media, with platforms like X, that you are able to influence some of these outcomes. I certainly think it was in play during the election. We’ve seen certain proposals go on and off the table.

We’ve even seen people who’ve been put up for positions have either a second chance or maybe had some cheerleaders because of everyone’s voices. So don’t be afraid to step up because we really do need to make sure even if you don’t feel like you’re part of Main Street, if it doesn’t work for Main Street, it’s not going to work for anyone else in the long term. So, you know, make sure that we’re championing the backbones of this economy.

Mr. Jekielek:
I am thinking of the Robinhood platform.

Ms. Roth:
Yes, Robinhood is interesting. It’s had some challenges over time in terms of, yes it has allowed for access when it has worked, but there are times when it has glitched up. So if you’re going to use a platform, make sure you understand the risks, and make sure you have a banking system. Make sure they have an appropriate level of insurance. Do something that’s right for you. Because we’re in a scenario right now where it seems like everything is just going to go up forever, but things don’t go up forever. And so make really smart decisions. You work really hard for your money. So make sure that you’re making smart decisions. If you’re going to make a bet, then it’s got to be with entertainment dollars. It’s got to be with something that you’re willing to lose it all, but otherwise, you make educated investment decisions.

Mr. Jekielek:
Carol Roth, it’s such a pleasure to have you on the show.

Ms. Roth:
Thank you so much. I appreciate it.