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American Monetary Association - Video Podcast

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Exploring the practical effects of monetary policy and government actions on Inflation, Deflation and Freedom.

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Exploring the practical effects of monetary policy and government actions on Inflation, Deflation and Freedom.

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Cover image of American Monetary Association - Video Podcast

American Monetary Association - Video Podcast

Latest release on Apr 05, 2013

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Rank #1: AMA 40 – The Five Love Languages with Dr. Gary Chapman

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AMA 40 – The Five Love Languages with Dr. Gary Chapman

Whether it’s your spouse, significant other, family, friends, or even business associates, each individual speaks his or her own love language. “The Five Love Languages” are: Words of Affirmation, Quality Time, Receiving Gifts, Acts of Service, and Physical Touch. Understanding which of these languages makes that special someone feel loved can be essential to the success of any relationship. Join Jason Hartman and renowned author, Dr. Gary Chapman as they discuss these timeless concepts and how our primary language affects our interactions in our relationships. Please visit: http://www.jasonhartman.com/podcast.

Dr. Gary Chapman seeks to fulfill his call to the ministry as a casino online pastor, speaker, and author. He speaks extensively throughout the U.S. and internationally on marriage, family, and relationships. The government of Singapore invited him to present his marriage seminar there and the Chaplain’s Office of NATO issued a special invitation for Dr. Chapman to speak to the NATO forces in Germany. Other engagements have taken him to England, Africa, Saudi Arabia, Turkey, Mexico and Hong Kong. Sales exceeding 5 million copies earned him the Platinum Book Award from the Evangelical Publishers Association for The Five Love Languages, which has been translated into over thirty-six languages. Twenty-seven other books and five video series are also among his publications.

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to today’s show. This is Jason Hartman, your host and as you may or may not know, every tenth show we kind of do a special tradition here that originated with my Creating Wealth show where we do a topic that is actually off topic on purpose. Something just to do with general life and more successful living, and that’s exactly what we’re going to do today with our special guest. Again, tenth show is off topic and it is very much intentional just for personal enrichment, and I hope you enjoy today’s show. We will be back with our guest in just a moment.

Start of Interview with Dr. Gary Chapman

Jason Hartman: It’s my pleasure to welcome Dr. Gary Chapman to the show. He is a very well-known marriage counselor and director of marriage seminars. His very famous work, he has many of them, but his probably most famous is The Five Love Languages. It has sold upwards of six million copies, translated into four languages, and has been on the number one spot of the New York Times best seller list and on many other best seller lists. It’s a pleasure to have Gary from North Carolina today. Gary, welcome. How are you?

Dr. Gary Chapman: Well, thank you Jason. It’s good to be with you. I am doing great.

Jason Hartman: Good, good. So tell us about the five love languages, and we want to hear from the perspective of people looking for a relationship, and people in a relationship as well. I know you’ve got The Five Love Languages for Singles, you’ve got a new book about what people should have known or wished they’d known before getting married and so forth, but start wherever you like Gary.

Dr. Gary Chapman: What I discovered years ago in counseling is that what makes one person feel loved doesn’t necessarily make another person feel loved. So they would sit in my office, husband and wife. She would say, “I just feel like he doesn’t love me” and he would say, “I don’t know what else to do. I do this, and this and this and she doesn’t feel loved.” So he was sincere, he was loving her, she didn’t get it. And I realized that people were hearing each other.

I kept hearing these similar stories over and over again and I knew there was a pattern, I just didn’t know what it was. So I went through about twelve years of my counseling notes and asked myself, when someone sat in my office, I feel like my spouse doesn’t love me, what did they want? What were they complaining about? And their answers fell into five categories and I later called them the five love languages. And I’ve started sharing that in small groups and then I started sharing it in my counseling that we each have a different love language and you have to learn to speak the other person’s language.

After about five years of using that in small groups and counseling, I decided to write the book. Because I knew that it would help people learn how to connect with each other emotionally. And then I was thinking primarily in the marriage relationship, and the original book does say it’s addressed to married couples. But I had a lot of singles say, you know I know you wrote that book for couples but I read it and it helped me in all of my relationships. Why don’t you write one for singles? So that’s how the singles addition was born. Because I do think that this applies in all human relationships.

Jason Hartman: Yeah, and you even addressed dealing with your children, probably your friends, everything, right? The five languages apply in intimate relationships and non-intimate relationships too, right?

Dr. Gary Chapman: Yeah, you know Jason, let’s face it. The deepest emotional need we have is the need to feel loved. Everybody wants to feel loved by the significant people in their lives. If you do feel loved, life is beautiful. If you don’t feel loved, life can be very complex. So whether you’re talking about a parent/child relationship, or whether you’re talking about a dating relationship or married relationship, learning how to communicate love in a language the other person will feel. It’s meeting that emotional need for love. That’s what this book is all about. That’s why I think this book has been so successful.

Jason Hartman: You know, Gary, I can’t help but kind of make the connection here. All of the listeners of course know what the golden rule is, hopefully they practice the golden rule but I had Tony Alessandra on one of my shows and you probably know his work. He talks about the platinum rule. And that is treating people the way they want to be treated. And I think that ties in pretty well with the five love languages doesn’t it? Because you’ve got to communicate with the person on their own preference, their own modality, right?

Dr. Gary Chapman: Yes, that’s exactly right Jason. Typically we speak our own language. Whatever makes me feel loved is what I’m going to do for the other person. But if that’s not their language it won’t mean to them what it would mean to me. So let’s say that my language is words of affirmation, and what I want to hear my wife say is I love you, you’re wonderful, I appreciate what you did, all these positive things. So that’s what I do for her. Because it makes me feel loved. But her language may be acts of service, doing things for her. So here I am giving her all these words, and after a while she’s going to say to me, you know you keep saying I love you, I love you. I’m kind of sick of the words. If you love me why don’t you do something to help me?

Jason Hartman: She wants you to show it to her, right?

Dr. Gary Chapman: Absolutely, and I’m blown away. I was loving the woman! What’s wrong?

Jason Hartman: You can’t figure out why she’s upset. Makes sense. Well, you just told us two of the five languages. What are the other three?

Dr. Gary Chapman: Receiving gifts, universal to receive gifts as an expression of love. My academic background is anthropology, especially cultural anthropology. We’ve never discovered a culture where gift giving was not an expression of love. So giving gifts and receiving gifts. Then quality time. Giving the person your undivided attention. I’m not talking about sitting in the same room watching television. TV is off, you’re looking at each other, you’re interacting, you’re sharing, you’re listening. Quality time where they have your undivided attention. And then number five is physical touch. And we’ve long known the emotional power of physical touch. And in every culture there are appropriate touches between males and females, whether they’re married or whether they’re single. And it’s physical touch that communicated love to some people. This is their primary language.

