Jason starts the show with a listener, Nate, and his mom to talk about the recent Creating Wealth event. They discuss tips on getting long-term tenants and how to get increased rents. On the second segment of the show, Jason brings on guest John Tamny, director for the Center for Economic Freedom, Editor of Real Clear Markets, and author of Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money. They talk about the Federal Reserve and why they haven’t been living up to their power reputation, why their policies aren’t effective in today’s world, and why demographics may not be as useful as they’re believed.
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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome to the creating wealth Show Episode 1003 1003 boy, those are high numbers. Thank you for listening all this time. This is your host, Jason Hartman. And I’m coming to you today from Philadelphia, we just held our creating wealth seminar, the only one we plan to do this year, yesterday here in Philadelphia. Thanks to all of you who came out for that that was a fantastic event. And we got such positive feedback on it. So thank you so much for joining us. It’s always great to do that every one of those events is different, even though they have the same basic structure and outline. You know, me, I’m the king of the tangents, right? So I always go on a tangent or a rant about something. So anyway, I’m glad you enjoy those. And I surveyed since we just passed the 1,000th episode, I surveyed the audience, and about 25% of the audience said they listened to over 500 episodes. So Wow, this show must be interesting to at least some of you to listen to that many episodes. Thank you for doing that. But one person in the room and I know there are others. out there some of you listening and and please By the way, if you are one of those people that I’m about to mention, contact me and let me know what you think at Jason Hartman comm slash ask Jason hartman.com slash ask because I’d love to have you raise your hands mentioned you on the show and know who you are and know your feedback if you have listened to all 1002 to this time episodes 1000 episodes and Mike in the audience here in Philadelphia yesterday, listened to all 1000 episodes. So, Mike, thank you for listening for so long. And we really appreciate it. We had a father daughter, the daughter was here at the event and and she listens to a lot of the episodes and her dad listens to all of them and they brainstorm about them together. So I thank you all so much for being such loyal listeners and for also telling your friends, your associates and even your enemies about the show because they need to know too You know the old saying I think it was a blink and keep your friends close and your enemies closer. Alright, today we saw the Barnes collection, which is this amazing collection a private collection of impressionist art here at the Barnes foundation in Philadelphia. And there’s a big controversy surrounding this incredible multi multi billion dollar that’s billion with a B, dollar private collection of impressionist art really an incredible thing. If you want to know more about that watch the Netflix documentary entitled The Art of the steel. Well, it’s not a Netflix documentary, necessarily, but it’s on Netflix, maybe it isn’t Netflix, whatever. Anyway, the art of the steel is the name of it. I saw that and I thought I’ve got to come and see this collection of impressionist art. It’s incredible, incredible. So we just finished that and we’re going to relax for a while go to dinner, but I’ve got a couple of our attendees here from yesterday. That wanted to share a few comments and today by the way, we have a fantastic day. Just remember I told you last week I had a really good interview? Well, this is it, you’re gonna hear it today, where we are going to talk about a really unique new idea as to how to solve recessions and cycles in the economy. This guest today, who wrote a book about the Fed and several other books as well about robotics and automation, we’re gonna dig into some really good stuff with our guest today. So you’re going to like this interview a lot. I really enjoyed this guest. So he’ll be coming up in a few minutes. But some of our attendees from yesterday are here. One of them is Nate in the other is my mom who’s been on the show before and shared some of her thoughts yesterday at the creating wealth seminar about self management, and about preventing tenant turnover, keeping your tenants for a long time because you know that the tenant turnover is an expensive thing. You want to keep your tenants for a long time, but don’t keep them for too long. Because If you keep them for too long, that might be a sign that your rent is too low. So remember the old adage that I’ve talked about, you know, you got to raise the price until the demand falls off. In other words, still you have some degree of vacancy, a palatable degree, but not too much. So that’s always a balancing act there. But first, one of our new attendees who hadn’t attended any of our events before, is Nate. And he’s here and he just wanted to share a few thoughts about the event. What do you think, Nate? Jason, thanks so much for having me. I thought the event was amazing. I thought that I knew a lot about real estate. But coming to your summer, I realize there’s a lot of things that I don’t know. And one thing that you did besides teach me a lot about real estate is you inspired me to look beyond where I live and to, you