Economics Series 2: Paul Musson / Inflation / Capital v Money / Real Estate

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Welcome to another episode of
Come Together.

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Paul Musson.
We are live.

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Did I pronounce your last name
right?

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You did it awesome.
Well, congratulations on your

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book.
Congratulations on on the book

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and congratulations on your semi
retirement or retirement, I

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guess.
Well, it was sort of supposed to

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be a semi retirement, but I
think I'm busy now than I was

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when I was working full time.
It's sort of seven, seven days a

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week for sure.
Yeah, because I also have a free

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blog that goes out every week.
All political economy instead of

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political.
Paul, my first.

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Name beautiful, I love it I.
Love it, so much fun.

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Yeah, I guess the only
difference would be that, you

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know, whether you're doing it
for someone or whether you're

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doing it for yourself, you know,
because I, I mean, I imagine

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that you don't want to ever stop
doing fun things that you enjoy,

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you know, but as opposed to
have.

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Yeah, no, that's true.
But I was fortunate in that I

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also loved my job.
You.

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Know I was a.
Professional investor for over

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30 years.
I worked for a great company.

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I had a great team who are now
continuing on what we all built

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together.
They're doing a great job.

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They were all over at my house
last Thursday for our annual

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team golf day.
So.

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So I'm still involved, but from
the from the periphery.

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But it's all fun.
Beautiful.

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Yeah, beautiful, beautiful.
So tell me a little bit about

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about yourself, if you don't
mind.

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Then we'll talk about the book
and we'll talk about everything.

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But tell me a little bit about
who you are first.

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Yeah, OK.
Yeah, sure.

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Yeah.
Thank you.

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So yeah, I was born in the UK
and don't worry, I'm not going

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to go through my whole life
history, but we moved to Canada

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when as a family when I was very
young back in 1965, and then

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grew up in Montreal, moved to
Toronto in 1990, December 1990,

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just looking for work.
And.

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Yeah, I was literally sleeping
on the hardwood floor of a

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bachelor apartment, like a one
room studio and looking for

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work.
Not, not.

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Even a chair.
I had no furniture at all and my

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first job was in a video store.
Your younger listeners probably

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don't even know what that is.
The blockbusters of the world.

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Exactly.
Yeah.

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And yeah.
Working nights and sleeping on

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the floor.
I was 29 years old.

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That's how.
Wow.

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Dart in Toronto.
Did you ever have a vision of

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what you wanted to do?
You weren't sure?

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Just I had a very broad vision.
I knew I wanted to do investment

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analysis, but I was very naive
about the structure of the

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industry.
What you know, what the entry

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even looked like.
I just wanted to, I knew I

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wanted to analyze companies, do
investment analysis.

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And so, yeah, so I knew that.
And and that came to me very

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late in life, like when I was 25
or something.

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I was just going through
university, taking all kinds of

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courses, not knowing what the
hell I wanted to do.

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My big passion actually back
then was reading stuff like

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philosophy and history and, and,
you know, I couldn't wait to, to

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finish my, you know, school work
so I could get home and read.

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And like, that's where I felt
the real learning was.

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It's like Mark Twain said, you
know, I never let school

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interfere with my education.
That's right.

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That's right.
School.

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Is necessary, don't you know?
But.

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But yeah.
And then and then going from one

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job to another, always trying
to.

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My attitude back then when I
arrived in Toronto was I didn't

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want to be a burden on anybody,
financially, emotionally,

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physically, nothing.
That's how I sign off on my

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weekly blog is be free and do no
harm, right?

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If you focus on not doing any
harm and just doing the things

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that you like to do, I think
you're a long way there to

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helping make the world a much
better place.

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And there's other things you can
do, too.

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But those two things.
And yeah, so I did the best I

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could at every job that I took
on, no matter what it was.

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And I tried to be pleasant.
And you know, people got all

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kinds of shit going on in our
lives that you don't know about.

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Things worse.
For them, why are you going to

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pile on top of that?
You know, try to be a positive

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influence and it's amazing the
the effect and the influence

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that you can have.
Judge by the way with very with

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very minimal interaction too.
Literally just eye contact and a

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smile is all you need it.
Goes a long, long way and you

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know, you can bring out the very
best in in good people.

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Conversely, if you're a jerk,
you're in an environment that

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you know is a very bad corporate
culture, bad environment that

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can bring out the very worst and
very good people.

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And like, I've been there.
Like my God.

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I can't believe I said that or I
did that.

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You know, what was I thinking?
Well, I, I know what it was.

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It was the environment.
It was, it was a conflict.

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Not I'm not a bad person, but
boy.

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Yeah.
Embarrassing.

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It was very hurtful.
I don't want to do that anymore,

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you know, and yeah, so just
going from not a lot of jobs,

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but here there do a good job.
And, and then, you know, I think

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if you do a good job and your,
your boss and your colleagues

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can rely on you, then they will
enthusiastically refer you to

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other jobs, you know, as long as
you're honest with them from day

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one about what your path is.
And, and you know, I told my one

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boss that, look, I'm, I'm only
going to be here for two years.

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Because I wanted to I.
Was an assistant to a

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stockbroker.
It was tough job and after two

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years I said you know, you have
to start looking for someone to

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replace me because two years is
up.

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I need to, I want to get into
research and she said.

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Paul, you've been straight with.
Me from day one, I'm going to

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help you find a job and I got a
job on the institutional trading

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desk at CIBC World Markets in
large part because of her her

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referral.
And yeah, she's.

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Still a friend today and she
listens and reads my blog and

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she's reading my book and.
That was beautiful in. 94 when?

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When?
I that was a full year before I

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was born.
Yeah.

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Yeah.
I'm. 63 now.

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So there you go.
Very unconventional.

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Well, maybe it wasn't, I don't
know, but it's unconventional

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career path.
It's not like the the path that

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they teach you to take in
school.

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Right, non non linear.
Yeah, no, exactly.

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But it was, it was fun.
And I learned so much and I met

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so many amazing people.
And, you know, and then you

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learn about careers that you had
no idea about.

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You know, like, how can you know
what's involved, You know, being

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an assistant to a stockbroker
unless you've done it.

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Or being an.
Analyst or being an

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institutional sales and you
know, settlements and stuff like

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that and yeah, so you learn as
you go and you know, it's you

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know, it's not it's not all fun
and games.

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There are times that you really
have to, you know, bear down and

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and and see through it because,
you know, as I said earlier, you

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know, I was trying to do no harm
and be a positive influence.

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Well, not everybody else around
you is thinking that way, sure,

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but you can't let it get to you.
Within reason, of course.

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Sure.
And and if you can't fix it,

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then then you have to move on.
And I had to do that a couple of

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times.
And yeah, you give it the old

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college try.
Be honest with people about what

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your concerns or issues are.
And if you can't fix it, then

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don't remain angry at those
people.

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Just move on.
Yeah, yeah, it's.

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Beautiful advice.
It's really good advice,

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especially I think that I think
what people struggle with and

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I've noticed, I guess
anecdotally, but from a lot of

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my friends would be that they
prefer the familiar devil and

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the unfamiliar solution.
You know, like they prefer

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you're like, well, I know what
I'm dealing with over here and

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like, I know what to expect.
But like out there, I don't know

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what's going to happen out
there.

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And, you know, at least at least
I have the consistency or you

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know, I could at least I could,
you know, predict within a

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relative, you know, with the
relative accuracy, the way that

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my boss is going to treat me
today or the way my Co worker is

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going to behave today.
And even though it's not great,

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it's better than not knowing
what's going on out there.

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You know, I think that's, I
think that holds a lot of people

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back.
Yeah, and it's, it is scary, you

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know, when you're change, when
you're changing and you have a

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an income, especially if you've
got bills you got to pay and

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stuff like.
That, yeah.

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And you might end up in a worse
place, it's true.

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But if you do, then change that
one too.

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Right.
Just keep going until you find

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something you really love,
because being stuck in a in a in

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a stressful environment is very
unhealthy.

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Yeah, you know.
For your longer term and yeah,

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and you want to be happy.
You don't want to be just

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existing.
Right.

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You know life.
Is happening right now, you

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know?
Don't just wait and hope

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something better comes along or
that person will change or maybe

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they'll leave or whatever.
It's not easy to do, but it

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really is for your own good, you
know?

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Yeah, it's beautiful.
Do you think that, do you think

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that your interest in philosophy
and I guess concepts and ideas,

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I guess and analysing them is
concurrent or runs along the

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same theme of your interest in
analysing companies and stocks

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and stuff like that?
Do you think that it's just the

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way that you think and your
train of thought?

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Yeah.
I'm not sure.

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Be honest with you.
Yeah, I don't know, Like, like.

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I was.
But what about what about what

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about stock analyzing, company
analyzing?

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Was it was attractive to you?
Well, first of all, like, I love

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math.
I'm not a math genius by any

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means.
Like I, I was above average.

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I always, you know, got good
marks in math, but I was

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definitely not a math genius.
But I like math.

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Like that, right?
And I like accounting.

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And.
I like figuring things out and

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you know when you're building
your mall, when you're looking

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at a company and you got your
income statement, balance sheet,

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cash flow, I would build it all
myself, input all the numbers.

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I just love doing it.
I loved inputting numbers.

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And then getting.
Them all to balance all the

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three statements and then as
you're building those statements

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statements yourself, you're
going year by year, you're

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discovering things about the
personality of the management

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team just through the accounting
because there's a lot of

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latitude and accrual accounting
like different decisions that

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management can make with respect
to how they want to account for

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the business.
And so that was so much fun over

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where's that big write off there
or how come they change the

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depreciation here?
But you know all this kind of

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stuff.
So it's like sleuth detective

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work, problem solving.
I was loved at that challenge.

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I love meeting.
I mean, who doesn't like really

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capable people?
Like the class.

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CEOCFOS, very impressive people.
Now you got to be careful

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because impressive people can
you know, you can get your guard

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down.
You now just you, you, you want

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to impress them that you know
what you're talking about too.

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Well, no, you shouldn't be doing
that.

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You should be trying to figure
out how they're really thinking

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what the long term plans are.
Do they make sense or, you know,

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or a day until lunch?
Different businesses look

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researching different business
models.

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Oh my God, I never even knew
this type of business existed.

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And that's also.
That's tons of fun.

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Yeah, it's tons of fun and
seeing how they are wowing their

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customers.
You know, their customers love

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00:12:34,680 --> 00:12:37,280
what they do in these companies,
reinvest in their business all

228
00:12:37,280 --> 00:12:39,600
the time to make the product
even better, to stay ahead of

229
00:12:39,600 --> 00:12:42,600
the competition.
When you do that, you improve

230
00:12:42,600 --> 00:12:45,680
your operating costs if you make
more money.

231
00:12:45,680 --> 00:12:48,720
But what that does is that
attracts competition because

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00:12:48,720 --> 00:12:51,760
you're making more money and now
you have to lower your price.

233
00:12:51,760 --> 00:12:57,560
So if all this is working
correctly without government

234
00:12:57,560 --> 00:13:02,000
interference, then prices should
steadily decrease as companies

235
00:13:02,000 --> 00:13:04,520
increase their efficiency
because the excess profitability

236
00:13:04,520 --> 00:13:05,480
gets computed.
Away.

237
00:13:06,120 --> 00:13:08,560
And that's right, we.
Should have an economy getting

238
00:13:08,560 --> 00:13:10,600
ahead of myself here.
Maybe, but we should.

239
00:13:10,600 --> 00:13:15,760
That is slowly falling prices.
So all that productivity growth,

240
00:13:16,800 --> 00:13:20,920
the hard work and innovation and
research and development, like

241
00:13:20,920 --> 00:13:23,360
people putting their own skin in
the game, the ultimate

242
00:13:23,400 --> 00:13:26,200
beneficiary should be the
consumer.

243
00:13:26,680 --> 00:13:31,640
And so if you have a flat wage,
your income isn't going up every

244
00:13:31,640 --> 00:13:33,600
year.
You would be getting wealthier

245
00:13:33,920 --> 00:13:37,360
as your flat wage would buy more
and more stuff because prices

246
00:13:37,360 --> 00:13:42,280
are slowly coming down and.
Yeah, so right.

247
00:13:42,360 --> 00:13:44,880
In reality, at least in reality,
we know that's.

248
00:13:44,960 --> 00:13:49,640
Opposite.
Yeah, because it's the opposite.

249
00:13:49,680 --> 00:13:55,720
Because policy makers increase
the money supply faster than the

250
00:13:55,720 --> 00:14:00,560
economy can produce stuff.
And so there's more money

251
00:14:01,040 --> 00:14:04,040
chasing not as much more stuff
as.

252
00:14:04,040 --> 00:14:05,760
So the prices of that stuff goes
up.

253
00:14:06,800 --> 00:14:09,280
Right.
They will tell you that

254
00:14:09,840 --> 00:14:14,680
inflation at around 2%.
It's a good thing that you need

255
00:14:14,680 --> 00:14:16,440
inflation for an economy to
grow.

256
00:14:16,920 --> 00:14:21,840
No you don't.
In the last in the last 30 years

257
00:14:22,360 --> 00:14:29,720
well 1867 to 1897 till that 30
year period in the states money

258
00:14:29,720 --> 00:14:34,200
supply growth was only about
four 4 1/2% per year to

259
00:14:34,600 --> 00:14:42,800
interrupts average.
Yet the the US economy exploded

260
00:14:42,800 --> 00:14:49,680
in terms of productivity and so
you had generally you had

261
00:14:49,800 --> 00:14:54,080
falling prices over that time.
So you had falling prices, you

262
00:14:54,080 --> 00:14:56,480
had deflation, not.
Inflation.

263
00:14:57,160 --> 00:15:00,320
In an economy that was booming,
right?

264
00:15:00,720 --> 00:15:03,640
Right.
So empirically, by experience

265
00:15:03,920 --> 00:15:08,720
and theoretically, you can
demonstrate and prove that deep

266
00:15:08,960 --> 00:15:11,640
inflation does not require for
an economy to grow.

267
00:15:12,520 --> 00:15:16,880
And if anything, inflation of
any sort detracts from the

268
00:15:16,880 --> 00:15:19,880
productive capacity of the
economy, not that the economy

269
00:15:19,880 --> 00:15:23,560
stops growing, it just grows
slower than otherwise would have

270
00:15:23,560 --> 00:15:28,360
grown.
And so it's it's the what French

271
00:15:28,480 --> 00:15:32,800
economist back in the 1800s,
Frederick Bastia, said that

272
00:15:35,040 --> 00:15:39,320
economist needs to look at what
is not seen.

273
00:15:40,640 --> 00:15:46,480
So if governments inflate and
economy is growing, they will

274
00:15:46,480 --> 00:15:50,200
say, hey, look, well, we have 2%
inflation, economy still

275
00:15:50,200 --> 00:15:50,880
growing.
Yeah.

276
00:15:50,880 --> 00:15:53,080
But what you don't see is if
they weren't inflating, the

277
00:15:53,280 --> 00:15:55,200
economy would have been growing
even faster.

278
00:15:57,480 --> 00:15:59,880
So what?
So what would the argument be

279
00:15:59,880 --> 00:16:02,360
for people to say that
inflation, that that inflation

280
00:16:02,360 --> 00:16:03,760
is necessary?
I mean, I understand, I

281
00:16:03,760 --> 00:16:06,680
understand what you're saying
now, but it can't be that I is,

282
00:16:06,720 --> 00:16:09,320
is there another perspective or
another argument that people

283
00:16:09,320 --> 00:16:14,160
make to to explain that away?
Yeah, it's largely, it's sort of

284
00:16:14,160 --> 00:16:18,160
the Keynesian economic.
Which is Keynesian is generally

285
00:16:18,160 --> 00:16:20,160
that with government spending
right or government back

286
00:16:20,160 --> 00:16:21,600
spending is typically the idea
government.

287
00:16:22,040 --> 00:16:27,000
Well, the So what is called
Keynesian economics today, I

288
00:16:27,040 --> 00:16:29,960
don't think John Maynard Keynes
would recognize.

289
00:16:29,960 --> 00:16:33,560
OK, I.
Think it's been bastardized, so

290
00:16:33,560 --> 00:16:35,760
what's the original idea and
what's what's it become?

291
00:16:36,280 --> 00:16:38,480
Yeah.
So I think that, you know,

292
00:16:38,480 --> 00:16:43,560
Keynes idea that he put forth in
his book called The General

293
00:16:43,560 --> 00:16:48,000
Theory back in 1936, you have to
remember the context as well.

294
00:16:48,960 --> 00:16:52,520
Yeah, the Western world was in
the middle of the Great

295
00:16:52,520 --> 00:16:54,360
Depression.
And.

296
00:16:54,920 --> 00:16:58,440
So he advocated for government
spending.

297
00:16:58,440 --> 00:17:04,440
He he would have said that the
Depression was a result of a

298
00:17:04,440 --> 00:17:09,359
lack of animal spirits and that
people all of a sudden wake up

299
00:17:09,359 --> 00:17:12,520
and they're, you know, they're
too afraid to spend their money.

300
00:17:13,359 --> 00:17:15,079
And if.
You don't spend your money,

301
00:17:15,079 --> 00:17:17,960
you're denying somebody else of
an income, right?

302
00:17:18,119 --> 00:17:22,160
So if you won't spend your
money, then the government will

303
00:17:22,400 --> 00:17:26,800
either tax you or borrow your
money or print money which takes

304
00:17:26,800 --> 00:17:29,000
your capital from you.
We can talk about in a second.

305
00:17:29,040 --> 00:17:31,520
And they will spend your capital
for you.

306
00:17:32,720 --> 00:17:36,040
So they will.
So the government can only spend

307
00:17:36,040 --> 00:17:38,360
capital by taking it from
somebody else, the government.

308
00:17:38,360 --> 00:17:39,240
Doesn't.
So it's for spending?

309
00:17:39,240 --> 00:17:40,440
Yeah.
The government has none of its

310
00:17:40,440 --> 00:17:42,280
own money.
Exactly.

311
00:17:42,280 --> 00:17:45,600
Yeah, or it has money, but it
doesn't have capital so the

312
00:17:45,640 --> 00:17:49,400
government can print money.
OK.

313
00:17:49,400 --> 00:17:55,080
And when it print money, they
take your capital so and that

314
00:17:55,120 --> 00:17:57,800
and that's an important
distinction which which we'll

315
00:17:57,800 --> 00:17:58,960
get to in a second.
But I just want.

316
00:17:59,040 --> 00:18:03,600
To which is capital versus money
capital, Yeah, go ahead.

