Welcome to Stocks and Translation. Yahoo Finance's video podcast that cuts through the market mayhem, the noisy numbers, and the hyperbole to give you the information you need to make the right trade for your portfolio. I'm Jared Blicky, your host, and with me is Yahoo Finance's Ali Canal, who's here to keep us honest and from veering off too far into Wonk land. And today we're gonna be talking about the ghosts of crises.Passed from the bailouts of 2008 to today's record $37 trillion debt pile, cheap money fueled a casino mindset that many say still grips Wall Street. And now AI threatens to erase jobs as dueling populist waves swell on both sides of the aisle. It all means a day of reckoning probably lies in the future. A word of the day, financialization. We saw a triple.bonds magically transformed into triple A's over the GFC and now tokenization and blockchain promised to financialize literally all assets, and we're only in the early innings. Plus, this episode is brought to you by the number 30%. Ominously, nearly a third of US work hours could be automated by 2030 thanks to generative AI, says McKinsey and Co. and this trend is also just getting started.And without further delay our guide through this minefield is Dimitri Kofinis. He is a media entrepreneur and financial analyst best known as host of the acclaimed Hidden Forces podcast with more than 450 deep dive episodes since 2017, challenging consensus narratives across finance, tech tech, and geopolitics.Dimitri was the first producer to put me on the air to talk about finance way back in 2012, and it's my pleasure to introduce him now. Dimitri, hello.

Yeah, it's great to be on. Thanks for having me on,

Jared. All right, just, I set the stage a little bit, but give us a big picture overview because we're talking about the ghosts of crises past and we're still dealing with some of the fallout. GFC and we could probably go even farther back, but set the stage here.

Yeah, sure, I mean you and I were reminiscing about this yesterday when we're talking and it's uh in some sense it's um what's surprising is just how predictable so much of the situation we find ourselves in today is I think back in when you and I first met each other, uh, I can't speak to you, but I certainly, um, I think, um I had um some misunderstandings about the mechanics of the monetarysystem.

I was learning back in 2009.

Yeah, I mean, I'm still, I'm still learning.Um, but, uh, certainly like a more accelerated time frame, but it feels very much like we are living in the future that was dictated by the choice that we made, not just in 2008. I mean you can go all the way back to the to the end of Bretton Woods or as I'd like to think oftentimes in the early 1990s with globalization and technology.And the diminution of labor as a relative portion of GDP and as a sort of um as part of the explanation for the divergence and wealth um and the again the the Iraq War, the 2008 crisis, these things also undermined the trust in institutions and in and in leadership and I think.That is a big, uh, goes a big way in explaining the 2016 uh election results and the election of Donald Trump. First, his victory in the Republican Party, which is, I think even more significant because what he did to the Republican Party is something I think we could see on the, on the Democratic side in 2028 and that's a, that is a scary statistic. 30% of work hours. I know it's just an estimate from McKinsey, but just think about what that means. You don't just have these long standing forces.Like globalization, some of which are are going to reverse and and technology driving down marginal costs.But you also have now technology coming in and normally we see productivity gains in technology occur during upswings and economic growth, but this is one area where we could actually see if we were to see a slowdown in the economy and I'm not even saying a recession, you know, like, uh, we, we know governments are prepared to spend and fiscal spending is a lever now that they're increasingly prepared to use as we've seen demonstrated multiple times.But I think we could see employers begin to deploy LLMs and AI in white collar work settings increasingly and in other settings as well because they're now good enough in the case where you know maybe profits declined or something else so there are a lot of headwinds and I think the thing that people aren't talking about enough is how these things play out politically.

Interesting. So it sounds like you believe we're in this moment of reckoning, not just on the corporate side, the AI side, obviously that's having ripple effects to the stock market as well, but also on the political side of the spectrum. And we've been talking a lot about the deficit concerns and how the government handles that. So when you look at an aggregate where we're at right now in this moment of reckoning, what keeps you up at night? What what scares you the most, and how do we get past something

like this? Demetri has young children, so I can imagine.

Yeah, that's true. I guess learn from the mistakes of the past too.

