In this episode, Jason Hartman shares his opinion of Tesla Motors, the self-driving car revolution, and cars as a service. In the interview segment, Jason Hartman hosts Richard Duncan. They continue their conversation about the gold-backed monetary system, paper money system, global bubbles, and globally-based economy.
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the company leet solution for real estate investors.
Jason Hartman 1:03
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 852. And happy Financial Independence Day. Well, it’s the fourth of July here in the USA. You’ll hear this on the fifth of July when it’s released, but Happy Independence Day to our US listeners and all those who appreciate freedom around the world. And hey, the US ain’t quite as free as it should be or as it used to be. But all things considered, it’s not bad. It’s holding up reasonably well. It’s had attacks for multiple presidential administrations for many decades now attacks on freedom. So, you know, we’ll see what we can do to keep the dream alive but for sure, do not be deceived, that those people out there are usually the jealous ones. Usually the envious ones, usually the lazy ones, or the than the unlucky ones. Maybe the slackers in life, maybe the over entitled the liberals, you know, whoever, whoever it might be whatever category, don’t let them tell you that money doesn’t buy happiness. It doesn’t they’re actually right. But it buys a lot more happiness than poverty. So as we celebrate Independence Day, let’s think about financial independence day as well, because money may not buy happiness, but it definitely can buy a lot of independence. Of course, it can weigh you down a lot too. If you’ve I remember several years ago, I watched a documentary called affluenza. affluenza, and it was all about the just the over overly focused nature that you know many of us have on materialism and you know, you certainly the things you own and the money even just the money itself can become a burden. Because then, you know, one’s focus can be on protecting it and sheltering it from the evil tax collector and all of that kind of stuff. Of course, we’ve got the most tax favored asset class in America with income property. So we’re doing pretty good on the tax front. It’s the best thing going, for sure. And it’s also the most historically proven asset class in the entire world. Yeah, you know, it can definitely become a burden. I mean, a friend of mine, one of our listeners drew Fox to me the other day and told me he was watching a documentary on minimalism. And I replied back I’m like, Yeah, I watched part of that documentary on Netflix. Actually, I got bored with it and turned it off and jumped online and one shopping. Just kidding. I didn’t do that. But, but you know, I thought, like, why do I need to be a minimalist? That doesn’t sound like too much fun. I definitely think though, that buying a lot of stuff isn’t quite that appealing. It used to be when I’m was younger I used to want a lot of stuff now I’m not that into stuff you know I used to always want a nice car now I really couldn’t care less about cars plus I have this Tesla and talk about a burden that is that’s a piece of junk if I ever had this Tesla Model X that I have is literally the worst car ownership experience ever. Ever Ever. I mean that car if you if you want to see my videos on what a piece of app absolute epic junk that Tesla Model X is, the car is a piece of crap. I kid you not. I know. All you Tesla fan people out there. Hey, listen, it’s my second Tesla. I like the first one. That’s why I bought another one. But this one is crap. It’s absolute junk. I hate that car. I hate it. I hate it. I hate it. I hate Tesla’s response to it even more. It is the worst car owners car ownership experience I’ve ever had. And guess what Had a Range Rover before. And that was pretty bad. That thing broke all the time. There were constantly problems with that Range Rover, but the Tesla is worse. Yes. And Tesla, you know over there, they’re so arrogant because the government through Elan Musk, crony capitalism, crockery, you know, the government and the stock market keeps throwing money at this company. And you know, to me, it just feels like a hot.com stock before the.com bubble. I think it is a highly overrated company. They did they do do some cool things. They’re definitely first in the self driving car revolution, which is why I bought the first one and why I bought the second one, but they lied about a bunch of stuff on the second one and they Well, in my opinion, they lied. Of course they have a different opinion but whatever. Anyway, look at enough about that. But here’s a couple interesting things I want to talk to you about before. Before we get to the second half of our Richard Duncan interview, first off, I was listening to a wall street journal article yesterday on the Wall Street Journal podcast. And it was fascinating you know it. I mean, it’s look at I didn’t, you know, this is not news to me this what I’m about to share with you, I already knew this. But you know, sometimes you hear it again, or you hear it in another way. And, and that’s why you need to keep listening until I get to episode number 17,265. And we’re on 852 now, and you know, once once you’re at that episode number, you can stop listening to me, okay, but you know, you hear things in a different way. I know a lot of times they’re kind of the same thing, right? But, you know, the way the human mind works is just kind of funny. It sometimes we don’t, you know, we hear it, but we don’t actually listen to it. Because maybe our The mindset we brought to that listening experience wasn’t ready, you know, the old Zen saying when the student is ready, the teacher will appear. Well, you know, the teacher may not be the actual person, right? It may not