317
00:18:03,600 --> 00:18:05,640
Sorry, versus.
Money, but let me just finish on

318
00:18:05,640 --> 00:18:06,520
the please.
Animal.

319
00:18:07,040 --> 00:18:11,840
Spirits and why policy makers
are convinced that inflation is

320
00:18:11,840 --> 00:18:15,120
a good thing.
OK, decidedly not.

321
00:18:16,280 --> 00:18:21,120
And so it's not animal spirits
that that caused the Great

322
00:18:21,120 --> 00:18:23,960
Depression.
I mean, it's still highly

323
00:18:23,960 --> 00:18:29,080
debated what caused it.
But there were things like Smoot

324
00:18:29,080 --> 00:18:30,920
Hawley tariffs that were put in
place.

325
00:18:30,960 --> 00:18:34,600
I think it was 1930.
So global trade ground to a

326
00:18:34,600 --> 00:18:37,720
halt.
All of a sudden, President

327
00:18:37,960 --> 00:18:42,120
Hoover, Republican sent tax
rates through the roof.

328
00:18:42,120 --> 00:18:45,960
There were no income taxes.
By the way, in. 19. 13 right and

329
00:18:46,120 --> 00:18:49,400
now.
I think he took them up to 63% I

330
00:18:49,400 --> 00:18:54,280
think in 1932. 63% on income
tax.

331
00:18:54,480 --> 00:18:58,560
Yes.
And then Roosevelt in 1935 or

332
00:18:58,560 --> 00:19:01,920
36, I think he took them to 75%
or something like that.

333
00:19:02,400 --> 00:19:05,280
What?
Yeah, the top, the top marginal

334
00:19:05,280 --> 00:19:09,320
tax rate in the 50s, they were
over 90%.

335
00:19:10,520 --> 00:19:12,960
For who?
How come I never heard about

336
00:19:12,960 --> 00:19:14,240
that The.
Top incomer.

337
00:19:14,320 --> 00:19:17,360
I know a lot of people.
I'm actually writing about it in

338
00:19:17,360 --> 00:19:26,280
my weekly blog section.
And so right now the last couple

339
00:19:26,280 --> 00:19:28,440
of books have been on supply
side economics.

340
00:19:29,200 --> 00:19:31,480
I'm not a supply side economist,
but I like learning about

341
00:19:31,480 --> 00:19:34,240
different economics and they've
got lots of great stats in

342
00:19:34,240 --> 00:19:37,520
there.
But anyways, getting off track.

343
00:19:37,520 --> 00:19:46,360
So, yeah, so the depressions or
recessions are for the most part

344
00:19:46,600 --> 00:19:50,120
the result of bad policy, the
bad monetary policy.

345
00:19:51,440 --> 00:19:55,520
And and this goes way back to
the 1800s, even before there was

346
00:19:55,520 --> 00:19:59,600
a Federal Reserve, monetary
policy was dictated primarily by

347
00:19:59,600 --> 00:20:03,520
the Treasury in the 1800s.
So you you had the the Sherman

348
00:20:03,520 --> 00:20:07,560
Silver Act and Land Allison
Silver Act and all this kind of

349
00:20:07,560 --> 00:20:12,040
stuff.
But so so policy makers like the

350
00:20:12,080 --> 00:20:16,280
idea of inflation.
Are people being having

351
00:20:16,440 --> 00:20:19,440
believing that inflation is good
for the economy because it gives

352
00:20:19,440 --> 00:20:23,720
the central bank the excuse to
increase the money supply and

353
00:20:23,720 --> 00:20:28,880
inflate and, and so then that
affords enables the government

354
00:20:28,880 --> 00:20:32,840
to spend more money than
otherwise could and be popular

355
00:20:32,840 --> 00:20:36,000
with the voters.
And then when you're inflating

356
00:20:36,080 --> 00:20:38,960
the money supply, you're
debasing the currency, you're

357
00:20:38,960 --> 00:20:42,560
making the money worth less.
And so all the debt that you

358
00:20:42,560 --> 00:20:46,320
take on becomes worth less over
time the more you inflate.

359
00:20:47,520 --> 00:20:49,560
It's.
Like governments, like

360
00:20:49,560 --> 00:20:54,560
inflation, and then they'll use
excuses like the paradox of

361
00:20:54,560 --> 00:20:56,520
thrift.
This is one of their favourites.

362
00:20:57,400 --> 00:20:59,240
What's that so?
Yeah.

363
00:20:59,320 --> 00:21:03,000
So they will say that saving an
investment is not a good thing

364
00:21:04,360 --> 00:21:08,080
for the economy as a whole,
because, like I said earlier,

365
00:21:08,080 --> 00:21:10,920
the more you save.
They will argue.

366
00:21:10,920 --> 00:21:13,880
Then you're denying someone else
of an income because you're not

367
00:21:13,880 --> 00:21:16,800
spending your money.
But this is really fallacious

368
00:21:16,800 --> 00:21:19,920
economic doctrine because when
you save your money, it's not

369
00:21:19,920 --> 00:21:22,600
like your money is not spent.
It's just spent in a different

370
00:21:22,600 --> 00:21:26,320
part of the economy.
Your money is invested and the

371
00:21:26,320 --> 00:21:28,600
part of the economy that is
producing goods and the

372
00:21:28,600 --> 00:21:31,800
intermediate goods part of the
economy.

373
00:21:33,120 --> 00:21:39,040
And so they will say that.
So let's say the example I use

374
00:21:39,040 --> 00:21:44,600
in my book is that central bank
will tell you that if there is

375
00:21:45,560 --> 00:21:49,280
0% inflation, that's really bad
for the economy because people

376
00:21:49,280 --> 00:21:53,120
won't be encouraged to spend
their money because prices

377
00:21:53,120 --> 00:21:55,440
aren't rising.
They think that you need to see

378
00:21:55,440 --> 00:21:58,080
rising prices to encourage you
to spend your money before

379
00:21:58,080 --> 00:22:01,400
prices rise.
And so I use the example of

380
00:22:01,960 --> 00:22:04,760
forget 0.
I use the example of 2%

381
00:22:04,760 --> 00:22:07,200
deflation.
So assume there's 2% deflation,

382
00:22:07,200 --> 00:22:09,800
which means that prices are
falling 2% every year.

383
00:22:10,440 --> 00:22:13,600
So this is a central banker's
nightmare that they think the

384
00:22:13,600 --> 00:22:16,000
economy will grind to a halt
because everybody will stop

385
00:22:16,000 --> 00:22:18,760
spending the money because
they're going to wait for 2%

386
00:22:19,440 --> 00:22:23,680
lower prices next year.
So assume that you you have ATV

387
00:22:24,160 --> 00:22:28,480
and you want another TV for your
basement for your kids so they

388
00:22:28,480 --> 00:22:30,600
can watch it down there and not
make a noise upstairs in the

389
00:22:30,600 --> 00:22:32,360
living room.
So this is a real.

390
00:22:32,360 --> 00:22:39,160
Luxury and the TV is 300 bucks
and there's 2% inflation.

391
00:22:39,160 --> 00:22:43,720
So your choice is your choices
are you can buy the TV today for

392
00:22:43,720 --> 00:22:49,040
300 bucks or you could wait a
year and save yourself $6 and

393
00:22:49,040 --> 00:22:52,080
buy it for $294.00.
Are you going to wait a year?

394
00:22:52,440 --> 00:22:53,200
No.
No chance you're.

395
00:22:53,480 --> 00:22:57,360
Going to buy?
It today exactly so anyways,

396
00:22:57,400 --> 00:22:59,360
it's preposterous economic
doctrine.

397
00:23:01,120 --> 00:23:04,320
Well, I would also imagine, I'm
sorry, I would also just

398
00:23:04,320 --> 00:23:06,000
imagine.
And I think I think it's a big

399
00:23:06,000 --> 00:23:10,200
problem that exists in today's
market is that people feel like

400
00:23:10,200 --> 00:23:14,040
no matter how much you save, you
can't keep up with the cost of

401
00:23:14,920 --> 00:23:17,400
like the the amount that you're
going to save over the course of

402
00:23:17,400 --> 00:23:20,280
a year or two or three.
Can't possibly keep up with the

403
00:23:20,280 --> 00:23:22,680
amount of that, of that the
prices are going to keep on

404
00:23:22,680 --> 00:23:24,640
rising over the course of two or
three a year.

405
00:23:24,680 --> 00:23:28,040
So like, why even bother?
You know, I mean, I, I can tell

406
00:23:28,040 --> 00:23:30,280
you even about, you know, I
mean, my own experience buying

407
00:23:30,280 --> 00:23:35,040
homes, you know, like it is
crazy, you know, and, and people

408
00:23:35,040 --> 00:23:36,760
don't.
And, and, and it used to be that

409
00:23:36,760 --> 00:23:39,400
I, I imagine at least, you know,
I don't know what, and I'm sure

410
00:23:39,400 --> 00:23:42,200
there's a lot of more many
factors involved in this, but

411
00:23:42,680 --> 00:23:45,640
you used to be able to save up.
My dad told me before I bought

412
00:23:45,640 --> 00:23:47,880
my house, you know, I was caught
asking whether it was a good

413
00:23:47,880 --> 00:23:49,640
idea.
And he said, I don't know.

414
00:23:49,720 --> 00:23:51,960
I said, what do you mean?
He said at the time when I

415
00:23:51,960 --> 00:23:56,280
bought my house, you know, in,
in 1990, 4, he's like, I bought

416
00:23:56,280 --> 00:23:59,720
a $250,000 house.
I was making $85,000 a year.

417
00:24:00,000 --> 00:24:03,160
And I, I, I, I, I spent
approximately 1/3 of my salary

418
00:24:03,160 --> 00:24:04,480
knowing that I'll be able to
cover it.

419
00:24:04,840 --> 00:24:09,320
He's like, nowadays you, you
know, if you, you know, you make

420
00:24:09,320 --> 00:24:13,160
$100,000 a year and you're
buying an $800,000 house or a

421
00:24:13,160 --> 00:24:16,200
$700,000 house, how you, I, I
don't know whether that's

422
00:24:16,200 --> 00:24:18,120
considered a good deal or not.
And whether it's going to be

423
00:24:18,120 --> 00:24:20,400
worth more in a couple of years
or not is almost irrelevant.

424
00:24:20,400 --> 00:24:22,040
Like how you have to be able to
keep up with your bills right

425
00:24:22,040 --> 00:24:25,200
now, you know, So, you know, I,
I feel like it's discouraging

426
00:24:25,200 --> 00:24:26,920
people from spending even more.
No, no.

427
00:24:27,880 --> 00:24:31,120
Absolutely.
And it's again, I have two

428
00:24:31,640 --> 00:24:35,040
chapters in my book on housing
and.

429
00:24:35,440 --> 00:24:40,280
Explaining.
Why house prices going up should

430
00:24:40,280 --> 00:24:46,200
not be happening.
And again, it's it goes back to

431
00:24:46,200 --> 00:24:50,120
the difference between capital
and money and how a free market

432
00:24:50,120 --> 00:24:53,920
system is supposed to work.
So let me backtrack a little

433
00:24:53,920 --> 00:24:56,560
bit, but then I'll get right
into housing.

434
00:24:56,680 --> 00:24:58,360
Sure.
And, and your listeners will

435
00:24:58,360 --> 00:25:02,560
understand, but your younger
listeners in particular, how

436
00:25:02,560 --> 00:25:06,880
they're getting screwed and how
my bet my my generation is

437
00:25:06,880 --> 00:25:10,360
benefiting at your generation's
expense and younger.

438
00:25:12,080 --> 00:25:12,520
Sure.
So in a.

439
00:25:12,920 --> 00:25:17,800
In a free market system, you
should only benefit to the

440
00:25:17,800 --> 00:25:20,800
extent that somebody else is
benefiting from your actions.

441
00:25:21,760 --> 00:25:26,320
So the example I like to use is
let's say you make a bike and I

442
00:25:26,320 --> 00:25:29,600
make a suit.
So we both created capital,

443
00:25:30,360 --> 00:25:32,560
right?
The creation of capital in a

444
00:25:32,560 --> 00:25:35,880
form of a good or a service.
That is what makes the world go

445
00:25:35,880 --> 00:25:41,480
around, people investing their
time and efforts and ingenuity

446
00:25:41,960 --> 00:25:46,440
to create capital that they
think other people would want.

447
00:25:47,080 --> 00:25:49,520
And then they exchange that
capital with each other.

448
00:25:49,520 --> 00:25:52,720
So then you make your bike, I
make a suit, we exchange that

449
00:25:52,720 --> 00:25:54,120
with each other.
No, I've got your bike.

450
00:25:54,120 --> 00:25:57,760
You got my suit.
And importantly, none of this

451
00:25:57,760 --> 00:26:00,360
came at anybody else's expense,
right?

452
00:26:00,360 --> 00:26:02,360
There was no bike and no suit in
the economy.

453
00:26:02,400 --> 00:26:05,640
Now there's one of each, and we
exchanged it and we do it,

454
00:26:05,840 --> 00:26:08,440
exchange it with each other.
It's called direct exchange or

455
00:26:08,440 --> 00:26:11,400
barter.
You can't have an economy with

456
00:26:11,600 --> 00:26:13,920
direct exchange.
Barter, like once you get past,

457
00:26:14,440 --> 00:26:18,400
you know, 10 goods or something,
it it just doesn't work, you

458
00:26:18,400 --> 00:26:19,160
know?
Yeah.

459
00:26:19,520 --> 00:26:21,920
How many kitchen chairs would it
cost to take a flight to

460
00:26:21,920 --> 00:26:23,560
Florida?
You know, that sort of thing.

461
00:26:24,880 --> 00:26:30,360
So we don't do direct exchange.
We do indirect exchange and we

462
00:26:30,360 --> 00:26:34,680
use money.
So money is what's called the

463
00:26:34,680 --> 00:26:40,160
medium of exchange.
We use money to exchange all the

464
00:26:40,160 --> 00:26:43,040
capital that we are all
creating.

465
00:26:43,120 --> 00:26:47,040
That's all.
Money is there for store value,

466
00:26:47,040 --> 00:26:49,640
unit of account stuff.
But that's essentially what it's

467
00:26:49,640 --> 00:26:52,520
there for, to exchange all the
good stuff that we're creating.

468
00:26:52,960 --> 00:26:57,200
So if you increase the amount of
money, you haven't increased the

469
00:26:57,200 --> 00:27:01,440
amount of stuff, right?
All that happens is the prices

470
00:27:01,440 --> 00:27:04,080
that that that that stuff gets
exchanged at goes up because

471
00:27:04,080 --> 00:27:05,840
there's more money.
Right.

472
00:27:06,480 --> 00:27:13,200
So now let's say you make 10
bikes, 1000 bucks each.

473
00:27:15,440 --> 00:27:18,840
You sell them for 1000 bucks.
So you've got $10,000.

474
00:27:18,840 --> 00:27:24,680
Now in your bank account, that
$10,000, effectively what it's

475
00:27:24,680 --> 00:27:28,560
doing is temporarily storing
those 10 bikes that you made.

476
00:27:29,280 --> 00:27:33,800
That's where that value for that
$10,000, it's the ten bikes that

477
00:27:33,800 --> 00:27:36,360
you created.
When when you go and spend that

478
00:27:36,360 --> 00:27:40,480
$10,000, what gave you the
wherewithal to go buy something

479
00:27:40,480 --> 00:27:43,960
else is that you made 10 bikes.
You created capital.

480
00:27:44,440 --> 00:27:47,600
And.
So when you look at whatever

481
00:27:47,600 --> 00:27:54,040
your material wealth is, house,
car, clothes, whatever, that's

482
00:27:54,040 --> 00:27:59,160
supposed to be a reflection of
material wealth cumulatively

483
00:27:59,160 --> 00:28:02,320
that's out there that other
people have because your

484
00:28:02,320 --> 00:28:04,480
efforts, it didn't come at
anybody else's expense.

485
00:28:04,480 --> 00:28:07,520
Now we're moving away from that
and I'll get into that in a

486
00:28:07,520 --> 00:28:11,560
second.
So let's say you've got your

487
00:28:11,560 --> 00:28:15,400
$10,000 in your bank account and
you don't want to spend it yet.

488
00:28:15,400 --> 00:28:18,040
You're going to save it at the
end of the year going on a nice

489
00:28:18,040 --> 00:28:21,760
vacation.
But before you get to spend your

490
00:28:21,760 --> 00:28:24,200
$10,000, the central bank double
S the money supply.

491
00:28:25,000 --> 00:28:29,480
Now when they double the money
supply, what they do is they

492
00:28:29,480 --> 00:28:33,120
print the money out of thin air.
They don't create any capital to

493
00:28:33,120 --> 00:28:37,520
obtain that money.
But is there a way to?

494
00:28:38,280 --> 00:28:40,360
Is there a way to a?
Way to?

495
00:28:41,440 --> 00:28:44,680
To create the cap meeting, can
they say we're going to, can we,

496
00:28:44,680 --> 00:28:49,280
we want to do a construction job
and so we need people to do the

497
00:28:49,280 --> 00:28:56,760
work or something like that.
Yeah, but to pay the people to

498
00:28:56,760 --> 00:28:59,320
do the construction work, they
have to take capital from the

499
00:28:59,320 --> 00:29:01,160
private sector.
Right.

500
00:29:01,200 --> 00:29:02,200
OK, fine.
Gotcha.

501
00:29:02,360 --> 00:29:04,320
OK.
So good question.

502
00:29:05,240 --> 00:29:09,720
So, so when they print, the
central bank prints money, it

503
00:29:09,720 --> 00:29:12,280
just prints it out of thin air,
press the buttons.

504
00:29:13,440 --> 00:29:19,480
So that new money has no capital
stored up in it, but it obtains

505
00:29:19,480 --> 00:29:23,960
capital as soon as that money
comes into the economy, and it

506
00:29:23,960 --> 00:29:27,960
obtains capital by taking
capital from the rest of the

507
00:29:27,960 --> 00:29:30,680
money that's already in
existence, Correct.

508
00:29:31,320 --> 00:29:35,280
So as soon as they double the
money supply, that new money

509
00:29:35,280 --> 00:29:39,240
takes 5 bikes from your $10,000
and puts it in new money.