Uh, um, I, well, look, the thing that struck me when you were providing an answer there, you were asking your question was you mentioned deficits, and I'm just thinking about how it's really about perspective. Now we could look at the problem, we could look at the, our debt and deficit like we did a few years ago and not think it's a giant problem. The thing is we see it as a huge problem today in part because I think our political we, we're in a, we're in a.Period of political inertia and I guess that is one of the things that concerns me the most. It is um the unseriousness with which we are running our political system, the unseriousness of which politics happens in America, and the seriousness of the economic challenges we face and those two things are problematic because if you get into a situation where you're having now a headwind on white collar employment.And you're also seeing a disproportionate number of young people becoming unemployed to bring it back to the comparison between 2016 and what happened to the Republican Party, which was the resentment that was building up in part from the blue collar working class part of the country that felt ignored and also the, the uh the the loss of institutional trust.That happened in that demo and now you move to what is really a Democratic Party coalition demographic which is white collar workers, highly educated young voters and now you have those people begin to lose their work and their jobs and I think you could see a populist revolution on the democratic side.And so I think even though we're talking about the budget, we're talking about debt, we're talking about trade, I think there's a potential that the big game changer for us will be politics and we aren't talking about that because we're focused on the causal factors that could actually affect it.

All right, let's talk about our word of the day here, which is financialization ties into a lot of this. This is the growing dominance of financial markets, institutions, and motives in the economy where profits from trading or securitizing assets are prioritized instead of producing goods or services, and this really reminds me of 2008 all over again because as I mentioned in the intro, we're turning Crile C bonds into AAA bonds to the magic of financialization.And really you compare the financial services industry, uh, that kind of sprung up this century beginning with the, the, in the wake of the dot-com bust, it didn't really exist to that extent before then and a lot of this was aided and abetted by technology, and then you bring that forward to today with uh the tokenization and the blockchain and everything. Give us your thoughts here.

I mean, there are a lot of things to talk about there. Just putting aside the, the larger point about financialization.I think that we are, as you know, I've talked about, uh, my framework of financial nihilism we talked about that last time. That's right and I think that you know that um obviously that parallels the the the financialization of the US economy because it also made made it easier to generate outsized financial returns more quickly and we certainly have seen that.I think that um one of the silver linings with respect to what's going on in crypto right now despite again the trends of financial nis that I talked to and its origin point in crypto is what's going on with stable coins because even though a lot of what's going on through the administration, the tariffs, and, and not, not so much, not as much the tariffs, but more I think the uncertainty around policy making in this administration has been, I think bears for the dollar.I think that the um the adoption of stable coins and the passing of legislation that is more amenable to their use cases is actually something that could be uh positive for the dollar and as you know as I think we've talked about in uh in my previous appearance, I never believed in the arguments for a CBDC and when I say I didn't believe in the arguments edral bank digital, right, exactly. I thought that people that um were suggesting that, and I think in some sense fear mongering.That the United States was going to launch a CBDC did not understand the sources of dollar dominance and as we may have talked about, I think also that appearance that the dollar is the most decentralized currency on the planet because

we got cash and a lot of people use that cash.

We have cash, a lot of people use cash and also lots of third parties that exist outside the Federal Reserve banking.System issue dollars lots of people contract in dollars, and this, this is all a source of dollar demand. And, and so when a, when a foreign bank that's not under the jurisdiction of the of the Federal Reserve issues a dollar-based loan, what it's doing is it's issuing what we know as euro dollars. And what are stablecoins? They're euro dollars. So what we're really seeing is the expansion of the euro dollar market.And, uh, and so I think, I think in the last year alone, and don't quote me, I mean, I'm on the air here, but I have it in my head somehow that it was about $100 we had $100 billion in in stablecoin market cap in the last year. So, you know, we could see a huge expansion here and that money is gonna go into DFI use cases. It's gonna go through the crypto markets and this is one area where I'm very bullish on, on what's going on in decentralized finance and DFI is the the first time where I.really feel like of all the use cases that have been promoted for crypto, it's finally found one where we could actually see real um real value created, at least in terms of people using the products and the capital comingthrough.

And it's it's interesting that you say it's bullish for the dollar because we have seen the US dollar index down about 11% since the start of the year. But when I talked to strategists, they say that post-financial crisis we're actually getting to more normal levels and that the dollar hasReally been overvalued. What are your thoughts there and with stablecoins, do you think we could get back to that prior dollar dominance?

Well, so you're right. I mean, I think in 20, 2008, the euro dollar exchange rate, the dollar to euro exchange rate was $1.60 I think it peaked at 160. So certainly, uh, the dollar is not weak by the historical standards of my life, at least, um.I, I don't know what it means. I don't know whether or not the dollar goes lower from here. I think there's a lot of risk baked in long term because well, the, the, the, the single biggest risk of the dollar is the reversal of capital flows or a decrease in flows and flows into US assets and and US capital markets from foreign buyers, but from foreign buyers. So what is the Trump administration effectively doing here? And I'm not suggesting that the Trump administration's policies are the singular driver they're responding to.On accumulation of factors, butThe, the US runs, uh, runs chronic current account deficits. Um, what is the opposite of a current account deficit or what is the other side of a current account?