know, kind of shrink down the world and make it smaller so that I can invest in places that are further away and get better returns. So I really appreciate that and I’m excited to be here this weekend. And, again, for me From all the people I heard there, thanks for doing these events because they’re great. Yeah, thank you so much, Nate. I really appreciate it. And I’m glad you attended. And then you will be with us next weekend as well in New York City for the venture Alliance event, you got the big public seminar, and then you’ll be at the smaller mastermind group next weekend. Any thoughts about this coming weekend in New York City, what comes to mind is the amazing people that are going to be at that event. So I’m excited to just be around and listen and again, learn from people who are high level achievers and the areas of life that they’re working in. So basically, I’m really excited for the people that I’m going to meet their good stuff. Well, thanks a lot for joining us, and thanks for sharing some of your thoughts about the event. And we had a couple people there yesterday that shared some thoughts about the event with our videographer, Ben, who came out and videotape he came down from Baltimore, he actually works for one of the Gora financial companies. So you’ve heard many of the Gora financial guests on the show over the years, including my very favorite financial writer, even though I disagree with him about the solution. Most of these guys, I don’t agree with their solution, but I love their analysis on things. You know, they’re all generally kind of gold bugs and stuff like that and I’m definitely not a gold bug and I’m not a cryptocurrency bug either. But they do have some interesting thoughts and I love bill Bonners. Writing. He, of course, is one of the Gora or via Gora financial founder, and he’s been on the show before. So we’ll get him back. He’s just has a great way of writing about stuff. And I just love I love his style. So that’s good. Yeah, so we’ll share those later on a future episode some of those comments and maybe some tape, well not tape, but you know, digital audio files from the event yesterday on the show in the future, just so you can get a sampling of that. Also, my mom was there. She doesn’t come to many events, but she’s been to several over the years, you know, but not many lately. And Mom, welcome back on the show you’ve been on a few times before. So what did you think about yesterday?
Jason’s Mom 7:59
Oh, enjoyed the seminar very much. I had never attended your actual creating wealth seminar or you ever been well,
Jason’s Mom 8:06
no, that was brand new for me. And I also enjoyed the providers from Ohio. Yeah, the local market specialists from my Dayton, Ohio and from Florida. So it was very interesting. And it was great to meet all of the attendees from Philadelphia.
Jason Hartman 8:23
Yeah, the other a lot of people from Philadelphia, we had quite a few people from like New Hampshire and, and then Minnesota obviously was representing pretty heavily at this event, which was kind of interesting people from all over. But, you know, this was our first event in the northeastern United States. Well, I take that back. We did a venture Alliance mastermind event A few years back in Newport Rhode Island and saw the Newport Rhode Island mansions and stuff, but this was our first sort of public seminar up here. So it was kind of fun to do it. And you know, Philadelphia, I haven’t been Philadelphia in a long, long time, so it’s good to be back here and the sun is out now. It was raining yesterday. And maybe for a little bit, but it’s beautiful weather now. So we’re going to go to dinner at a beautiful rooftop restaurant. That ought to be fun but dumb. Do you want to share any thoughts though about tenant turnover and keeping your tenants to some practical advice for our listeners just really quickly about that. I know you shared some great stuff yesterday in the seminar, just about self management. You know, I give you a hard time about being the extreme do it yourselfer, but I tell you, folks, I am more and more as you listeners know, recommending self management of your properties, because it’s so easy to do nowadays with some of the technologies and tools available to you and, and you can do it from a long distance, which is a great, great thing. But I don’t know I’m kind of putting you on the spot. But do you have any quick thoughts about that you want to share?
Jason’s Mom 9:46
You have heard about this tenant to Lou? Yeah, the long term tenant.
Jason Hartman 9:50
We got to explain that to listeners. So my mom was on the show before and we did this. We did this episode where she shared her longest Staying tenant who’s been on a property of hers a rental property since 1989. Now, just note how long ago that was. That was right around the time the Soviet Union collapsed. Okay, so, and the Cold War ended. So, you know, that’s a long time ago, folks. Anyway, this tenant is a truck driver. But you know, I asked you, I mean, that’s a long running tenant, my longest tenant ever stayed nine years. And interestingly, that was a property I self managed. I kept the tenant a long time. So for some reason, you know, it seems that some of these property manager properties have more turnover. Now, I don’t know if there’s a specific reason or conspiracy behind that. But I just know that it’s happening. So some of your tips mom on long term tenant retention, but you also raise the rent every year. Right? talk about that a little bit.