Jason Hartman: I love the way Denis Waitley says that. He says, “Touch is the magic wand of intimacy.” So that’s definitely important. How do we discover what someone else’s language is? You don’t just ask them, do you? Or what is the best way to go about that?

Dr. Gary Chapman: Well if you are discussing the topic with them and they’re open, you can go online and take a little quiz or they can go online and take a little quiz, then it will tell them and they can tell you. That’s one way, and that would be at FiveLoveLanguages.com. But another way, there’s two or three other clues. One is you observe their behavior. How do they respond to other people? If they’re always, when they greet people giving them a pat on the back or a hug, then physical touch is probably their language. If they’re speaking that to others on a regular basis, it’s probably what they want. If they’re always giving encouraging words to people, then words of affirmation is probably their language. So observe their behavior.

Secondly, what do they complain about most often? The wife who says to the husband, “We don’t ever spend any time together. We’re like two ships passing in the night!” She’s saying quality time is my love language and I’m not getting it from you. So what are they complaining about? If he says to her, “I don’t think you would ever touch me if I didn’t initiate it.” He’s telling her that physical touch is his love language. So listen to the complaints and then thirdly, what do they request of you most often? If they’re saying periodically, could we take a walk after dinner? Or do you think we could get a weekend away? They’re asking you for quality time. If you put those three together Jason, you’ll very likely find out the other person’s primary love language.

Jason Hartman: Good point. Let’s actually kind of put it in reverse here and go maybe in chronological order. What’s the title of your new book, Gary?

Dr. Gary Chapman: My new book is Things I Wish I’d Known Before we Got Married.

Jason Hartman: Okay, perfect. I want to talk about that and you have another book, The Five Love Languages for Singles. Let’s start with the single person looking for a relationship, and then we’ll tie it back into being in a relationship as you were just now. How do singles use your body of work? Whether it be the things they wish they knew, or the five love languages?

Dr. Gary Chapman: Well this most recent book, Things I wish I’d Known Before we got Married, I really wrote that to singles in all categories whether they’re dating or whether they’re engaged or whether they’re just hoping to find someone they can relate to. What I’m saying to them is if you think that someday you will get married, now is the time to prepare for marriage. Don’t wait until you are engaged and then say oh we have to get ready for marriage. No, get ready for marriage now. And I’m sharing in that book twelve things that had I known these things, it would have made my life much easier in the early days of my marriage. So I’m trying to say to singles, why don’t you learn from my mistakes? Here’s some things that can help you.

For example, one of the things I talk about in that book is I wish I’d known that falling in love or being in love is not an adequate foundation for marriage. And the reason I say that is, the experience that we typically call falling in love is temporary. It has an average lifespan of two years. You will come down off the high, and that’s when all the other things that you ignored that your friends told you about, your mother said honey, have you considered he hasn’t had a steady job in five years? And you said mama, give him a break. He’s just waiting for the right opportunity. But when you come down off the high, you’re going to start thinking mother was right. He’s lazy.

So I wish I’d known that before I got married. Because when I came down off the high, not very long after we got married, I was frustrated. I didn’t realize that I was going to come down. And when I came down, I thought oh man. And I realized there were things about her that irritated me, and we ended up arguing with each other and it wasn’t a very pretty picture. And I wish I’d been prepared for that. I wish I’d known that there’s two stages of romantic love. One is the in love experience, at which the emotions push you along, and then there’s the more intentional stage which we’re talking about today in the five love languages where you have to learn how to keep emotional love alive by speaking each other’s love language.

So for singles, I would say if you can acquaint yourself with this love language concept, and then read this book on things I wish I’d known, I think it’ll give you ideas on what you need to be talking about when you do get in a dating relationship, or if you’re already in a dating relationship it will give you an idea of the kind of topics the two of you need to discuss and the issues and things you need to learn on the road to getting married.

Jason Hartman: Very good points. With that, any more about how someone discovers it, or discovers those things in a partner? Is this a disqualifier in any sense, Gary? Or is it just a better relating tool? Or do sometimes you find that maybe a couple doesn’t relate? People have their different languages and so forth, but do they ever just not work in your eyes? Or can any relationship work if it’s worked at?

Dr. Gary Chapman: I don’t think so. Now obviously, if their number one, that is their primary love language, their number one out of the five is your number five, that is it means almost nothing to you. Then you will have a learning curve. But the good news is you can learn to speak these languages. Let’s face it. Most of us did not grow up hearing and speaking these five languages. We perhaps learned one or two of them and that’s what we speak. And so let’s say if words of affirmation did not come easily to you, you didn’t receive a lot of words of affirmation, you’re not motivated to do that, it’s just very meaningless to you. And then you find out that the person that you’re dating or the person that you’ve married, that that’s their primary language.

Well, you’re going to have to work at it. It’s going to be a learning curve. I usually suggest to get yourself a notebook, start writing down things you admire about the person, things you like about them, listen to other people as they share comments and you hear those comments. Maybe when you read a book or listen to television and so forth, write down positive statements you hear people say. Stand in front of the mirror, read those things out loud so you hear yourself saying them, pick out one of them, walk in the room where they are and say it. You break the silence. And the second time it’s easier, the third time it’s easier. You can learn to speak words of affirmation even if you didn’t grow up receiving that love language.

Jason Hartman: What is the love tank?

Dr. Gary Chapman: I use that concept simply to give people a visual image. An automobile has a gasoline tank and if the gasoline tank is full, it’s going to operate fine. If the gasoline tank is empty, the car’s not going to operate. And I like to say that we have an emotional love tank. And if the love tank is full, that is we genuinely feel loved by the other person, the relationship moves along in a positive way. But if the love tank is empty, you don’t feel loved by that person, then the relationship begins to get shaky. And eventually if you don’t do anything about it the relationship will die. Because if a relationship does not have a sense of love or measure of emotional love, the relationship goes downhill.

Jason Hartman: My ex-girlfriend Lyn is the person who actually introduced me to your work, about two years ago maybe. And I believe we mentioned something Gary, about a timeframe of two years. What was that about? Was she correct in mentioning that?

