At the start of the show, Jason Hartman shares his thoughts on the Biden administration and his tax plans. In the second part of the show, he finishes his interview with Jim Rickards about inflation. They also talk about the migration of people out of the major cities and whether Bitcoin will be a global currency.
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 1000s 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 0:53
Welcome to Episode 1637 1637. And I am broadcasting from the People’s Republic of China. Yes, the US was taken over today by the Chinese government or at least a puppet for the Chinese government. His name is Joe Biden. Thought you’d enjoy that. So here we are. And we have a new president, we have a highly contentious, highly disputed, unreliable election, to say the least. But let’s get past all that we have what we have, you know, I remember many years ago, I took this course on mastery, and the first step toward mastery was experience your experience, you know, just take it in and experience it and feel it. Right. How do you feel? What do you think, just experience it, right. And then the next step toward mastery was communicate your experience with the intention of others getting it, communicate your experience with the intention of others getting it. And then the next step was, and I can’t remember the way it was said in the course. But it was basically, you know, take action, do something about it, right. But then, the fourth step to mastery was, have what you have. And that is, to an extent, a surrender. And I don’t mean, surrender in the sense that you give up, but it means be somewhat at peace with it. Right? have what you have have what you have. And we have all we have. So what does it mean to us as real estate investors?
What does this mean, as I talk to you, at 5:05pm, here on Inauguration Day, what does it mean? Well, it means so many things, there is no way we will be able to cover it in this election. It means it means higher taxes, it means significant inflationary pressure, it means a significant change in tax law. For two years, the Biden administration will be able to run roughshod over the country, there’s really almost nothing stopping them. I mean, they have the government. Okay, we have this, you know, this this three, three tier government, which is fantastic. It was set up by the founders of a country and and it’s brilliant, because it has the checks and balances of the legislative, the judicial and the executive branch. Right. And so that’s a wonderful thing. Certainly. But look, I don’t know that the Supreme Court will need to be be getting involved in much of what is about to occur in the country. So it’s just really two branches of government. And, hey, that party is in control. But is it really the democratic party? I would argue that it is not the Democratic Party in control. So maybe, if you’re not a Democrat, you feel some sense of relief from that statement. Well, don’t be so fast. Don’t be so fast. Because I would argue that really, and I kid you not, that the Biden person is really a manchurian candidate. And if you haven’t seen the Manchurian Candidate movie, there are, I think, three movies. You know, hollywood ran out of original ideas a long time ago, so they just keep doing remakes. And I think there are three versions of the Manchurian Candidate movie actually. So check out one of them. You know me I like watching Oh, old stuff. I like new stuff too. Of course, it’s got way more bells and whistles, it’s better looking. It’s got better sound. But you know, the old stuff has a certain quality to it, doesn’t it? It just has a certain character. That’s why I love old movies, old TV shows old books, old music. And when I say old music by a special favorite is the 70s. Yes, the 70s music. That’s when? I don’t know. It was just it was kind of a chaotic decade, the economy sucked. But the music was so genuine, you know? So romantical, very romantical music in the 70s. Anyway, enough of that enough that but Biden is a proxy, right? Even like, I mean, seriously, even Democrats, even the most democratic of the Democrats, right? You can’t deny that Biden is a proxy for corporate America, big tech, and the Chinese government. You just there is so much evidence for this. It is absolutely incredible. So let’s talk about tax for just a moment. I mean, this is such a big subject, we need multiple episodes on this. And we will have multiple episodes on Biden tax plans. But very briefly, we have got and you know, this is extremely likely to happen, and it’s likely to happen quickly. And it’s good news for you. Are you ready for some good news, real estate investors? Get ready cuz you’re about to profit? Yep, you’re about to profit from this. Biden is going to very likely provide a $15,000 tax credit.
Now remember, a tax credit is different than a tax deduction. A deduction just means you take your income, you deduct the amount of the deduction, which in this case, $15,000, and then whatever’s leftover than net income, so if you make $100,000, you take a $15,000 deduction, you’ve got 85,000 leftover, that’s what you pay tax on. No, no, no, no, no, no, a tax credit is much better. So what that says is, okay, if your tax bill, for example, the amount of money you owe to the government is $30,000. And you have a $15,000, first time homebuyer tax credit, then you only pay $15,000. You got a coupon that says $15,000 off, that’s a tax credit, much better than a tax deduction. A credit is, you know, dollar for dollar. So it’s really, really good. And what is going to happen? Look, remember the cash for clunkers stupid program? Remember that dumb, dumb Cash for Clunkers program that comrade Obama did years ago? It was a disaster, cash for clunkers. You know, basically, you turn in your old clunker of a car that’s not fuel efficient. That doesn’t have all the latest emissions controls, you know, seems like a good idea. Right? And we’ll give you cash for it in the form of a tax credit. Right. And Obama did that. And so everybody turned in their clunkers? Well, what happened? Right, what happened? Well, the used car market, the used car market just totally dried up, because there was like, no inventory, right? Because everybody was turning in their clunkers. And what did they do with those? Well, some they set them to the junkyard, some they send them to Mexico and other countries, right. And so it’s not like, as a great, by the way, the great john F. Kennedy, former president who went up against the Federal Reserve and against the establishment and, you know, was assassinated, of course, he said, we all breathe the same air. Right? That was one of his great quotes. We all breathe the same air. And he’s right. Well, you send the clunkers to Mexico. And guess what, they’re still ballooning over there, comrade Obama, you know, another conceived, you know, left wing government program. It’s it’s just absolute stupidity, you can make this stuff up. But the point was Cash for Clunkers. Everyone went out and bought a new car. So all those new cars had to be manufactured with incredible damage to the environment, of course, because the old thing, you didn’t need to make a new thing. So if you didn’t need to make a new thing, you didn’t need to pollute any rivers or pollute any air or, you know, make any new steel or anything. You just have the old thing and it was there and it was fine.