Just to be clear, that's, that's the deficit that we incur through trade, not necessarily on the fiscal side through spending,

right,exactly. So, um.Uh, uh, if you run a current account deficit, it means you run a capital account surplus, and that capital account surplus has been a source of dollar demand, money coming in from the rest of the world into US capital markets. Um, and if you want to buy US dollars, you, if you want to buy US assets, you need to buy US dollars. So I think a big risk to the dollar is a reversal on those capital flows. And again, I think so much of the policy uncertainty and, and one of the, the other thing is like, you know, a lot of people talk about the petro dollar.and uh deal, the deal that Nixon made after Bretton Woods to support the dollar in the in the in a world where it was no longer anchored to gold. But I think that people underappreciate just how much dollar demand results from the fact that people perceive the United States to be a safe haven in a place where they feel confident in the rule of law and property rights. And I'm not suggesting that those things have disappeared or that they're going away anytime soon, but I think to the extent that these intangible factors are impacted and people lose confidence.to some degree or another, or they wish to diversify their holdings that could be very negative on the dollar and I think that that's a structural headwind going forward in part because I think people perceive the US administration and future administrations to be intent on changing these long term current account deficits. Status quo ischanging.

All right, hold that thought right there. We need to take a short break, but coming up we're going to be talking AI taking over people hours and a runway showdown for the people.This episode is brought to you by the number 30%. That is the share of US worker hours that could be taken over by artificial intelligence by 2030, according to McKinsey and Co. and uh it's a jaw-dropping stat, and these are just hours. We're not talking about 30% of jobs, but you could imagine it going that.That route too. You were just talking about the potential for a white collar recession, and then we all have all this, uh, these political, uh, these political footballs in the air right now. So break it down for how you see AI really shaping the future here and just some of the discussion points because it's no one can really predict this with any kind of certainty.

Well, I think, again, I, I think you've heard a lot of people talk about the potential for.to create chronic levels of unemployment. You hear people like, uh, for example, Andrew Yang, who ran on this platform in 2020 promoting things like universal basic income as a solution. I think that's actually a bad idea for uh reasons for, for lots of reasons that we can get into today. But I think the, the, again, I, I wanna go back to this point that I was making, which is I think that an underappreciated, um, risk factor here is that.AI in its application in the white collar workforce and also for younger demographics, this is huge too, and we saw how COVID impacted younger people disproportionately during the pandemic. Now imagine if you have a a wave of technological innovation, creative destruction.It's making it harder for younger people who are qualified with with all sorts of different degrees exactly. So how do these people you're talking about a need for a radical transformation and that's not those solutions are all not all going to come from the marketplace. Many of those solutions need to come from government.And the problem is that in a dysfunctional society where government where people have lost trust in government and also government isn't working very well, how are those what what solves those problems and that's where populism comes in because ultimately what populism is, it's the response of the people to a non to a it it is it is the expression of politics in a in a in a society that has weak institutions when institutions are weaken people elect large personalities, people who make big promises.And those people develop direct relationship with the masses and so I think that that creates a lot of volatility in policy making going forward and that is something that we have to consider when we think about things like the value of the dollar because foreigners, will they feel comfortable, will they feel safe reinvesting dollars in the United States.And or their currency in in US dollars. So I think again, I think that the political ramifications of the sort of trends that we're seeing in technology and some of these forecasts, I think is a really big one that not enough people are talking about and specifically as I think it'll manifest, especially on the on the democratic side.

Isthe US prepared for that?

It certainly doesn'tfeel like

I I I

I would say I think what's amazing is, and I don't know if you guys feel this way, but I'm amazed that things are still, I think things still function in some sense, but I feel like, again, just to, to borrow an analogy for monetary policy.I feel like the, the lags are long and variable and so many of the, the, the political, um, forces that were unleashed in the 2016 campaign had been building up for several decades, you know, and we had seen even in 2008, some of the early signs of that of the Tea Party movement and, um, you know, that we recently had a mayoral Democratic primary here where we elected uh Z Zhan uh Zoran Madani, um, and so I think that that's a, that's a sign of things to come. And are we prepared?You know, I'm a, I look, II don't, I'm not gonna do the whole I don't count America out, but I don't. I think that we're a dynamic society and I think we air our dirty laundry, so it's easy and with pride many times and we wear it and we air it, um, but I was saying that we air it and we, um, we, and so it's easy when we look at other countries, uh, to look at us and think that we're doing really bad though I will say there's something else that's really important here that's going on, which is that there's also a question of what is the economic model of the future.So like the Chinese are making a case that the economic model of the future is command control capitalism.And or or sort of you know state driven capitalism and they've been very successful at building infrastructure at employing people at at achieving incredible levels of economic growth. Understandably much of that growth was driven by the fact that they were starting at a lower base, but this is also I think a another so we talked about politics is one big thing that isn't talked about. Another one is.The race for the for the economic and political model of the future we had that in the for 40 years during the Cold War and capitalism won and then I think it accelerated to a in in many ways an unworkable form of global capitalism, free capital flows and um neoliberalism which failed, but the question is what's going to be the economic model of the future.The Chinese clearly have their bet that they're making, and I think that what's going on is that we haven't quite figured out what we want that. But

