What Will Cause The Next Recession – Richard Fisher Thinks It’s US Education

As Buffett says when the tide goes out you find out who’s swimming naked. There are a lot of ugly naked bodies in the credit system in my view in Europe. We’re having the longest economic expansion since the Civil War. The predecessor long expansion was exactly 120 months. It was March of 1991 to March 2001. We’re gonna pass through that. We had monetary policy all by itself but now you have a big boost from fiscal policy. And also a new regulatory regime that came in with, which is more pro-business, that came in with President Trump and also with the Republican Senate. So I would expect this to be prolonged perhaps all the way through next year we’ll see. But there are some risks with this because you have of course a hyper leveraged government right now or more leveraged. It was hyper leverage before. They’re going to issue another trillion, 350, $300 billion in bonds next year. At a time when the Fed, one of the buyers, is withdrawing from doing that. They’re shrinking their balance sheet. And so I can see some real pressures coming from higher interest rates. So that’s one thing I think we’ll be a bit of a retardant. We’ll have to see how strong the underlying economy is. We do have of course trade frictions and we have other issues of pinpricks in the system. Leveraged loans and corporate debt and a little bit of weakness in the auto sector, the housing sector. But in the end you run out of speed on a business cycle you begin to slow down. The issue is what happens when things slow down. And when that occurs and I know not one and no one can forecast with specificity, The Fed will need to be able to cut rates, and if needed, then expand their balance sheet, if that isn’t enough. So I think what the Fed wants here is to put some nuts in the tree. And what I mean by that is have some rate increases without disturbing the economy. But keep going as far as they can before it creates too much friction. At the risk of tipping the economy over, which they have a record of doing 10 of 13 tightening cycles before this one. I don’t see going into a negative pattern. It’s a question that we have had very robust growth. And how far you slow down. If we were slow down to 2% from the current run rate, which is much higher. I wouldn’t. To me, that’s a natural phenomenon. What you want to do is make sure that you don’t start cascading downward go into negative territory contract the economy, lay people off in jobs when economies contract and create the kind of frictions and problems that are a real recession creates. So we run that risk. I don’t think that’s the issue in the intermediate term. We do have business cycles. God hasn’t conquered the business cycle. President Trump hasn’t conquered the business cycle. And it’s hard for the Fed to conquer a business cycle but they can at least try to smooth it out as they go through time. There are some other things outside of the country that could come to infect us. I’m especially worried about Europe. I think the European Central Bank has conducted a policy that has hidden some really bad credits not just in Italy but elsewhere. If I come to you and say I’m going to lend you money and, by the way, I’m gonna pay you to take it. You’re gonna make mistakes, you’re going to stretch out on your risk spectrum and you’re going to make some bad decisions. That’s human nature. It’s not quantifiable. It’s just human nature. And as Buffett says, “When the tide goes out you find out who’s swimming naked.” There are a lot of ugly naked bodies in the credit system in my view in Europe. In the ECB sphere. Now the Euro pool is the big pool along with the US dollar, second biggest pool of credits in the world. It’s a key currency, other than the dollar which is the key currency. The prime currency. So if you have disruption in that sphere, and given it’s a huge market for the United States. Altogether the largest market that we sell into in terms of our exports, that could I could see that coming back to infect us and creating systemic risk. So that’s my biggest fear right now. It is not China. China doesn’t have an open capital account like we do with in the case for Europeans. And it’s not the emerging markets because emerging markets are emerging markets. We know Argentina is going to do the same thing repeatedly and South Africa and Indonesia and Turkey etc.. I don’t see that infecting us. But I can see potential problems in Europe. And that’s a big pool. It’s an important place and it could be a systemic risk. So the biggest long term threat I see to the US economy is our horrifically bad. Primary and secondary education system. If we can’t graduate high school kids that can read and write. That can do four functional math. That understand the nature of the world we live in. Imagine, how we’re going to compete against this enormous surge of STEM students in China who work hard and our incentive to work hard or elsewhere in the world. You know, we always lag in mathematics, for example, against the Russians and so on. This is serious right now because we have a massive population base in China. There is an emphasis on education. And I remember going to with the delegation that was sent by Jimmy Carter to meet with Deng Xiaoping in 1978– 79. We concluded that treaty on March 3rd, 1979. There was no education system at all. It was all mouth-taught. And by the way, there were no cars– there were 2,000 thousand cars in all of China when we were there. They’re the biggest auto industry in the world right now. But importantly, they have re-emphasized education as a way to grow up your income escape, the middle income trap. We almost de-emphasize it. And we talked about it a lot but we don’t do anything about it. In the end, it really comes back to families and what kind of incentives say they give and what kind of cultural incentives we have. And we’re seeing other cultures. China is probably the most glaring example where there’s an emphasis here. It’s value. It’s part of your sense of self to be well educated and to study hard and to work hard. That’s a major shift and it’s the further along we get without having that become part of our cultural ethic, the harder it is to correct. But it is to me the number one problem long-term for our country.