Okay. So, so, cash for clunkers was like an environmental disaster, but also notice what happened to the economy. It pushed up automobile prices. So now this $15,000 tax credit that Biden is going to offer, it’s going to push out Real estate prices. So all of the real estate that you’re looking at today, because all of these properties that you see at Jason hartman.com slash properties are in the first time buyer price range, well, all of those properties are suddenly going to have a $15,000 upward pressure on their price. And you know what that means, if you buy now, before the $15,000, Tax Credit goes into effect, and before every first time buyer rushes out there and gobbles up all the inventory because they were just incentivized do remember, the greatest management principle in the world is what gets rewarded gets repeated, what gets rewarded, gets repeated. So everybody’s going to go out and buy a house. And inventory is already extremely low. And all the lib tardes are saying that there’s a housing shortage, and we need more affordable housing. Well, providing a $15,000 credit is going to make the problem even worse. But Fine, go ahead and make the problem worse. What do I care? Rome is burning, the Titanic is sinking, you know, let the band play on on the Titanic, as the ship is sinking, you know, let’s rearrange the deck chairs. And, you know, sadly, sadly, I’m not saying this is good. It’s not good. It’s sad. But it’s the way things are, remember, have what you have, have what you have. And as you have what you have profit from it, profit from it. And I’m here to help you do that. Okay. So this is just another wealth transfer. And the Biden administration will be a wealth transfer, a massive wealth transfer to the cantor Williams. And we talked about the kantian effect before, so not going to go into it now.
But many times on prior episodes talked about that. And the corporatocracy and the big tech firms. It’s simply a wealth transfer. But guess what, you’re going to get in on it, you’re going to be a part of it. And some of that wealth is going to be transferred to you. Because you’re gonna go to Jason hartman.com slash properties right now. And you’re going to reach out to one of our investment counselors, and we’re going to help you find properties before there is more upward pressure on price due to this $15,000 tax credit. Okay. So congratulations. Also, also, the 1031 exchange rule is under attack, and the rule about step up basis when you pass away. So if you want to pass away anytime soon, do it before Biden passes his new tax law. Just kidding. I don’t really mean that. I like it when you’re alive. Because you know what, at the very least, you have to be alive to be one of our clients. So that’s a requirement. So stay alive, please. Because we love you clients, and we need you alive. Okay. So you’re not die. But from a tax planning perspective, it wouldn’t be a bad idea for people to die before. Before this goes into effect. Because what it does is it basically is an attack on states. So now, wealth will be again, transferred from bull to government, and then guess what else is going to happen? There is a lot of talk that the Biden ministration. And this is not about real estate specifically, but it’s about socializing, bad behavior and losses. And you’re gonna see a lot of this coming up. Okay, a lot of it. Here’s just one mega huge example of it. And it is going to be the failed states, okay, that we’ve talked about many times, my former home state, the Socialist Republic of California, and the Socialist Republic of New York and the other failed left wing states, right.
They are broke, they’re going under. And there is a high likelihood that they will get a bailout from the Biden kleptocracy, the Biden federal government, and as such, that means their bad behavior and their losses will be socialized among all American taxpayers, and all American consumers. Why is that? Because, of course, the government will have to spend money to bail out. California, New York, for example. Okay, and that will be a huge amount of money, it will not be a small check. You know, we see these multi trillion dollar packages, right? Well, when the state bailout packages come, it’s gonna be really big. It will be really big packages. So that’s coming, how will it affect? That’s taxpayers, but of course consumers because inflation, right, so there is a lot of pressure for more inflation now, literally, just by seeing sleepy Joe gets sworn in today is just, you know, they might as well have written on the screen inflation. It’s not the British are coming. It’s inflation is coming. Right. So that is another thing. And that’s a large part of our strategy. By the way, I’m interviewing Dan Ammerman next week to be talking about talking about that. I got sayfudine mosa on the Bitcoin standard. And he talks a lot about that fascinating discussion that interviews already in the can it’s coming up. So stay tuned for those. But I want to just before we get to Jim Rickards, who’s back with us today, he was with us Monday, of course, and we got more Jim Rickards today coming up. But before we get to that, you’ve just got to hear this piece. And this is not, you know, don’t read this as some political thing. This is just a factual thing. Okay. And this is about the just, you know, who do we have as president now, who do we have? And what is the corporate influence on this president, it’s extremely important to consider this. So this is obviously pre election results, this video, and it’s a Tucker clip that I’m going to play for you. But it is very telling, because this is exactly what we are going to see. And I think it is telling us to who we have in the office,
‘Audio Clip’ 17:01
At some point soon, we’re told maybe tonight, possibly, Joe Biden may take the stage declare himself effectively the president elect of the United States. But as the highly aggressive and very unusual move, keep in mind, there is a vote counting still underway in a number of states. But then the Biden campaigns behavior in the last 48 hours, like so much we’ve seen recently raises profound questions about our electoral system, and whether it’s really what we’ve assumed it was we’ll address all of that in a moment. But the first question tonight is far more basic than that. Who exactly is Joe Biden, this man who claims to be our president, we probably ought to find out put that on the to do list. The truth is, as of tonight, we don’t really no, we have no clue what Joe Biden actually thinks, or even if he’s capable of thinking, he hasn’t told us no one’s made him tell us for a full year now. that’s by design. In fact, it’s becoming clear there is no Joe Biden, the man you may remember from the 1980s is gone. He no longer exists. What remains is a projection of sorts a hologram designed to mimic the behavior of a non threatening political candidate. Relax joe biden’s here. He smiles a lot. Everything’s fine. That’s the message from the vapor candidate. Don’t think too much.
