When Mark Cuban sat down with Vator CEO Bambi Francisco last Thursday at Vator Splash LA, they covered a range of topics, from politics to the value of Shark Tank to whether or not Cuban would run for office.
One of the more interesting, and contentious, topics they touched on was the national debt. Even though the national debt has doubled during the Obama administration, the economy has grown roughly 2% year-over-year, meaning debt has grown 5 times faster than the economy, Francisco pointed out. Cuban admitted growth was slow, but that debt wasn't as big a concern as some headlines make it out to be.
The whole "debt" discussion started when Cuban had said that the reason he was supporting Hillary over Trump was the instability he would bring as President. Francisco brought up another factor - and more important factor these days - that destabilizes the market - the Fed's policies.
"You talk about instability, and that really hurts the stock market. Let me tell you another thing that can hurt the stock market: the debt and the Federal Reserve's policies. Every time the Fed eases over the last 10 or so years, the stock market just spikes higher. One thing you have to give him credit for, and I know that you've Tweeted about this, that Donald Trump doesn't know a thing about the Fed, and I agree with you there, but, again, he doesn't know these things but he calls them out," Francisco said.
"Think about what you just said!" Cuban responded, laughing. "Think about what you just said! 'He doesn't understand it but he calls them out?'"
"What he's pointing out is that we have had easing for the last 10 years. Has the Fed created an asset bubble? Do you think there's an asset bubble?" asked Francisco.
"Firstly, I think you leave the Fed alone," Cuban said. "They're trying to find a reason, and a way, to raise interest rates, because they know that any tools in the tool box that they thought they had hasn't worked the way they expected them to. They're playing big data. Probably everybody in this room has some viewpoint on big data, machine learning, deep learning, AI, etc. It's trying to find ways to take huge amounts of data and so stuff in an intelligent way. The Fed is trying the same thing," said Cuban.
"Is there an actual answer?" Cuban went on. "No, I don't have the answer and neither do they. But here's what I do know: what other economies are better than ours right now? Where are people sending their money? Anybody here rushing to invest their money outside the United States? China and Russia are passing laws and cracking down on people investing money in the United States. You know who's going to hurt the most from that? Trump, because he can't sell them condos, but that's a different issue. Those countries are working to try to keep capital that's controlled by individuals inside their countries. So, when you just look at the path of capital, it's all coming here."
While he admitted that he'd like growth to be higher than it is, he also said that this is the longest period of sustained growth.
"Every other post-recession growth period has had a recession in there, so you go two steps forward, one step back."
Francisco then pointed out that the economy has grown but only because the country has doubled the debt by $10 trillion, which Cuban countered with, "And what's our GDP?"
"If you take all of our entitlement programs, and everything that we possibly own, the amount's always been about equivalent to our GDP in absolute debt. So what's the alternative? What do you think would happen if we didn't spend the money? That's the question. You want lower debt."
"GDP has grown 2 percent each year [or some 16%] while debt has doubled. Debt has grown by a 5-to-1 ratio," she said.
"Does the debt concern you?" Francisco asked.
"No," Cuban responded. "It's not that I don't care about it. I care about what happens to this country. I want to see the economy grow. I want to see more jobs. But I want to think through. I don't want just headline porn. Headline porn is, '$9 trillion increase in debt.' Headline porn is, 'We're in so much debt the country's going to implode,' which is nonsense."