Jason’s Mom 10:53
Yes, it’s just simply much more profitable to keep a tenant in your property for a long time. period of time. Number one, they begin to treat it like their own home. And instead of bothering you for a little fix it items and you’re having to pay for them or hire someone to do them. The tenant ends up doing most of that himself. I just can’t recommend that you keep tenants for a long term for you
Jason Hartman 11:20
can recommend that you mean you want to say,
Jason’s Mom 11:23
Yes, I recommend it highly, that you try very hard to keep those tenants on a long term basis. But you must not forget to raise their rent each year, even though it is only a token amount of $25. This is part of your training Matt tenet to expect that there will be yearly increases.
Jason Hartman 11:45
Okay, good. So you raise rents, that’s your policy, you always raise rents every year is that pretty much the deal? And you raise it about 25 bucks. Now there’s I’ve talked about that philosophy many times. Okay, calm down. She’s motioning at me, folks. I know you gets you out. But
Jason’s Mom 12:01
I want to talk
Jason Hartman 12:02
Hang on. One of the philosophies I’ve shared with you over the years listeners is that you raise the rent, you know, and it depends on the price of the property, the amount of rent you’re charging, of course, the base rent is relative to the rent increase, obviously. But you know, if it’s $1,000 property, or a 1500 dollar a month property, and you raise the rent, 25 or $50, whatever it is, even if it’s a token amount, it’s not worth moving for such a small amount of money, right? It’s just enough to increase your yield, but not enough to get the tenant to move away. Now rent increases, talk about that on a kind of maybe a percentage basis, if you can read them $1 amount, it’s more relevant.
Jason’s Mom 12:47
Okay, sometimes I will just feature the rent at 4%. And if the tenant is really right at
Jason Hartman 12:54
the percent increase,
Jason’s Mom 12:56
a 4% increase and if it Canada’s at the Maximum rent for that area simply give a $25 increase, because that’s part of letting that tenant know that they will have yearly increases and not have a fit once you increase the rent,
Jason Hartman 13:14
so you’re kind of training them to expect that. Now, I’m curious, do you charge pet rent? I don’t know if I’ve ever had this conversation with your mom. But I am really recommending and hey, I love animals. I have a dog. I like huge fan of animals. Right. But I think that all regular single family home independent landlords need to get in the habit of following what the institutional landlords in apartment complexes are doing in charging pet rent, people will pay $25 or $30 a month per pet. And it’s magic, the way that increases your yield. I mean, think about it, folks, that’s $360 a year or if it’s 30 bucks a month, right. That’s a significant increase in your yield that someone will barely notice.
Jason’s Mom 14:00
Yes, I charged pet rent. It was either 25 or $30. Right now I don’t have anyone I know about that has pets. So that doesn’t apply. But I have charged it and they seem to accepting of it.
Jason Hartman 14:15
I remember I had a tenant once in one of my properties that I was self managing. And he had two dogs there didn’t tell me about either of them, but I caught him. And then because the neighbor told me Actually, and then I just that charged him for all the pet rent, and he was happy to pay it was like no problem. He was happy. I didn’t kick him out. I think so for violating a covenant at the least. So yeah, and by the way, let me just address that for a minute. Because someone asked me about that question last week, the lease, you know, everyone knows that you can kick someone out of a property, you can evict them for not paying the rent. That’s sort of obvious, but there are other issues in the lease that you can kick them out for. And one of our clients thinks that you know, the tenant may be doing other wrong things in the property. Those are covenants of the lease You can also evict someone you can start eviction process for violating a covenant of the lease. So say for example, you know, they have an animal there and they didn’t disclose it to you. Say, for example, they’re doing something, God forbid doing something illegal, you know, maybe they’re doing drugs in the property. Now, look, marijuana is legal in a lot of places. Now, the trend is going to be that it’s going to be nationally legal, probably. But you know, other drugs, more serious drugs, obviously, right. say they’re having big parties, and they’re getting noise complaints all the time. You know, these are things that could fall under covenants of Elise, obviously, and you can also evict people for that or you can sanction them for that or negotiate with them for that. So you know, remember, there’s more to it than just paying the rent, you have more power than you think landlords. So keep that in mind. Another