be yours truly, it may be the teacher appears in another way, and you’re ready in a different way to hear the thing that I possibly said on episode number 462. Right, but here it is. Anyway. So this was not news to me, but I think it’s a big deal. Okay, in here. Here’s the basic. Alexa is going off in the other room. Alexa thinks I’m talking to her. And she’s, I don’t know what she just did. She probably just bought something on Amazon without my permission. It’s an amazing time to be alive, folks. I don’t know if you heard Alexa in the background. way in the other room, by the way. She heard me ranting at you and was listening anyway. Pretty scary. Jeff Bezos and the NSA have an open microphone and all of our homes nowadays, right? Pretty scary stuff. I resisted it for a long time, but I finally gave him okay. Anyway, this article in the Wall Street Journal yesterday, it was all about the self driving car revolution and how that’s going to change everything and how automobile manufacturers are starting to design cars in different ways with seats that rotate 180 degrees. So instead of facing forward, we can face backwards Are you know that our car will be more like a living room on wheels. And this will be an amazing revolution to real estate because location will be less meaningful than it’s ever been in human history. And the three cardinal rules of real estate have always been location, location, location. Those are the three major value drivers when it comes to real estate, but that is going to change and that’s something I predicted a long time ago. And you know what? I’m going to be right again. I’ve been wrong about a few For sure, but I’ve been right about a lot of things. And this one is big. So here’s the other component of this, obviously, that we have talked about, but here a little bit more in this monologue portion of the intro to today’s show. And that is that car ownership will be be going out of style, okay, some people will certainly want to own cars, especially if you use them a lot. Certainly companies that deliver things and so forth will want to own cars or drones to deliver things to us. You know, I I just can’t wait till that the drones start just landing on the balcony of my high rise condo with my packages. That’ll be pretty cool. It’s an amazing time to be alive. Because it’s kind of a hassle to go downstairs and wait for the doorman to get my packages. You know? That’s really just too much work. How spoiled are we folks? How spoiled are we? It’s an amazing time to be live. Okay. So cars will become kind of like a SAS, you know what a SAS is? s a s Software as a Service, like the software company that I’m a partner in real estate tools comm which by the way, property tracker, the software got a beautiful makeover last week. And as I mentioned before, and you definitely need to check it out, go to Jason Hartman comm click on the resources page, and then the property tracking and analysis software and you know what, we’ll get that link more prominently displayed, but it’s good. It’s just a beautiful visual update really, really looks nice. It’s more intuitive now. I think you’ll really like it. Also check out real estate tools comm for links to all of the apps that we have the iPhone and iPad apps and just some great tools to evaluate and track your investment properties there. So that is a software as a service right? tracker is a software as a service, you don’t need to download anything on your computer. It’s just a service. It’s in the cloud, and you access it when you want. And there it is wonderful, easy, right? No updates. We do the updates when we get around to it, but we do them. And so, so that’s a much easier time. Can you remember how it used to be with software? And if you use Microsoft products, well, you still have to deal with a lot of these headaches, by the way, sorry. And you have always had the updated and there’s all these bugs and and you know, it’s like on your desktop, right? Well, so cars, automobiles transportation will be like a software as a service. So what is the significance of this? Well, in an era when even us normal people on like me that you know, people that don’t work out of the house, right? If you commute to your Your job, and you drive around town and drive the kids to soccer practice or whatever you do, right? You are only using your car about 4% of the time. Okay? I mean, look, you got 24 hours in a day. And your car’s only being used for maybe a couple hours a day, not very much. So it’s much easier to have a car as a service, right? Where you just summon it on your phone, through companies like the rideshare companies now, all kinds of other companies are going to be providing these types of services. And so what will that do? Well, here is the significance. I just want to remind you of this, of course, it’ll be super convenient. Of course, alcohol and marijuana consumption will probably increase by the way I mentioned. Good old plant marijuana only because it just became legal in Nevada the other day, the sixth state. Now to I guess it’s the sixth to have it have it be legal right for recreational use? So undoubtedly, you know, we’ll see a bunch of potheads around town, kind of like Portland, right? where people are smoking pot all the time. Hey, wait in Oregon, it’s not even legal is it? It? Well, that was Washington State in Colorado where the first and then washington dc because all those politicians want to get stoned. You know, it’s basically legal there. It’s like a $25 fine or something. By the way, I have a little conspiracy theory, may I indulge you in a tangent for a moment? So, of course, I’m a libertarian, as you probably know, and I don’t think it’s any of the government’s business if someone wants to smoke pot or get drunk or even do other drugs. Some drugs are extremely harmful and