Dr. Gary Chapman: Yes, it’s based on research that was done by Dorothy Tennov of Bridgeport, Connecticut. She did a long term study on the in-love experience. That is this euphoric stage of a love relationship where you see the person as just being absolutely incredibly wonderful and you don’t see the negative things that are there, you’re just pushed along by these euphoric emotions. It’s something that you’ve never felt before or you’ve seldom felt before, and you just know that you’re going to be happy if you can be with this person forever. We call it falling in love or being in love. Her study indicated that the average lifespan of that heightened emotion is two years.

So consequently, most people date at least two years before they get married. So when they get married, or rather soon after they get married, they tend to come down off the high. Now some people blame marriage on that.

Jason Hartman: Honeymoon is over!

Dr. Gary Chapman: It has nothing to do with whether you get married or you don’t get married. You will come down off the high whether you marry or whether you don’t marry. So that’s what she was talking about. And that’s why, here’s what happens Jason, a lot of times in the dating relationship. A couple will be attracted to each other, they start dating, they become obsessed with each other, they feel loved by each other, and things just go along really wonderful. And then the two years pass and they begin to come down off the high, and they don’t have those feelings, and they start thinking well, maybe this is not the right one for me. I don’t feel like I used to feel.

Well, if you understand this you know that what’s happening is very natural and very normal. Now what happens most of the time when people don’t understand this, they bail out on that relationship. They get out of that relationship. Whereas, they may have really been good for each other. They may have really been a good match for each other but they made the decision to break off the relationship because they lost the love feelings. Had they learned the love language concept, spoken each other’s language, then they would keep emotional love alive and they could make their decision to marry or not to marry based on other issues in the relationship.

Do we have enough in common intellectually, emotionally, socially, all those things, to really build a marriage? So I think if singles understand this, it will help them assess their dating relationships.

Jason Hartman: Yeah, makes a lot of sense. So that two year point, it’s a recommendation then that says don’t get married before two years? Is that what you’re saying?

Dr. Gary Chapman: Well I wouldn’t say that necessarily, but I would say that you’re far more likely to make a wise decision if you have come down off the high. Because then you recognize some of their weaknesses as well as their strengths and you can work on those things. But when you’re in that euphoria you think, well we don’t have anything to work on. It’s just perfect. In fact, I had a lady say to me, she was engaged and she was in the euphoria and she asked me what I did, and I said I do marriage seminars. She said what’s that? I said well, I help people work on their marriage. And she said what do you have to work on? If you’re in love…

Jason Hartman: It’s all just easy, right?

Dr. Gary Chapman: Yeah. And that’s the way you feel when you’re in love. There’s nothing to work on.

Jason Hartman: Yeah, that wears off eventually and it gets down to a realistic relationship, exactly. One of the things, you talk about the five languages but one of them in particular, words of affirmation, since that one involves words, it has some different dialects to it, doesn’t it Gary?

Dr. Gary Chapman: Yeah, it can be words that focus for example, on their personality. One of the things I like about you is you’re so optimistic. I tend to be pessimistic, you’re saying to this person. Obviously, it needs to be a true statement, but it can focus on their personality, it can focus on the way they look, it can focus on something they did for you, it can be encouraging words. They express to you a desire to do something and they’re a little fearful of doing it and you say, it’s up to you of course to decide what you’d like to do, but just observing you I think that if you really want to do that, you would be a success at it. Because I see a lot of qualities in you that would really equip you to do that. It’s encouraging them to do something that they need a little more courage to do. Or it can be words of praise, where you’re praising them for something they have done.

So I use the word dialect trying to communicate that within each of these languages there are different ways and nuances of expressing them. It’s very similar, Jason, to spoken language. Everyone grows up speaking a language with a dialect. I grew up speaking English, southern style.

Jason Hartman: And we can hear it!

Dr. Gary Chapman: You can hear it! Everyone grows up speaking a language and a dialect, and that’s the one you understand best. And the same thing is true with love.

Jason Hartman: No question about it. Of the five languages are certain of the five easier to learn than others?

Dr. Gary Chapman: I think, not necessarily across the board, but for an individual one of them might be more difficult than the others. If you never received quality time growing up, your parents never really spent any one on one time with you, you were just a part of the family, you were kind of lost in the crowd, they were focused on themselves. Then, sitting down and having an in depth conversation with somebody may be difficult for you. Because you didn’t grow up having those kind of conversations, so it would be difficult for you. Whereas another person, if they got a lot of quality time, it’s natural for them. It’s not difficult for them. So it depends on the individual as to which of these you might find to be more difficult to speak. But the good news is that you can learn to speak any one of the five.

Jason Hartman: What would you say is, and I certainly don’t mean this in any sort of non-appreciative way when I say this, but this seems pretty simple really. What’s the big deal about it? Is it just one of these things that’s so beautifully simple but just needs to be practiced? Not everything great in life is complicated. Or is there sort of a big ah-ha here, in this book or in your work in general that is a real take home you want to make sure people get?

Dr. Gary Chapman: Well Jason, I think you’re exactly right. It’s a very simple concept, but when you practice it, that is when you discover the person’s love language, you start speaking it on a regular basis, they discover your language, and start speaking it on a regular basis, it radically changes the emotional climate of the relationship. Almost every Saturday when I do marriage seminars, I’ll have half a dozen couples come up and say we just want to tell you that we were having real struggles in our marriage, someone gave us your book on the five love languages and it actually saved our marriage. It really makes the difference because we all need to feel loved. And especially in the early stages of a marriage, we are loving each other. We’re making real efforts to reach out to each other but we’re not always connecting. And when we spend our energy speaking the right language, we connect. So it’s a simple concept, it doesn’t help you if you don’t apply it, but if you apply it, it really changes the emotional climate of the relationship.

Jason Hartman: Talking just for a moment here about some more of the nuances as we were, are certain stereotypes effecting people’s ability to implement any of the five languages? For example, acts of service. Speaking acts of services. Are there stereotypes that people filter things through that make it difficult for them?

Dr. Gary Chapman: I think that may be true, Jason. For example, a man said to me after he had read the book and he discovered that his wife’s language was acts of service. He said to me, I found out that her language is acts of service. And she wants me to wash dishes, and vacuum floors, and take out the garbage, and he said a couple of other things. He said, I’ll just be honest with you. He said, if it’s going to take that for her to feel loved, you can forget it. Now, you understand what he was saying? I’ve got the information, I hear what you’re saying, but I’m not going to do that.