Jason Hartman 18:16
Do you notice how that’s the perfect Manchurian Candidate? I mean, it’s the it’s the puppet presidency. And I think that is really what we are going to see where you’re going to see so much of this puppetry. In fact, one of my friends posted today that Joe Biden begins his ninth year as Vice President. I thought that was pretty good. Joe Biden begins his ninth year as vice president.
‘Audio Clip’ 18:45
So who’s running the projector here? Well, the first thing you should know is the people behind Joe Biden aren’t liberals that we’ve often called them that incorrectly on this show. A liberal believes in the rights of all Americans to speak freely, to make a living, to worship their god to defend their own families, and to do all of that, regardless of what political party they belong to, or what race they happen to be born into, or how far from Midtown Manhattan they currently live. A liberal believes in universal principles fairly applied. And the funny thing is, all of that describes most of the 70 million people who just voted for Donald Trump this week. Most of them don’t want to hurt or control anyone. They have no interest in silencing the opposition on Facebook or anywhere else. They just want to live their lives in the country
Jason Hartman 19:33
they were born in,
‘Audio Clip’ 19:34
it doesn’t seem like a lot to ask. So by any traditional definition, they are liberal that way, though, our languages become so politicized and so distorted, that you would never know it. What you do know for certain is that the people behind Joe Biden are not like that at all. They don’t believe in dissent. You think one thing I think another that’s okay, no, that’s not them.
Jason Hartman 19:55
We’re gonna get to the corporate stuff here in just a moment. So keep listening.
‘Audio Clip’ 20:01
at all, they demand obedience, diversity, which is to say legitimate differences between people is the last thing they want diversity. It’s a cruel joke. They must mean ironically, these people seek absolute sameness, total uniformity. you’re happy with your corner coffee shop, they want to make you drink Starbucks every day from now until forever.
Jason Hartman 20:24
Starbucks is poison. Remember, on prior episodes, when I’ve read you the, quote, nutritional value, unquote, of the poison they serve at Starbucks. You know, I was thinking when I went to a Starbucks recently, by the way, I must just break in and mention this, that, you know, the concept of workers compensation, right, you know, we carry workers compensation insurance, because if someone gets hurt on the job at my company, they can file a worker’s comp claim, right? Well, have the employees of Starbucks ever sued the company under a worker’s comp claim or even filed a worker’s comp claim? Because I don’t know about you. But whenever I see that, like a new person going to work at a Starbucks, and then I see them four months later, they’re suddenly becoming obese and diabetic and future cancer patient. You know, it’s unbelievable the poison Starbucks is foisting on the world. But it’s funny how no one attacks them the way McDonald’s used to get attacked for this, right? No one complains about Starbucks, cuz it’s a protected, woke leftist organization. Unbelievable.
‘Audio Clip’ 21:41
No matter how it tastes, that’s the future they promise everyone doing the same thing. Now, these seem like corporate values to you uniformity is the most basic corporate value, then you’re catching on to what’s happening. The Joe Biden for president campaign is a purely corporate enterprise. It’s the first one in American history to come this close to the presidency. Its values, its slogans, its goals come straight from the HR department. If a multinational corporation decided to create a presidential candidate, he would be a former credit card shill from Wilmington, Delaware. And that’s exactly what they got. What’s good for Google is good for the Biden campaign and vice versa. We have never seen a more Solus Project. They literally picked Kamala Harris as the vice president, someone who can’t even pronounce her own name. Not that it matters because it’s purely an advertising gimmick. We watched all of this come together in real time. We stood slack jawed in total disbelief, as a man with no discernible constituency of any kind, rose to the very top of our political system as if by magic, we look for wires. How did he do that? He keeps rising. It’s possible in the end, that Joe Biden himself never convinced a single voter of anything over the entire duration of the presidential campaign, not one.