dangerous, like the ones prescribed by doctors, mostly, but some of the recreational drugs are also very dangerous. methamphetamine, cocaine, you know, there are some heroin. These are very Very dangerous drugs, obviously, right? Maybe those should always be illegal. I’m not sure I don’t have the answer to this. But when it comes to the the marijuana thing, what’s interesting about that, is that philosophically as a libertarian, you know, I don’t believe the government should be in charge of whether or not someone wants to consume this plant. okay or not, but but that plant makes people lazy and apathetic. Okay, and maybe, maybe, maybe it’s a conspiracy theory, maybe this big push toward legalization that is happening all around the country. And undoubtedly, it will, in the not too distant future be legal at the federal level, I’m sure right. So that’s just in the cards. It’s probably going to happen, right? Trump, no, Trump, Obama, Michelle Obama, who knows who will be the next president. By the way Trump is acting it probably won’t be Trump. Don’t know maybe it will you know Blair Waldorf from Gossip Girl, that’s the female counterpart of Donald Trump. Okay, anyway, so maybe this is just a big way to control the population, make them more empathetic, more sedate, more peace loving. You know, it’s like Woodstock great in the 60s, the Woodstock concert. You know, the hippie flower child love fest. So, heck, we will see but be on guard for that be on guard for that because remember, it’s the old concept of what bread and circuses, bread and circuses that’s how you control the population. You just entertain them. You give them the basics and entertain them to distract them bread and circuses okay. So what will happen tangent is over what will happen with the self driving car this the software as a service the automobile as a service. Well if you live In a place like the Socialist Republic of California, you probably have an expensive car. Because California is a place especially LA, for example, is a place where your car is a big deal. Okay, everybody’s into their super high end cars, where their car payment is almost Well, it’s more actually than the rent, and the mortgage payment on any of these income properties that you’re gonna buy through my network, right? At Jason hartman.com. Shameless self promoter. So so your car payments, probably more than that, if you live in California, right or any of these other places, Miami, where you know, the car is a big deal, right? So what will happen is that this car on demand the car as a service model, will drive down the cost of transportation by more than two thirds. Think about this, this is not that far fetched. So all those folks in areas where the car is a big deal that have 1000 to 1200 dollar a month car payments. And I know some of you listening think that’s ridiculous. That’s such a small percentage of the population, it’s insignificant. Well, I beg to differ with you. That’s a lot more people than you think. Okay? But even if you don’t have 1000 to 1200 dollar a month car payment, and maybe if you don’t know anybody who does bought the car cash, you still have a payment because you have an opportunity costs on the money. That’s the same cost, right? Of course it is. It’s an opportunity cost on the money. But even if the car payment is three or $400 a month, that person relative to their income, it’s very significant. So this will lower the cost of living. That’s a deflationary concept. But it will allow people to buy more assets or more consumer goods from people who use that income to buy more assets. The rich get richer, the poor get poorer. It’s been that way throughout history. It’s always been that way. Probably not going to change in time soon. But I say that the future looks like this. I say that the tech maybe maybe this is the way it’ll all work out. Technology, the huge deflationary force of technology, very deflationary. And as I’ve said before, I think we are at an inflection point in the world of technology, where technology is becoming incredible, truly amazing. In a networked world, ideas, change hands, there’s more velocity of ideas, right? That’s like the Clinton administration. Right. Good, old liquidly Bill Clinton back in the 90s. You know, he had this giant economic expansion on his watch. Do you? Would you give him credit for it? No, not really. I mean, the best credit I could give Clinton is that he kind of didn’t interfere too much odd for a Democrat. But yeah, he didn’t interfere too much, which I’ll give him big time credit for that. But he presided over a time when the world became connected. And commerce sped up there was more velocity of money because of the fax machine, and then its successor, the internet. Can you believe people still use fax machines? Yes, there are still people who live in caves. dinosaurs, yes, they use fax machines. Okay, look. So technology driving down cost, monetary and fiscal policy driving up cost, right in that those are inflationary versus the deflationary force of technology. But what’s going to happen, I believe, is that we will continue to see rather significant, and we’ve seen dramatic, but at least it will be significant, if not dramatic, if not even more dramatic. And I want to get back to what I used to talk about back in 2004. In my seminars in my creating wealth seminar in 2004 13 years ago, the Jeremy Siegel and Michael Milken article about the asset shortage, the looming asset shortage, I’m gonna dig that up for you. I’m going to share it with you. But hey, it might just appear on a flashback Friday episode, or you can just go back and listen to the old episodes, which I know many of you do. And I appreciate your spending so much time with me. So thank you for that. But this is going to cause more and more asset inflation. And guess what? What, as