Now, it may well be that stereotypes of what men are supposed to do and what women are supposed to do, was behind that statement. Maybe he grew up in a home where his father did not vacuum floors, his father did not wash dishes, his father did not take out garbage, and he communicated that to his son either verbally or by his model that men don’t do those things. So he may have been influenced by a stereotype of what a male is supposed to do, and that may have been behind his decision. There may have been other issues as well, but I do think that there are certain stereotypes that people may have as to what men do and women do that may hinder them from moving down the road to express love in that language.

Jason Hartman: You have been writing for a long time, and you’ve just got a giant body of work. Tell us about some of your other works. As I look at your list of titles, it is pretty comprehensive here. You’ve got a lot of work, Gary. Talk about some of your other works, if you would.

Dr. Gary Chapman: Well, one of the books I wrote was on anger and it’s another one of my very popular books. Because I think a lot of people misunderstand anger and they don’t know how to handle anger. And they simply operate on the model that they had in their mom and dad. If their dad yelled and screamed in anger, then he probably is going to yell and scream in anger. If his mother in anger would clam up and walk away and not say anything , and not discuss whatever stimulated the anger, then that’s probably what she or he’s going to do.

So we all grew up with a model of how our parents handled anger. And let’s face it, we don’t get a whole lot of training in our culture on how to handle anger. We see a lot of mismanaged anger.

Jason Hartman: We see a lot of bad examples. That’s exactly what I was going to say, especially on television.

Dr. Gary Chapman: Yeah, absolutely. So that book has been very, very popular. I talk about the origin of anger. Why do we get angry? I think it’s because we have a sense of right, all of us have a sense of right, that people shouldn’t do that, people shouldn’t do this. And whenever we’re treated wrongly or unfairly in our minds, then we experience anger. Anger is the response to being treated wrongly or unfairly. And then in the book I deal with techniques on how to slow down the process of response. Don’t simply do the first thing that comes to mind. My mother taught me growing up, when you get angry count to ten before you do anything.

Jason Hartman: Yeah, take a deep breath or whatever, yeah.

Dr. Gary Chapman: Yeah, good advice. Only I would suggest you count to a hundred or a thousand. Leave a little more time to cool down. In fact, what one lady told me, she said what I do when I get angry is I go water my flowers until I cool down. She said the first summer I tried that, I almost drown my petunias. But learning how to process anger in a positive way. And the flip side of that also dealt with in the book is how to respond to an angry person. It may be your teenager, it may be a next door neighbor, it may be your spouse, it may be your boyfriend or girlfriend who’s angry and they’re coming at you in a rather harsh way and loud way perhaps. How do you respond to them? See the typical response is that we respond in a similar way, we mirror their behavior. If they’re yelling at us, we start yelling at them.

But I deal with a pattern. The first step is you listen. No matter how they’re delivering the message, you listen to that they’re saying. The second step is you listen. Because you didn’t get it all the first time.

Jason Hartman: Right, listen twice.

Dr. Gary Chapman: So I think I hear you saying you’re mad because blank, and they say well that’s part of it. And the third step is you listen. So you listen at least three times before you say anything. And then you say to them something similar to, I think I understand what you’re saying and if I were in your shoes I’m sure I would be angry too. Wow, you’re no longer their enemy. You’re now their friend.

Jason Hartman: That’s a pretty diffusing statement. It’s hard to remain upset if someone says that to you.

Dr. Gary Chapman: So yeah, that book has been very popular. Another book is called The Four Seasons of Marriage.

Jason Hartman: I was just going to ask you about that one. I’m particularly interested in some of the bullet points on that. The unique characteristics found in each season, seven strategies for making the most of each season… tell us more about that one.

Dr. Gary Chapman: Well it’s not the idea that most people think. When I say the four seasons they say okay, well you get married in spring, and if you live long enough you get to winter. But what I do is I use the seasons to describe the quality of a marriage. A winter marriage, it’s very cold. We’re isolated. We’re like an igloo. And there’s either no communication or it’s very harsh communication. We speak of bitter winters, or harsh winters.

A summer marriage is relaxed, it’s laid back. You’ve learned how to resolve conflicts, you’ve learned how to accept some things about each other that you don’t particularly like but you know they’re not going to change so you accept them. Summer marriages are people who go to marriage seminars, they read books on marriage, they know you have to continue to water the flowers if you want the marriage to continue to bloom.

And then the fall marriage, here in North Carolina the fall is beautiful. The leaves are all colors, it’s just incredibly beautiful. But the reality is in about six weeks the leaves are going to fall off the trees. So in a fall marriage, it looks good from the outside. People would say isn’t that a nice couple? But we know that things aren’t going well, and if we don’t do something the leaves are going to fall off and everybody’s going to know that we’re not doing well.

So after I describe that and help people locate where they are, and it’s not a-typical that a wife would say we’re in winter and a husband would say we’re in spring or fall. They have different perceptions on where they are. But then I deal with seven strategies for spending more time in spring and summer. And one of those first strategies is being able to deal with past failures. To be honest and say, to be honest with you I haven’t done a good job and I know that our relationship is not what it should be, and I know that a lot of it is my fault. And here are some things that I know specifically where I have failed, and I really would like to ask if you would be open to forgiving me and then help me learn how I can be a better partner in this relationship.

And I give some other strategies. But that book has been very helpful. In fact, I’ve had a lot of people say to me, two of your books changed our marriage. One was the five love languages, and the other one was the four seasons or marriage.

Jason Hartman: And I tell you Gary, of course you’ve probably seen many of your revues, not all of them, but if you look on Amazon, any of the listeners, and see the revues there are all kinds of people saying that your books have saved their marriage and just helped them grow in their relationships and so forth. So just congratulations on just such an impactful body of work that you have with all of this. You mentioned earlier that someone can take a little quiz to discover their primary love language, and maybe that of their spouse as well or their significant other. Where can they do that? On your website?

Dr. Gary Chapman: Yes, FiveLoveLanguages.com. You can spell out the word five or you can put in the number five. 5LoveLanguages.com. And you can take that quiz. It’s a free quiz. It can be a good communication tool. If you take it, you challenge your spouse to take it or your significant other to take it, and then the two of you sit down and share with each other how it turned out. And talk about whether you agree with it or not. It’s possible you might disagree with the quiz, but at least it will give you a starting point to open this topic and discuss it with the other person.

Jason Hartman: Fantastic. What else would you like the listeners to know, just in wrapping things up?

Dr. Gary Chapman: Well I think for singles I’d like to say what I said earlier, and that is now is the time to prepare for a good marriage. You may not even be dating, or maybe you just started dating two months ago, or maybe you’re even thinking about getting married. But wherever you are in the journey, this is the time to be preparing for marriage. And I really think you’ll find some practical help in my book, Things I wish I’d Known Before we got Married. I think Jason, if a couple will go through that book, read the chapters, discuss the issues with each other, they’re going to be better prepared than 90% of the couples are when they go into marriage.