Jason Hartman 23:00
That’s why the Biden campaign and we’ll stop talking about this, but it just doesn’t even pass the smell test. Like no rallies, when he had a little rally, like nobody showed up. Hardly. I mean, this whole thing is just such a it’s such a Manchurian event. It’s a puppet show. It’s truly amazing. I could totally understand even though I was not a supporter of Obama, I could understand why Obama is an exciting candidate, or was an exciting candidate, I should say. I mean, Obama, you know, was the first half black president. Right. That was exciting. That was interesting. I mean, you know, we’re breaking ground here. You know, this is a new chapter for America. He was a great speaker. I mean, at least when he was reading a teleprompter, you know, he was inspiring in some ways. I mean, I even felt that way. You know, I didn’t, you know, I hated his policy, but I kind of liked Obama in some ways, you know, but there was there is nothing exciting about Biden, what so ever. I mean, just nothing, nothing. There’s zero passion in this candidate at all.
‘Audio Clip’ 24:13
But he didn’t have to. Joe Biden won the Democratic nomination, because he wasn’t Bernie Sanders. Okay. Now, Bernie Sanders, on the other hand, even though I don’t agree with Bernie Sanders.
Jason Hartman 24:25
He’s an exciting candidate, in some ways, right? He had like, different ideas, new ideas. You know, he was like a man of the people. Supposedly, he’s just not in the club in corporate America can’t buy him as easily. But they could buy Joe Biden where he is today because he isn’t Donald Trump. That is the entire story. It’s the shortest political book ever written. Now, whatever you
‘Audio Clip’ 24:50
may think of Donald Trump and Bernie Sanders, they did it the traditional way. Each one of them had the support of actual voters, living, breathing. People love them, believed in them, vested their hope in them, and by the way, agreed with their ideas, which they articulated clearly. The corporate america hated them both. They couldn’t be controlled, particularly Donald Trump, whose complete unwillingness to submit made him the greatest possible threat. And that’s why they hate Donald Trump. That’s the reason because he won’t obey. Tonight is possible, these forces may be winning. We can’t say that. Now, of course, we would never say that until it is absolutely certain. But it could happen. What then who we say really won the election, Joseph, our Bidi, please, that’s insulting. The tech companies will have won the big banks will have won
Jason Hartman 25:44
the government of China, the media establishment, the permanent bureaucracy, the billionaire class, they will have won, in not in a way. So the cantillon effect is coming big time, the Biden presidency is going to be a massive, massive, massive wealth transfer. And I just want to make sure that you get your cut of this massive wealth transfer that is going to occur under the Biden administration.
‘Audio Clip’ 26:19
The democracy promises with numbers alone, if a single person equal to single vote, a coalition like that could never win anything. There aren’t enough of them. But as a group, they have something that Donald Trump’s voters sadly do not have. And that is power. They have lots of power, and they plan to wield that power, whether you like like it or not. It’s all starting to look a lot like oligarchy. At this point. The people who believe they should have been in charge all along now actually may be in charge. So what does that mean, for the rest?
Jason Hartman 26:50
It’s a kleptocracy. It’s a plutocracy. It’s an oligarchy. And it is a massive, massive transfer of power. By the way, if you want some homework, and you want to look up and learn about something that really changed the character of our politics, go research. Don’t Google it, because Google is evil. Use DuckDuckGo. Type in Citizens United. Okay, Citizens United, and just learn about Citizens United. And it’ll help you understand why we are where we are, which is in a bad place for the country. But hey, we can all profit from it. So that’s, that’s the good thing about it. Okay, we’ll wrap this up here and get to Jim Rickards in just a moment.
‘Audio Clip’ 27:41
The rest of us. Now the corporate america controls everything, which is what they wanted. Will they declare victory and back off? Finally, can we speak freely again? Will they take the boot from our necks? Can we have America back? Now that the great orange emergency has passed? Will the mandatory lying orders finally be lifted? Those are the questions we’ll be paying attention to since we plan to stay in this country. And one other thing, by the way, while we’re at it, who’s excited to greet our new corporate overlords? Who plans to collaborate particularly who on the right side, the Republican side, the side that said it was defending you? Who’s happy about all of this? That seems worth keeping track of just
Jason Hartman 28:24
so we know who we’re dealing with here? All right. Well, I think Tucker summed it up pretty well. It’s a corporate takeover. And it’s a Chinese takeover. But we have profit strategies. We will continue to explore them as we go forward on future episodes. But we’ve got Jim Rickards, back with us today. So let’s get to Jim Rickards right now. So the government and the central banks all around the world have created an unprecedented, absolutely mind boggling amount of new currency. Jim, what does that mean to us? You know, it’s like money printer Gober, as the saying goes, right?
Jim Rickards 29:13
Sure. It actually means nothing. And let me explain what I mean by that. And by the way, your your Austrians and your monetarist and your Neo Keynesian, they’re gonna say inflation rate of inflation. Well, they’ve been wrong for 13 years. That’s how long has it been going on? In 2008? The Federal Reserve balance sheet was 800 billion. Today, it’s about 7.5 trillion. So they point they printed over almost $7 trillion in new money. Where’s the inflation? There’s no inflation?