an income property investor? What do you own? You own the most important asset after food and water, you own shelter. Okay, you know, they say food, clothing and shelter. That’s the old saying, it’s really food, water and shelter. Okay, that should be the saying we take oxygen for granted. Okay, so let’s just assume we have that one, food, water and shelter. Okay, now, we got to get to Richard Duncan and get to part two of this interview because it’s quite fascinating, but I just want to tell you a couple things I want to talk to you about on future episodes. And if I forget to talk to you about this next week’s episodes, please remind me because I want to talk to you more about self liquidating debt. We have not talked in quite a while about self liquidating debt. And I also want to talk to you about money supply versus credit supply because here Here’s the deal. I’m looking at a chart right now. And it’s Richard Duncan’s chart. But again, this was not news to me, except for the exact numbers being news. I’ve seen stuff like this over the years. But here’s what it shows. And remember the key time in history was the late 60s, early 70s. And then the Volcker, the paul volcker era, when he was Fed chair for a short time and did the right thing. In the Reagan era, all those times when we saw this huge expansion in spending, but a big part of that spending was credit based spending. You know, you may have wondered, if you’ve got a few years behind you and you’ve got some life experience, right as most of our listeners do it at least if you don’t have that experience. Hopefully you study history and Do you watch movies from the past? and documentaries like the Well, there’s a good documentary series out by the communist News Network, otherwise known as CNN, otherwise known as the clinton News Network. But they’ve got a great documentary series that does the decades as I love these, they’re on Netflix, by the way. And if you haven’t cancelled your Netflix subscription over there racism against, you know, against white people, frankly, but that’s another tangent that I’m not going to go on right now. So I was watching it on Netflix kept my subscription. And they’ve got the 60s, the 70s and the 80s. I don’t think they have one for the 90s yet. I hope they make it soon. I hope they make it at all if cnn sticks around. Yeah, these are great. Like, you know, they take you through all the things that influence those decades and it’s just fascinating because, you know, some of it I was alive for some of it I wasn’t alive for and it’s just really interesting to see how those decades shaped The way the world is today, you know, really in the US, but he talks about foreign affairs and things like that and fascinating stuff. But here’s the chart on the explosion in credit. And this is what really matters, you know, during the Great Recession. It felt like, although I’m sure there was someone else, but it felt like I was the only voice talking about this. I couldn’t believe it. It shocked me I would listen to CNBC. I’d see these talking heads on there. And they’d be talking about, well, money supply is, you know, done this and that it’s not expanding that much. Really, you know, and then they would then they would come on and say, money supply is expanding like crazy. They’re printing money, like it’s going out of style, you know, fiat money, there’s fiat money that Well, those were the people that were right. But the problem is, at the same time, credit had massively contracted. I mean, it just was a huge contraction of credit. And the thing that Richard Duncan and I talk about in this interview a little bit, I don’t It was part one or part two, but is that, you know, look at when money is Fiat, really credit is the exact same thing as money. The only difference is it needs to be paid back. But at the Federal Reserve level, all money is credit. It says, pull out $1. Bill Well, sorry, a Federal Reserve Note. It says it’s a note. A note means it’s secured by what debt? When you get a mortgage on a property, it has a note. It has the mortgage is a note. That means you it’s secured and it’s debt. You got to pay it back. Well, one of the wonderful things about real estate or income property I should say not real estate income producing real estate, is that we outsource the debt obligation to people called tenants. We don’t pay our own debts. So good for us, right. But yeah, just a huge, huge expansion in credit. Look at this, listen to this. This is from one of them. slides, total credit expanded from $1 trillion in 1964 to $50 trillion in 2007. And now it’s at 59 trillion. That’s trillion with a T. By the way, just to give you a reference point, let me remind you that the total GDP of the entire human race of planet Earth of what seven and a half billion people or so the entire GDP of the planet is about 70 trillion. We have 59 trillion in credit, just in the good old US of A Wow, that is insane. Li significant. Okay. I’ll leave you with that thought. By the way, I will mention that in just A couple of days we’re starting our Oklahoma City property tour and Jq live Jason Hartman University live. The only reason I mentioned that, that it’s so close, right. But someone, we just had a couple of people sign up today. So welcome. We will look forward to seeing you on Saturday. And go to Jason hartman.com to register for that, and check out some great properties. And let’s get to the second half of Richard Duncan, because I am talking way too long. Here we go.
Richard, it is truly amazing to think of the massive global historical impact that happened under the LBJ administration under the Nixon administration. And, you know, tell tell us about these points in history. 1968 1971 and then you said in the 80s, you know, early 80s, were about 1980 I think Give us a synopsis of those, if you would.