tip I wanted to share with you that my mom brought up recently one of my properties in Texas, that I purchased a long time ago, needs a new fence. I’ve owned this property for maybe 14 Yours, and the fence is looking pretty shabby. You know, it’s just a cheap wood fence. Right? My mom says, Jason, you know, the neighbors have to share the cost of the fence with you. The property manager didn’t bother to think of that. But mom did. And I thought I didn’t even think of that. Why didn’t I think of that, of course, they have to share the cost. And so now the property manager went and got one of the three neighbors that share the fence. You know, there’s three sides of the fence in the backyard that are shared with neighbors, they got one of the neighbors to share the cost of the fence, that neighbor would contribute $644 and I would pay $644 and that would replace one of the three sections of the fence. So I said, Mom, okay, what do I do now my ultimate self manager mother, who’s pretty good at getting deals on stuff. She says, Jason, what you do is you collect that $644 from the neighbor and your place only the one section of the effects. That’s a pretty good idea, because it’s gonna make the Other two neighbors jealous that there’s a nice new fence on that one section. And that’s going to motivate them to contribute. So we can replace the other two sections. Look, I want to replace the fence as the landlord, I don’t mind spending the money. It’s not that big a deal. It’ll last a long time, we’ll probably put in a nice vinyl fence that’ll basically last forever, and really upgrade the property. So it’s fine with me to do it. But again, the neighbors have to contribute half the cost for the section they share of the fence. You know, they’re getting half the benefit. Why should I pay for it all? So, Mom, thank you for that advice. I liked it. You’re very welcome, Jason. Okay, hey, we got a really good guest. Today we’ll get through half of the interview. today. We’re going to talk about some really interesting stuff about the concept of recessions and cycles in the economy. This is a fascinating interview. I think you’ll really enjoy it. Also, if you want to join us we have a couple more people that have joined us for the venture Alliance next week in New York City or I should say this coming weekend. If you want to join go to venture Alliance mastermind calm and check out the venture Alliance mastermind group, you can go to Jason hartman.com and purchase a one time guest ticket for that. Or you can reach out to anywhere through our website and contact an investment counselor and they’ll help you with that. So more to come on that and here is our guest.
Jason Hartman 18:26
It’s my pleasure to welcome john Tammany to the show. He is Director for the Center for Economic Freedom at freedom works. Senior economic advisor at Theodore research and trading and editor of real clear markets best selling author of popular economics with the Rolling Stones, Downton Abbey and LeBron James can teach you about economics, and also who needs the Fed what Taylor Swift Uber and robots tell us about money credit and why we should abolish America central bank, but his new book is entitled The end of work. Why robots won’t take your job and might get you one you love. We got a lot to talk about today. JOHN, welcome. How are you?
John Tamny 19:07
I’m great. Jason, thanks for having me on. Yeah, it’s good to have you I These are great topics. And
Jason Hartman 19:11
let’s talk a little bit about I mean, what Taylor Swift, Uber and robots can tell us about money credit and why we should get rid of the Fed, I mean, make the connection for us.
John Tamny 19:24
Well, it’s a surprisingly easy connection. Several years ago, my wife and her friends went to a Taylor Swift concert in Washington DC at National Stadium. Afterward, as you could imagine, there was a rush to the exits to get home. And so if you want to ride the metro from that stadium, it was going to take at least two hours to get on one. cabs were non existent. And so my wife your friends, tap the button and Uber showed up. Uber charged four times the going rate surge pricing and my wife was home within a half hour. And so it was a reminder right there that even if you take the Fed seriously, its interest rates are wholly backwards. The Fed during periods of economic distress pushes the rate that it targets down to zero. Why on earth would it do that? That’s the equivalent of Uber during mass demand for its drivers setting the rate as low as possible. Well, if it did, that there wouldn’t be drivers at Nat stadium to take my wife and her friends home. The fact that they had surge pricing is what brought the drivers to the stadium. Sure the Fed in its infinite wisdom, does the exact opposite of what it should do. It tries to push the cost of credit down right at a time when you want it to rise to a level that brings in savers who will be there for those who need credit?