Jason Hartman 29:42
Well, there’s a lot of that, you know, I mean, I don’t want to like belabor the point, but some would say there’s more inflation than is disclosed. Of course, they’d say the indices are misleading, but that’s fine. But then others would say look at the asset inflation. I mean, there’s a lot of inflation of assets, right? Maybe not consumer
Jim Rickards 30:01
guarantees. Yeah, but that’s not inflation. I mean, asset prices are up there bubbles all over the place. I agree with that, you know, Bitcoin stock market, some sectors real estate, not all those are asset bubbles. That’s not inflation inflation is what is the consumer price index, or the the PPI, the purchasing index, producer price index rather. And, and he said, Well, I got my own definition, we’ll find that for you. But you’re not gonna be able to forecast policy. If you’re making up definitions. You got to look at it the way the Fed does. And I’m not saying that that there’s no no problems with it. I’m not saying the models are right. They’re not. But if you’re trying to forecast Fed policy and forecast markets, which I do, you better look at it the way the policymakers looking at it, because that’s going to guide their actions. If you want to stay ahead of the curve. In terms of policy changes, you have to look at it through their eyes, whether the models are I know the models wrong, I get that I can do I do my own modeling. But you can’t just make up your own definition. If you’re talking about. Well, the official, the the inflation benchmark that the Federal Reserve uses is PC price deflator, personal consumption expenditure price deflator, that’s the one that’s used to determine GDP and their target for those 2%. And they’ve hit that target about two months in the last 13 years. And knows they don’t know how to cause inflation, we don’t have inflation. But just to kind of come back to your point, Jason. So we printed the $7 trillion over $7 trillion. We’ve talked about the monitors ago, all that money, you’re going to cause inflation we have not money printing does not cause inflation. What causes inflation is the velocity of money is the train over. So you know, I, I go to dinner, I tip the waitress, she takes a taxi home tips, the taxi driver, right taxi driver puts gas in his car. So in that example, my dollar tip had velocity of three that was the waitress tip, the taxi tip and the guest line, right? $3 of goods and services for one dollars, that’s velocity of three. If I stay home and watch TV, and don’t spend any money, my money has velocity of zero. So gross, sorry, nominal GDP is money supply times the last city, what 7 trillion times 000. Right? It knows if you don’t have velocity, you don’t have economy. So you think of the money, there is money printing, for sure. But think of the money printing as piling up or just piling up piling up pile, a big pile of wood doesn’t start a fire. You need a match. You need a bolt of lightning, you need a blowtorch. You need some catalyst. So if you if you’re worried about inflation, and actually right now, deflation is a bigger problem. But if you’re worried about inflation, don’t worry about the $7 trillion pile would ask yourself, where’s the spark?
Jason Hartman 32:45
Okay, so could that spark commit any time, right? Could it just suddenly create a lot of velocity? And also, is the lack of any significant inflation in the system? How do we know that it’s a result of velocity versus just technological progress? that technology is deflationary? I think we’d all agree with that, you know, because it just makes things better, faster, cheaper, we, you know, which is it? Could that spark come at any time?
Jim Rickards 33:16
Well, it can come in anytime, which begs the next question, which is okay, what could it be? And am I looking forward to seeing signs of this? I’m not saying I’m not saying let your guard down about inflation. I’m just saying there’s no inflation right now. And there’s nothing on the horizon is going to cause inflation? You’re asking a good question. Is there something that could be I can tell you what it is actually, exactly. I tell the reader in the conclusion of my book, what could cause inflation? In fact, I recommend it because we’ve got another problem which I just explained why monetary policy does not work. Fiscal policy does not work, either. You can have deficit spending, but stop calling it stimulus because it’s not stimulus. And why is that? You have to look at another metric, which is the debt to GDP ratio. So how much government debt is there? And what’s GDP? and simple example, let’s say these are not the right numbers. Now, just as an example, let’s say a $10 trillion in debt, and $20 trillion of GDP? Well, in that example, the debt to GDP ratio is point five, it’s 50% of deaths 50% of the sorry, the other deaths 50% of GDP. Well, what are the actual numbers? The actual numbers today are about 25 trillion the debt and about 22 trillion in GDP. In other words, the debt to GDP ratio is actually around closer to 130%. Now, what’s the significance of that other than the fact is a bigger number is research and this is from a number of sources, we can throw off a professor at Harvard, Carmen Reinhart, who was a professor at Harvard, she’s now chief economist of the World Bank, and others and the collaborators in books, papers, studies and the numerous time periods, emerging markets and developed markets on it’s etc. And they show very conclusively that your Keynesian multiplier will works up to a debt to GDP ratio of about 90%.
Jason Hartman 35:04
And we’re at about 130%, I believe, right?
Jim Rickards 35:07
Correct. So 90s
Jason Hartman 35:08
in Japan is at 230%. Somewhere around.