510
00:29:40,160 --> 00:29:44,880
And so on your bank account, it
still says that you have $10,000

511
00:29:44,880 --> 00:29:49,160
in your in your bank in your
bank account, but now it's only

512
00:29:49,160 --> 00:29:53,760
storing 5 bikes instead of 10,
and so your $10,000 will now

513
00:29:53,760 --> 00:29:55,880
only buy half as much as it
would have done.

514
00:29:56,320 --> 00:29:58,760
Before the central bank.
With the money supply, so that's

515
00:29:58,760 --> 00:30:00,480
how they take your capital from
you.

516
00:30:00,800 --> 00:30:03,920
Government can take your capital
from you in three ways,

517
00:30:04,360 --> 00:30:08,800
taxation, borrowing.
You can lend them your capital

518
00:30:09,440 --> 00:30:13,240
or they print money and take
capital from the money that

519
00:30:13,240 --> 00:30:15,760
you've already have.
There's no other way for the

520
00:30:15,760 --> 00:30:17,440
government to get capital.
That's it.

521
00:30:18,360 --> 00:30:23,800
So, so you, we should not be
benefiting at somebody else's

522
00:30:23,800 --> 00:30:25,280
expense.
We should all be creating

523
00:30:25,280 --> 00:30:27,400
capital and fairly exchanging
it.

524
00:30:28,240 --> 00:30:31,040
But what's happening in this
world because of monetary

525
00:30:31,040 --> 00:30:38,720
policy, which deliberately
drives asset prices higher, it

526
00:30:38,720 --> 00:30:41,480
does so at the expense of the
general economy.

527
00:30:41,920 --> 00:30:46,160
And So what you have is, is, is
becoming, there's still a lot of

528
00:30:46,160 --> 00:30:47,920
great things going on in the
economy.

529
00:30:49,480 --> 00:30:51,600
But again, it's that which isn't
seen.

530
00:30:51,600 --> 00:30:54,640
There's a lot less of it than
there should be, which is why

531
00:30:54,640 --> 00:30:57,520
debts going through the roof,
productivity growth has declined

532
00:30:57,520 --> 00:31:02,640
over the decades.
It's moving towards like a game

533
00:31:02,640 --> 00:31:08,720
of poker now at a game of poker
at the table, there's no net

534
00:31:08,720 --> 00:31:12,240
wealth creation.
It's not that everybody walks

535
00:31:12,240 --> 00:31:16,680
away from the table a winner.
It's a redistribution of wealth

536
00:31:16,680 --> 00:31:21,640
at the poker table, right?
So increasingly we are moving to

537
00:31:21,760 --> 00:31:24,800
a redistribution of wealth in
the economy rather than a

538
00:31:24,800 --> 00:31:28,680
creation of wealth.
And so in a poker game, what you

539
00:31:28,680 --> 00:31:32,840
end up with is 1 winner and a
bunch of losers, which is

540
00:31:32,840 --> 00:31:35,880
increasingly what the real
economy now is starting to feel

541
00:31:35,880 --> 00:31:37,680
like for so many people.
They.

542
00:31:37,680 --> 00:31:40,320
See.
The top 10% making out like

543
00:31:40,320 --> 00:31:43,880
bandits and life is really tough
for everybody else, particularly

544
00:31:43,880 --> 00:31:49,080
for the bottom 50% who are far
more hurt by inflation than

545
00:31:49,240 --> 00:31:51,280
higher income people.
Sure.

546
00:31:52,000 --> 00:31:55,520
So back to housing.
Yeah.

547
00:31:55,520 --> 00:32:00,080
So nobody should be making money
on their home.

548
00:32:00,080 --> 00:32:07,120
A home, If you have a mortgage,
it's like a form of forced

549
00:32:07,160 --> 00:32:10,760
savings.
So you have to pay the bank

550
00:32:10,760 --> 00:32:13,720
back.
And every time you do, you pay

551
00:32:13,720 --> 00:32:15,320
some principal and you pay some
interest.

552
00:32:16,200 --> 00:32:18,760
Every time you pay some of the
principal, it's like for saving.

553
00:32:18,760 --> 00:32:20,960
So you're you're putting money
into your home.

554
00:32:21,720 --> 00:32:24,960
And to clarify, sorry, to
clarify people that don't know,

555
00:32:24,960 --> 00:32:27,960
principal is amount that I
borrowed and then the interest

556
00:32:27,960 --> 00:32:31,360
is the percentage that they're
charging me to borrow that

557
00:32:31,360 --> 00:32:33,000
money.
So, so if I, if I take out a

558
00:32:33,000 --> 00:32:36,280
$300,000 mortgage or $100,000
mortgage, that would be the

559
00:32:36,280 --> 00:32:38,680
principal.
And then if it's a 3% interest,

560
00:32:38,680 --> 00:32:41,640
then I pay a partial amount that
I of the total amount that I

561
00:32:41,640 --> 00:32:44,760
borrowed from the bank and then
X percent of the interest that

562
00:32:44,760 --> 00:32:46,760
I'm paying on it as well.
Right, Exactly.

563
00:32:47,600 --> 00:32:50,080
OK, Yeah.
Thanks for clarifying that.

564
00:32:50,080 --> 00:32:51,960
Sure.
And so then over the life of

565
00:32:51,960 --> 00:32:56,240
your mortgage, if you have a 30
year mortgage, 30 years later

566
00:32:56,240 --> 00:33:00,360
you've paid it off and you don't
owe the bank any money.

567
00:33:00,400 --> 00:33:04,400
And so if you bought a home for
$300,000, now you have a

568
00:33:04,400 --> 00:33:09,240
$300,000 home.
That's your your home equity and

569
00:33:09,400 --> 00:33:10,920
you can use that for your
retirement.

570
00:33:12,520 --> 00:33:17,360
But today, central bankers will
encourage people to extract the

571
00:33:17,360 --> 00:33:20,640
equity from their home.
So once you've paid part of your

572
00:33:20,880 --> 00:33:23,120
mortgage down, they want you to
borrow on that.

573
00:33:24,080 --> 00:33:26,680
Excuse me, you go and spend it.
So because when you spend

574
00:33:26,760 --> 00:33:32,400
somebody else's income and and
so they never pay their mortgage

575
00:33:32,400 --> 00:33:35,160
down and you have older people
who still got a lot of debt on

576
00:33:35,160 --> 00:33:36,720
their home, which is crazy.
Oh yeah.

577
00:33:37,480 --> 00:33:40,720
And effectively what people were
doing, especially in the boom of

578
00:33:40,720 --> 00:33:44,280
06/05/06, people were
effectively consuming their

579
00:33:44,280 --> 00:33:46,120
homes by.
Extracting.

580
00:33:46,160 --> 00:33:49,400
Equity from it and buying a big
SUV and other big flat screen

581
00:33:49,400 --> 00:33:51,440
TV, whatever, more expensive
trip.

582
00:33:52,840 --> 00:33:57,600
But back to housing and why
nobody should be making money on

583
00:33:57,600 --> 00:34:00,600
your home.
So our home, we live in

584
00:34:00,600 --> 00:34:04,400
Mississauga, which is a suburb
of Toronto, and we bought our

585
00:34:04,400 --> 00:34:08,960
home in 2001 just when the
central bank, the Federal

586
00:34:08,960 --> 00:34:13,800
Reserve, started what's called
their wealth effect monetary

587
00:34:13,800 --> 00:34:17,800
policy targeting asset prices to
drive them higher, to try and

588
00:34:17,800 --> 00:34:19,600
drag the economy up with it,
doesn't work.

589
00:34:21,120 --> 00:34:26,440
Of course not so.
Yeah, so our house for the last

590
00:34:26,520 --> 00:34:30,400
24 years has gone up in price
four times.

591
00:34:32,560 --> 00:34:38,760
So what was our contribution to
society that justifies my wife

592
00:34:38,760 --> 00:34:40,480
and I making four times on our
home?

593
00:34:41,560 --> 00:34:43,560
Let me help you.
It was 0.

594
00:34:43,920 --> 00:34:49,360
We did nothing.
So if we did not do something to

595
00:34:49,719 --> 00:34:55,159
warrant making four times on our
home, then our benefit must come

596
00:34:55,159 --> 00:34:58,560
at somebody else's expense.
There is no apartment.

597
00:34:58,560 --> 00:35:01,400
Yeah, go ahead.
I'm so sorry.

598
00:35:01,560 --> 00:35:09,120
So, but can you make the
argument perhaps that that it's

599
00:35:09,120 --> 00:35:12,600
based on just the demand for
people wanting to live in a

600
00:35:12,600 --> 00:35:15,160
beautiful suburb near Toronto
and there's only limited amount

601
00:35:15,160 --> 00:35:17,480
of homes?
And so the reason why your home

602
00:35:17,480 --> 00:35:20,280
value went up isn't because you
contributed necessarily, but

603
00:35:20,280 --> 00:35:23,040
because other people want to
live where you live and they

604
00:35:23,040 --> 00:35:25,880
can't.
Yeah, so, and yeah, it's a good

605
00:35:25,920 --> 00:35:28,160
point.
And for like big cities like New

606
00:35:28,160 --> 00:35:31,880
York or London, England or
whatever, that's definitely

607
00:35:31,880 --> 00:35:34,200
true.
And that, you know, it's going

608
00:35:34,200 --> 00:35:36,080
to attract people.
There's only so much space.

609
00:35:36,240 --> 00:35:38,160
Although New York.
They start building up, right?

610
00:35:38,160 --> 00:35:43,040
But it's more expensive.
But in suburbs, you know it

611
00:35:43,040 --> 00:35:47,400
should result in increased
supply of homes.

612
00:35:48,160 --> 00:35:50,440
OK.
Now the supply in the housing

613
00:35:50,440 --> 00:35:54,720
industry, there's a term in
economics, it's called

614
00:35:54,880 --> 00:36:00,320
elasticity and inelasticity.
So the supply of homes is less

615
00:36:00,320 --> 00:36:02,600
elastic.
What that means is if demand

616
00:36:02,600 --> 00:36:06,000
goes up, yes, supply of homes
will adjust, but it doesn't

617
00:36:06,000 --> 00:36:07,800
adjust overnight.
You got to get permitting.

618
00:36:07,840 --> 00:36:13,920
It takes time to, but it does
happen and for years, for

619
00:36:13,920 --> 00:36:17,880
decades, it did happen that
house prices, yeah, they grow a

620
00:36:17,880 --> 00:36:22,080
little bit faster than that
inflation, but not much, right?

621
00:36:22,240 --> 00:36:33,120
In Canada, from 1970, I think it
was 75 to 2000 or 2001, the

622
00:36:33,120 --> 00:36:38,960
average price to after tax
income ranged from 6 to 8.

623
00:36:38,960 --> 00:36:43,640
So it's like 7 times as soon as
the Federal Reserve wealth

624
00:36:43,640 --> 00:36:47,760
effect policy starting in 2001
versus Greenspan and then

625
00:36:47,760 --> 00:36:52,960
Bernanke, prices just continued
to soar.

626
00:36:53,600 --> 00:36:57,400
And so we went from an average
of seven times price to after

627
00:36:57,400 --> 00:37:02,800
tax income and we're now at 12.
And that's why young people in

628
00:37:02,800 --> 00:37:07,600
Canada can many of them can't
even dream of ever owning a home

629
00:37:07,720 --> 00:37:08,520
and.
Raising a family.

630
00:37:08,600 --> 00:37:15,560
This is a moral crime, I think.
So a house is not a productive

631
00:37:15,560 --> 00:37:19,200
asset.
So our house went up four times

632
00:37:19,200 --> 00:37:22,960
in price, not because all of a
sudden it started producing 4

633
00:37:22,960 --> 00:37:28,240
times as much stuff, not because
it grew 4 times in size, not

634
00:37:28,240 --> 00:37:32,400
because it relocated maybe down
to where you are in Florida and

635
00:37:33,120 --> 00:37:36,760
oceanfront view.
No, it's the same economic good

636
00:37:37,640 --> 00:37:41,960
that a younger couple or a
newcomer to our country has to

637
00:37:42,000 --> 00:37:45,760
pay 4 times for what we paid for
it.

638
00:37:45,760 --> 00:37:47,680
And so it was a redistribution
of wealth.

639
00:37:47,800 --> 00:37:51,560
There was no wealth creation in
society, right?

640
00:37:51,920 --> 00:37:54,560
So you made your suit.
I made by bike.

641
00:37:54,560 --> 00:37:57,080
There was none.
And then there's one of each.

642
00:37:57,640 --> 00:38:01,040
But when I make $0.04 in my
home, there's not like four more

643
00:38:01,040 --> 00:38:03,400
homes were created.
There's there's no more capital.

644
00:38:03,400 --> 00:38:05,600
It's still one home.
Yeah.

645
00:38:05,720 --> 00:38:09,120
Distribution of wealth from the
younger couple's bank account

646
00:38:09,840 --> 00:38:14,240
into our bank account, still the
same amount of capital, right?

647
00:38:14,400 --> 00:38:17,520
And you know, I haven't done
anything wrong.

648
00:38:18,560 --> 00:38:21,120
People, my generation, none of
us have done anything wrong.

649
00:38:21,120 --> 00:38:25,920
We've played by all the rules
and housing prices always go up

650
00:38:25,920 --> 00:38:28,760
and that's what we're told.
And so you want to get in on the

651
00:38:28,760 --> 00:38:31,400
housing ladder.
All this ridiculous terminology.

652
00:38:33,040 --> 00:38:35,400
Well, and I get it, don't.
I mean, they're not.

653
00:38:36,080 --> 00:38:39,720
There's no bad people here.
It's just a bad system.

654
00:38:41,600 --> 00:38:46,520
Central banks see when you have
a wealth effect through stock

655
00:38:46,520 --> 00:38:50,440
markets.
So stock markets are rising

656
00:38:51,800 --> 00:38:55,760
because companies are putting
capital to productive use and

657
00:38:55,760 --> 00:38:59,560
creating more capital, growing
their sales, growing their

658
00:38:59,560 --> 00:39:03,280
profitability, hiring more
people, paying them more.

659
00:39:03,640 --> 00:39:07,920
Everybody's winning.
Stock markets go up to reflect

660
00:39:07,920 --> 00:39:11,200
the fact that more capital is
being produced in the economy.

661
00:39:11,680 --> 00:39:15,160
That's a really good thing.
That's a real wealth effect,

662
00:39:15,160 --> 00:39:18,720
real wealth being created, and
the world is better off.

663
00:39:19,760 --> 00:39:21,200
And the shareholders benefit
too.

664
00:39:21,960 --> 00:39:24,080
Shareholders benefit.
Employees benefit.

665
00:39:24,080 --> 00:39:28,160
Society benefits, suppliers,
everybody benefits, right?

666
00:39:28,160 --> 00:39:31,320
That's the way it's supposed to.
There are 6 constituents to a

667
00:39:31,360 --> 00:39:34,960
business.
So shareholders, senior execs,

668
00:39:34,960 --> 00:39:38,880
employees, suppliers, society at
large.

669
00:39:38,960 --> 00:39:42,400
And then the consumer, consumer
or customer.

670
00:39:42,840 --> 00:39:45,520
Customer is number one, right?
Because of all these six, the

671
00:39:45,520 --> 00:39:46,920
customer's the only one that
pays.

672
00:39:49,080 --> 00:39:51,920
But it's, it's important that
all of them are benefiting from

673
00:39:51,920 --> 00:39:56,360
this business model, right?
So, so that's all really good.

674
00:39:56,360 --> 00:39:58,520
That's a really good true wealth
effect.

675
00:39:59,520 --> 00:40:01,760
And So what you want to do is
the central bank, you would want

676
00:40:01,760 --> 00:40:05,400
to establish the conditions that
would allow for the most capital

677
00:40:05,400 --> 00:40:09,400
to be produced and then fairly
exchanged through a medium of

678
00:40:09,400 --> 00:40:11,840
exchange money that could be
trusted.

679
00:40:13,280 --> 00:40:17,240
But the central banks decided
they couldn't wait for all that

680
00:40:17,240 --> 00:40:21,400
stuff to happen.
For all the productivity stuff

681
00:40:21,400 --> 00:40:25,040
to drive stock prices higher.
So instead they decided to drive

682
00:40:25,040 --> 00:40:28,640
stock prices higher themselves
and hope that that would drag

683
00:40:28,640 --> 00:40:32,400
the economy up with it, drive
asset prices higher.

684
00:40:33,000 --> 00:40:37,840
And yes, the top 1% and top 10%
will inordinately benefit from

685
00:40:37,840 --> 00:40:42,400
this, and they do.
But their belief, policy makers

686
00:40:42,400 --> 00:40:46,080
believe, I think, was that the
benefits of all that would

687
00:40:46,080 --> 00:40:48,160
trickle down to everybody else
over time.

688
00:40:49,320 --> 00:40:53,240
Well, spoiler spoiler alert,
they haven't and they won't.

689
00:40:54,200 --> 00:40:56,760
You know.
And theory will tell you that

690
00:40:57,200 --> 00:41:00,520
and empirically that is also
what has happened, right.

691
00:41:00,560 --> 00:41:03,040
So they drove interest rates
first to zero to drive the

692
00:41:03,040 --> 00:41:07,960
valuations of stocks higher and
then they and then they drove at

693
00:41:07,960 --> 00:41:11,040
the same time making they say,
well, we're taking mortgage

694
00:41:11,040 --> 00:41:12,520
rates.
They started buying more

695
00:41:12,720 --> 00:41:15,240
mortgage-backed security to
drive mortgage rates to

696
00:41:15,240 --> 00:41:17,080
ridiculously low levels.
We're.

697
00:41:17,280 --> 00:41:18,960
Doing this to make housing more
affordable?

698
00:41:18,960 --> 00:41:20,640
No, you're not making housing
more affordable.

699
00:41:20,880 --> 00:41:24,720
You're making mortgage payments
more affordable in a short time

700
00:41:25,640 --> 00:41:28,400
by driving interest rates down.
But what what happens is it

701
00:41:28,440 --> 00:41:31,800
results in an explosion of
demand for housing, Right.

702
00:41:32,480 --> 00:41:35,320
And so housing prices go through
the roof.

703
00:41:35,680 --> 00:41:39,760
And so when people later on are
buying a house, their mortgage

704
00:41:39,760 --> 00:41:41,440
payments are no longer
affordable.

705
00:41:41,920 --> 00:41:43,600
Yeah.
And this is where we are today.

706
00:41:44,240 --> 00:41:47,360
Anecdotally, by the way,
anecdotally with my I, I, I

707
00:41:47,360 --> 00:41:50,760
owned a townhouse before I
bought my house now and I bought

708
00:41:50,760 --> 00:41:55,280
my townhouse in I think 2021 for
about $300,000.