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91 Responses

  1. F3ND1MUS says:

    Thank you! Great stuff.

  2. Dragon Skunk Studio says:

    Neil DeGrasse Tyson said it best
    "Educate the electorate and when they vote they will elect educated politicians."
    This is not happening in the US right now.

  3. Maeu Daou says:

    As an Asian American, this is just common sense that education is the driver for everything. Like… you don't need to interview this guy to validate the important of education. I mean how dumb can we be? Are we that stupid? Sadly, I think the majority of American are dumb like a rock. They are so good at being loud and obnoxious though.

  4. Bear Briganti says:

    Clear your debts people

  5. doomtomb3 says:

    How can you convince kids to pursue an education when this culture worships entertainers making more money.

  6. ThanatosXRS says:

    Why is the guys face a cake of makeup?

  7. amu sonu says:

    what will cause nexr recessions ?
    those same old things which caused early recessions .

  8. awesome one says:

    America has large students in gender studies and social justices studies..activists are booming crop in america, retroic like companies should remove all male ceo's and replace them with female or fluid gender people.aka gender war… ignoring biology.. future coming of socialism … refusal to end war mongering .will bring next recession in america ..it will be good for America as
    .. people will come to senses..

  9. Papito Aman says:

    Simple, rich people will cause the next recession as they have caused others.

  10. Chris Hobson says:

    obama and biden are needed again we were just starting to come out of the malaise

  11. whyno713 says:

    This tool has forgotten where he came from. Wall St. is always quick, and pre-emptive, to "Blame the Fed" every-time their own Wall St greed adds to the misery of the inevitable down-turn of the business cycle. So it's the Fed that 'tips over the economy, which they have a record of doing last 10-13 times' ? Typical pathetic & spineless tripe shoveled to the retail investors, who are about to get whacked, to draw attention from Wall St. themselves. Instead, Wall St. (and despicable politicians E.g. dotard) scapegoats the very institutions that provide them the safety, stability, and security that allowed them to gorge. Oh, and bail them out.

  12. Mohamed Algml says:

    Why there has to be a recession?!!

  13. George Cruz says:

    What causes recessions interest rates going up. People topping out waits ng for a bottom. Some random really low number and a headline duh

  14. Adam Smith says:

    Good riddance, big education needs to fall.

  15. Some Person says:

    We have another housing bubble, car loan bubble, education bubble, and the federal goverment is currently lead by republicans who slash regulations on everything. This is why libertarian ideals don't work, people will not play by the rules and companies have a fiduciary responsibility to stock holders not citizens…

  16. George Cruz says:

    Because we don’t want people compounding there big gains, duh

  17. ThisCreatedAccount says:

    The govt is not dumb they know what they are doing to you. If you file for bankruptcy you still owe student debt. You are basically a LEGAL SLAVE with a mortgage, car payment, and student loans. This is MERICA bois.

  18. Walter Black says:

    American higher education is already dominated by a small minority of Asians. It will never be able to compete with a country like China with 4 times its population, ALL of them Asian.

  19. Adam P says:

    America is not even in the top 20 when it comes to education. And it shows.

  20. Ser Davos Seaworth says:

    “See how I did that? By leading us into a recession I technically am the reason we’ll eventually get out of it. I am a genius.” – Trump in ten years

  21. Pinchedi says:

    Clear all this insane student debt, it's hindering progress.

  22. Ryan Ryan says:

    Yes, keep people locked into huge student loans….that’s the solution…..?

  23. Frank Umlaut says:

    Get rid of public schools, or allow people to use vouchers like they do in Europe.