Richard Duncan 28:03
Well, it is a fascinating story. So President Johnson and the 60s spent too much money on domestic welfare programs. At the same time, he was spending too much money on the Vietnam War. And that great society that overstimulated the US economy, and at that time, we were still on the Bretton Woods system. And so at that time, the US as hard as it is to believe now, the US did not have a trade deficit. No country did no country could under the Bretton Woods system. And so we suddenly all of that, too much government spending caused higher started to lead to higher rates of inflation. And also, all of the government spending sent a lot of dollars overseas for, for instance, the spending in Vietnam, that caused a lot of dollars to go overseas. And also US corporations and banks were investing a lot in in Europe. So a lot of dollars went overseas for those reasons. Now at that time, other countries had the right to take the dollars that they accumulated, and convert them into us gold at $35 an ounce. So during the 1960s, for those reasons, the US lost half of its gold reserves. And at that time, there was a law that required the Fed to maintain 25% Gold backing for every dollar that it issued. Well, by 1968, it hit that limit, it didn’t have enough gold to continue backing the dollars. And so, at that point, Lyndon Johnson asked Congress to remove the requirement that the Fed maintain any gold backing for the dollar whatsoever. And Congress. Congress complied and afterwards the dollars no longer had any gold backing
Jason Hartman 29:46
right. And then in 71, what did Nixon do?
Richard Duncan 29:49
So this situation continued under Nixon. He should have put put his foot on the brake on the economy and slowly Economy down so that the US trade deficit would become less severe, and so less dollars would leave the country. But he did just the opposite. So he would be reelected.
Jason Hartman 30:10
Yeah, of course. That’s what they all do.
Richard Duncan 30:13
That’s what they do. And so that stimulated the economy even more and let even a larger trade deficit and more dollars going overseas. So by 1971, there were far more dollars overseas than the United States had gold available to convert them into. And so at that point, Nixon reneged on the US pledge at Bretton Woods to allow other countries to exchange their dollars for gold in August 1971. And afterwards, there was no gold backing whatsoever. That was the end of the Bretton Woods system. And afterwards, suddenly, we got a very because suddenly, we had a very big surge in the amount of paper money being created. This led to the high rates of inflation and The 1970s we had double digit inflation in the 70s. And Paul Volcker had to crush that Fed Chairman Volcker.
Jason Hartman 31:09
And and and that he did. So Volcker was kind of and he was like a real guy. I mean, take the medicine, but he fixed the problem. But Richard, I gotta ask you something. Indulge me in this little conspiracy theory for a moment. So I wonder many times, if Nixon, because of what he did, maybe he felt guilty and knew it would be a huge problem, you know, closing the gold window. And, you know, his historic trip to China was Nixon thinking, this is a new labor market, a cheaper labor market that would allow us to get it took a while for it to happen, certainly didn’t happen under him, obviously, but you know, to bring in all kinds of cheap goods and hide the ravages of inflation that he knew was coming because remember, he was the guy that did price controls, and we had gas lines. And I mean, that was a pretty crazy time under Nixon, you know,
Richard Duncan 32:06
tricky. Dick was pretty clever, especially with Kissinger at aside. But, of course, that may be true what you suggest, but I think that was premature. I don’t think anyone could have foreseen that occurring. Remember, it hadn’t been that many years earlier that Chairman Mao had urged Soviet Union to have a nuclear war with the US because he believed China could survive it. No one else would. They were very much a Cold War enemy at that point, Chairman Mao was still in office. So I don’t think that was the reason at that time. But eventually, of course, that’s the way things evolved. And so once once, Chairman Volcker crushed inflation, we had a very severe he, he hiked the federal funds rate up into the very high double digits or 20% or so. That caused very severe recession in the early 80s. Unemployment went to 10% He was one of the worst recessions we had seen in the century. And then and then President Reagan was elected. And the next year, the US, he started doing exactly what what President Johnson and President Nixon had done. He started running budget, very large budget deficits. In fact, his budget deficits were far, far larger than the other presidents up until that time.
Jason Hartman 33:25
Yeah, I give I give Reagan a bit of a pass on that, because I think that was a business plan with a, you know, Soviet Union to win the Cold War, but maybe you don’t, I don’t know, feel free to disagree, but
Richard Duncan 33:35
Well, the reason. So you would have thought that that spending by the government on such a massive scale would once again lead to higher rates of inflation, as it did under Johnson and Nixon, but it didn’t. And the reason it didn’t is because starting in 1981, the US started buying things from other countries and running massive trade deficits. By the mid 80s. The US trade deficit was three and a half percent of GDP and of course, by 2000 And six, it was 6% of GDP that in 2006, it was $800 billion. And those trade deficits change the US economy from being a relatively closed domestic economy concerned about domestic bottlenecks. Suddenly, we had a global economy. And in our global economy today, 2 billion people live on less than $3 a day. So this changed everything. So now they’re compared to what
Jason Hartman 34:22
I mean, did they didn’t they live on less before? I mean, look at how urbanized China has become. Now you could certainly argue that living in smog filled cities is not as good as living in the country. You know, eating your daughter’s but in by the way, that’s actually true. So pretty disgusting. But yeah,
Richard Duncan 34:39
well, they, but my point is, is that because of globalization, beginning in the early 1980s, the massive budget deficits that President Reagan ran, didn’t cause inflation. And in fact, we started seeing interest rates and inflation rates moving lower and lower and lower and interest rates. kept going lower and lower lower
Jason Hartman 35:02
because of importing cheap goods.