709
00:41:55,760 --> 00:42:00,120
And and then for a while, and
this was I think 2021 and

710
00:42:00,120 --> 00:42:01,280
there's before it was a big
bump.

711
00:42:01,280 --> 00:42:03,760
I think borrowing was still at 2
or 3%.

712
00:42:03,960 --> 00:42:08,680
And then, and within a year or
two, it went up to like the I,

713
00:42:08,720 --> 00:42:10,720
I, I, an agent knocked my door
and said you could sell your

714
00:42:10,720 --> 00:42:14,120
house for 4/4/15.
And I was like, I'll do that.

715
00:42:14,120 --> 00:42:17,080
And the next day interest rates
went up and I could not get a

716
00:42:17,080 --> 00:42:19,680
single offer.
And I ended up, I think

717
00:42:19,680 --> 00:42:21,880
something for like 375 or
something like that.

718
00:42:22,200 --> 00:42:26,080
But it just shows just to just
to, you know, bring your point

719
00:42:26,080 --> 00:42:29,320
to life Like, you know, just
because interest rates are low

720
00:42:29,320 --> 00:42:32,600
does not necessarily mean that
it makes it cheaper in the long

721
00:42:32,600 --> 00:42:35,160
run by any means.
Exactly.

722
00:42:35,760 --> 00:42:39,560
And you know the trouble with
all of this, I mean, not only

723
00:42:39,560 --> 00:42:45,040
have you priced a whole
generation pretty much out of

724
00:42:45,040 --> 00:42:47,760
the housing market, I mean, I'm
sure you've seen the stats of

725
00:42:47,760 --> 00:42:50,640
the average age of the first
time home buyer in the States is

726
00:42:50,800 --> 00:42:53,560
way older now than it was back
in the day.

727
00:42:53,600 --> 00:42:56,400
And there are certain societal
things that have changed over

728
00:42:56,400 --> 00:42:58,320
time as well that will
contribute to that to be.

729
00:42:58,520 --> 00:43:02,600
Fair expectations for sure.
Pardon expectations, I'm sure.

730
00:43:02,600 --> 00:43:06,120
My grandfather lives in a three
bedroom, 1 1/2 bathroom with

731
00:43:06,120 --> 00:43:09,840
five people in the house, and no
one wanted, and I wouldn't buy

732
00:43:09,840 --> 00:43:11,480
that if I knew that I was going
to have three kids.

733
00:43:11,480 --> 00:43:13,360
I don't want to 1 1/2.
I don't want everyone to share

734
00:43:13,360 --> 00:43:16,960
one shower, you know?
So that's strange too, Yeah.

735
00:43:17,640 --> 00:43:19,240
Of course.
Yeah.

736
00:43:20,840 --> 00:43:25,400
No so, but the the bad news.
So there's two things, you know.

737
00:43:25,440 --> 00:43:27,760
First, a younger generation
being priced out of the housing

738
00:43:27,760 --> 00:43:32,880
market.
But to fix it you have to let

739
00:43:34,120 --> 00:43:37,800
interest rates and mortgage
rates be determined naturally by

740
00:43:37,840 --> 00:43:40,920
market forces rather than
dictate.

741
00:43:41,400 --> 00:43:45,280
How would that work?
So just if the central banks

742
00:43:45,280 --> 00:43:50,680
stopped deciding on interest
rates, and they do and may

743
00:43:50,680 --> 00:43:52,640
affect the short term interest
rate, but the short term

744
00:43:52,640 --> 00:43:54,840
interest rate also has an
influence on the longer term

745
00:43:54,840 --> 00:43:57,520
interest rate.
And then when it doesn't, they

746
00:43:57,520 --> 00:44:00,640
will start what's called
quantitative easing.

747
00:44:00,640 --> 00:44:04,640
They print money to buy longer
dated bonds and mortgage-backed

748
00:44:04,640 --> 00:44:07,640
security to drive those interest
rates down, right.

749
00:44:07,800 --> 00:44:13,320
And so, so there's what's called
actually before I get on to

750
00:44:13,680 --> 00:44:15,240
natural interest rates, I have
to determine.

751
00:44:15,240 --> 00:44:18,600
Just let me finish my thought on
the negative impact.

752
00:44:18,600 --> 00:44:21,000
Of this, yes.
So first the younger people not

753
00:44:21,200 --> 00:44:25,200
price out of the market, and
then for people, particularly

754
00:44:25,200 --> 00:44:28,520
younger people who have bought a
house in the last five years or

755
00:44:28,520 --> 00:44:33,600
so, the only way to fix this is
for interest rates to be

756
00:44:33,600 --> 00:44:36,280
naturally determined and stop
driving them to zero.

757
00:44:37,040 --> 00:44:42,280
And for prices of houses to
descend to their long term

758
00:44:42,280 --> 00:44:48,200
average of price to income,
which would be again determined

759
00:44:48,200 --> 00:44:51,680
by market forces.
But the problem for people who

760
00:44:51,680 --> 00:44:54,480
have bought over the last five
years is that they'll end up

761
00:44:54,480 --> 00:44:58,240
being could be end up being
significantly underwater on

762
00:44:58,240 --> 00:44:59,960
their mortgage.
They would have like negative

763
00:44:59,960 --> 00:45:03,000
equity that the mortgage would
be worth more than the house.

764
00:45:03,760 --> 00:45:06,280
And then people feeling that
they can't move because they

765
00:45:06,280 --> 00:45:09,960
can't take that loss.
And this is a terrible thing,

766
00:45:11,480 --> 00:45:16,400
right?
But it should not be prevented

767
00:45:16,400 --> 00:45:20,240
from happening.
And because so these are your

768
00:45:20,240 --> 00:45:25,080
choices, save the equity in
people's homes today or allow

769
00:45:25,080 --> 00:45:27,800
the next generation to dream
about buying a house one day and

770
00:45:27,800 --> 00:45:32,440
raising a family.
And the equity like for me that

771
00:45:32,440 --> 00:45:36,000
I've made in my home, as I said,
I've made it unfairly.

772
00:45:36,520 --> 00:45:40,000
And so I'd be very happy to see
the price of my house go back to

773
00:45:40,000 --> 00:45:43,600
what it was when we bought it in
inflation adjusted terms, of

774
00:45:43,600 --> 00:45:46,520
course, because then that would
mean the housing is becoming

775
00:45:46,520 --> 00:45:50,360
more affordable for people.
And the money I've made, I made

776
00:45:50,360 --> 00:45:53,440
it somebody else's expense.
Now to give that money to our, I

777
00:45:53,440 --> 00:45:57,240
have three daughters that money
to them so they can afford to

778
00:45:57,240 --> 00:46:03,000
buy an over price, you know, but
that's between a rock and a hard

779
00:46:03,000 --> 00:46:04,880
place.
There is no easy way out of this

780
00:46:04,880 --> 00:46:07,320
quagmire.
But this is what happens when

781
00:46:07,320 --> 00:46:10,360
you interfere with the market.
All good intentions.

782
00:46:10,400 --> 00:46:12,080
I don't think there was a
conspiracy here.

783
00:46:12,400 --> 00:46:15,720
I believe that central banks
primarily through arrogance.

784
00:46:16,040 --> 00:46:19,440
They thought they knew better
and they thought they could take

785
00:46:19,440 --> 00:46:22,480
credit for doing this and, and
they love the adoration that

786
00:46:22,480 --> 00:46:24,840
they get from Wall Street and.
Everybody's happy.

787
00:46:25,160 --> 00:46:27,320
Driving stock markets higher and
housing prices higher.

788
00:46:27,680 --> 00:46:31,920
Everybody loves them.
But now we are in this unholy

789
00:46:31,920 --> 00:46:35,000
mess of which there is no easy
way out.

790
00:46:36,040 --> 00:46:40,120
And So what they will probably
do is inflate their way out.

791
00:46:41,080 --> 00:46:43,600
They'll tell you that inflation
is a lot lower than it really

792
00:46:43,600 --> 00:46:47,000
is.
It's called financial repression

793
00:46:47,000 --> 00:46:51,160
is a term that they use and they
financially repress the

794
00:46:51,160 --> 00:46:55,640
populace.
And so your money will be

795
00:46:56,120 --> 00:46:59,240
debased, the value of your money
will erode over time, your

796
00:46:59,240 --> 00:47:01,040
savings.
And to your point, then people

797
00:47:01,040 --> 00:47:03,640
start to feel, well, what's the
point in saving?

798
00:47:04,320 --> 00:47:07,560
You know, inflation is so high
that my money is going to be

799
00:47:07,560 --> 00:47:10,360
worth less in the future.
I'll spend it today.

800
00:47:10,680 --> 00:47:14,000
Policymakers actually like that
because if you spend your money

801
00:47:14,040 --> 00:47:17,960
today, that makes GDP look
stronger because all GDP is a

802
00:47:17,960 --> 00:47:22,480
measure of final spending.
Final spending, 75% of it or 70%

803
00:47:22,480 --> 00:47:26,520
of it is consumption.
But the more you consume, the

804
00:47:26,520 --> 00:47:32,400
more an economy consumes today
instead of investing, the less

805
00:47:32,400 --> 00:47:34,440
stuff that will be produced in
the future.

806
00:47:35,360 --> 00:47:37,920
And there's no ifs, ands or buts
about this this.

807
00:47:37,920 --> 00:47:40,960
Is the less the less that we
consume?

808
00:47:41,560 --> 00:47:42,360
Say that again.
I'm sorry.

809
00:47:42,960 --> 00:47:45,000
Yeah.
So the more that you consume,

810
00:47:46,160 --> 00:47:47,440
spend.
Today.

811
00:47:48,360 --> 00:47:50,880
Yeah.
And the less that you save and

812
00:47:50,880 --> 00:47:56,640
invest, the less stuff that
could be produced in the future

813
00:47:56,640 --> 00:47:58,640
because it was less investment,
right?

814
00:47:58,720 --> 00:48:04,640
So if society is consuming more
rather than saving more than

815
00:48:04,640 --> 00:48:09,920
that consumption results in a
higher GDP number at the expense

816
00:48:09,920 --> 00:48:12,080
of a lower GDP number in the
future.

817
00:48:12,520 --> 00:48:15,480
Right long term, right because.
Because policy makers, they

818
00:48:15,520 --> 00:48:18,040
focus on GDP, which is a
symptom.

819
00:48:18,920 --> 00:48:23,480
It's not a fundamental GDP is
just final spending.

820
00:48:24,320 --> 00:48:29,000
So if final spending is growing,
consumption is growing.

821
00:48:29,640 --> 00:48:31,520
Let's say your consumption is
growing because you got a

822
00:48:31,520 --> 00:48:34,880
fantastic job and you're
creating all this capital and

823
00:48:34,920 --> 00:48:36,840
fairly exchanging it with
others.

824
00:48:37,280 --> 00:48:41,000
So your GDP, your final
consumption is growing because

825
00:48:41,080 --> 00:48:45,400
you're creating more capital
that's allowing you to spend.

826
00:48:46,320 --> 00:48:50,040
But if you're spending is
growing because you're saving

827
00:48:50,040 --> 00:48:53,160
less and borrowing money to
consume.

828
00:48:53,640 --> 00:48:57,120
So if your GDP as a result of
you taking a more and more debt

829
00:48:57,760 --> 00:49:01,680
then you're spending, your GDP
is not going to be sustainable.

830
00:49:02,160 --> 00:49:04,120
Eventually you're not going to
be able to service anymore debt.

831
00:49:04,120 --> 00:49:06,560
And that's what's happening in
the economy. the US debt is

832
00:49:06,560 --> 00:49:10,400
going through the roof.
I think over 120% debt to GDP

833
00:49:10,400 --> 00:49:15,000
now I think it is.
It's, it's, it's so concerning

834
00:49:15,000 --> 00:49:18,560
and what, what if, what at least
to me and perhaps you could, you

835
00:49:18,560 --> 00:49:23,320
know, I guess confirm or you
know, confirm this or not, is

836
00:49:23,320 --> 00:49:26,560
that it feels like we just keep
on building on like finding new

837
00:49:26,560 --> 00:49:29,720
ways to create more debt to push
off the consequences.

838
00:49:29,720 --> 00:49:32,960
So first, you have, you know,
student loan, medical debt,

839
00:49:32,960 --> 00:49:36,040
credit card debt, buy it, buy
now, pay later models that are

840
00:49:36,040 --> 00:49:38,200
going on right now that have
nothing to do with your credit

841
00:49:38,200 --> 00:49:40,080
score or anything like that,
which is crazy.

842
00:49:40,360 --> 00:49:42,240
You got auto debt.
You got your mortgage.

843
00:49:42,600 --> 00:49:46,520
It feels like the entire
American economy is just kicking

844
00:49:46,520 --> 00:49:50,320
the can down the line until we
figure out a way to either start

845
00:49:50,320 --> 00:49:53,760
paying off the debt or just
collapse under it, you know?

846
00:49:54,840 --> 00:49:59,880
Yeah, well, it'll be the latter.
No will it's.

847
00:49:59,880 --> 00:50:04,320
What do you do?
But well, the reason I wrote my

848
00:50:04,320 --> 00:50:10,320
book, which is called Capital
Offense, why some benefit at

849
00:50:10,320 --> 00:50:13,640
your expense because they take
your capital every time they

850
00:50:13,680 --> 00:50:16,720
print money.
Like I explained earlier, the

851
00:50:16,720 --> 00:50:20,520
reason I wrote the book and I
wrote it in very easy to

852
00:50:20,520 --> 00:50:24,720
understand terms.
I wrote it for people who are

853
00:50:24,720 --> 00:50:30,000
not in the finance industry, who
are not investors, who are not

854
00:50:30,000 --> 00:50:34,160
studied economics.
And I use analogies and stories.

855
00:50:35,000 --> 00:50:38,680
And if you read it, you will
understand how an economy works

856
00:50:38,680 --> 00:50:42,800
and how it doesn't, and the
difference between good

857
00:50:42,800 --> 00:50:46,760
inflation and bad deflation of
what really causes inflation,

858
00:50:46,760 --> 00:50:50,320
all that kind of stuff.
And the reason I wrote it in

859
00:50:50,320 --> 00:50:54,600
this way is because I think that
the average person is very, very

860
00:50:54,600 --> 00:50:58,240
smart, particularly when it
comes down to what to do with

861
00:50:58,240 --> 00:51:00,960
their own hard earned capital.
They don't need policy makers or

862
00:51:00,960 --> 00:51:03,960
central bankers to tell them
that this price is fair or you

863
00:51:03,960 --> 00:51:05,360
shouldn't be buying this or you
should.

864
00:51:05,480 --> 00:51:07,000
You shouldn't be saving as much
as you should be.

865
00:51:07,080 --> 00:51:09,320
No, they don't need anybody
telling them they know what to

866
00:51:09,320 --> 00:51:14,440
do.
And so once you have an

867
00:51:14,440 --> 00:51:19,960
empowered citizenry who really
understands what's going on, you

868
00:51:20,040 --> 00:51:23,280
arm them with the truth.
Then they can demand from our

869
00:51:23,280 --> 00:51:27,720
policymakers better actions,
better decision making, and our

870
00:51:27,720 --> 00:51:31,160
policymakers will make those
better decisions, but they'll

871
00:51:31,160 --> 00:51:34,240
only do it once we demand it
from them.

872
00:51:35,240 --> 00:51:38,280
And for years, decades, we've
been demanding something else.

873
00:51:38,280 --> 00:51:40,560
They have convinced us, and
they've been convinced,

874
00:51:40,640 --> 00:51:45,520
convinced by economists and
people in academia with

875
00:51:45,520 --> 00:51:52,280
fallacious, ideologically driven
economic doctrine that you can

876
00:51:52,280 --> 00:51:56,000
have your cake and eat it too.
That you can have get something

877
00:51:56,000 --> 00:51:57,480
for nothing.
You cannot.

878
00:51:58,240 --> 00:52:02,000
If you get something without
contributing, it comes at

879
00:52:02,000 --> 00:52:05,680
somebody else's expense.
So want people.

880
00:52:05,960 --> 00:52:07,280
The policymakers are good
people.

881
00:52:07,720 --> 00:52:11,360
They just.
They they want to believe in the

882
00:52:11,360 --> 00:52:15,040
easy way out, the popular way
out.

883
00:52:15,360 --> 00:52:19,600
But the popular way out is what
leads to terrible consequences

884
00:52:19,600 --> 00:52:20,920
for the rest of us down the
road.

885
00:52:20,920 --> 00:52:23,880
But it's hard for people to
connect the dots between these

886
00:52:23,880 --> 00:52:27,040
popular, fun, nice decisions.
It gave us all kinds of stuff

887
00:52:27,560 --> 00:52:30,120
years ago to now.
We're screwed.

888
00:52:31,240 --> 00:52:34,040
And.
And a like, a perfect example is

889
00:52:34,040 --> 00:52:38,320
back in 1983 in France,
President Francois Mitterrand,

890
00:52:38,320 --> 00:52:41,400
he lowered the retirement age
from 65 to 60.

891
00:52:42,440 --> 00:52:46,000
And so, oh, he loves us.
What a nice guy.

892
00:52:46,000 --> 00:52:48,280
He wants us all to retire five
years earlier.

893
00:52:49,000 --> 00:52:52,080
Well, I want you to retire at
30.

894
00:52:52,320 --> 00:52:56,520
That makes me even nicer.
Doesn't come to somebody else's

895
00:52:56,520 --> 00:52:59,480
expense, right?
And now?

896
00:53:00,120 --> 00:53:05,720
There's the pension plan is in
huge trouble, and the liability

897
00:53:05,720 --> 00:53:08,480
is foisted on to the generation
that's following them.

898
00:53:08,960 --> 00:53:12,200
So all these people retiring
earlier at the expense of the

899
00:53:12,200 --> 00:53:15,680
next generation.
And so, you know, there's a

900
00:53:15,680 --> 00:53:20,800
saying that the people always
get the government that they

901
00:53:20,800 --> 00:53:22,280
deserve.
Yeah.

902
00:53:22,280 --> 00:53:24,000
In other words, while you voted
them in.

903
00:53:24,000 --> 00:53:27,160
So stop complaining, you know,
but you can only get the

904
00:53:27,160 --> 00:53:30,800
government you deserve.
What's going on?