And if you’re already married and have not read The Five Love Languages, I would really, really encourage you to read The Five Love Languages. I think today we’ve given them the core idea, but as you read it and get all of the real life illustrations, I think you will be able to get hold of it, go home and discuss it with your spouse. Or if you’re in a dating relationship, discuss it with them. And I think you’re going to find that that’s going to be very helpful in all of your relationships.

Jason Hartman: Excellent. Dr. Gary Chapman, thank you so much for joining us today. We appreciate the insights, and keep up the good work. At garychapman.org there’s a list of many of your books, and there are quite a lot of them, so many subjects we didn’t have time to discuss today and there’s a lot more depth there as well, and certainly listeners take that quiz and check it out. And do you want to mention anything about your live events?

Dr. Gary Chapman: Yeah, they can find those at FiveLoveLanguages.com and they can even register online as well. I would just mention this Jason: I have a new book coming out that takes this love language concept to the workplace. It’s called The Five Languages of Appreciation in the Workplace, and I wrote it with Dr. Paul White, a psychologist, and we think that book is going to do for the workplace relationships what the Five Love Languages has done for marriage relationships. I’m really excited about that one.

Jason Hartman: Yeah, that’s great. And with the tough economy we have nowadays, I think that will be very helpful for people in their business and work life as well. Well Gary Chapman, again thank you so much. Appreciate having you on the show today!

Dr. Gary Chapman: Thanks Jason. Good to be with you. I appreciate what you’re doing.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by The Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email media@HartmanMedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

The American Monetary Association Team

Transcribed by Ralph

The post AMA 40 – The Five Love Languages with Dr. Gary Chapman appeared first on americanmonetaryassociation.org.

Apr 05 2013

32mins

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Rank #2: AMA 39 – Capital Crisis with Chris Mayer

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Jason Hartman talks with Chris Mayer who is managing editor of the Capital and Crisis and Mayer’s Special Situations newsletters. He also is a contributor to the Daily Reckoning. Visit: http://www.jasonhartman.com/podcast/ or search Jason Hartman in the iTunes Store for more. Graduating magna cum laude with a degree in finance and an MBA from the University of Maryland, he began his business career as a corporate banker. Mayer left the banking industry after ten years and signed on with Agora Financial. His book, Invest Like a Dealmaker, Secrets of a Former Banking Insider, documents his ability to analyze macro issues and micro investment opportunities to produce an exceptional long-term track record of winning ideas. Mayer’s commentary has been featured by MarketWatch, Russia Today TV, the Atlanta Journal-Constitution, and the Huffington Post. http://dailyreckoning.com/author/chrismayer/

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at AmericanMonetaryAssociation.org or the website for the foundation which is JasonHartmanFoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Start of Interview with Chris Mayer

Jason Hartman: It’s my pleasure to welcome Chris Mayer back to the show. He is the author of two newsletters for Agora Financial, Capital in Crisis and Mayer’s Special Situations. And the thing I like about Chris is that although he is a stock person, and Chris you may object to that I know, so just give me a moment. I’m going to call him a stock person, and you know I usually don’t like to invest in stocks and things like that where you don’t have control of things. I like being a direct investor. But, the great thing about Chris is that he wrote a book called Invest like a Deal Maker. And it’s really taking the approach of what is the underlying value of the asset, the commodities?

So we talk a lot on the show about buying income property far below the cost of replacement or far below the cost of construction. And that’s what Chris recommends doing with companies. He also has some new opinions and thoughts on the housing market, which we’ll hear about today. And just some really interesting insights. So, Chris welcome back. How are you?

Chris Mayer: I’m great. Thanks for having me back. It’s good to be on.

Jason Hartman: And you’re coming to us from Baltimore, Maryland today?

Chris Mayer: I am in Baltimore, yup.

Jason Hartman: Okay, great. Well tell us a little more about, if you want to expand on my thoughts about investing like a deal maker.

Chris Mayer: Yeah, I thought you had a pretty good characterization of it. I don’t mind being called stock picker. I think that’s alright. I think of Peter Lynch and some of those guys. But to talk more about the deal making aspect, what makes that different is that like you actually, I’m not really interested in owning just any stocks, and so I’m more interested in thinking like a deal maker. And that is, they’re thinking about the things like the assets and control and they’re thinking about the business as a whole, sort of what can be done with it as opposed to when you hear a lot of more amateur stock pickers, they’ll mostly focus on things like what’s the price earnings ratio, or what’s the dividend yield or what’s the growth rate?

But when you talk about deal makers, and a deal maker might be as an example somebody like a Carl Icahn or somebody who’s buying or selling whole companies. Someone who’s more of a direct investor and has control over that investment. And they kind of look at them in a much different way. So I’ve tried to focus my investing activities around sort of the way those folks look at businesses.

And one of those ways, as you talked about, replacement value. And that’s really a big part of it. Because the housing analogy is perfect and I’ve used that analogy before to describe it to people how it works. You can buy a house for significantly less than what it costs you to construct it. You might have a pretty good deal there. And you can apply that same kind of analysis in the stock market, where you can sometimes find companies where the assets that you can buy in the stock market cost you far less than what it would cost someone else to build them from scratch.

Jason Hartman: Absolutely. Now, I want to talk to you a lot about housing today. Because that is a primary focus of the show. Or I should say real estate investing. But before we do that, let’s talk for a moment if we could about the financial services industry, Wall St., stock pickers… you’ve talked about investing like a deal maker, which I think is a fantastic way to look at it. The investment bankers, the corporate take-over guys back in the 80s, the people that would greenmail the board, cut up the company and sell off the assets and a lot of people characterize them as evil and so forth.

But they really in a lot of ways had the right idea, because they looked at the underlying value of the assets of the company. And sometimes, what we really realize from all that stuff going on in the 80s is that the company is worth more when you buy the stock to gain control and sell off all the assets. Like the pieces of real estate, the equipment, the goodwill, the trademarks, etc. than actually running the company itself, right?

Chris Mayer: That’s right. And I think the big problem that we’ve found in American finance and why the corporate take-overs, part of the reason that they came onto the scene so strong is that we’ve found that a lot of American corporations really, what they lacked was owners. They lacked somebody who was there watching the shop, they lacked somebody that was there thinking creatively about the assets that they had and what they might do with them. They lacked the entrepreneur. So if you look at some of the best investments over the last 50 years, you’ll find that they almost always had a dominant entrepreneur as part of it.

