Jason Trennert, the chairman and CEO of Strategas Research Partners, spoke with Quartz for the latest installment of our “Smart Investing” video series.
Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): Bitcoin is at an all time high. Why does it keep going up?
JASON TRENNERT (JT): I think there’s a couple of reasons. One is that the SEC just made it easier for the average person to invest in it by approving an ETF, so that clearly has made it a lot easier for people to buy into it. I also think it has something to do, particularly in the context of the fact that gold is going up at the same time, at least recently, that it has a lot to do with the fiscal and monetary situation in the US and, and around the world. But particularly in the US there’s really no coordination between fiscal and monetary policy when it comes to inflation. And I think people are looking for hedges against fiat currencies, particularly the dollar. So I think that’s another reason why people are looking for alternatives to what would traditionally be, again, seen as, as fiat currencies.
AM: OK. So you think it’s getting a little out of control?
JT: It’s getting out of control. I think by almost any standard, right? Right now the US has $34 trillion in debt. The last trillion dollars was added in three months. And part of the problem is that we never termed out our debt. 50% of our debt matures in the next three years. So interest expenses are rapidly increasing and rapidly really crowding out other parts of the budget.
AM: It sounds really dangerous.
JT: It is. Having the reserve currency has been called the ‘exorbitant privilege’. There was a French finance minister called Giscard d’Estaing, he called it the ‘exorbitant privilege’. And what he meant is that you get away with a lot of bad behavior when you have the reserve currency. You can do a lot of risky things, but we’re kind of rapidly approaching Johnny Depp, Charlie Sheen, types of levels of irresponsibility, I think fiscally.
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AM: Fiscal policy is Johnny Depp, Charlie Sheen level, like, on the edge of falling apart maybe, or risk taking?
JT: Well, we’re taking a lot of risks. Yeah. The, the biggest, it’s hard to lose the reserve currency once you have it, and the US is not at risk of losing it, but it is at risk of having significantly higher interest rates or having a much weaker currency or baking in higher inflation for a long period of time, just based on the fact that we’re not being responsible in terms of our fiscal responsibilities.
AM: If our fiscal policies are Charlie Sheen in the darkness, who are Bitcoin and gold? Is it Martha Stewart and Snoop Dogg?
JT: Yeah. I think they’re maybe seen as the 12-step programs or they’re the things that would kind of anesthetize you to some of the bad decisions that we’re making at the federal level. Part of the problem with, we’ve had this policy of quantitative easing and financial repression since the global financial crisis from 2009 through 2021. And I think we purposely suppressed interest rates to stimulate the economy. Part of the problem with doing that is that you remove the price mechanism for policy makers and for investors. So there’s a lot of moral hazard that gets built into the system where policy makers are saying, what’s the problem? We’ll just run bigger deficits. Or even investors say, we’ll just take more risk because we’re not worried about interest rates being kind of the frontier justice that it normally should be in any sort of real free market.
AM: Yeah. It feels like we’re playing kick the can down the road.
JT: You bet.
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AM: With the election coming up in November it’s a marker in the sand, politically – It’s like they don’t want a recession between now and November, so they’re gonna do whatever they can to kick that can into December.
JT: Yeah. And that’s, of course, both sides since I don’t wanna make it a political issue, but, you know, every, but I think clearly administration is trying to avoid a recession at all costs. And in some ways that’s noble because bad things happen during recessions, people lose their job. It’s not pleasant. By the same token, if you believe in free markets, as I do, business cycles are a normal part of the evolution of the economy, and there’s a risk to avoiding a recession at all costs. And that, in my opinion, will be inflation longer term. It’s hard to have it both ways. It’s hard to kind of fix everything if you believe in free markets and the wisdom of free markets.
AM: Gotcha. So would you be a buyer of Bitcoin right now? I
JT: Probably. It’s hard to say this, but I probably would be. I would view it more as speculative. It’s very, in my opinion, it’s more speculative than gold, but I certainly wouldn’t short it. It seems to be there’ll be more demand for it, not less, unless there’s a change in our approach to our fiscal policies.
AM: Yeah. Anybody that’s shorting Bitcoin right now, they gotta have their finger on the trigger 24/7.
JT: Yeah, it’s risky both ways. Risky on the long side and risky on the short side. Right now, I think it’s riskier to be short than long.