905
00:53:31,200 --> 00:53:34,080
Yeah, if you know what's going
on, like if you don't know

906
00:53:34,080 --> 00:53:38,200
what's going on, if if they tell
you that, yeah, we we'll just

907
00:53:38,200 --> 00:53:40,880
take on more debt and we'll
drive stock prices higher and

908
00:53:40,880 --> 00:53:42,600
housing prices higher.
And then it benefits will

909
00:53:42,600 --> 00:53:46,080
trickle down to everybody else.
And we're all going to, you

910
00:53:46,080 --> 00:53:48,880
know, make a fortune.
Rainbows and butter cups as far

911
00:53:48,880 --> 00:53:50,920
as the eye can see.
You're going to believe it or

912
00:53:50,920 --> 00:53:52,040
not, then you're going to vote
for that.

913
00:53:54,600 --> 00:53:57,320
You run into the same problem
when it comes to minimum wage.

914
00:53:58,160 --> 00:53:59,800
If people are judged
arbitrarily.

915
00:53:59,800 --> 00:54:02,880
Choose a minimum wage, $20.00 an
hour, $15.00 an hour.

916
00:54:02,880 --> 00:54:05,000
And you say, you know what?
I, you know, I said minimum wage

917
00:54:05,000 --> 00:54:07,240
was $12.00 an hour.
I'm going to decide now that I'm

918
00:54:07,680 --> 00:54:10,200
minimum wage that America is
going to be $25.00 an hour.

919
00:54:10,640 --> 00:54:13,520
That's essentially the same
thing, right?

920
00:54:13,520 --> 00:54:16,560
I mean, you're, you're, you're,
you're forcing people to be,

921
00:54:16,560 --> 00:54:20,680
you're forcing people to get
paid more even though they

922
00:54:20,680 --> 00:54:23,960
haven't really created more
capital or done anything more to

923
00:54:23,960 --> 00:54:26,640
create more capital, right?
Yeah, no, exactly.

924
00:54:26,760 --> 00:54:31,000
And you know, the and the issue
is not, I don't think, minimum

925
00:54:31,000 --> 00:54:32,640
wage.
OK.

926
00:54:32,640 --> 00:54:36,600
And.
I think the issue is the prices

927
00:54:37,560 --> 00:54:41,240
that people have to pay with
their minimum wage, either for

928
00:54:41,240 --> 00:54:46,920
food, gas or health care
insurance or rent.

929
00:54:47,680 --> 00:54:52,120
Yeah, house prices, you know, I
mean, everybody wants people to

930
00:54:52,120 --> 00:54:56,720
make more money, but it comes at
somebody else's expense.

931
00:54:57,720 --> 00:55:01,480
And, you know, it's, I mean,
it's, it's not.

932
00:55:02,160 --> 00:55:06,160
People don't like the laws of
economics sometimes because they

933
00:55:06,160 --> 00:55:09,840
can be very inconvenient, but
they are what they are.

934
00:55:10,800 --> 00:55:14,960
And so in writing my book, you
know, again, I'm not an

935
00:55:14,960 --> 00:55:16,840
economist.
I've studied economics for the

936
00:55:16,840 --> 00:55:21,560
last, I don't know, 17 years.
That's all I read Economic

937
00:55:21,560 --> 00:55:25,720
philosophy and monetary policy
and stuff like that.

938
00:55:26,920 --> 00:55:31,400
But the laws of economics can be
very inconvenient, and so when

939
00:55:31,440 --> 00:55:34,080
people don't like the laws of
economics, they make up their

940
00:55:34,080 --> 00:55:37,840
own.
It's called normative economics

941
00:55:40,160 --> 00:55:41,560
for.
That.

942
00:55:42,240 --> 00:55:45,200
Is being on ideology in a way
they would want things to be

943
00:55:45,200 --> 00:55:48,640
rather than how they are.
And it makes them more popular,

944
00:55:49,080 --> 00:55:51,280
especially with politicians,
right?

945
00:55:51,520 --> 00:55:55,480
And, you know, some economists
have likened it to getting angry

946
00:55:55,880 --> 00:55:59,760
at the law of gravity and
blaming the law of gravity for

947
00:55:59,760 --> 00:56:02,440
plane crashes.
Stupid gravity.

948
00:56:02,760 --> 00:56:04,640
No, it's just the law of
gravity.

949
00:56:05,160 --> 00:56:09,520
Don't get angry at gravity.
Get angry at the pilot or the

950
00:56:09,520 --> 00:56:12,800
manufacturer or, you know,
whatever.

951
00:56:13,520 --> 00:56:15,040
Sure.
And so, yeah.

952
00:56:15,040 --> 00:56:21,080
So there's no easy way out.
But what I believe that again,

953
00:56:21,640 --> 00:56:25,560
people are very smart and I
think most people want to do the

954
00:56:25,560 --> 00:56:29,800
right thing.
Most people like to help people.

955
00:56:29,800 --> 00:56:36,520
But and so but like we were
talking about before we started

956
00:56:36,520 --> 00:56:41,480
recording, you know, the issues
transcend politics.

957
00:56:43,080 --> 00:56:47,040
So people know that they're
getting screwed, but they don't

958
00:56:47,040 --> 00:56:48,600
know how.
And then?

959
00:56:48,640 --> 00:56:52,720
We always, If we're getting
screwed, we want to be able to

960
00:56:52,720 --> 00:56:55,160
blame somebody because it's not
our fault.

961
00:56:55,520 --> 00:56:59,080
It's not young people's fault.
So who's to blame for this?

962
00:56:59,480 --> 00:57:01,920
And so if you don't understand
what's going on, then it's very

963
00:57:01,920 --> 00:57:06,240
natural for Republicans to then
blame Democrats and Democrats to

964
00:57:06,600 --> 00:57:08,800
blame Republicans.
And.

965
00:57:08,800 --> 00:57:11,640
Even though in terms of it's had
the same consequences over the

966
00:57:11,640 --> 00:57:14,080
last 25 years.
Yeah, no, exactly.

967
00:57:14,080 --> 00:57:15,080
It doesn't matter who's in
power.

968
00:57:15,520 --> 00:57:18,200
Yeah.
So I know beautiful people who

969
00:57:18,200 --> 00:57:20,160
are Republicans and who are
Democrats.

970
00:57:20,160 --> 00:57:23,240
And for the most part, they
believe in exactly the same kind

971
00:57:23,240 --> 00:57:27,160
of stuff, right?
You know, But then if once

972
00:57:27,160 --> 00:57:29,240
there's a Republican and they're
a Democrat, all of a sudden they

973
00:57:29,240 --> 00:57:30,800
hate each other.
You know it's.

974
00:57:31,480 --> 00:57:33,240
Crazy.
It's so sad what's going on.

975
00:57:33,840 --> 00:57:36,640
Yeah.
But I, but I think that with a

976
00:57:36,640 --> 00:57:43,480
better understanding of truth
and that it's a lot easier to be

977
00:57:43,480 --> 00:57:50,360
compassionate and, and, and that
for for younger people who've

978
00:57:50,360 --> 00:57:54,880
recently bought home and if home
prices go down and they sell at

979
00:57:54,880 --> 00:57:59,560
a loss, you know, there could be
some sort of taxpayer benefit to

980
00:57:59,560 --> 00:58:02,240
help them out partially.
Sure, at least you know,

981
00:58:02,560 --> 00:58:06,200
particularly if that benefit is
coming from those who made a

982
00:58:06,200 --> 00:58:09,160
fortune on their homes.
Right who?

983
00:58:09,640 --> 00:58:13,200
I mean, I know and people my
age, most people my age, when I

984
00:58:13,200 --> 00:58:17,560
tell them this thing about
housing, you know, first I kind

985
00:58:17,560 --> 00:58:20,320
of shocked, but then they get
it.

986
00:58:20,440 --> 00:58:23,200
And they said, yeah, you know,
honestly, I never even thought

987
00:58:23,200 --> 00:58:24,560
about it.
You're right.

988
00:58:25,680 --> 00:58:29,440
Every now and then I run across
somebody who doesn't like it.

989
00:58:30,120 --> 00:58:34,840
And they like to think that they
made a fortune on our home

990
00:58:36,040 --> 00:58:40,640
because they timed the purchase
just right or somehow they

991
00:58:40,640 --> 00:58:42,720
deserve it.
And they'll throw all kinds of

992
00:58:42,720 --> 00:58:47,960
stuff at me to try and justify
and rationalize why they're

993
00:58:47,960 --> 00:58:51,560
making money in their home.
And it doesn't come at somebody

994
00:58:51,560 --> 00:58:54,360
else's expense.
And I understand.

995
00:58:54,960 --> 00:58:57,040
I mean, they're few and far
between, by the way.

996
00:58:57,080 --> 00:59:00,760
Most people can.
But it's not a pleasant thing to

997
00:59:00,760 --> 00:59:05,680
hear because, no, for years
you've thought, hey, I know what

998
00:59:05,680 --> 00:59:09,120
I'm doing in housing, you know,
good for me, you know?

999
00:59:09,120 --> 00:59:12,320
And then I come along and say,
well, no, not so fast, you know?

1000
00:59:13,320 --> 00:59:21,280
And yeah, just, and, and I think
particularly in America, you

1001
00:59:21,280 --> 00:59:25,880
guys have such a can do spirit
patriotism.

1002
00:59:26,200 --> 00:59:30,000
When you're all facing something
together, you all come together

1003
00:59:30,640 --> 00:59:34,600
and and and we'll want to do the
right thing.

1004
00:59:34,800 --> 00:59:40,120
But importantly, people have to
believe that we are all in this

1005
00:59:40,120 --> 00:59:43,440
together, that it's not just me
that's going to be making the

1006
00:59:43,440 --> 00:59:45,440
sacrifice.
It's not just me the one that's

1007
00:59:45,440 --> 00:59:49,280
going to get screwed.
Yes, the leaders, my boss,

1008
00:59:49,360 --> 00:59:52,600
everybody.
We're all going to, you know,

1009
00:59:52,600 --> 00:59:56,120
we're going to struggle a little
bit for a few years, maybe make

1010
00:59:56,120 --> 00:59:59,560
some sacrifices.
But coming out the other end,

1011
00:59:59,560 --> 01:00:01,120
things are going to be
fantastic.

1012
01:00:01,520 --> 01:00:05,760
And it's going to be a much
fairer redistribution of the

1013
01:00:05,760 --> 01:00:09,400
capital that we're all creating.
And if people believe that,

1014
01:00:09,400 --> 01:00:12,840
that's the end game.
I think people will agree to do

1015
01:00:12,840 --> 01:00:17,440
what's necessary and then the
leaders will come to the fore to

1016
01:00:17,440 --> 01:00:23,840
make those kind of decisions.
And well, the alternative is

1017
01:00:23,840 --> 01:00:27,040
that we continue on this current
unsustainable path.

1018
01:00:27,080 --> 01:00:29,880
And rather than a controlled
implosion, you know, like when

1019
01:00:29,880 --> 01:00:34,400
you you blow up a building and
it all comes down, it doesn't is

1020
01:00:34,400 --> 01:00:39,200
an out of control explosion
significant collateral damage.

1021
01:00:40,200 --> 01:00:44,680
Even worse is that we could get
a significant change to our

1022
01:00:44,680 --> 01:00:49,920
economic and political system,
which at first would appear to

1023
01:00:49,920 --> 01:00:53,400
be a good thing because there
would be a much fairer

1024
01:00:53,400 --> 01:00:55,680
redistribution of wealth, like
through socialism.

1025
01:00:56,320 --> 01:01:00,040
But there would be far lower
wealth being created and the

1026
01:01:00,040 --> 01:01:05,840
world would be significantly
poorer and ultimately anger

1027
01:01:06,080 --> 01:01:08,840
angrier at each other because of
what's happening.

1028
01:01:10,040 --> 01:01:11,760
Right.
So I have a couple of follow up

1029
01:01:11,760 --> 01:01:16,160
questions.
It seems that a lot of the

1030
01:01:16,160 --> 01:01:24,880
issues are a consequence of
policy in order to make short

1031
01:01:24,880 --> 01:01:31,400
term gains and right.
And I also noticed that it feels

1032
01:01:31,400 --> 01:01:33,720
like, especially with corporate
companies, there's enormous

1033
01:01:33,720 --> 01:01:36,720
pressure, especially ones that
have to answer to stockholders

1034
01:01:36,720 --> 01:01:39,040
and, and and have and have
stockholders.

1035
01:01:39,400 --> 01:01:44,000
The quarterly earnings forces
them to try to create the short

1036
01:01:44,000 --> 01:01:45,720
term wealth.
Well, you know, decision to

1037
01:01:45,720 --> 01:01:50,760
create wealth as opposed to long
term company success, right?

1038
01:01:50,760 --> 01:01:54,680
Because and Amazon was a
notorious case of a company that

1039
01:01:54,680 --> 01:01:58,840
didn't care about its, you know,
it's valuation, I guess, or you

1040
01:01:58,840 --> 01:02:01,440
know what, it's short term.
They said we have a big picture

1041
01:02:01,440 --> 01:02:03,360
in mind.
And for a couple of years, you

1042
01:02:03,360 --> 01:02:05,040
know, they didn't mind what the
stock price was.

1043
01:02:05,040 --> 01:02:08,680
I believe I could be wrong.
I believe I recall reading that

1044
01:02:09,120 --> 01:02:12,440
and and they were able to keep
their eye on the, on the long

1045
01:02:12,440 --> 01:02:17,800
game and they are what they are
now, you know, but so do you

1046
01:02:17,800 --> 01:02:19,720
think they would change?
Like I, I think I heard Trump

1047
01:02:19,720 --> 01:02:21,960
float the idea of changing
quarterly earnings to half a

1048
01:02:21,960 --> 01:02:23,400
year earnings or something like
that.

1049
01:02:23,400 --> 01:02:25,120
Do you think that would make an
impact?

1050
01:02:26,760 --> 01:02:32,040
It would help for sure.
And you know, my investment

1051
01:02:32,040 --> 01:02:34,920
style and my investment team, we
were very long term

1052
01:02:36,400 --> 01:02:38,520
shareholders, long term
investors.

1053
01:02:39,200 --> 01:02:42,760
So when we were meeting with a
company, the company would often

1054
01:02:42,960 --> 01:02:45,400
start talking about what they
were going to do the next

1055
01:02:45,400 --> 01:02:47,760
quarter, what sales would be,
what the profit margin would be

1056
01:02:47,760 --> 01:02:49,760
the next quarter.
We said we don't care.

1057
01:02:50,440 --> 01:02:52,720
Right.
We want to know what your sales

1058
01:02:52,720 --> 01:02:57,800
growth and profit growth will be
over the next 10 years and how

1059
01:02:57,800 --> 01:03:00,880
are you going to do it?
How much are you investing in

1060
01:03:00,880 --> 01:03:02,640
the business?
What are you investing in?

1061
01:03:02,640 --> 01:03:05,240
What gives you confidence that
you're going to win this game?

1062
01:03:05,760 --> 01:03:07,880
What are the biggest threats
that you have longer term,

1063
01:03:07,920 --> 01:03:10,920
either from competition or
regulatory issues and policy

1064
01:03:10,920 --> 01:03:15,080
makers and stuff like that?
And you know, if the stock

1065
01:03:15,080 --> 01:03:18,760
market and analysts and whatnot
focus more in the long term,

1066
01:03:19,760 --> 01:03:24,040
then company, it would change
the behavior of companies and

1067
01:03:24,040 --> 01:03:27,480
they would focus on longer term
rather than on a short term

1068
01:03:28,160 --> 01:03:30,920
share price.
So companies, you know, if

1069
01:03:30,920 --> 01:03:33,320
they're expected to hit a
certain profit margin over the

1070
01:03:33,320 --> 01:03:36,360
next three months or six months,
they might start under investing

1071
01:03:36,360 --> 01:03:40,080
in their business to save money
to make their profitability

1072
01:03:40,080 --> 01:03:41,240
higher.
But they're not coming to the

1073
01:03:41,240 --> 01:03:44,040
expense of sales growth in the
future, right?

1074
01:03:44,240 --> 01:03:47,560
Or, you know, they they want to
drive their stock price higher.

1075
01:03:47,560 --> 01:03:52,240
So companies will, you know, if
you have your own company and

1076
01:03:52,240 --> 01:03:54,760
you take on debt to start your
company, one of the first things

1077
01:03:54,760 --> 01:03:59,560
you want to do is pay down the
debt and stop sharing, you know,

1078
01:03:59,560 --> 01:04:02,400
the profitability with the banks
by paying them interest on your

1079
01:04:02,400 --> 01:04:04,800
debt.
And plus you want that

1080
01:04:04,960 --> 01:04:07,160
confidence that if things
change, you're not going to have

1081
01:04:07,160 --> 01:04:12,720
too much debt and go broke.
But then the in stock markets

1082
01:04:13,000 --> 01:04:16,000
companies are rewarded for
taking on debt because the

1083
01:04:16,000 --> 01:04:18,760
market sees that the company is
going to take on debt to buy

1084
01:04:18,760 --> 01:04:21,880
back their shares and drive
their share price higher than

1085
01:04:21,880 --> 01:04:24,320
the executives then cash in on
all their options.

1086
01:04:24,320 --> 01:04:27,080
And there have been maybe a
couple of examples in my book,

1087
01:04:27,480 --> 01:04:31,240
or at least one.
OK, you want to give a couple of

1088
01:04:31,240 --> 01:04:32,920
them one or one or two examples.
Yeah.

1089
01:04:32,920 --> 01:04:37,840
So General Electric took on
billions, 10s of billions of

1090
01:04:37,840 --> 01:04:42,720
dollars in the mid 2000s of debt
to buy back their shares.

1091
01:04:42,720 --> 01:04:46,520
So they're buying back millions
of shares every year and this

1092
01:04:46,520 --> 01:04:48,200
was driving their share price
higher.

1093
01:04:49,200 --> 01:04:53,240
And so every year executives
were cashing in millions of

1094
01:04:53,240 --> 01:04:56,840
dollars worth of options, but
they're they were driving the

1095
01:04:56,840 --> 01:05:00,360
share price higher not because
they were creating more capital

1096
01:05:00,800 --> 01:05:03,680
and the capital was growing and
driving the share price higher

1097
01:05:03,680 --> 01:05:07,360
because they were taking on debt
to buy back shares and reducing

1098
01:05:07,360 --> 01:05:10,040
the amount of shares in the
market and driving the share

1099
01:05:10,040 --> 01:05:13,160
price higher.
And then they got into trouble

1100
01:05:13,160 --> 01:05:15,960
and they because they had so
much debt and they were having

1101
01:05:15,960 --> 01:05:19,160
to start selling off parts of
the business just to survive,

1102
01:05:19,520 --> 01:05:21,920
right.
You know, this is really bad

1103
01:05:21,920 --> 01:05:26,640
corporate culture.
And it's similar to what policy

1104
01:05:26,640 --> 01:05:31,280
makers do.
So when you have company

1105
01:05:31,280 --> 01:05:34,600
management who rather than
taking on debt to invest in the

1106
01:05:34,600 --> 01:05:37,760
business and create more
capital, they drive their share

1107
01:05:37,760 --> 01:05:39,880
price higher by buying back
shares.