Jason Hartman 20:51
Ah, Interesting. Interesting. You know, I haven’t heard anyone expressed that before and maybe you haven’t either, and that’s why you thought of it. It’s an interesting problem. is because, you know, when we look at the supply and demand curve of anything in any market, and money is just another commodity credit is just another commodity like gold, silver concert tickets for Taylor Swift, one of my favorites, whatever, right? So you’re right, it makes sense. But the way the Fed would seem to view it, john, is that they would say, well, we need to pump money into the economy. And since they don’t really play by normal rules, they play by Fiat. They can create money out of thin air and adjust the abundance of credit and money supply, money supply and credit supply are kind of the same thing but not exactly by just lowering reserve ratios or creating money electronically out of thin air. I mean, you know, we used to say printing but they don’t even print anymore. printing is now too much of a burden. Running a printing press, so it’s not really The same is it because
John Tamny 22:03
they don’t really play by the rules that Uber plays by. They ultimately they do. The Fed can’t change reality the Fed cannot increase credit, they can certainly distort
Jason Hartman 22:13
it for a while.
John Tamny 22:15
Ah, My take is that the feds ability to distort much of anything is overstated. Let’s never forget that when you borrow dollars, you’re not borrowing dollars. My argument in the book is that money and credit are totally different. You’re borrowing dollars for what they can be exchanged for you’re borrowing access to trucks, tractors, computers, desks, chairs, buildings, most important of all labor. The Fed cannot increase what it is you’re seeking when you see credit. And so My take is okay, assuming the Fed were to print trillions and trillions of dollars, it’s not going to change the on the ground reality. Just because the Fed prints dollars doesn’t mean that people are going to release their trucks and tractors to Those who are in need of resources. And I would just add that the Fed can’t pump money into the economy in the first place. Let’s look at quantitative easing. The Fed tried to do that. And the reality is that 10s of billions of dollars, quote, exited the United States on a monthly basis. Let’s let’s look at it on a local level, let’s say the Fed dropped $10 billion into the center of Baltimore, that money would exit Baltimore as quickly as it arrived, and it would be as there’s no economic growth taking place in Baltimore. Conversely, let’s say the Fed drained all the banks and Silicon Valley of the money it raised the reserve requirements substantially, it would be utterly meaningless, simply because people around the world are lined up trying to have exposure to Silicon Valley. And so my take in the book is that we vastly overstate the feds importance. It’s dealing with antiquated banks that are no longer major players in the credit space and so Sure, I’d love to see it end but even if it doesn’t, then I think market forces are ending the Fed forest
Jason Hartman 23:59
well Listen, you’re not gonna get any argument from me, in principle. I agree with you. And I like what you’re saying. I do think however, you know, obviously, the ivory tower theory and practice are two different things. And I’m not saying you’re coming from the ivory tower, because I don’t think you are. I mean, this popular economics we’re talking about. Right. But, look, I mean, there’s there’s no doubt that the fed by managing interest rates, massively influences markets. I mean, look at what’s happened over the past several years coming out of the Great Recession, in the housing market, in the stock market. I mean, the money is just flowing. And, you know, it’s finding places to go. I admit that there’s a, you know, I worked with john, let me give you a little more. Let me give you a little more to chew on. You could argue with me all you want about it, no problem. But one more thing to chew on. I’d like it more like to pumping oneself up with caffeine or going out and partying and Having a hangover the next day. Of course, the crash is always present when you do that, but you definitely can stimulate for a little while. Right. Okay, go ahead.
John Tamny 25:11
I really question that. I do. And I question in the book if quantitative easing is what powers markets forward wolven Let’s explain Japan because they’ve been conducting quantitative easing for 30 years now, with no corresponding market rally. I can explain that,
Jason Hartman 25:31
by the way, if you want me to, but go ahead.