Jim Rickards 35:13
Japan’s a special case, I can explain that. But just to come back to the other research, so what’s the Keynesian multiplier? Keynesian multiplier is when you’re in a liquidity trap, and you want consumption and people want spend, they, they say, that’s what they’re doing today. You know, the stock market was up today, because, okay, so Biden’s gonna be president and Republicans, so the democrats control the Senate. So that means we’re not going to get $600 checks, we’re gonna get to $1,000 checks, and more. So the stock market, which usually gets into on by the way, but they said, I will stimulus, people are going to get the money, they’re going to spend it, here’s your inflation, none of what you were asking about Jason, is your inflation. So interest rates are going up. That’s not what people do with the mind, they will get the money. I agree with that. And there will be more deficit spending, but they’re not spending it, they’re saving it. They’re either paying down debt, which economically is the same as saving where they’re actually saving. And if you lost your job, of course, you’re going to save money, you’re not going to pay the rent or whatever, but you’re not going to go spend it on a you know, vacation, or whatever. But even people who haven’t lost their jobs, worried that they might be next, maybe their neighbor losses. So
Jason Hartman 36:17
they’re more they’re raining, and they’re pulling in their horn. So
Jim Rickards 36:20
there’s an evidence called proportional savings and savings just in case, well said he has savings, you’re in a liquidity trap, nobody’s spending the money. So what Keynes said is, well, the government can spend the money if people want, the government will. And so you borrow $1, and you spend $1, and you get $1 25 of GDP.
Jason Hartman 36:41
And it works for a while priming the pump works for a while
Jim Rickards 36:44
the Keynesian question is when does it not work? And the answer is it does not work.
Jason Hartman 36:48
90% while So Jim, my question is, why does it you know, like the economy turns into sort of this zombie economy with too much debt, right? If it stops working, it’s sort of like, maybe a metaphor would be look, you know, I woke up, I didn’t sleep well, I had a cup of coffee, it didn’t do the job, like usual, you know, one cup is usually good enough. Well, I have three cups, and you know, I have 10 cups, it’s not going to make me 10 times more awake, right? It’s going to actually hurt me. So what happens with the economy though, when you do that?
Jim Rickards 37:23
So sampling, the concept is that diminishing marginal returns. So at very low levels of development of productivity, one guy has a bright idea that you got a bunch of farmers 5000 years ago in China that says, you know, we got together and build an irrigation canal, but the water over here, we could all grow rice, the good idea, and guess what that works, but pretty soon you need an irrigation Commissioner, and he hires an assistant and, you know, the bureaucracy builds up and the cost is no investment. Okay? You still get gains, you still have gains, but the curve goes up very steeply at the beginning, then flattens out. And as such, they go down, and then it actually goes negative. Yeah, because
Jason Hartman 38:01
you sort of collapse under your own weight.
Jim Rickards 38:05
That’s exactly right as its complexity theory and scaling metrics. But that’s where we are now when the negative return. That’s what happens when you go past 90%. The Keynesian multiplier drops below one. Now, you borrow $1, you spend $1, and you get 90 cents of GDP, not $1 25. But 90 cents, or 80 cents and progressively less. But look at look at the math what’s happening, your debt still going up by $1. But your GDP is only going up 90 cents. So what’s happening to the debt to GDP ratio, it’s getting worse. That means the return of the next dollar is lower. This is why you cannot borrow your way out of the debt crisis cannot print your way out of liquidity crisis, you need other solutions. And I talked about the solutions in the conclusion of the book.
Jason Hartman 38:49
Okay, so I want to ask you about you know, what people should do? But before we get into that, you I believe, correct me if I’m wrong, are bullish on gold and silver? Is that correct? That’s when most people would think and maybe your your ideas is more counterintuitive, or there’s some distinction. Most people would say, Well, you know, people buy gold or silver if they’re worried about inflation, or they’re worried about a general crisis, or collapse of any flavor, I guess. Why are you saying inflation isn’t the worry but still buy gold and silver?
Jim Rickards 39:31
Because gold does very well in deflation. Also, you’re right about the inflation. That’s pretty intuitive, and most people understand that but just again, just to give like concrete data and concrete models, I don’t make claims without backing them up. The greatest period of sustained deflation in US history was the Great Depression between 1929 1940 in that period gold went up 75% it started at $20 an ounce to I was $20.67 an ounce and went up to $35 an ounce in dollar terms as the 75% gain the best performing stock market, so the best performing stock on the New York Stock Exchange during the Great Depression was homestake. mining in South Dakota, which, again because they were producing gold, so so gold is very well in deflation. No. So why is that seems kind of counterintuitive? The answer is governments cannot afford deflation because you can’t tax it. You can tax inflation all day long. Governments love it. But you can’t text deflation. If I don’t get a raise. But the price of everything goes down. My standard of living just went up because I my my same amount of cash has higher purchasing power. So much general living goes up and deflation but the government can’t tax it. So they want inflation does they want me to get more nominal dollars they can tax it. So if governments can’t stand deflation, and they can’t and you have deflation, how do you get out of it? The answer is raise the price of gold raise the dollar price of gold, not to reward gold holders. In fact, FDR did it. And he confiscated all the gold first government. It was the ultimate front running the ultimate insight. There was an absolute scam in 1933 was a scam but it worked. It was a scam. The work. The reason was a scam was the government got all the profit, not the individual investors. But But as economic policy at work. Because what Roosevelt was saying is, I don’t want to reward gold holders. In fact, he took all the gold. But what I wanted, I want the price of everything else to go up. In other words, if gold, I expect gold to go to $15,000 an ounce over the next several years. But let’s just take $5,000 an ounce, which is so be a big jump. The world of $5,000 Gold is also the world of $400 oil, $100, silver, you know $20 wheat, their issue inflation is the price of everything else goes up. I tell people, if the dollar price of gold goes up, if you have gold, that’s fine, you made a profit, don’t pat yourself on the back. Because what’s really happening is that the dollar is devaluing. This is not to say Gold’s going up now, okay. But that’s not really what’s going on. And now see, it’s