So you look at Wal-Mart, you had Sam Walton. You look at Apple, you had Steve Jobs. You look at Amazon, you had Jeff Bezos. There’s just a long, long list of companies where you had this controlling inside owner and someone who thought long-term about the business, and someone who had invested interest in doing the right thing over the long term. And that’s really what I’m focusing on.

So when I think about deal makers, I’m also thinking what I’m really looking for is an owner. Someone who’s there. And what I don’t like is the trend in American finance, and really it’s a problem all over the world, where you have corporate management teams that have really no stake in the businesses that they manage or the stake that they have is given to them with low cost options.

So the incentive really isn’t for them to think long term about the business, the incentive is for them to keep their cushy positions.

Jason Hartman: Right, and their big salaries and their bonuses. And what they end up doing is kind of raping and pillaging the company usually and taking too much out of it so that it can’t operate correctly. But when you talk about Sam Walton and Steve Jobs, and there are many other examples too, rather than just the “financial” people, the business people, what you’re talking about there is the guy that is watching the store. Those companies had a soul. They had a person that was at stake who really saw a vision, and really cared. No one cares as much as the shop keeper about the shop. And of course this is why big government doesn’t work, this is why socialism doesn’t work, this is why communism doesn’t work…

Chris Mayer: That’s applicable to a wide range of things.

Jason Hartman: It’s true it is. It’s why relationships and marriages don’t work sometimes.

Chris Mayer: That’s right. It’s all based on incentives and who has ownership.

Jason Hartman: And who believes in it and who’s at stake. So what I would say about the companies that you mentioned is that they had a soul. They didn’t just have a financial person who was looking to just tear it up and make their tenure for four or five years.

Chris Mayer: And the thing about it is too, we talk about a lot of the famous examples and we could talk a lot about those, but there’s also… and this is why I spend a lot of time trying to fare it out, is there are other companies too that people have probably never heard of that also have, you look at a CEO and he’s the cofounder and he owns 17% of the shares or he owns 25% of the shares, and there’s a family involved that owns a big stake in the business.

And it’s remarkable because it’s not only that these businesses, as you mentioned before, that they take out as much as they can or we both talk about how they just try to protect their salaries, but when you have a person behind it like that they’re also willing to change and push the business forward. Because if you have a care-taker management sometimes they can take really big risks because they have nothing to lose really, but sometimes they can be care-takers in that they take no risk.

And really what you need to thrive is you need an entrepreneur. You need someone who is going to push the company in new directions. Steve Jobs is a classic example. He’s had a tremendous impact on Apple. You can look at Apple while he was CEO, while he wasn’t CEO, and Apple when he was CEO again, and there’s marked differences between those different periods. You can do this across the board. You can look at IBM and look at it when the Watsons were running it and then IBM post Watson. You can look at almost any company and you can see remarkable differences when there’s not this person at the helm. So yeah, I think it’s very important.

Jason Hartman: I think that’s a great point. One of the things I’d say to listeners that are investing in income property is that that person is you. You are that person that has a passion about it, and you are the shop keeper. You’re the person who cares, instead of relinquishing your hard earned money to some guy at Merrill Lynch who sticks it in a couple of mutual funds, and you don’t have any soul in that. There’s just no… no one has thrown themselves into it. And you know what’s interesting Chris? You talk about Steve Jobs, and I’d encourage any of our listeners to do this because it’s such a great story. Of course, it’s a big story so it’s not really applicable to a lot of investors.

But it illustrates the point that you’re making. There’s a website. One night I just got kind of interested, when there was some news about Steve Jobs’ illness on the news, I just looked it up and it was all of Steve Jobs major speeches from the very beginning of Apple. And all through the years, and I watched them in chronological order and it took a couple hours as I recall to do this. It was just really interesting. And I remember when I bought my first company back 13 years ago, when I’d give a speech there was that same twinkle in my eye. I had that passion for the business that Steve Jobs had, and that’s really important.

Chris Mayer: Oh yeah. And it’s funny you mention that because I did something similar. I looked at his speeches, and there was one commencement address I think it was at Stanford…

Jason Hartman: It’s Stanford, yeah.

Chris Mayer: It’s brilliant. It’s a classic and I’d certainly encourage anyone to read that. The passion for what he does clearly comes through there. But other things about Jobs that I’ve come across also that’s interesting, is when you look at the number of times he’s failed, there’s a lot. Again, it’s that whole entrepreneurial thing about being creative and trying things. He’s had his share of that. But he’s also had tremendous successes. So all of this I think plays into what we’re talking about.

Jason Hartman: It sure does. And I always say to people, if you want succeed more often it’s really pretty easy. Just increase your failure rate.

Chris Mayer: Yeah. The founder of Agora always says, “Fail, but fail quickly”. So there’s no stigma to failing. You just get it done and move on. If it doesn’t work, we do the next thing.

Jason Hartman: Right, the problem is most people wallow in it and poor me, and it’s a pity party and they don’t move on from their failures. But the failures can be great educations. Nixon said “failure that does not destroy you strengthens you”. And I firmly believe that’s true. But on the financial services industry, before we talk about some specific companies and housing and real estate and that stuff, I just wanted to give the comparison. Because I think there’s sort of maybe three major tears: there’s the tear of the mainstream financial services industry, which I think has been in a bubble for a few decades, the bubble has burst.

I think people have discovered that the emperor has no clothes, that walking into Ameriprise or Merrill Lynch or any of the other companies that sell you a bill of goods, a bunch of stupid mutual funds, it just doesn’t work. I think that industry is over and it blows my mind the people I know personally as friends in that industry, nice people, etc, but when I ask them questions their knowledge is just so elementary. They just don’t have any details. It sounds like they listen to the morning call at Merrill Lynch and they heard this is what we’re going to say today, and they just go on and they repeat that spiel to all the clients.

And you look at the commercials for these companies on TV… I don’t mean to pick on Merrill or Ameriprise – I just happen to mention those two names. There’s a whole industry of them. I’m speaking of them generically because they advertise in their bank. But the commercials, the advertising for these companies is so generic. It is amazing these big image ads of people retiring and living the good life. And frankly, I don’t know anyone who’s followed their plan who’s achieved that situation.