John Tamny 25:34
What what what why didn’t it work in Japan, but it worked in the EU or
Jason Hartman 25:37
Yeah, my theory about Japan is Japan has a wholly different problem number one, of course, it doesn’t work as well for anybody else because they don’t have the reserve currency and the bully pulpit like the US does. But that aside, Japan has a demographic problem. Japan is very insular, you know, there’s really almost no immigration, okay? And they’re not having any Kids in you can’t build an academy on that country this extends
John Tamny 26:03
the economy go Would you agree that this demographic problem is exponentially better than the one after world war two when the country was literally destroyed? That was a major demographic economy boom. And I just I think that it’s so easy to make I think it’s more ivory tower to say that well, we’ve got the printing press here. Markets respond all this sounds though investors are stupid. Like you’re Well, yeah, but see, the Fed kept interest rates low and so there’s a flight into yield. Oh, really? Funny how that didn’t happen in Japan. And let’s never forget that Japan is still a major economic force, of course. Oh, but see the fit. The Fed created 4 trillion and had to find itself somewhere. Well, it didn’t it borrowed 4 trillion from banks, but for a buyer excited by QE to enter the market by definition, a seller must exit. It’s not as though implicit in this QE narrative that the Fed uniquely among all central banks had this ability to pump up stock market. It ignores all the time the Fed couldn’t pump up the stock market. But implicit there is that there are only buyers now there are sellers to Furthermore, markets price in the future, if in fact, the Fed had been pumping up stock markets. logic dictates that when the Fed announced well before 2014 they do and and eventually sees quantitative easing, that markets would react to it and sell off for good except for they never did. I just I find the QE stories so easy to discredit. I’ve presented my argument in front of the best investors in the world, including Cliff Asness at AQR. And I’ve never been questioned because it’s not a very compelling argument. When you think about it. Well,
Jason Hartman 27:55
I only think, you know, listen, I don’t want you to get the impression I’m disagreeing with Because in philosophically and in principle, I definitely agree with you. I’m just saying that people are creatures of instant gratification, you know, they know that it’s a big game and it’s a big Sham, of course, you know, and so to other countries that hold our debt, they know it’s, you know, they know we’re destroying the value of our debt with inflation, ultimately, but but you know, they play it in the small time horizon, right, they play
John Tamny 28:22
these little wow, you know, and then and then if it’s all time horizon, it would show up in 30 year treasuries, I beg to differ I’ve spent doesn’t make me an expert, but I’ve spent lots of time in China and you talk to the government officials there, they point out that we’re still not a rich country. We expect that money to be paid back the idea that the rest of the world is in on some a wink wink nod nod that Oh, yeah, sure the treasures are worthless, but we’ll hold them. I don’t find that compelling. I don’t find realistic. I’m not defending the debt. I’m not defending government spending. I’m a libertarian. But the idea that the rest of the world would sit there and just buy what is claimed to be worthless defies common sense. The reality is, is that the US Treasury is backed by the most productive people on earth. We can talk about the Fed and all this other stuff and all these horrible things going on the world but the reality is the 10 most valuable companies in the world are based in the United States right now attract more investment than any other country in the world. People risk their lives trying to get to this country. Is it any wonder that the rest of the world wants to hold us debt? Yeah, we want to talk about the dollar and everything absolutely story. Yeah, yeah.
Jason Hartman 29:38
let’s not pretend that this is worthless. No, you’re absolutely right. the right question to ask is the one I always state it’s compared to what you know Yes, the US has all these things and all this monkey business but you know, compared to what everybody’s playing this game, okay, every country does this stuff, you know, couldn’t agree more. Okay, so on the Japan thing though, post World War Two I’m no expert on that. But my impression would be that hey, number one, we were rebuilding Japan. Number two, we were moving into this baby boom time, their exports, they were exporting all these cheap little products. Then the auto industry, the Japanese auto boom came along and, you know, that’s I don’t know, it’s it’s complicated, but
John Tamny 30:19
it’s got no I but I just think it’s dangerous to say that was a much bigger demographic difficulty and to pretend it, okay, so the way to fix a demographic problem is to go to war and have your country destroyed so you have to rebuild it. I don’t think holy that’s
Jason Hartman 30:34
not a good idea. I’m just saying it.
John Tamny 30:36
Okay. Okay. So that it happened did not improve Japan, Japan would be exponentially better off today, as with the US have been, had we not been in that war in the first place. I really think it’s dangerous to make an argument about Oh, yeah, well, the war saved Japan. Japan is a major, major economy. implicit in the demographic argument is that somehow Japan’s in Ireland. Now Japan interacts with the rest of the world, just as us producers interact with the rest of the world. It would be an interesting argument if Japan didn’t trade or import or export with anyone else. But that’s just not true.
Jason Hartman 31:13
Now, of course, of course, they’re not isolated. I mean, they’re just in terms of their immigration policy in the birth rate. And that’s all but and I wasn’t saying the word was good for Japan.