Jason Hartman 41:59
the measuring stick. It’s it’s fed keeping pace, I
Jim Rickards 42:02
think of gold, but I wait, I think it will by weight. And an ounce of gold is still an ounce of gold sticking in a drawer go away for a year come back, guess what, it’s not two ounces, it’s still an ounce of gold. But the dollar value is higher. What really happened is that the value of the dollar went down. That’s inflation. And that’s
Jason Hartman 42:19
my mind listeners. Get back in tune with you there. No problem. Okay. Okay. So before we get to what to do, and then we’ll wrap it up that question I asked you about Bitcoin off air before we started? Yeah, I found it very interesting that you said on another video I saw you on that Bitcoin will not become Well, you’re not a fan of Bitcoin, right? Is that fair to say? Yeah, I
Jim Rickards 42:44
have no interest in it. It’s tell us why. Because it’s not going anywhere. I mean, it might go down to $200 a coin or whatever. But here’s the thing with Bitcoin I know where it is. It’s around $35,000. So I did an interview in December 2017. with Sarah Silverman, she’s a journalist. And at the time Bitcoin was going up about $1,000. Well, certainly $1,000 a week was almost $1,000 a day. So it was gone. At the time, it was about $8,000 $5,000 $6,000 $7,000 $8,000. It’s highly speculative and very volatile. So be careful, folks, if
Jason Hartman 43:21
you’re doing it be really careful. Well, yeah.
Jim Rickards 43:23
But yes, I agree. There’s more to it than that. And Sarah asked me the same question. You just said look serious, what’s going to happen? It’s going to go to $20,000. And then it’s going to crash. And that’s exactly what happened. It went to $20,000. You know, in January, then it crashed. About 80%. Alright, so now that $35,000 it’s another bubble, and it’s going to crash Bitcoin, but a lot of people say, oh, bitcoins going to take over the dollar, Bitcoin is going to replace the dollar as the global reserve currency as the place to be. And it’s the new gold. So it’s all nonsense. And here’s why. When people say the dollar is the leading reserve currency, and it is 60% of global reserves are in dollars. And by the way, about 30% of global reserves are in euros a little bit less. So the dollar and the Euro together, make up almost 90% of global reserves all the other currencies combine your Sterling francs, Canadian dollars. Together, they’re they you know, they add up to maybe 40%. No, not 40% 10 and 15%. The dollar, the dollar in the Euro makeup.
Jason Hartman 44:21
Oh, God, I thought you were talking everything about the dollar
Jim Rickards 44:23
almost almost 90%. Correct. So, so those two currencies of the whole show, but it’s not as if two people, so many say China has $1.4 trillion in the reserves in dollars, which they do. It says that they have pallets of $100 bills sitting in the basement of the People’s Bank of China. They buy securities, they buy treasury bills, notes and bonds. So they’re denominated in dollars, yes, but they’re not dollars there. Treasury notes are 10 year Treasury notes, or five year Treasury notes, etc. And that was the thing that makes you a reserve currency is not the currency. It’s the securities, the liquid securities market. You can invest in. You need something To invest in, you can’t just pile up, you know, printed money. So where’s your Bitcoin bond market doesn’t exist. Where’s the Chinese yuan bond market? It’s a small, small time, but it essentially doesn’t exist. Chinese yuan is not going to be reserved currency. bitcoins can be reserved currency, because there’s nothing to invest in. Oh, you think the Chinese yuan is going to replace the dollar fine? Where your bonds where your primary dealers? Where’s your payment system? Where’s your repo your options, your when issue trading your futures? You’re hedging your settlement, Claire’s, none of that stuff exists. And even if it did, which would take 10 to 20 years to build, which they don’t have. There’s no rule of law. You wouldn’t you wouldn’t invest in a Chinese bond if they can wake up and confiscate it just like that, sir. So the only bond market so it’s not about the currency. I mean, the currency is a is a, it’s a numerous way to count. But it’s not about the currency. It’s about the bond market. And yes, the Treasury market is the largest most liquid bond market in the world. By the way, there is no such thing as a euro bond. In terms of Yeah, they’re dollar denominated bonds issued in London that traditionally called euro bond. So when I say euro bond, I mean, an instrument denominated in euros backed by the full faith and credit of the European Monetary System, that instrument does not exist. If you want to invest in euros, you buy bonds, Italian government bonds, you know, good luck with the tie, and you can buy Greek government bonds if you want to. They’re in euros, but there’s no unified euro denominated bond market. So how many German buns are there not enough to absorb the 70s of the world? So when I was when I went to Washington, the first thing I learned it was a lobbyist. My wife hates me to admit it, but it was. And the first thing I learned is, you can’t be something with nothing. In other words, if you really dislike something, I hate this, it’s awful. Get rid of it. So fine, but you need something to replace it. You can write up this and rant and yell and scream on TV. But if you don’t have something, replace it, you’re not going to change things. And right now, there’s nothing to replace the dollar.