Chris Mayer: Yeah, I guess there’s not a lot of people in the Forbes 400 that have done it by investing in mutual funds. I certainly agree with your point, and also I think a lot of it falls on people because they invest in these things, and I have good friends too who have money in these mutual funds and these are people who will go out of their way to save money on gasoline, who go the extra mile when they want to buy a washing machine or anything like that, checking consumer reports, talking to people. And yet, when it comes to thousands and thousands of dollars, their life savings…

Jason Hartman: Or hundreds of thousands…

Chris Mayer: Hundreds and thousands, they’ll commit on nothing more than oh, the flimsiest of rationales.

Jason Hartman: Yeah, it’s the guy reading all of the reviews on Amazon.com before he buys a two hundred dollar printer, yet he’s…

Chris Mayer: When it comes to mutual fund, they have five stars then in he goes.

Jason Hartman: Exactly. So the next tear. That was one tear. I’m just going to call that the main stream financial services industry. The next tear is the tear that you mentioned of, I’m going to call them stock pickers. So these would include, and I’m a big fan of this name I’m about to mention by the way, I really want to get him on my show, people like Charles Payne. And I like Charles Payne, I think he’s great. Jim Cramer, who maybe I like less, and all of the people out there giving specific stock recommendations. That would be like the next tear, which I think is better than the mainstream financial services industry. But I think the top tear is the tear of investing like a deal maker.

And that includes being a direct investor sometimes, or at least investing in something where you know that the founder or operator has absolute vision and passion for the company, and you’re buying the assets far below their replacement costs. Would you agree that those are three different tears that maybe investors interface with out there?

Chris Mayer: Yeah. I think those are interesting tears, and I think that two of those things you nailed are very important. I have a system I use when I pick stocks, and I have an acronym so people can easily remember it. And the acronym is CODE.

C is cheap, which you mentioned with buying below replacement value, O is for ownership because we want people to have a stake in the business that we invest in. So that’s two of the four right there. The D being disclosures, meaning it has to be something that’s transparent. Transparency is very important, meaning that we can understand the business, we know how they make money, and follow it. And E is for excellent financial condition. Which covers for a lot of sins. We don’t want to invest in things that have excessive amounts of leverage and those kinds of things. So those are kind of my four pillars of how I look at these stocks.

Jason Hartman: So say the code again, just so people get it.

Chris Mayer: Yup, CODE C is cheap, specifically buying below replacement value. O is for ownership. We want people to have a stake in the business, and D is for disclosure, which has to do with the transparency of the business so we can understand what’s going on. And E is for excellent financial condition. We don’t want to invest in things that are excessively leveraged. So those are the core principles.

Jason Hartman: Right, right. So we’ve got these three tears. So let’s talk about the corporate world and the stock world for a moment, and then I want to talk about real estate stuff. What do you like out there and why do you like it?

Chris Mayer: Yeah, well that’s a good question. I think right now is a very, very uncertain time so one of the things that I’ve fallen back on is to look at what the insiders themselves are buying. And that’s been a big part of for the last couple months that I’ve been writing these letters.

Because one of the most remarkable things we had and that we saw in this called the August Crash, is that we saw insiders come out of pocket and start buying stock in numbers that we haven’t seen since 2009. So that certainly has gotten my attention, and that is really sort of an interesting response to a crisis because a lot of people have sold. If you look at individual investors, they’re pulling money out of mutual funds at record levels. So they have a tendency to take money out at the bottom and put it back in when things are going well.

And the insiders tend to give you a different indicator. Normally thematically I might tell you certain stocks I like, whether I like energy, or I like this or I like that. But right now it’s more patchy, and so I’m picking and choosing among things that the insiders are buying, where their fundamental business seems to be very profitable and have a bright future. So I can mention specific names if you want to know…

Jason Hartman: Yeah, absolutely. I’d love you to mention some specific names. But before you do that, the insider thing, certainly that seems like great advice. I want to buy into something where the insider has faith in their own deal. I want my partners in that venture to be at stake, right? You never want a partner who’s not at stake and doesn’t have “skin in the game”, right?

Chris Mayer: Right. And some of them have proven to be pretty good buyers of their own stocks. There’s some of these CEOs that you look at, and you say well the last time he bought stock was here and look what happened, and that sort of thing.

Jason Hartman: Yeah, absolutely. So the one thing though that could sort of tilt this equation and make it maybe a little less valid, I’m just trying to be a skeptic here so forgive me but just sort of the general economic environment where there’s just loads of money that’s been sitting on the sidelines for the last few years, and maybe the reason the insiders are buying more is they just sort of have this money available. They’ve got to do something with it, and one of the things they’re doing is buying their own stock, but they’re also doing other stuff too. Your thoughts on that?

Chris Mayer: Well, my experience is that the insiders won’t buy their own stock unless they’re pretty confident. There are some insiders where you’ll look and they’ll be token purchases, so those you’ll discount. There’s some insiders that buy and maybe they’re on the border or something, and that’s probably less of a signal than if you had the CEO and the CFO and the chairman of board all buying.

Jason Hartman: The act of operations…

Chris Mayer: Yes. And so there is something to that. And I also would lean back on a lot of the academic research that’s been done on this, which shows that insider purchases as a whole outperform the market depending on what study you site. Something between 6-10% percentage points a year that can be outperformanced there. So I think there can be a lot of skepticism because when I’ve talked to people about this, I thought you were going to say because I’ve heard this objection before, is people say well, there’s a lot going on with the economy now, a lot of bad stuff in Europe, bad stuff in…

Jason Hartman: So they’re moving the money back to the thing…

Chris Mayer: So they don’t really know. They don’t really understand the macro situation. They’re discounting. Well, their company might look good, but they might be overwhelmed by events.

Jason Hartman: So that’s the theory of there’s no other place to put the money, so they think their company is that safe haven in other words.

Chris Mayer: Yeah, and you’ve got to remember too with the insiders, in a way most of them are betting pretty heavily on the company. They may have a big stake already. They get their salaries and livelihood out of it, so for them to then reach in their own pocket and put more money in is usually a pretty strong statement. Of course there are exceptions and nothing’s perfect. But in general if you’ve got a chairman CEO and they’re buying million dollar shots of the stock at a time and you can buy right alongside them, then that’s usually something interesting.

Jason Hartman: I agree with you. The only thing I’d love to see, and I doubt this is even possible, is a study of the amount the insider holds of that company’s stock in relation to their own personal net worth. For example, so if an insider buys a million dollars’ worth of stock in their own company, but their net worth…

Chris Mayer: He’s a billionaire.

Jason Hartman: Yeah, but their net worth is a hundred million or a billion dollars, that’s chicken feed to them, right? It’s nothing. So it looks good on paper that hey, that insider is buying, but they might just be doing that to sort of make it look good and they might just have a moderate faith in the company. But they’re throwing a few bones at it, whereas they’ve got so much net worth out of the company. That would be a great study.