  24. Huey Freeman says:

    China really just copy and paste. Although they are graduating in good fields, they don't, or can't, or won't create their own.

  25. Gilster says:

    I agree that our biggest challenge will be the education issue. I also agree strongly (and this is not discussed at all) that the biggest problem lies with parents and the family not emphasizing the importance of education. American youth have too much involvement in social media and it is social media and socializing that seems more important to them.

  26. Cool Breeze says:


  27. ggl driv says:

    US have to stabilize Euro/Europe before ChiNa breaks.

  28. Stop Israel's Genocide says:

    …add the bad very expensive health care systems and zero raises in wages.

  29. Jarid Gaming says:

    How to fix the Economy:

    Hang all the whole Republican Nazi Party

  30. PP C. says:

    Good assessment.

  31. R A says:

    Pay for ppl with a 4 year degree needs to be at a minimum salary so the debt can be paid off… like 55k-65k a year

  32. ecobra169 says:

    Banks will cause the next recession.They always do. Then blame it on the poor and uneducated.

  33. zodiacfml says:

    Hey CNBC, do you put background music on your telecasts?

  34. Cole Russell says:

    sign the bill for the wall then!

  35. Franco Zhou says:

    This will. China falls the world falls.

  36. R R says:

    Just keep printing petrodollars as usual.

  37. Massimo O'Kissed says:

    Don't worry folks, Betsy DeVos is in charge.

  38. Kevo A says:

    The deepstate mad because trump wants to build the wall they need open borders so they can traffic drugs in to the ghettos and they need foreigners to form gangs to sell their drugs .the deepstate is afraid of trump because trump is the change we need in our country to end corruption the demoncratic party is part of the deepstate the old order if corruption.

  39. D Max says:

    Doesn't everyone realize that we have a reasonably consistent economic boom bust cycle occurring every 7-10 years? The coming recession should not be a surprise nor should it necessitate a video with an opinion from a fancy suit…

  40. Meldridge Reed Jr says:

    You should read "The Accidental Superpower" and "The Absent Superpower" by Peter Weihan. Your wrong.

  41. Sharjeel Khan says:

    These r the people who were in position of influence in the crisis of 2008 as well. No trust on bankers.

  42. Grant N. says:

    STOP deregulating wallstreet, stop doing trickle down economics it’s 1987 all over again.

  43. LiS Wright says:

    Everybody should just relax. All these experts predicting a recession like they WANT a recession to happen. Just be sure you have a cache of money saved up for emergencies.

  44. NC Styles says:

    I spoke to a car salesman. He told me that people with 300 FICO scores are getting approved for loans! 24% rates!! We in a bubble!!!

  45. Jamie Ward says:

    The fed prob number 1,printing money when theres none?Like bouncing checks,feds intrest rate only winner.

  46. ForestNinjaZero says:

    There's already a recession, and Richard Fisher is perfectly accurate. Unfortunately, there's no possibility of re-educating the population without world war.

  47. AES says:

    Nothing to see here.. move along

  48. Costa Michailidis says:

    Narrative games, narrative games… I see them everywhere.

  49. Sulfen says:

    We need to invest more in education and on trying to solve our educational problems.

  50. Bailey Henderson says:

    More opinons sears and JCP papa Murphy's rad kona aprn are so cheap please don't let this video win you if let technology entertainment e commerce run the nation you will not do well because the investors have to use years of money at minimum to the giants and they are hogs

  51. jttt3 says:

    what's the point of trying to time recession. No one can, so the best option is to invest for long term 5-15 years. Buy more stocks during recession this has been my experience. Bought lot during 2008 sitting on good profit. Suffer temporary losses for more gain

  52. Mike Fani says:

    Sell stock buy gold gold gold gold

  53. Rich Ovejero, CPA says:

    With the national IQ lowering, it is impossible to make America great again. Like he said we do not focus on education. But it is worse than that we just do not have the capacity. Just look at the fact that we have to import hi-tech employees from China and India via H 1 visas. The best jobs are going to foreigners because we as a nation lack the brain power. So we end up with people holding up signs that read "We want $15 per hour" while silicon valley is offering a signing bonus of $250,000 for new hires. But there is not any Americans applying for the jobs.

  54. conmigo carolina de norte says:

    Teachers want a million dollars a year to teach. They only turn out dumb nuts, cannot do math or even read.