1108
01:05:40,560 --> 01:05:48,600
Similarly, policy makers will
encourage GDP growth through

1109
01:05:48,600 --> 01:05:55,960
debt rather than a establishing
the conditions for the efficient

1110
01:05:55,960 --> 01:05:59,680
allocation of capital in the in
the economy to create more

1111
01:05:59,680 --> 01:06:03,920
capital to drive GDP higher.
And what would be the sensible

1112
01:06:04,280 --> 01:06:06,120
ways to do that?
What are some tangible ways to

1113
01:06:06,560 --> 01:06:08,240
what are some?
What would be some tangible or

1114
01:06:08,240 --> 01:06:11,200
actionable ways?
Like if if that was implanted

1115
01:06:11,200 --> 01:06:13,240
tomorrow in the States, what
would that look like?

1116
01:06:14,160 --> 01:06:17,240
Well, the first thing they'd
stop manipulating interest

1117
01:06:17,240 --> 01:06:22,360
rates.
So the most efficient capital

1118
01:06:22,360 --> 01:06:26,960
allocation in an economy is to
is driven by what's called the

1119
01:06:26,960 --> 01:06:31,240
natural rate of interest, very
different from the neutral rate

1120
01:06:31,240 --> 01:06:32,720
of interest.
And these two often get

1121
01:06:32,720 --> 01:06:34,600
conflated, but they're very
different things.

1122
01:06:35,240 --> 01:06:36,880
So the.
Natural rate of interest is

1123
01:06:36,880 --> 01:06:41,800
determined by market.
Players in the economy will have

1124
01:06:41,800 --> 01:06:44,160
their own skin in the game,
their own capital.

1125
01:06:44,920 --> 01:06:50,240
So individuals, corporations,
banks, and we're all making a

1126
01:06:50,240 --> 01:06:54,280
risk return assessment about
what to do with my capital.

1127
01:06:54,280 --> 01:06:56,160
So if I'm going to lend my
capital or you're going to lend

1128
01:06:56,160 --> 01:06:58,760
capital to me, you're going to
have to make an assessment with

1129
01:06:59,000 --> 01:07:00,680
respect to what kind of risk I
am.

1130
01:07:01,080 --> 01:07:01,520
Am I?
Am I?

1131
01:07:01,560 --> 01:07:03,600
Going to pay you back the money
or am I going to be gone?

1132
01:07:04,320 --> 01:07:07,040
And so if I'm a higher risk, you
want a higher interest rate,

1133
01:07:07,200 --> 01:07:09,840
lower risk, lower interest rate.
And so.

1134
01:07:09,880 --> 01:07:13,360
You get millions of people and
corporations, organizations,

1135
01:07:13,360 --> 01:07:16,200
banks making all these decisions
on a daily basis.

1136
01:07:16,200 --> 01:07:18,720
And what results is what's
called the natural rate of

1137
01:07:18,720 --> 01:07:20,960
interest.
And this results in the most

1138
01:07:21,240 --> 01:07:24,120
efficient allocation, the most
productive economy.

1139
01:07:25,640 --> 01:07:29,640
But what's central banks focus
on is the neutral rate of

1140
01:07:29,640 --> 01:07:34,000
interest, which is the rate of
interest that allows for

1141
01:07:34,400 --> 01:07:39,880
consumption spending and steady
growth in the economy without

1142
01:07:39,880 --> 01:07:44,840
resulting in inflation.
And so they will they start

1143
01:07:44,840 --> 01:07:48,080
taking interest rates down to
encourage consumption and get

1144
01:07:48,080 --> 01:07:51,040
GDP growing.
And when they take interest

1145
01:07:51,040 --> 01:07:53,760
rates down, what happens is
people take on more debt to

1146
01:07:53,760 --> 01:07:56,360
drive the economy.
So it's debt fueled consumption,

1147
01:07:56,360 --> 01:07:59,800
debt fueled spending.
And so it looks like it worked

1148
01:07:59,800 --> 01:08:04,080
while we lowered the the rate to
get to that neutral rate to get

1149
01:08:04,080 --> 01:08:06,840
the economy growing without
inflation happening.

1150
01:08:06,840 --> 01:08:09,920
But then because people took on
debt, they're servicing more

1151
01:08:09,920 --> 01:08:11,200
debt.
Eventually they have their

1152
01:08:11,520 --> 01:08:14,120
spending starts a flat line
because they can't take on any

1153
01:08:14,120 --> 01:08:16,640
more debt.
And so, oh, it seems about, oh,

1154
01:08:16,640 --> 01:08:20,520
we have to lower the neutral
rate again so people take up

1155
01:08:20,520 --> 01:08:23,240
more debt.
So the spending picks up and

1156
01:08:23,240 --> 01:08:25,160
then it flatlines again.
Oh, we have to say.

1157
01:08:25,680 --> 01:08:28,240
And they're all mesmerized.
They're astonished that the

1158
01:08:28,240 --> 01:08:30,640
neutral rate of interest for
some reason the last number of

1159
01:08:30,640 --> 01:08:34,399
decades has kept grinding lower.
And then they blame it on SEC

1160
01:08:34,520 --> 01:08:37,560
global secular stagnation or or
something like this.

1161
01:08:38,040 --> 01:08:43,279
No, it's because you're taking
it the neutral rate further and

1162
01:08:43,279 --> 01:08:45,279
further below the natural rate
the.

1163
01:08:45,279 --> 01:08:47,279
Natural rate.
That results in the most

1164
01:08:47,279 --> 01:08:51,359
productive economy is up here.
We've got interest rates down

1165
01:08:51,359 --> 01:08:55,240
here, so people could take a
more and more debt to drive GDP

1166
01:08:55,240 --> 01:08:57,920
higher, right?
And so the further you go down

1167
01:08:57,920 --> 01:09:00,319
here, the worse things get.
And debt.

1168
01:09:00,319 --> 01:09:03,520
And debt means long term, lower
GDP, less spending long term.

1169
01:09:03,520 --> 01:09:05,479
Because people have less money,
they're more focused on paying

1170
01:09:05,479 --> 01:09:07,040
it back.
Wow.

1171
01:09:07,960 --> 01:09:10,680
And so.
There I have a quote in my book

1172
01:09:10,880 --> 01:09:15,120
from Ludwig von Mises.
He was, he was considered the

1173
01:09:15,120 --> 01:09:17,680
king of the Austrian School of
Economics.

1174
01:09:18,120 --> 01:09:22,279
Brilliant.
And he had a saying where he

1175
01:09:22,279 --> 01:09:25,960
said that policy.
So here's a natural rate, right?

1176
01:09:26,359 --> 01:09:29,960
New choice down here.
He said policy makers can deny

1177
01:09:29,960 --> 01:09:34,240
you the right to receive the
natural rate of interest where

1178
01:09:34,240 --> 01:09:35,960
they drive it.
Down here, you're getting this

1179
01:09:36,359 --> 01:09:38,279
right.
They can deny you the right to

1180
01:09:38,279 --> 01:09:41,920
receive the natural rate of
interest, but they cannot

1181
01:09:42,000 --> 01:09:47,960
eliminate its existence.
The natural rate, IE the most

1182
01:09:47,960 --> 01:09:53,520
productive rate, is still up
here, they're just denying you

1183
01:09:53,560 --> 01:09:54,920
from getting it.
Yeah.

1184
01:09:55,320 --> 01:09:58,440
And with the resulting
consequences that that has for

1185
01:09:59,120 --> 01:10:03,200
the economy at large so.
Abolish the Fed.

1186
01:10:03,200 --> 01:10:08,080
I'm just kidding.
I'm just kidding.

1187
01:10:08,080 --> 01:10:11,800
I'm just kidding.
You know, the starting point

1188
01:10:11,800 --> 01:10:15,640
matters, OK?
And I, I don't believe that the

1189
01:10:15,680 --> 01:10:20,360
Fed are bad people.
They have a mandate, right,

1190
01:10:20,560 --> 01:10:23,720
which comes from Congress, and
Congress can change this mandate

1191
01:10:23,720 --> 01:10:27,240
anytime they want.
Presumably.

1192
01:10:28,000 --> 01:10:30,200
Independent from the No, they're
not.

1193
01:10:31,080 --> 01:10:35,720
And I think Mcchesney Martin, he
was a famous Fed chairman from

1194
01:10:35,720 --> 01:10:42,760
the through the 50s and 60s.
He said something like it was on

1195
01:10:42,880 --> 01:10:47,920
a, like a free to choose Milton
Friedman documentary.

1196
01:10:49,080 --> 01:10:52,120
Nikki said that the Federal
Reserve is independent.

1197
01:10:55,720 --> 01:10:59,360
Not independent from government,
but independent within it or

1198
01:10:59,360 --> 01:11:01,800
something like that, something
cryptic like that.

1199
01:11:02,360 --> 01:11:04,160
But the bottom line is they're
not independent.

1200
01:11:04,640 --> 01:11:06,680
They're definitely not.
They're not.

1201
01:11:06,800 --> 01:11:09,200
But so I wouldn't abolish the
Fed now.

1202
01:11:09,240 --> 01:11:12,480
I would have.
It would have been better if the

1203
01:11:12,480 --> 01:11:18,160
Fed had never been created in
the 1st place back in 1913, I

1204
01:11:18,160 --> 01:11:21,640
think it was.
But it is here.

1205
01:11:21,640 --> 01:11:27,720
So I think we if we just had a
more responsible Federal

1206
01:11:27,720 --> 01:11:33,560
Reserve, you know, who would be
able to resist pressure from the

1207
01:11:33,560 --> 01:11:35,720
government to increase the money
supply.

1208
01:11:36,640 --> 01:11:41,040
But the problem is if you did
have that sort of Federal

1209
01:11:41,040 --> 01:11:44,320
Reserve, then Congress would
probably just change it's

1210
01:11:44,320 --> 01:11:47,160
mandate and change the people
who were in charge.

1211
01:11:47,160 --> 01:11:49,560
So, you know, Congress on board
as well.

1212
01:11:50,480 --> 01:11:53,640
And so again, Congress on board
and and then the right people at

1213
01:11:53,640 --> 01:11:57,760
the Fed and just have a more
responsible approach to monetary

1214
01:11:57,760 --> 01:12:04,040
policy and stop driving the
money supply so high so quickly.

1215
01:12:04,720 --> 01:12:09,680
That will go a long way to to
fixing things.

1216
01:12:10,640 --> 01:12:15,480
The other another way would be,
well, stop bailing out Wall

1217
01:12:15,480 --> 01:12:16,680
Street.
Yes.

1218
01:12:17,680 --> 01:12:21,280
Stop, stop, You know,
privatizing the profits and

1219
01:12:21,280 --> 01:12:26,880
socializing the losses.
That would go a long way if Wall

1220
01:12:26,880 --> 01:12:31,720
Street and financial markets
knew that the central bank would

1221
01:12:31,720 --> 01:12:35,240
not come to their rescue with 0
interest rates and or

1222
01:12:35,240 --> 01:12:38,000
quantitative easing.
It would significantly.

1223
01:12:38,000 --> 01:12:43,360
Change the behavior of market
players and but they're doing

1224
01:12:43,360 --> 01:12:47,760
the rational thing because they
know that the central bank will

1225
01:12:47,760 --> 01:12:51,800
come to the rescue, even though
it comes at the cost of Main

1226
01:12:51,800 --> 01:12:57,080
Street of the general economy,
because the Federal Reserve has

1227
01:12:57,080 --> 01:13:01,480
sacrificed the Main Street
economy on the altar of higher

1228
01:13:01,480 --> 01:13:03,600
asset prices.
And the market players know

1229
01:13:03,600 --> 01:13:06,280
this.
So you get that out of the moral

1230
01:13:06,280 --> 01:13:08,920
hazard, you get that out of the
picture, things would be much

1231
01:13:08,960 --> 01:13:13,840
better.
And then this belief that I'm

1232
01:13:13,840 --> 01:13:15,760
not anti government.
You know, government's very

1233
01:13:15,760 --> 01:13:18,360
important and a lot of great
hard working people in

1234
01:13:18,360 --> 01:13:22,400
government, but too much
government is a really bad thing

1235
01:13:23,040 --> 01:13:26,080
and government keeps growing and
because it can only obtain

1236
01:13:26,080 --> 01:13:29,520
capital by taking it from the
rest of from the private sector.

1237
01:13:30,120 --> 01:13:32,600
The.
More it takes the more and

1238
01:13:32,680 --> 01:13:35,360
government spending is
consumption, very small part of

1239
01:13:35,360 --> 01:13:37,640
it is investment.
So the larger government

1240
01:13:37,640 --> 01:13:40,920
becomes, the more consumption
that happens rather than

1241
01:13:40,920 --> 01:13:44,080
investment and the poorer
society becomes, the government

1242
01:13:44,080 --> 01:13:48,400
starts becoming this entity of
itself and you know, it's got

1243
01:13:48,400 --> 01:13:51,720
it's own survival at stake and
in mind.

1244
01:13:52,720 --> 01:13:57,040
And again, bad systems bringing
out the worst and good people.

1245
01:13:58,000 --> 01:14:03,040
And so you need smaller
government and not anti welfare.

1246
01:14:03,320 --> 01:14:07,680
I like the fact that we can help
people or employment insurance

1247
01:14:07,680 --> 01:14:11,160
or medical insurance or
whatever, you know, help people

1248
01:14:11,160 --> 01:14:13,680
who can't help themselves.
I mean that's really important

1249
01:14:13,680 --> 01:14:18,480
and it feels really great to do.
Within reason, sure, within

1250
01:14:18,480 --> 01:14:22,160
reason because it all comes.
There's no such thing as

1251
01:14:22,200 --> 01:14:26,400
government benefits.
They're all taxpayer benefits.

1252
01:14:26,400 --> 01:14:29,120
Taxpayers are the ones who pay
for all of those things.

1253
01:14:29,360 --> 01:14:32,800
So we should get that
terminology out of lexicon or

1254
01:14:32,800 --> 01:14:35,160
whatever.
You know, it's not government

1255
01:14:35,160 --> 01:14:36,920
benefits.
It's not government subsidies.

1256
01:14:37,400 --> 01:14:39,960
They're just.
Channelling money from the

1257
01:14:39,960 --> 01:14:43,240
private sector, one part of the
private sectors to the other

1258
01:14:43,240 --> 01:14:49,360
part of the private sector and
reduce red tape, bureaucracy.

1259
01:14:50,040 --> 01:14:53,640
You know, it doesn't mean there
shouldn't be rules, doesn't mean

1260
01:14:53,640 --> 01:14:57,360
there shouldn't be regulations,
but within reason.

1261
01:14:57,360 --> 01:15:01,040
Regulations should not be there
to justify jobs, to justify

1262
01:15:01,040 --> 01:15:07,040
careers in government.
And yeah, so it's not going to

1263
01:15:07,040 --> 01:15:09,560
be easy, right?
But it's.

1264
01:15:10,680 --> 01:15:13,040
But I think just this
understanding and

1265
01:15:13,040 --> 01:15:15,520
acknowledgement with respect to
how they really work and how

1266
01:15:15,520 --> 01:15:18,440
they don't and who's suffering
and who's benefiting somebody

1267
01:15:18,440 --> 01:15:21,840
else's expense, you know,
that's, I think that could be.

1268
01:15:23,240 --> 01:15:25,320
A good starting right, right,
right.

1269
01:15:26,800 --> 01:15:28,840
And you give me a lot to you
give me a lot to process over

1270
01:15:28,840 --> 01:15:40,600
here you all have to think about
and what happens, I guess worst

1271
01:15:40,600 --> 01:15:44,840
case scenario.
Well.

1272
01:15:46,480 --> 01:15:48,560
The worst case scenario is that
we just keep on doing exactly

1273
01:15:48,560 --> 01:15:50,880
what we're doing and then it
just, and then it like collapse.

1274
01:15:51,040 --> 01:15:53,200
Like what, what does it, what
does it look like when we have

1275
01:15:53,200 --> 01:15:55,760
too much debt and we and then we
just don't have enough money to

1276
01:15:55,760 --> 01:15:56,760
pay it back?
What does that look?

1277
01:15:56,760 --> 01:15:58,920
What happens then?
Yeah.

1278
01:15:59,000 --> 01:16:03,680
So what happens is the
government, the most likely path

1279
01:16:04,200 --> 01:16:06,680
that the government will take is
what I mentioned earlier.

1280
01:16:06,680 --> 01:16:08,480
It's called financial
repression.

1281
01:16:09,920 --> 01:16:15,520
And so you will be repressed
financially.

1282
01:16:16,680 --> 01:16:22,640
So the so they have so much debt
outstanding that the only way I

1283
01:16:22,880 --> 01:16:25,880
mean, they can't pay it back,
raising taxes.

1284
01:16:25,880 --> 01:16:30,400
And eventually, and a lot of the
debt is held by people outside

1285
01:16:30,400 --> 01:16:33,240
of the country.
And so people start to get

1286
01:16:33,240 --> 01:16:37,680
nervous that the US is not going
to be able to pay back the debt.

1287
01:16:38,040 --> 01:16:39,760
And it's not just the US, it's
all developed.

1288
01:16:40,360 --> 01:16:44,000
I think our debt is downgraded,
right, Has been downgraded the

1289
01:16:44,000 --> 01:16:46,360
last couple of years, yeah.
Marginally.

1290
01:16:47,440 --> 01:16:50,720
I mean, if it's a corporation,
that'd be like a junk credit

1291
01:16:50,800 --> 01:16:51,960
rating.
You know, right?

1292
01:16:52,000 --> 01:16:52,240
Right.
But.

1293
01:16:54,120 --> 01:16:57,800
You know, but the US people will
say that, well, the US can't

1294
01:16:57,800 --> 01:17:00,840
ever default on their debt.
And technically that's true

1295
01:17:01,680 --> 01:17:03,080
because they can just print
money.