there'san answer to that. Maybe the Dark Enlightenment. I don't know if you've read about this, but it's more of a technocratic AI-driven, uh, command and control economy, maybe more fascist style, um, in the West, and that's kind of, uh, it drives into some of the, some of the, some of the same technological factors that drive the Chinese communist economy would drive this dark enlightenment.

100%. So you're totally right.And so what I think what you're referring to also is this this intersection of people in Silicon Valley, a lot of a lot of the the folks in the transhumanist community who I think um really see uh an opportunity to build that kind of uh that kind of a society, and they, I think many of them want that. The question is do the vast majority of Americans want that kind of an economic future and what sort of political consensus.Uh, can emerge to actually drive, uh, uh, to, to, to, to help forge a new social contract in this country.That is actually something that most people can get behind them that they actually want.

All right, hold that thought there because we got to put the spotlights up. We have two political power looks trotting down our catwalk, each claiming to own America's future. On the stage left, we have the populist left which stocks forward in union blue overalls, student debt buttons, promising free college wealth.Taxes and AI job guarantees. Her prop, a megaphone labeled Gen Z turnout on the stage right, we have the populist right which is charging in with star spangled denim and tariff tags clinking like spurs. He vows to bring jobs home, crush woke Wall Street, and seal every border. His accessory is a 5 point cowboy hat marked 2026 House majority.So Dimitri, who claims the 2026 midterms and the 2028 Oval Office is it the debt-forgiving organizer or the flag waving sheriff?

So by the way, you know, when you're doing that whole thing, it was reminding me I used to work in Italy when I was out of college, I worked in Italy.And what was amazing about Italian society, I don't know to the extent this is still true, but it was such politics was so infused in Italian society, so much so that it actually defined your fashion. So if you were, if you dress a certain way, if you had more like artisanal wool scarves, you were a communist. If you were dressed in like Eorio Armani, you were a fascist. So, um, who was going to win the, the midterms? Uh, look, you know that it's like a cliche, but like it politics is so dynamic things change.I think right now the Trump administration is dealing with its first scandal, you know, remarkably so, by the way, but it, it is truly the first scandal of the Trump administration and it has to do with the Jeff Jeffrey Epstein files, so to speak, um, and I, I think, you know, this is, this presents a huge challenge for Trump because it is a, it's, it's a, it's not just an attack vector for the opposition, uh, for the party outside of him. It's an attack vector from within his own ranks, you know, he's holding together a very unstable coalition.And we saw first with the eviction of Trump uh from uh the eviction of Elon from that coalition and now with the Epstein files and him going to war with some of the, the figures in the media, um, and you could see a very sort of tight tight line that everyone's trying to walk we'll see how this plays out, uh, but I think this, if it continues is gonna present a problem for the president, certainly his ability to, to run his agenda and then certainly his ability to maintain uh a unified government.And then 2028, um, you know, Steve Steve Bannon is, I think, uh, someone who sort of regularly says when the president is re-elected, he says he gets, get the joke obviously. So, you know, I don't know what's gonna happen. That's a long ways out, um.We'll see. Will Trump, uh, seek to, to run again? Does it really matter? And then again, what's going on on the Democratic side? Will they feel the candidate who's exciting?And appeal to some of the populist, um, sentiments that I think we could see emerge in those in the next few years.

All right, we are basically winding things down right now. I do want to say very much a big thank you to Dimitri for coming out. I mean, we went all the way back to the 1940s. You were talking about Bretton Wood. Actually, we went back to the Civil War just now. That's right, we did. So we went back what, 100, 100 something years.We'll call it right there. Um, all kinds of economic disruption that we've seen 1970s, Nixon closing the gold window, and then leading up into more modern times, the global financial crisis and the social socialization of all of those private losses now kind of kind of finding uh their home here, coming home to roost and very much turning up the electoral, um, the electoral.spigots or what have you to describe kind of what's going on in politics today. So a big thank you once again and a reminder to the audience here. Be sure to check out all our other episodes of our video podcast on the Yahoo Finance site and mobile app. We're also on all your favorite podcast platforms, so be sure to like, leave a comment, and subscribe wherever you get your podcasts, and we'll see you next time on Stocks and Translation.