  55. MIke M says:

    I think overall I have never met a dumb Chinese person, but most of them lack charisma that western people have.

  56. Cali Dreams says:

    This man is intelligent and speaks the truth about education in the USA. USA can’t be complacent with it’s education system any longer. The sheer NUMBER of “excellent” students that will enter the workforce in countries like China and India will be daunting to compete with in the future EVEN IF our education system is fixed and we can excel. If we do not fix, I really do not want to even think about it. There is a huge discrepancy in public education in the USA. There is even a huge difference in the quality of teachers in general. I’m not suggesting all lower income public school teachers are below standard but the difference is definitely there. We do not pay or respect teachers enough to get the best talent into the field. We need the brightest and the most talented in the field but why would the brightest and most talented choose teaching when other fields offer more respect and pay. Now even college professors find it difficult to find full time positions because colleges and universities make budgeting priority over quality and providing decent full time pay and benefits to it’s professors. If you remain complacent because your kids attend the best schools and will attend the best colleges, think twice. If the rest of the country goes down, so do you. Unless, you’re teaching your kids Mandarin and and have an escape plan which I imagine the wealthy can. Truly a sad state we’re in.

  57. tim ahlf says:

    Hopefully the rich man can suffer like the poor has to suffer when the next recession comes.

  58. Jay M says:

    The next recession will be caused by the chinese communist party which kills its own people and spys on its own people and other countries around the world. the world is slapping chinese communists in the face and banning its networks from their own countries.

  59. Li Li says:

    he is smart enough to see the real point

  60. Marc Padilla says:

    What is it? Reflexivity. In the process of bubble forming there is some loss somewhere in the system. So my guess is the ebb and flow of the market forces and those sensitive ,time sensitive, areas that become the focus of reflexivity.

  61. level says:

    so importing ten of million of uneducated immigrant into the country not helping

  62. IBM Carry says:

    Thos looney is part of the problem

    The fedral reserve


  63. Luca Matteo Barbieri says:

    Chinese are taught not to question authority. That's fundamentally really bad in science and math. Open minds and creativity are penalized: If you only do what you are told, and you can't think out of the box, than you will be replaced by AI in the future.
    Take for example people who were trained to do rapidly the calculations that are now done by any calculator/software: their expertee is today 100% useless.

  64. R Arbuckle says:

    I think it is the corrupt banking system

  65. no further west says:

    This guy knows his sh*t

  66. John Laubenstein says:

    Agree with most things he said but NOT about very robust growth. The 4 qtrs of robust growth referenced (3%+ GDPs) were because of disasters.
    -Two consecutive qtrs were from natural disaster rebuilds (wild fires and hurricanes)
    -Two following wars were from man made disaster (trade war stocking).
    -Q3 was revised to 1.2 adjusted for trade war stocking and Q2 was als revised much lower ex trade war stocking.
    Pretend it is strong but reality is different.
    Since 09 the average growth is 2+ which is subpar. Growth this cycle is 1/2 the last cycle.
    CB forced $5T in QE/Stimi/Bond Buying on ZIRP and NIRP and gave us massive debts/deficits for below avg growth.
    The Federal Reserve is to blame along with D.C. politicians.
    The corps who used tax plan for buybacks will face vengeance of the people at some point when the people become aware of what happened.
    Fischer failed in this interview

  67. Gerry Boric says:

    Tariffs, Tariffs, Tariffs

  68. Buffalo Gal 913 says:

    More videos pls Richard, excellent video. Especially the educational comments. Education and the desire for its starts in the home and when it is not there seldom is there success.

  69. River Yang says:

    Key modules in Asian school: math and science.
    Key modules in American school: basketball, human rights.

  70. Ender Wiggin says:

    It’s not a business cycle. It’s a credit cycle. He knows that..

  71. Ender Wiggin says:

    The only real growth the US has had is credit growth. No, my mistake, poverty is the other growth area.

  72. ACK Preacher says:

    Wow — this Richard Fisher has more make up on than Tammy Faye Baker — looks like he is ready for his own wake —

  73. Jasc Random says:

    One idea to fix the Education system:
    -Ban all education-related fees & loans for students.
    -School funding (Private & Public) should instead be tied to their Graduate's income. About ~0.5% of their income for every semester studied or so.
    This would strongly incentivise Schools to give their students the best and all the tools they would need to succeed later in life. Over time, Bad schools would be defunded and good schools would get much more funding.
    Things i expect would happen are:
    -Many schools would specialize in certain types of professions like Sports, Arts, STEM, Craftsmanship, etc.
    -Schools will setup networks, communications and contacts with Industries so they learn what skills are needed, and to make it far easier for their Graduates to get (high-paying)Jobs.