1296
01:17:04,320 --> 01:17:06,280
But it's like.
No capital backing it.

1297
01:17:07,640 --> 01:17:10,800
No, exactly.
So if they just print money to

1298
01:17:10,840 --> 01:17:16,240
pay you back the debt that you
lent them, then yes, you'll get

1299
01:17:16,240 --> 01:17:19,160
100 cents on the dollar.
But those hundred cents are only

1300
01:17:19,160 --> 01:17:21,560
going to be worth half as much
as they were when you lend them

1301
01:17:21,560 --> 01:17:22,960
the money.
Right, right, right.

1302
01:17:23,760 --> 01:17:27,640
Taken your capital from the
money before they give it back

1303
01:17:27,640 --> 01:17:32,680
to you and you're poorer.
And so that's the accepted a lot

1304
01:17:32,680 --> 01:17:35,000
of people's drives me nuts.
A lot of people out there all

1305
01:17:35,000 --> 01:17:36,800
will just revert to financial
repression.

1306
01:17:36,840 --> 01:17:40,120
Worked after World War 2 and all
this kind of stuff, the

1307
01:17:40,240 --> 01:17:44,000
government, we cut spending and
we got debt to GDP down

1308
01:17:44,000 --> 01:17:46,080
significantly after World War
Two.

1309
01:17:47,120 --> 01:17:50,440
Well, the situation today is
completely different from World

1310
01:17:50,440 --> 01:17:52,880
War 2.
You know, the government

1311
01:17:52,880 --> 01:17:55,160
spending during the war
obviously went through the roof

1312
01:17:55,160 --> 01:18:01,120
because they were building tanks
and planes and guns and ships.

1313
01:18:01,720 --> 01:18:05,000
And after the war, the
government just stopped.

1314
01:18:06,240 --> 01:18:09,240
Well, we didn't stop.
We just changed where it was

1315
01:18:09,240 --> 01:18:10,720
going.
It wasn't going to for American

1316
01:18:10,720 --> 01:18:12,120
armies, it was going for other
armies.

1317
01:18:13,240 --> 01:18:16,480
Well, yeah.
Well, in late 40s government

1318
01:18:16,600 --> 01:18:22,680
spending plummeted because they
didn't need to create all this

1319
01:18:22,680 --> 01:18:26,880
war material.
And so in the late 40's, the

1320
01:18:26,880 --> 01:18:29,800
government was running a budget
surplus.

1321
01:18:30,720 --> 01:18:33,560
Right.
And debt to GDP fell

1322
01:18:33,560 --> 01:18:38,000
significantly because also at
the same time they lowered

1323
01:18:38,000 --> 01:18:42,520
interest rates from very high
levels and the private sector

1324
01:18:42,720 --> 01:18:45,840
productivity exploded.
In the late 40s.

1325
01:18:46,800 --> 01:18:50,640
And then it sort of flatlined
almost in the 50s because tax

1326
01:18:50,680 --> 01:18:53,440
rates went back up again, as I
mentioned earlier, to over 90.

1327
01:18:53,520 --> 01:18:54,640
Percent.
Yeah, there.

1328
01:18:54,880 --> 01:18:57,720
Were I think there were 4
recessions in the 1950s.

1329
01:18:58,280 --> 01:19:03,000
So people look at the 1950s as
this glorious heyday of economic

1330
01:19:03,040 --> 01:19:08,880
prosperity wasn't really late
40s was, and the 60s were, And

1331
01:19:08,880 --> 01:19:13,200
it happened in the 60s because
Kennedy was the one who first

1332
01:19:13,200 --> 01:19:15,480
started lowering interest rates
in the early 60s.

1333
01:19:16,400 --> 01:19:20,280
And yeah, got off track.
I can't remember how.

1334
01:19:20,560 --> 01:19:23,200
We got that's OK.
So then so I wanted to ask then

1335
01:19:23,200 --> 01:19:26,080
if that's the case, because the
World War Two example is a great

1336
01:19:26,080 --> 01:19:28,320
example.
You know, remember the movie

1337
01:19:28,320 --> 01:19:30,080
Charlie Wilson's war with Tom
Hanks?

1338
01:19:31,480 --> 01:19:35,760
You ever watched that?
Yeah, it's about it's about how

1339
01:19:36,160 --> 01:19:40,360
Tom Hanks plays the congressman
Charlie Wilson that realized

1340
01:19:40,360 --> 01:19:44,600
that the United States could
fund the Afghans in the war

1341
01:19:44,600 --> 01:19:50,760
against, against the USSR.
And he basically just ended up,

1342
01:19:51,080 --> 01:19:54,320
you know, they had like a $2
million budget and, and he ran

1343
01:19:54,320 --> 01:19:57,080
like this Black Ops
congressional, you know,

1344
01:19:58,160 --> 01:20:01,920
committee and basically just had
the reins to the purse.

1345
01:20:02,280 --> 01:20:05,120
And they just started spending
like crazy right now.

1346
01:20:05,120 --> 01:20:08,840
On one hand, the emphasis of the
movie was, you know what we did,

1347
01:20:08,840 --> 01:20:11,560
you know, that we basically
funded a quote UN quote secret

1348
01:20:11,560 --> 01:20:13,920
war.
But what the movie doesn't talk

1349
01:20:13,920 --> 01:20:19,000
about would be the potential
economic consequences of taking,

1350
01:20:19,120 --> 01:20:23,280
you know, 255 hundred, you know,
a billion dollars, whatever it

1351
01:20:23,280 --> 01:20:28,080
is and in and, and, and, and
giving it to the Afghans or

1352
01:20:28,080 --> 01:20:31,240
let's say, even moving it to the
private sector to create weapons

1353
01:20:31,240 --> 01:20:34,440
to give to the Afghans, right?
No one talks about the

1354
01:20:34,440 --> 01:20:38,040
consequences of what that what
that does to the American

1355
01:20:38,040 --> 01:20:39,640
taxpayers.
You talk about what it does over

1356
01:20:39,640 --> 01:20:41,320
there in the Middle East, but it
doesn't, we don't talk about

1357
01:20:41,320 --> 01:20:45,160
what it does over here.
And that has a pretty

1358
01:20:45,160 --> 01:20:48,760
astronomical impact on, on our,
on our, on our economy, doesn't

1359
01:20:48,760 --> 01:20:52,720
it?
Yeah, I'm sure it does.

1360
01:20:53,040 --> 01:20:56,080
How much I don't know.
And it's and it's, I'm not

1361
01:20:56,080 --> 01:20:59,600
belittling it, but it's not sort
of my focus in my book.

1362
01:21:00,160 --> 01:21:02,440
Okay.
There's enough things to be

1363
01:21:02,440 --> 01:21:05,760
angry about.
Yeah, yeah, I don't want to be

1364
01:21:06,800 --> 01:21:10,520
angry is the term.
But I think to be frustrated.

1365
01:21:11,080 --> 01:21:15,920
Frustrated, right Or
conscientious as to I think that

1366
01:21:15,920 --> 01:21:18,600
I think that I think the real, I
think the problem, like what you

1367
01:21:18,600 --> 01:21:21,360
said, is that it's so it's
coming from so many different

1368
01:21:21,360 --> 01:21:23,240
like places and so many
different strands.

1369
01:21:23,240 --> 01:21:26,600
It's hard to even like nail down
what the, what the problem is.

1370
01:21:26,600 --> 01:21:29,200
And I think, like you said, so
many young people who are smart

1371
01:21:29,480 --> 01:21:32,320
don't even know where to even
start looking, you know, and

1372
01:21:32,320 --> 01:21:34,440
Start learning about this stuff.
Yeah.

1373
01:21:36,720 --> 01:21:42,800
And you know, the issue is that
people believe that something

1374
01:21:43,160 --> 01:21:47,240
can come from nothing.
So when government is spending

1375
01:21:47,240 --> 01:21:52,880
all this money, you know, they
they never have to go and face

1376
01:21:53,400 --> 01:21:55,600
directly the people that they're
taking the money from.

1377
01:21:56,600 --> 01:22:00,280
And so it just feels like
there's this endless stream of

1378
01:22:00,320 --> 01:22:03,240
money that they obtain or
capitally obtain taxation or

1379
01:22:03,240 --> 01:22:06,480
borrowing or.
And then they hear certain

1380
01:22:06,480 --> 01:22:08,640
economists tell them, yeah,
don't worry, deficits don't

1381
01:22:08,640 --> 01:22:11,440
matter, debt doesn't matter.
We could just print the money

1382
01:22:11,440 --> 01:22:13,600
and they don't think about the
consequences.

1383
01:22:14,440 --> 01:22:19,000
This is the problem.
And, and, and by the way, I

1384
01:22:20,280 --> 01:22:26,080
think before 1942 there's no
such thing as withholding tax.

1385
01:22:26,800 --> 01:22:30,600
So you would earn your money and
at the end of the year the

1386
01:22:30,600 --> 01:22:32,960
government will tell you how
much you owe them in taxes.

1387
01:22:33,280 --> 01:22:36,040
So you would.
Get the gross amount of your

1388
01:22:36,040 --> 01:22:39,640
productive efforts.
You would get fairly compensated

1389
01:22:39,840 --> 01:22:42,200
what you produce.
So that was a gross amount.

1390
01:22:42,240 --> 01:22:44,480
This is how much capital I
produce and somebody else out

1391
01:22:44,480 --> 01:22:46,760
there has that now.
And then the government come,

1392
01:22:46,760 --> 01:22:50,440
OK, you owe us this much, but
now with withholding taxes, you

1393
01:22:50,440 --> 01:22:52,520
just get the net amount.
Right.

1394
01:22:52,720 --> 01:22:54,600
You you never see the gross
amount.

1395
01:22:54,800 --> 01:22:56,720
Yeah.
And so you start to think, well,

1396
01:22:56,960 --> 01:23:00,840
the net amount is what I earned.
No, you actually earned way more

1397
01:23:00,840 --> 01:23:02,400
than that.
But the government took it,

1398
01:23:03,600 --> 01:23:05,600
right.
So it's out of sight, out of

1399
01:23:05,600 --> 01:23:07,600
mind, something you never get
your hands on it.

1400
01:23:07,600 --> 01:23:12,560
It's less, feels less painful.
It was an ingenious thing that

1401
01:23:12,560 --> 01:23:15,320
they did.
Well, I would also imagine, I

1402
01:23:15,320 --> 01:23:18,560
know for myself hypothetically,
because it took me, I'm still

1403
01:23:18,560 --> 01:23:20,680
working on my financial
responsibility, right?

1404
01:23:20,680 --> 01:23:23,160
I'm not, I'm not the most
responsible individual out there

1405
01:23:24,080 --> 01:23:26,760
with my $30 bottles of craft
beer or whatever it is, you

1406
01:23:26,760 --> 01:23:32,280
know, but I, you know, but I, I
could imagine, I actually know

1407
01:23:32,280 --> 01:23:36,880
this from, you know, experience.
Like if I would got all my money

1408
01:23:36,880 --> 01:23:39,120
gross and then at the end of the
year, the government said, Hey,

1409
01:23:39,120 --> 01:23:43,720
you owe me 20% or 15% of
whatever you made, right.

1410
01:23:44,440 --> 01:23:47,560
I, I bet a lot of people
wouldn't have that.

1411
01:23:48,120 --> 01:23:49,720
I wouldn't have that just lying
around.

1412
01:23:49,720 --> 01:23:54,960
You know, I think that I.
Think they would because if you

1413
01:23:54,960 --> 01:23:58,600
know what the consequences are
of not having it right and the

1414
01:23:58,600 --> 01:24:00,760
focus the mind.
OK, a lot.

1415
01:24:00,760 --> 01:24:03,400
Of people aren't capable of it,
they're not incentivized to.

1416
01:24:03,880 --> 01:24:06,280
I see, right?
I'm not saying we should go back

1417
01:24:06,280 --> 01:24:07,040
to that.
I'm just.

1418
01:24:07,360 --> 01:24:08,520
Yeah, yeah, yeah, yeah, yeah,
yeah.

1419
01:24:08,600 --> 01:24:11,800
It's.
Easier for governments, you

1420
01:24:11,800 --> 01:24:15,840
know, to to spend money on
whatever their projects are

1421
01:24:16,680 --> 01:24:21,040
because they don't actually see
the people and don't have to go

1422
01:24:21,040 --> 01:24:24,480
and ask them for it.
It's just taken automatically.

1423
01:24:24,560 --> 01:24:28,720
And yeah, so it's just a mindset
issue.

1424
01:24:28,720 --> 01:24:32,120
You think is is is the problem.
Yeah, and.

1425
01:24:32,920 --> 01:24:34,120
It's going to take a lot to
change it.

1426
01:24:34,760 --> 01:24:36,840
So what?
So I guess the, I guess, and

1427
01:24:37,000 --> 01:24:39,720
then the other solution would be
to start creating more capital

1428
01:24:40,240 --> 01:24:44,480
and to be actually, you know,
creating more goods and services

1429
01:24:46,080 --> 01:24:49,520
rather than just trying to get
more money, trying to print more

1430
01:24:49,520 --> 01:24:52,400
money and then distribute it,
you know, because and.

1431
01:24:54,440 --> 01:24:57,600
Printing more money harms the
productive capacity of the

1432
01:24:57,600 --> 01:25:01,680
economy.
Natural rates, no bailouts for

1433
01:25:01,680 --> 01:25:06,280
Wall Street and less bureaucracy
increases the amount of stuff

1434
01:25:06,280 --> 01:25:10,480
that's produced in the economy.
But those who are in control

1435
01:25:12,000 --> 01:25:14,720
prefer the the the former.
Yeah.

1436
01:25:14,720 --> 01:25:19,880
Because then they're in power.
And this is how you get elected,

1437
01:25:19,880 --> 01:25:25,640
by spending more money.
And yeah, So that that's the

1438
01:25:25,640 --> 01:25:27,920
issue.
Right, right.

1439
01:25:27,920 --> 01:25:29,280
How long did it take you to
write this book?

1440
01:25:30,800 --> 01:25:32,840
Six years.
Six years 'cause.

1441
01:25:32,840 --> 01:25:35,760
I was, well, I was 'cause I was
still working full time when I

1442
01:25:35,760 --> 01:25:38,600
was writing it.
I started in January of 2019

1443
01:25:38,600 --> 01:25:41,280
actually down in Florida in a
place in South Palm Beach there

1444
01:25:42,440 --> 01:25:45,200
and but I could only write on
vacations.

1445
01:25:45,760 --> 01:25:48,400
Right and.
Sometimes I would go 5 months

1446
01:25:48,400 --> 01:25:50,760
without even looking at it
'cause it was just too busy.

1447
01:25:52,000 --> 01:25:57,520
And then in 2023, I decided to
leave my employer.

1448
01:25:58,000 --> 01:26:00,000
As I said before, I love my job,
my company.

1449
01:26:00,880 --> 01:26:03,320
I just got so frustrated I
wasn't able to finish the book.

1450
01:26:03,760 --> 01:26:06,760
Right and.
So and communication and and

1451
01:26:06,760 --> 01:26:10,600
whatnot really became my real
passion and I'd already started

1452
01:26:10,600 --> 01:26:15,760
my my weekly blog, which people
can access on my website for.

1453
01:26:15,920 --> 01:26:17,560
Free they.
Were going to put that notes up

1454
01:26:17,560 --> 01:26:20,360
on the in the, in the in the.
I'm set up in the notes for

1455
01:26:20,360 --> 01:26:21,800
sure, yeah.
Thank you.

1456
01:26:22,000 --> 01:26:24,920
And yeah.
And so that became my great

1457
01:26:24,920 --> 01:26:27,200
passion and I just needed more
time to finish the book.

1458
01:26:27,200 --> 01:26:30,160
So if I wasn't working full
time, I would have finished it,

1459
01:26:30,720 --> 01:26:32,080
you know, a lot quicker,
obviously.

1460
01:26:32,120 --> 01:26:36,040
But but it was a journey writing
that book for sure as well.

1461
01:26:36,440 --> 01:26:40,280
And you learn a lot by writing,
you know, by speaking.

1462
01:26:40,320 --> 01:26:43,760
By getting the.
Thoughts out of your head and

1463
01:26:43,880 --> 01:26:48,040
out there, you learn.
Because for me personally

1464
01:26:48,040 --> 01:26:51,800
anyways, when I'm just thinking
about things in my head, I don't

1465
01:26:52,240 --> 01:26:55,080
really challenge myself enough
on my thoughts.

1466
01:26:55,400 --> 01:26:57,720
Right.
And I don't need to because

1467
01:26:57,720 --> 01:26:59,120
nobody else knows what I'm
thinking.

1468
01:26:59,480 --> 01:27:01,560
Right.
But if I'm going to put it on

1469
01:27:01,560 --> 01:27:04,480
paper or send it out in my blog
or put it in a book, all of a

1470
01:27:04,480 --> 01:27:06,840
sudden we justify the world to
see said boy.

1471
01:27:06,920 --> 01:27:08,160
I better make sure this is right
you.

1472
01:27:08,560 --> 01:27:11,080
Know so you.
Know a bit more thinking about

1473
01:27:11,080 --> 01:27:13,800
it, You challenge it, you stress
test it, you do a bit more

1474
01:27:13,800 --> 01:27:16,120
digging.
Oh, actually, I was wrong.

1475
01:27:16,840 --> 01:27:18,000
You know, I never thought of
that.

1476
01:27:18,000 --> 01:27:21,360
But you don't, for I don't force
myself to think of things

1477
01:27:22,440 --> 01:27:25,680
through as much as I should
unless I get them out of my head

1478
01:27:25,680 --> 01:27:28,800
and on paper or verbally.
And the way that you would

1479
01:27:28,800 --> 01:27:31,120
structure, the way that you'd go
about writing the book, was that

1480
01:27:31,120 --> 01:27:35,200
you had a list of topics that
you thought were significant for

1481
01:27:35,200 --> 01:27:37,840
everyday people to understand,
and then each chapter would be

1482
01:27:37,840 --> 01:27:40,880
an elaboration on that.
Yeah.

1483
01:27:40,920 --> 01:27:48,200
So not really.
Like I knew what theme I wanted

1484
01:27:48,640 --> 01:27:53,560
to discuss and help people to
understand in terms of the

1485
01:27:53,560 --> 01:27:55,560
difference between capital and
money.

1486
01:27:55,560 --> 01:27:57,400
That's a big one.
Yeah.