Jason Hartman 46:57
Yeah, well, I agree that the dollar has a much better future than many would say. But is that are we asking the right question, Jim? I mean, we kind of went from is Bitcoin an investment? Or should it is it going to become the reserve currency of the planet?
Jim Rickards 47:14
No, and no, but
Jason Hartman 47:17
okay, but, but I think everybody listening, I don’t know if they care about it being a reserve currency or not. They just care if they can make some money,
Jim Rickards 47:24
right, I guess. When I was. in junior high school, there was a popular dance song thing was Dion and the belmonts the song’s called shell. And the refrain was shout shout, knock yourself out. If you want to buy bitcoin, knock yourself out. I mean, it’s a free country, you can do it, but it’s never going to be a reserve currency because there’s no bond market.
Jason Hartman 47:41
Right? Okay. Okay, so what should What should we do with all of this, like, sum this up for us, and give out your website, you know, any action steps people can take in these absolutely turbulent times?
Jim Rickards 47:53
Thanks, Jason. It’s all my new book, the new Great Depression, and talks to my editor. So Jimmy, you can write a book about a pandemic and a depression and not have a happy ending. what you meant by that was, let’s have some constructive advice for investors. And we have that at the end of the book and chapter six and the conclusion So specifically, I like gold I recommend that for 10% of your portfolio you know, people always want to put words in your mouth is a Jim Rickards says sell everything buy gold, never said that don’t believe a 10% 10%. Okay,
Jason Hartman 48:24
Jim Rickards 48:26
10 to 20% 10 year Treasury notes, interest rates are going to go negative the yield to maturity, not not the Fed policy rate that’s different, the Fed policy will stop at zero. But 10 year Treasury notes and secondary market trading many paying your premium greater than the present value of the strip of coupons and principal, then you have negative return you have a negative yield to maturity. Those who go negative two right now there are about 1% take it down to negative 50 basis points, they’re going to have huge capital gains on your 10 year Treasury knows I like cash people say oh cash has no yield, okay. But in a world of deflation, cash can be your cash
Jason Hartman 49:02
becomes more valuable,
Jim Rickards 49:04
so they could actually be your best performing asset. The other benefit of cash is people are looking at huge embedded optionality. So meaning does Islam uncertainty right now No, I don’t dispute that and if you put a stake in the ground and go all in any you know asset class which should never be all on one acid anyway but you make two or three bets on us and private equity or real estate or whatever and then a year from now you say you know that was a mistake or whatever here, you might be locked in. I mean, good luck getting your money back from Henry Kravis. If you invest in he’s a good guy, but you know, he’s not going to give you your money back. Not soon, but so the benefit of having cash is it’s like taking out the money call option on every class and every asset class in the world. You’re the person when we get better visibility, you can pivot you’re not locked in. It also reduces the volatility of the portfolio help you sleep at night. There’s room for equities as sure but be selected like defense stocks are the world’s second safer, natural resource. For sure, agriculture, water, oil is gonna do a lot better. It’s had a bad year. And well, that doesn’t tell you much about what’s going to happen in the year ahead. And I like residential real estate do not like commercial real estate, commercial real estate is not hit bottom. I look at it. I would
Jason Hartman 50:17
Jim Rickards 50:19
I wouldn’t touch it until late 20, probably 2022. at the earliest residential real estates different people there’s a mess is a massive tournament, millions of people migrating out of the cities, and they’re going to either the suburbs or other cities. So where are they leaving? They’re leaving Los Angeles, San Francisco, Portland, Seattle, Philadelphia, New York, Chicago, and Baltimore in a few other cities. Where are they going? Miami, red hot. Nashville, fastest growing city in America. Phoenix Scottsdale, I don’t like the heat, but it’s a lot of people do. So they’re going there, Boise, Idaho. So figure out where people are leaving figure out where they’re going.
Jason Hartman 50:56
And they’re going to the suburbs, I call it the suburban tsunami,
Jim Rickards 51:00
where there’s a suburban tsunami, but to the extent they go to suburbs of cities, you’re right there, there are particular cities, and I would put Miami, Nashville and Phoenix at the top of the list. But there are other other places. Austin is another one.
Jason Hartman 51:12
And the only problem is that in that equation, you’ve got to be able to make the rent to value ratio work in in a lot of the cities, even if there’s a migration in pattern, you’re speculating on a buy low, sell high, rather than buy low, sell high and have cash flow. So you know,
Jim Rickards 51:31
real estate, the way we just described it, there’s some simple formulas, to me the differentiating factors and management, find a management company or an investment company or Private Limited Partnership, where people know what they’re doing and have experienced and you know, it’s easier said than done. But absolutely, there is opportunity there. website. Yeah, James records project.com. But I also encourage people to follow me on twitter at James G. recursos. My middle initial g records is ri ck a RDS. So at James g records, and the book is the new Great Depression available on Amazon, Barnes and Noble and being in the bookstores on Tuesday.
Jason Hartman 52:06
Good stuff. Well, Jim Rickards, thank you so much for joining us. I appreciate it having you on the show and hearing some of these insights. Thank you.
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