Richard Duncan 35:05
Exactly. And that pushed out wage rates in the US. And that’s caused the wage rates to stagnate for practically 30 years now in the US, but it also allowed interest rates to come down and this property prices to move way, way up, and the stock prices to move up. And so that changed everything once we moved from a gold back monetary system that didn’t allow trade deficits to this paper backed monetary system that allows massive trade deficits, then this has created a completely different economic environment that with new rules, and the new rules are, there’s really very little limit as to how much the government can borrow and how much paper money the Fed can print and use to finance the government budget deficits. As long as this system of globalization continues to keep a lid on interest rates. You are absolutely
Jason Hartman 35:57
right. And so I you know, Just looking back on all of this stuff, it seems like the US got the better end of that deal all the way around. I mean, look at the massive amount of material. I don’t want to say wealth but consumption in the US, compared to these other countries now, I think globalization has made it better for, you know, 300 million people around the world, at least economically. You know, we can argue sweatshops all you want and all that. And, you know, that’s arguable for sure. But you know, I mean, the US has just been the beneficiary of this. The only problem has been the stagnating wages, but Heck, you go shopping and everything’s cheap, and that inflation has been hidden. And I think that’s why they don’t want to control the southern border. Because just as you import cheap goods from China, you import cheap labor from Mexico and and you can you can paper over the problem by Gestalt printing money and there’s no limit to money printing. So
Richard Duncan 37:03
well there’s there’s no doubt that the global economy is far larger today than it would have been if we’d remained on a gold backed monetary system isn’t allowed total credit in the US has expanded from $1 trillion in 1964 to $66 trillion. Now, that would not have been possible if we’d remained on a gold back monetary system. But, you know, by the way, in terms of who’s benefited most Well, I think, for instance, I moved to Asia in 1986, when I was 25. And in since that time, Asia has been completely transformed. China has gone from a very poor third world country now into the second largest economy in the world. Shanghai looks like the Emerald City in The Wizard of Oz. And this is all done because of their massive trade surplus with the US which was a third of a trillion dollars last year alone. So the trade surplus countries rates have benefited and been completely transformed the world has been transformed by this new arrangement. Hundreds of millions of people have been pulled out of poverty around the world. Now within the United States, some groups have benefited and others have have suffered or at least not benefited as much as much. The corporations and the managers of the corporations have their salaries have increased many many fold and of course, the banking industry has benefited from financing so much increase in debt and currency trading and stock trading etc, etc. But the middle class in the US, okay, they have
Jason Hartman 38:43
is getting smaller, they’re under attack.
Richard Duncan 38:44
It’s not all bad. They have iPhones and iPads.
Jason Hartman 38:50
They they got they got a lot more junk in their house, but overall, it’s wrong. They don’t have the job security.
Richard Duncan 38:57
Right. Yeah. In terms of their relative standing their, their self worth has suffered because it has been declining relative to the wealthiest segments of society who have benefited normal enormously.
Jason Hartman 39:11
So So which was so on the whole, if you’re trying to analyze this, and it’s really hard for me to figure out Look at my, um, you know, I dig into all these things and complain all the time, but at the same time, I also say, as all my listeners know, Richard, it’s an amazing time to be alive. And, you know, maybe technology will just save us all and solve all our problems. It certainly solves a lot of them on balance, it’s hard to tell if things are better now, or worse, you know, I mean, everybody’s got it. There’s massive consumers, you know, our homes are just full of stuff. And you know, we’ve got modern cars and you know, there’s all kinds of surveys that say the poor today are dramatically better off than the poor were, you know, Two decades ago, 10 decades ago? I don’t know, you know, it’s hard to figure out.
Richard Duncan 40:06
Yes. Well, I think as long as our economy doesn’t collapse, I do believe that we still have a big global bubble that has to be kept and plated through government policy of one kind or another. But as long as this bubble continues to remain inflated the way it is now, then we should we’re going to experience technological miracles and Marvels unfolding over the next couple of decades that will completely transform everything. But on the other hand, if we were to take the Austrian medicine and and allow the bubble to implode, as natural forces would have it do market forces? Well, just let’s think what would have happened in 2008. If we if we had allowed market forces to work? Well, if they had not propped up the banks,
Jason Hartman 40:54
then all Goldman Sachs would probably be gone and that would be okay with me.