1487
01:27:57,760 --> 01:28:00,400
And how an economy really works
and how it doesn't.

1488
01:28:01,280 --> 01:28:02,680
And then I just started.
Oh, yeah.

1489
01:28:02,800 --> 01:28:05,000
Oh, yeah, I better talk about
governments.

1490
01:28:05,000 --> 01:28:06,840
There's 20.
I better talk about housing.

1491
01:28:06,920 --> 01:28:08,360
Oh, I better talk about
inflation.

1492
01:28:08,360 --> 01:28:10,840
I've got two capital inflation.
Oh, I better talk about

1493
01:28:10,840 --> 01:28:12,800
corporate culture.
And bad corporate.

1494
01:28:12,800 --> 01:28:14,080
Culture good.
Corporate.

1495
01:28:14,280 --> 01:28:20,280
Oh, I better talk about capital
and Oh yeah, now we have to talk

1496
01:28:20,280 --> 01:28:22,120
about stock markets.
What are they?

1497
01:28:22,400 --> 01:28:24,200
Yeah, like why are they
important?

1498
01:28:24,200 --> 01:28:26,520
What's the good role the stock
markets play?

1499
01:28:27,320 --> 01:28:32,120
So again, easy to understand
terms and yeah, so here there's

1500
01:28:32,120 --> 01:28:34,560
nothing wrong with stock
markets, right?

1501
01:28:34,760 --> 01:28:37,480
There's just a lot wrong with
what they have become.

1502
01:28:38,080 --> 01:28:39,960
Right.
Because of central bank

1503
01:28:39,960 --> 01:28:42,600
interference and moral hazard
and stuff like that.

1504
01:28:43,480 --> 01:28:45,400
And yeah, so we're just started
to build.

1505
01:28:45,480 --> 01:28:50,440
Oh God, you know if.
Because I really want the reader

1506
01:28:50,440 --> 01:28:55,560
to understand and if the reader
reads the book, they will

1507
01:28:55,560 --> 01:28:59,760
understand what's going on and
trying not to take anything for

1508
01:28:59,760 --> 01:29:01,280
granted.
Right.

1509
01:29:02,440 --> 01:29:07,760
You know, so you know, when I
was first making presentations

1510
01:29:07,760 --> 01:29:11,440
when I was a professional
investor like 25 years ago, my

1511
01:29:11,440 --> 01:29:14,240
main goal was to impress people
with how smart I was.

1512
01:29:14,720 --> 01:29:17,560
And if I.
Impressed them and they thought

1513
01:29:17,560 --> 01:29:19,160
I was smart.
Then maybe they gave me their

1514
01:29:19,160 --> 01:29:20,560
money so I could manage the
money.

1515
01:29:20,560 --> 01:29:21,560
I could make money.
That way.

1516
01:29:22,760 --> 01:29:25,640
And then, you know, I wasn't
being entirely honest or

1517
01:29:25,640 --> 01:29:27,160
intellectually honest with
people.

1518
01:29:27,880 --> 01:29:32,160
I was trying to impress them.
And then I got get caught up in

1519
01:29:32,200 --> 01:29:35,600
like little white lies and stuff
like that where I'd leave out

1520
01:29:35,600 --> 01:29:38,040
certain things that I knew that
they would be interested in, but

1521
01:29:38,040 --> 01:29:40,520
that might mean they wouldn't
give me the money to manage.

1522
01:29:41,560 --> 01:29:43,320
And so I just don't know about
doing it anymore.

1523
01:29:43,360 --> 01:29:45,680
I am just going to tell the
truth.

1524
01:29:45,680 --> 01:29:47,160
There's a great saying.
I have my book.

1525
01:29:47,160 --> 01:29:49,760
I forget who said it, but you
know, if you tell the truth, you

1526
01:29:49,760 --> 01:29:51,520
never have to worry about what
you said.

1527
01:29:52,160 --> 01:29:54,640
Yeah, you have to remember what
you said.

1528
01:29:55,760 --> 01:29:57,200
Right.
It's a beautiful line and.

1529
01:29:58,280 --> 01:30:03,040
It's so, oh, it's so liberating.
It just, it just feels so good

1530
01:30:03,440 --> 01:30:05,880
and it's amazing the impact it
has on people around you.

1531
01:30:07,480 --> 01:30:10,760
Sure, you know.
And so I want to empower my

1532
01:30:10,760 --> 01:30:13,160
clients who are financial
advisors, like financial

1533
01:30:13,160 --> 01:30:17,280
planners and stockbrokers.
I want to empower you with the

1534
01:30:17,280 --> 01:30:22,560
most information and knowledge
that I can so you can make the

1535
01:30:22,720 --> 01:30:26,720
the most informed decision about
what's right to do with your

1536
01:30:26,720 --> 01:30:28,640
clients capital.
And.

1537
01:30:28,640 --> 01:30:32,040
It might mean that you don't
invest in our funds, but then

1538
01:30:32,040 --> 01:30:35,640
that's a good outcome because it
means that we're not appropriate

1539
01:30:35,640 --> 01:30:38,800
for you and your clients.
Long term thinking.

1540
01:30:39,760 --> 01:30:42,760
Exactly.
And yeah, and it and it works,

1541
01:30:43,400 --> 01:30:47,120
but yeah.
Anyways, so before we before we

1542
01:30:47,120 --> 01:30:49,320
call it, I want to end on a more
positive note.

1543
01:30:49,320 --> 01:30:52,920
Can you give me some example of
responsible corporate culture or

1544
01:30:52,920 --> 01:30:56,680
corporate behaviour?
Because I don't know of any

1545
01:30:56,680 --> 01:30:58,120
positive.
I can't, I don't, I don't.

1546
01:30:58,120 --> 01:31:00,080
You don't hear people going on
the news and talking about how

1547
01:31:00,080 --> 01:31:02,240
great this corporation is or
what they did that was so

1548
01:31:02,240 --> 01:31:04,200
productive, you know.
So you want to give me, you want

1549
01:31:04,200 --> 01:31:06,360
to see if you can give me some
positive news to end this?

1550
01:31:06,360 --> 01:31:08,080
Yeah.
Yeah, for sure.

1551
01:31:08,080 --> 01:31:10,640
Yeah.
The reason you don't hear the

1552
01:31:10,640 --> 01:31:14,400
positive stuff, it's kind of,
it's kind of boring and people

1553
01:31:14,400 --> 01:31:17,760
like hearing like the scandals.
And.

1554
01:31:18,680 --> 01:31:21,600
Well, I know from my, my own
experience as a, as a small

1555
01:31:21,600 --> 01:31:25,600
business, you know, work in a
small business that people only

1556
01:31:25,600 --> 01:31:28,040
write reviews and respond to you
when they're unhappy and when

1557
01:31:28,040 --> 01:31:30,080
they're happy, you'll never hear
from them ever again, you know,

1558
01:31:30,080 --> 01:31:35,200
So I believe it exactly.
Well, so first, I would say that

1559
01:31:35,920 --> 01:31:41,520
there are a lot more great
corporate culture businesses out

1560
01:31:41,520 --> 01:31:46,920
there than you think there are.
And I believe that for a

1561
01:31:46,960 --> 01:31:51,360
business to model a great
business model to persist for a

1562
01:31:51,360 --> 01:31:55,360
long period of time, you need a
great corporate culture where

1563
01:31:55,360 --> 01:31:57,200
all the constituents are
benefiting.

1564
01:31:57,200 --> 01:32:01,920
So like I was saying earlier,
supplier shareholders, a senior

1565
01:32:01,920 --> 01:32:06,640
exact employees, community at
large and the consumer or

1566
01:32:06,640 --> 01:32:10,280
customer, they all need to be
benefiting from it.

1567
01:32:11,200 --> 01:32:14,920
And you know, in the short term
the company can screw some of

1568
01:32:14,920 --> 01:32:18,760
those constituents and make more
money for themselves, but it

1569
01:32:18,760 --> 01:32:21,120
comes at the expense of the
business model in the future.

1570
01:32:21,640 --> 01:32:26,840
So I would, I would guess that
most companies understand this.

1571
01:32:26,840 --> 01:32:31,680
A lot of private companies get
it and they share in the success

1572
01:32:31,680 --> 01:32:34,840
of the business, particularly
with their employees and don't

1573
01:32:34,840 --> 01:32:38,200
keep it all for themselves.
And I use an example of my book

1574
01:32:38,200 --> 01:32:41,600
of a company called Fastenal
based in Minnesota.

1575
01:32:42,400 --> 01:32:46,360
It's a pretty basic business.
They distribute the fasteners,

1576
01:32:46,520 --> 01:32:48,080
you know, screws and stuff like
that.

1577
01:32:48,960 --> 01:32:52,960
And we had a tour of their plant
years ago.

1578
01:32:53,200 --> 01:32:56,480
And the plant manager, he's
taking us around and he

1579
01:32:56,480 --> 01:32:59,200
absolutely loves the business
and he's so excited.

1580
01:32:59,400 --> 01:33:01,960
So check out these screws are
customers love us?

1581
01:33:01,960 --> 01:33:05,600
No, nobody here goofs off 'cause
if they do, we give them shit

1582
01:33:05,600 --> 01:33:07,920
because it's our company.
We're all in this together.

1583
01:33:07,920 --> 01:33:10,360
It's holy smokes, what the
Hell's going on here, you know?

1584
01:33:12,000 --> 01:33:15,120
And so I asked the guy, I said,
well, why do you love the

1585
01:33:15,120 --> 01:33:18,400
business so much?
They said, oh, it's management,

1586
01:33:18,400 --> 01:33:20,920
ownership, you know, they treat
us so fairly.

1587
01:33:20,920 --> 01:33:23,200
They treat us like partners.
They always listen to what we

1588
01:33:23,200 --> 01:33:26,400
have to say.
And we all share the success of

1589
01:33:26,400 --> 01:33:28,160
the business.
The more money the business

1590
01:33:28,160 --> 01:33:31,480
makes, the more everybody makes,
not just the owners and the

1591
01:33:31,480 --> 01:33:35,720
senior execs.
Then he said, oh, here's a great

1592
01:33:35,720 --> 01:33:38,400
example.
So the, the CEO was the founder

1593
01:33:38,400 --> 01:33:42,000
of the business, right?
So first of all, if you're the

1594
01:33:42,000 --> 01:33:46,200
founder of a business, you
started off on your own, you're

1595
01:33:46,360 --> 01:33:49,400
probably doing every job.
It's your baby, right?

1596
01:33:49,560 --> 01:33:52,400
And, and as the, as the business
grows, you start hiring more

1597
01:33:52,400 --> 01:33:55,720
people to do the stuff that you
were doing so you could do other

1598
01:33:55,720 --> 01:33:59,760
stuff.
So if you're the founder and you

1599
01:33:59,760 --> 01:34:02,440
know things aren't going right,
you have more empathy for what

1600
01:34:02,440 --> 01:34:04,640
your employees are going through
because you've been there,

1601
01:34:04,880 --> 01:34:07,360
you've done it.
You're like a career executive,

1602
01:34:07,360 --> 01:34:10,120
just come from MBA school and
never started a business.

1603
01:34:10,120 --> 01:34:14,080
You don't have that same sort of
empathy.

1604
01:34:14,080 --> 01:34:15,720
You can't because you haven't
done it.

1605
01:34:16,400 --> 01:34:21,160
So that's the first thing.
So he said, Oh yeah, great

1606
01:34:21,160 --> 01:34:23,560
example for you.
So the, the CEO was the founder.

1607
01:34:23,560 --> 01:34:25,560
We owned about 1/3 of the
business.

1608
01:34:25,920 --> 01:34:28,960
His wife also owned a good stake
in the business, but a few years

1609
01:34:28,960 --> 01:34:32,600
prior she had passed away.
So the CEO took all of her

1610
01:34:32,600 --> 01:34:36,200
shares and he distributed them
to all the employees in the.

1611
01:34:36,200 --> 01:34:38,840
Company that's that's that's
shocking, That's crazy.

1612
01:34:40,040 --> 01:34:41,480
Yeah, you know, it's a great
story.

1613
01:34:41,520 --> 01:34:43,440
It's beautiful and I.
Got permission from the company

1614
01:34:43,440 --> 01:34:45,680
by the way, e-mail.
Can I use the story in my book?

1615
01:34:45,680 --> 01:34:47,320
And I said, yeah, go.
Ahead, yeah.

1616
01:34:47,720 --> 01:34:51,200
And but a lot more companies do
that than you think.

1617
01:34:51,360 --> 01:34:56,400
And just one other anecdotal
example, I guess the IT was on a

1618
01:34:56,400 --> 01:35:01,480
cruise and I was talking with
the guy from England and he was

1619
01:35:01,480 --> 01:35:05,680
talking about his business and
they made furniture or something

1620
01:35:05,680 --> 01:35:09,800
like that or appliances.
And during the great financial

1621
01:35:09,800 --> 01:35:14,520
crisis in 08/09, when everything
turned down, you know, sales

1622
01:35:14,640 --> 01:35:17,640
went through the floor.
And so they went to the

1623
01:35:17,640 --> 01:35:20,440
employees and said, look, we
don't want to lay anybody off.

1624
01:35:20,640 --> 01:35:24,040
We're asking everybody to take a
10% pay cut.

1625
01:35:25,080 --> 01:35:27,920
We, the senior management, we're
going to take a 20% pay cut.

1626
01:35:28,360 --> 01:35:30,600
Well, yeah, senior.
Management can unfortunately

1627
01:35:30,600 --> 01:35:34,320
take a bigger cut, but still.
But we're all in this together.

1628
01:35:34,920 --> 01:35:39,760
And then once business turns
around, we'll make up that 10%

1629
01:35:40,440 --> 01:35:44,200
and more, right?
Like I said earlier, people need

1630
01:35:44,200 --> 01:35:45,760
to know that we're all in this
together.

1631
01:35:46,440 --> 01:35:49,760
And he said over 90% of the
employees agreed to take the 10%

1632
01:35:49,960 --> 01:35:51,400
pay cut.
Within.

1633
01:35:51,400 --> 01:35:55,160
A few years, they're all,
they've made all that up and

1634
01:35:55,160 --> 01:35:58,520
paid them more.
And there are a lot of companies

1635
01:35:58,520 --> 01:36:04,240
out there that are like that.
But we need more and we need

1636
01:36:04,240 --> 01:36:09,480
more high profile companies to
behave in that matter and but

1637
01:36:09,480 --> 01:36:12,120
they're not rewarded by Wall
Street for doing that kind of.

1638
01:36:12,120 --> 01:36:13,360
Thing that's the problem.
Right.

1639
01:36:13,360 --> 01:36:15,160
They're they're not
incentivized.

1640
01:36:15,720 --> 01:36:17,800
And I think it was Charlie
Munger.

1641
01:36:17,800 --> 01:36:20,920
He was passed away earlier this
year.

1642
01:36:20,920 --> 01:36:24,080
He was the sidekick of Warren
Buffett, right?

1643
01:36:24,360 --> 01:36:28,040
And he had a, he had a saying.
It was something like, show me

1644
01:36:28,040 --> 01:36:30,800
the incentive and I'll tell you
the behaviour.

1645
01:36:32,960 --> 01:36:36,240
Incentives matter, yes.
And you need well structured

1646
01:36:36,240 --> 01:36:40,480
incentives to bring out the best
and the right behaviour in

1647
01:36:40,560 --> 01:36:43,600
people that will lead to longer
term success.

1648
01:36:43,880 --> 01:36:47,560
But it might mean that in the
short term that the share price

1649
01:36:47,560 --> 01:36:51,360
doesn't grow as quickly as you
would like, or GDP doesn't grow

1650
01:36:51,360 --> 01:36:54,120
as quickly as you would like.
Yeah.

1651
01:36:54,200 --> 01:36:57,600
And unfortunately we're not.
We're our, our, our patience is

1652
01:36:57,600 --> 01:37:00,400
getting shorter, not longer
these days, you know, and.

1653
01:37:01,480 --> 01:37:04,680
And it might not coincide with
an election cycle or something.

1654
01:37:05,760 --> 01:37:07,080
Right, right.
Something.

1655
01:37:07,360 --> 01:37:14,440
I understand, you know, it's,
it's not rocket science, but we

1656
01:37:14,440 --> 01:37:18,520
do need to change it, yes.
Paul, I really appreciate your

1657
01:37:18,520 --> 01:37:20,040
time.
This is so much fun.

1658
01:37:20,040 --> 01:37:22,720
I actually it's so funny because
halfway through there's another

1659
01:37:22,720 --> 01:37:26,840
topic I wanted to talk to you
about, but I guess what, but I

1660
01:37:26,840 --> 01:37:28,520
want to bring it up.
Maybe we'll do it all fair.

1661
01:37:28,520 --> 01:37:30,360
And I see if you could do
another recording another time

1662
01:37:30,360 --> 01:37:33,360
about it.
But this is this is so much fun.

1663
01:37:33,360 --> 01:37:36,840
I really appreciate your time.
And I'm going to post the link

1664
01:37:36,840 --> 01:37:41,040
to your book into your website.
And I really appreciate this is

1665
01:37:41,040 --> 01:37:43,320
this is this is great.
This is really, really useful

1666
01:37:43,320 --> 01:37:45,600
and what you're doing is really,
really, really wonderful.

1667
01:37:46,080 --> 01:37:48,600
So on behalf of myself and
everyone else that's going to

1668
01:37:48,600 --> 01:37:51,200
learn a lot from this, I really
appreciate your time.

1669
01:37:51,200 --> 01:37:51,720
Thank you.
Well.

1670
01:37:52,680 --> 01:37:53,760
Thank you.
It's been great effort.

1671
01:37:53,760 --> 01:37:55,320
Midnight.
Yeah, we'll do it again.

1672
01:37:55,320 --> 01:37:56,640
Just let me.
Know and when I'm down to

1673
01:37:56,720 --> 01:37:59,160
Florida, I'll give you a call.
Go for a beer.

1674
01:37:59,360 --> 01:38:02,320
I'm a I'm a beer drinker too.
So beautiful.

1675
01:38:02,320 --> 01:38:04,320
Beautiful.
All right, let me know when

1676
01:38:04,320 --> 01:38:06,080
you're in town, OK?
I'm looking forward to it.

1677
01:38:06,320 --> 01:38:07,680
All the best, Paul.
We'll talk soon.

1678
01:38:07,680 --> 01:38:08,920
Take care.
Have a good day.

1679
01:38:09,280 --> 01:38:09,440
Bye.