  74. mohali shaf says:

    ??? ??????? ??????? ???? ?? ? ??????? ????? ???????.. heads should start rolling for any war in the Middle East or Russia.. they control the ????????? ?? ??????? ??????? ???? ???? ??? while dictating other countries from doing so.. who actually owns the Federal Reserve Central Banks? The ownership of the 12 Central banks, a very well kept secret, has been revealed:

    Rothschild Bank of London

    Warburg Bank of Hamburg

    Rothschild Bank of Berlin

    Lehman Brothers of New York

    Lazard Brothers of Paris

    Kuhn Loeb Bank of New York

    Israel Moses Seif Banks of Italy

    Goldman, Sachs of New York

    Warburg Bank of Amsterdam

    Chase Manhattan Bank of New York.. God Willing.. Ameen.. https://www.facts-are-facts.com/news/the-federal-reserve-is-privately-owned?fbclid=IwAR0GdlKf1drkHkGpVlWxMjmp4cHyVAAfSjPn0G9278z0pnCAHjGNyr3_Smk#.XCjP61wzaUl

  75. FlowChange 54tyr says:

    "We need more education!" Millennials are already more educated than previous generations, that didn't work out, pretty soon Ph.D's in astrophysics will be the norm at your local McDonald's. Why don't bankers just stop stealing money instead of lazily making excuses and blaming it on the young and the poor?

  76. Hannz says:

    So…..US will have more asian bosses? And professors?

  77. Hero Of Bukit Padang says:

    Scholarship are given to ballers…. nuff said

  78. Alan_1212 says:

    Next recession huh? We could avoid that if we end the stupid war in the middle east that costs us 5.9 trillion dollars so far, stop giving money away for foreign aid and use that money in America to pay down some debt we have. End the federal reserve which couldn't even account for 5 trillions dollars lost back in the early 2000's and get rid of these globalist elitist that control the central banking system like George Soros or the Rockefellers. Not that hard.

  79. Madison Miller says:

    Couldn’t agree more , well said all around !

  80. Eagle Artillery says:

    It's education not military industrial complex which runs the deficit and digs whole nation in debt.

  81. meowmeow says:

    This guy has a lot of makeup on……
    China cheats at everything………EVERYTHING

  82. Mozzy Arfa says:

    America is done. When you invest more
    Money in guns and Weapons and stupid wars than your education and infrastructure, you’re doomed for failure.

  83. Christian Lovborg says:

    Ahhh no… Education is a massive problem, sure. So is our healthcare system, but the next recession, like all the prior will be caused by excessive debt (public, private, or corporate – currently the biggest problem) and a downturn in the credit cycle.

  84. Clyde Macasero says:

    completely agree. if we want our US economy to grow & fluorish, we need to nurture the future generation now! we lack in emphasizing a strict & rigorous education system. thanks to STEM, we are slowly making our way there, but newly developing capitalist countries have always adhered to a strict academic system

  85. Clinton Lunn says:

    True patriotism is working together for a stronger national fabric. Patriotism is not putting an American flag or "I support the troops" sticker on your SUV. It doesn't really matter though. The time has past for America to turn around in my life time. I will spend the next 50 with a front row seat to the greatest reality TV show on earth. ?

  86. SAY FAMI says:

    Very True!!! FakeEducation

  87. Greiguci Wootchie says:

    Money education is the ONLY bad thing about the US education, apart from that, it's one of the best on earth.

  88. Phillip Zhong says:

    True. Americans are a bit too stupid

  89. Diane DePould says:

    Would you buy a used car from this man? Never trust someone (in a tie or not) who makes liberal use of the word "robust" or also "systemic." Rob us blind and blame it on Chinese kids!

  90. Kevin Merdy says:

    True, the U.S. will become a third world country, economically and socially.

  91. Anardo Cuello says:

    That is your f* fault you god damn bean counters. You do massive layoffs and rob states from taxes so you can get a better return per share.

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