Richard Duncan 40:58
Well, Goldman Sachs and every other bank in the world and all the savings that they contained. So all of the savings would have been destroyed. There would have been a political backlash against free trade. So globalization would have broken down, and unemployment would have shot up to 25% as it did during the Depression.
Jason Hartman 41:18
And so did a lot of many people would argue that it really unreal unemployment was 25%. Like I had shadow stats founder john Williams on the show, and he made a pretty good argument for that. But go ahead, so
Richard Duncan 41:28
government tax revenues would have collapsed by about 50 50%. So that they would no longer have been able to pay Social Security or Medicare or maintain the US military bases around the world. So the old people would end up eating cat food again, as they did in the depression, the US police force around the world but have to come home and so we’d be back in a world of chaos. And it would all probably end up in general global chaos, possibly starvation and probably war. doesn’t sound good. So it wouldn’t have been just, you know, let’s take our medicine and everything will be okay. In a couple of years, we’ll be back in some sort of laissez faire Garden of Eden, it wouldn’t be like that at all.
Richard Duncan 42:11
It would have been such a
Jason Hartman 42:12
severe crisis, it would have been really ugly,
Richard Duncan 42:14
our civilization might not have survived. And so the policy response that they have carried out has worked, miraculously, because it’s prevented that from happening. Now, it still could. It’s all of that all of those horrible things could still happen. But it as far as I’m concerned, it’s much better if they happen 10 years from now, 20 years, or better yet, 30 or 40 years from now, then if they happen today, because if it happened today, it’s the equivalent of death. There is no better than dead. It’s always better to die tomorrow than die today. So if this is just a matter of kicking the can down the road than normal for ticket hard.
Jason Hartman 42:54
Yeah. Okay. All right, fair enough. So, Richard, we’ve been going long so we got to wrap it up here fairly soon. And I’m sure you’ll agree here, you’ve probably got, you know, you’ve got to go hang out in Thailand. But what you said I think it was you a few years ago when you were on my show is, you know, right post Great Recession, you were talking about how we should spend $3 trillion, we should spend, you know, maybe I can’t remember on what it was, but you will, maybe a trillion on biotech a trillion on infrastructure and a trillion on something else. And that will make us the world leader and in like three fields, pretty much instantly in a year or two. Was that you that said that and how do you feel looking back on that?
Richard Duncan 43:37
Yes. So earlier on, you asked me which economic school I belong to, am I a Keynesian or? Well, I would, I would describe myself you you change with the times.
Jason Hartman 43:47
I wouldn’t say you’re an Austrian. That’s
Richard Duncan 43:49
for sure. I’m an Austrian heretic.
Jason Hartman 43:53
Richard Duncan 43:54
The Austrians were absolutely right. And in telling us that this sort of Credit explosion would ultimately create a world a massive global bubble, which it did. But where I break with them is in that I believe this bubble has become so enormously large that if it implodes, they will probably destroy us all. So therefore, we have to analyze our current situation. And I really believe that what we have is a unique moment in history. printing money is is not new. But the combination of printing money with globalization is new. That is new. Yeah. So one great Austrian economist Joseph Schumpeter believe that economic growth was driven by waves of innovation. mm hurt at one time automobiles at another time chemicals at one point railroads. Well,
Jason Hartman 44:53
no, I’m a
Richard Duncan 44:54
Schumpeter fan but no question. Perhaps we need to look at what it’s experienced what we’ve experienced. Such a Schumpeter type rebel innovation, this combination of fiat money with globalization, fiat money should create inflation that globalization is so deflationary that it doesn’t. So it has allowed an explosion of credit to occur over the last three decades. And when that credit bubble started to pop, the policymakers were able to reflate it by creating even more credit and even more paper money. And it’s this explosion of credit has been the thing that has been driving economic growth for the last 30 years or more. So. So what should we do?
Jason Hartman 45:36
Well, what hang on before you tell us what we should do? I’ll let you close with that. But let me just throw in a comment here that you might want to, you know, comment on, and that is that I think you’re right. Of course, money printing is definitely not new. We all know the stories of that and how it all has always ended but it is new when you combine it with globalization absolutely true. And and that’s a change but eventually Don’t you ultimately cause the wages and you know, it’s gone in that direction, but it’s still got a long way to go to start to equalize and say China or Mexico versus the US. I mean, they’re going in that direction, although admittedly, there’s still a giant gap. And when you cause those wages to equalize, when they start equalizing, then you look for other labor markets. And there’s certainly been a lot of talk about Africa, but Africa is a disaster. So what what’s the next cheap labor market you exploit to not have fiat money come home to roost? Right. Is that a fair statement?