John Tamny 31:22
It was never birth rates in the world are the poorest countries and the countries that have the lowest birth rates get the most investment. Yeah. And so I just think the demographic argument is, again, an exciting one that excites people who think that there are crises coming but please know to spend time in Japan is not to spend time in a declining country if that were true, you’d see a massive capital outflow markets aren’t this stupid.
Jason Hartman 31:48
Okay. All right. All right. Yeah. Good points. Well taken points well taken. I mean, you know, if I had Harry dent on you hear he’d be arguing with you, of course you don’t you know, the arguments that you’ve heard them all. Okay. Listen, I want us to gears. I want to just finish this topic, though with. So during recessionary periods, it sounds like your thesis is that the Fed or while the Fed should go away, but the marketplace should just raise interest rates, then more people would come in and want to loan money. And the lending of that money would act as a natural stimulus for the economy. Is that proper analysis?
John Tamny 32:28
Oh, yep. For the just surge pricing
Jason Hartman 32:31
on money. Look, we should have surge price everyone money. Well,
John Tamny 32:34
surprisingly, credit, you know, money is luck. Mexico could lend the peso but it would mean a whole lot, you know, the point is, is that credit is always going to find its level. And so the last thing you want to do is try to artificially lower the cost of it. Now, my book argues is look throughout the US and we act as though the Fed doesn’t exist. Credit is so expensive in Silicon Valley, that if you want to start business, you’re going to give up a big portion of it to a venture capitalist and then you’re giving give even more of it up to potential employees in the form of stock options. Credits so expensive in Hollywood, that even the best movie producers are turned down well over 90% of the time. Donald Trump is our president for decades after the early 90s. He couldn’t get a loan from a US bank to save his life. My point is, is that while the feds often never Neverland, trying to set a zero rate and pretending Oh, yeah, there’s now easy credit in the real economy. We thankfully act as though the Fed doesn’t exist because if the Fed did have control over us, we would be in perpetual decline, simply because who would lend at our artificially low rates and so in the real economy rates are set by the markets, thank goodness they are, if the Fed were a fraction of as powerful as we thought as people thought it was, we’d be a very poor country. Interesting.
Jason Hartman 33:57
Okay. So the wave The Fed looks at that equation, though, is they say, we need to pump money in. So we need to artificially, admittedly, make rates lower. And that pumps the money in you say, let the market decide. And if you want money, pay a surge price because you need it more and there’s less supply of it because people are reining in their horns. So you should pay more for credit. And then there will be more credit. I mean, that makes sense. Well,
John Tamny 34:29
yeah, of course in that is what’s happening implicit is that when a recession hits suddenly credits easy, no. surge pricing takes place. The feds over here decrease zero rates, but no one borrows for zero. I mean, apples the most valuable company in the world, it still pays 3% to borrow. Small businesses in a recession are still going to be shut out of the credit markets. The Fed is this entity dealing with banks that just aren’t very big players and credit in the first place. Yeah, yeah. So in the real world credit costs what it costs, the Fed pumping up the money supply Oh, please. But where can it pump up the money supply? If it tried to shrink it and Silicon Valley market actors around the world would would run roughshod over that within seconds, just the same the Fed could put billions into West Baltimore tomorrow, and that money would disappear instantaneously. Money flows to its highest use soda resources. The notion of the feds a big player is defied by common sense if it were it could fix Baltimore tomorrow yet Baltimore still perpetually recessed in Silicon Valley. Well, banks aren’t players in Silicon Valley in the first place, but the Fed can’t change the on the ground reality in either place. Right,
Jason Hartman 35:46
right. Yeah. Dear listeners, we can tell our guest today is not a fan of Baltimore.
John Tamny 35:53
But I know I’m fully fan I just don’t think the fed the Fed can’t change the Fed, changed. Taro, Illinois. The Fed cannot change Detroit, Stockton, California can in my book I make the Detroit argument to said wants to drop billions into Detroit, it will disappear instantaneously. Because no businesses going to expand based on money drop. Yeah, money always flows to its highest use. The Fed can’t change it in a city, state or country. Yeah, no, absolutely.
Jason Hartman 36:22
This is why central planning doesn’t work anywhere, anywhere it’s ever been tried. It really doesn’t work. It only works around the margins. You know, it’s, you know, and it’s always temporary. helicopter. Ben, are you listening? So, Ben Bernanke. He, of course is who we’re referring to. This will be continued on the next episode.
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