Richard Duncan 46:35
Sure. It’s a fair question. But the thing is, there are two or 300 million people in India who would like to work for $5 a day. So we have generations of cheap, ultra cheap labor in front of us. We have generations before wage rates are going to equalize or even begin to equalize. So this is not something that’s going to prevent us from doing what we’re doing now, anytime soon. It’s a long ways away as long as globalization doesn’t break down, as long as we don’t put up trade barriers, which our president promised to do during his election campaign.
Jason Hartman 47:18
Yes, he did.
Richard Duncan 47:20
But as long as he doesn’t, and he’s seemed to have backed off from that at the moment, then we’re never going to run out of cheap labor, not for generations. So this can continue. So we need to when I say we need to look at all of the theories and economist from the past and apply them to our world and our reality. Well, in our reality, what we have seen over the last well nine years now is that it is in fact possible for the US government to borrow and spend trillions of dollars that it doesn’t have to stimulate the economy and to finance much of that with paper money creation. That’s just the fact that’s what we have done. So, yes, the government debt has doubled to 110% of GDP, half the level of Japan’s. So we have to understand the government is going to have these very large budget deficits four years into the future. Anyway, the question is, is how are they going to spend this money? Are they going to continue to spend wastefully on unnecessary wars and too much consumption? Or how about this, let’s have a better plan. The government could invest in new industries and technologies in order to restructure the economy and grow our way out of that way out of this crisis. So for instance, over the next 10 years, the government could invest a trillion dollars in solar energy, and a trillion dollars in nanotech and another trillion dollars in biotech and another trillion in genetic and engineering, just for example. And they could do this in two different ways. They could do it the way that they did with NASA under one big roof somewhere where the government manages everything that worked out pretty well. And not only did we send a man to the moon, but it also greatly enhanced us intercontinental ballistic missile capabilities and bankrupted the Soviet Union without so that wasn’t a failure. But perhaps a more sensible way to do this would be the government could act as a giant venture capital funding Corporation, the government could borrow the money, and the Fed could finance part of it by printing money. And it could fund the government could set up joint venture companies with let’s say, the 10,000 most promising us entrepreneurs, Elon Musk, and set up joint venture companies with them. The government provides the funding in exchange for a 60% equity stake for the government. And the 40% is for the management and the management controls the company. And when one of these companies lavishly funded, when one of these companies invents a cure for cancer, then they could list that company on NASDAQ for $10 trillion 6 trillion dollars going to the government, US taxpayers. In other words, they could these sorts of investments could pay themselves off very quickly and probably pay off the entire national debt. Meanwhile, instead of wasting all of the government money that’s going to be spent anyway, foolishly on unnecessary wars, we could end up inducing a new technological revolution through sensible government investment in new industries and new technologies that would completely restructure the economy, retrain the American workforce, so that they would stop pining for their industrial jobs which are never coming back and instead be educated at a postgraduate level, at least their children and grandchildren so that they could contribute at the highest level to technological advances and to economic growth. And that way, we could grow our way out of this crisis, we would never have to take the Austrian medicine of collapsing into a new Great Depression and we could lock in another American century. Which would benefit not only the US but the world? Yeah,
Jason Hartman 51:03
I think that is a pretty exciting plan. And you know what, this is an interesting way, you have a very interesting way of looking at things. And I have to say you move the needle on my sort of philosophical bent of take the Austrian medicine. So, Richard Duncan, thank you very much fascinate. It’s always fascinating to talk to you. give out your website once more, and listeners should go and check out the video on the front page of your site. What does that site again?
Richard Duncan 51:32
Yeah, great. So yes, I would just encourage everyone to be open minded and not not too dogmatic and really keep an open mind about how different our world is, than it has been in the past. Things keep changing. And the Austrian solution, as you know, we’ve seen Therefore, we must go to hell is not necessarily right. We can find new solutions, new problems in our new environment. So I primarily don’t discuss these sort of philosophical issues on my A website are more focused on how government policy is driving credit growth and asset prices and what that means for individuals and, and the financial markets. And so, yes, I would encourage your listeners to visit my website. It’s Richard Duncan economics.com. And if you go there, you can sign up for my free blog. Or you can subscribe to my video newsletter macro watch. every couple of weeks I upload a new video, which is more or less me discussing things like we’ve been discussing fantastic subscribers to macro watch, have access to 36 hours now of my macro watch videos, so they can subscribe with a 50% discount if they hit the subscribe now button and use the discount coupon code global.
Jason Hartman 52:46
I hope you’ll check it out. Fantastic. Richard Duncan, thank you so much for joining us,
Richard Duncan 52:51
Jason. My pleasure is always nice talking with you. Let’s do it again sometime.
Jason Hartman 52:57
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