Chris Mayer: Yeah, I don’t know if there are any studies that address it quite that way, but there are studies that show that CEOs that have at least some percentage at stake in the business outperform. So I’ve seen CEOs where they’ve done threshold at 10% and they look at their stocks and compare it to control group where the CEOs on much less percentage. And the CEOs which have a bigger percentage of the business do well. so there’s something to holding a sizable stake in the business. But I haven’t seen it relative to their own net worth, which would be more difficult to do as you suggest because you’d have to know their personal financial statements and so forth.

And a lot of these guys also are… I’ve been in this business writing newsletters for seven years and before that I was in corporate banking for ten years. A lot of them in addition, even though they may have 10% net worth in the company, there’s a quite of bit of ego involved in all this and there’s certain pride in being part of a successful company and a company that does well. So some of that, I mean I don’t know a company that they’re going to throw money into something deliberately in an effort to deceive people, but I’m sure that’s happened at some point. As a general rule I think it’s probably not the case.

Jason Hartman: Well and the ego is definitely a powerful thing, so that’s good that they have ego in the game. I want them to have their ego invested in it.

Chris Mayer: Yeah, you want that.

Jason Hartman: Well tell the listeners some of the things you like and why. Maybe three examples would be good.

Chris Mayer: Okay, well one recent example that I’ve recommended is a company called Federal Mobile, which Carl Icahn actually owns 76% of the stock. So you definitely have an owner there. And this is a company that makes auto parts. And it’s fallen quite a bit in August. Sell offs down to about $15 or so. And he’s been buying it for about two weeks straight. In the collapse he was buying it a million dollars a shot. Now we know that Carl Icahn’s a billionaire, so you can make of that what you will. But he owns 76% of it. And the other thing I like about it is the CEO has particular incentive.

When Icahn took out Federal-Mogul bankruptcy, he brought in his own handpicked CEO, a guy named Alapont. And he has option to buy four million shares at 19.50. So when the stock hit 27 dollars a share earlier in the year, he didn’t sell or exercise any of those options that he could have. The options expire in 2014. So I think that’s a good incentive there. I think the alignment of all the incentives that I look for are set up really well here at Federal Mobile. And I think that the business has gone through a tremendous transformation. They’ve taken a lot of costs, they have tremendous opportunity overseas, they have more and more cars.

I’ve done a lot of overseas travel. Columbia, South Africa just this year. I’m heading to South East Asia soon. And everywhere you go there’s cars, cars, cars. So there’s tremendous opportunity for auto parts over the long term. So Federal Mobile is a play on that. That would be an example of something that I’ve recommended recently that I like.

Jason Hartman: Talk about transparency. Why aren’t the transparent? These are publically traded companies. They do all the filings as they’re required to by law. How do you evaluate transparency? You’re not just going with the basic requirements that the SCC puts out, right?

Chris Mayer: That’s correct. This is more of a qualitative issue. But I would say that transparency business model has a role in that. So off the bat, I’d say that almost any bank would fail transparency except perhaps some of the smallest banks that are maybe thrifts and have loan portfolios that you can get a pretty good handle on as far as what’s in them. But for a large, multi-billion dollar institution there’s just no way you can get inside that portfolio and get comfortable at all with what kind of risks they’re taking. And in fact, I’d argue that the presidents and CEOs of these companies don’t really know what kind of risks they’re taking.

Jason Hartman: Well I think if the last few years has taught us anything…

Chris Mayer: That’s right. But you can also extend it beyond that. You could take a business model that seems very simple, like say a natural gas pipeline, but it can be made to be very complicated and not transparent with financial engineering. So I’ve seen pipeline companies that have layered on top of that a number of derivatives buying and selling different natural gas say forward and so forth that makes it not transparent.

So I think when it comes down to it, you have to be able to understand how the business makes money and it has to be pretty simple. So most of the time because I have this limitation, most of the companies I invest in are companies that make something. Because you can generally follow a manufacturing operation. You’ve got cost of input, they make something and out it goes at a certain price. You can get a better feel for it.

Those kind of ideas, or even like a retailer, although I haven’t recommended any retailers in a very long time. Or energy companies, a company that produces natural gas is something you can generally get a hand on, that produces oil, real estate companies. So these would be examples. So disclosure is a qualitative test, and you have to really be honest with yourself whether you really understand what’s going on in the business. There are certain red flags I think that you would look for.

We saw this in the last few years in the banks: you have this special purpose off balance sheet joint ventures and things that are contributing income, and basically they’re little black boxes and that’s something you have to heavily discount. But in general it’s a qualitative gut feel based on what you have discovered.

Jason Hartman: You know what I get approached with fairly regularly? Oil and gas exploration deals, and oil and gas production deals. When I say gas I mean natural gas. And these are just small deals where a guy has a fund… and he’s raising a million dollars for a fund, and he’s going to all his friends and family and getting 50 grand from each person type of thing. Do you have any thoughts about those?

Chris Mayer: No. I think that is an area that has been rife with problems in the past, so I would be particularly careful. You have to know and trust the people, and I would think you’d have to have some basic knowledge of oil and gas so you know what you’re getting into. But I haven’t recommended any of those. I’ve seen a number of things like that. I see a lot of these kind of deals too. Private farm land deals, real estate, oil and gas, those are all very popular.

Jason Hartman: It’s interesting. And definitely exploration would be incredibly risky, versus production which is less risky. But still there is always a chance for fraud and so forth. So Chris, you went to Saskatchewan recently, and it seems like your trip there you had some thoughts of commodities on your mind, didn’t you?

Chris Mayer: Yes, and I went to Saskatchewan and I had a couple companies I was visiting. One company I like very much that I visited there which fits a lot in what we’re talking about is a company called Alliance Grain Traders. And that’s a company where the people running it have a big stake in it, the employees and the insiders own I think together 35% of the stock. And the founder is still with it, it’s only ten years old. But Saskatchewan is an agricultural powerhouse really.

And Alliance Grain Traders processes pulses, which would be things like chick peas, and lentils and different kinds of beans. So I was also going there because I’ve been writing about Saskatchewan, probably have been writing about it for three or four years. Because some of the farmland deals out there are very interesting. The government there for a long time had a very tough view on foreign investors.

And it’s kind of funny because even if you are a Canadian, let’s say you were born in Alberta, you couldn’t buy Saskatchewan farmland. You had to be born in Saskatchewan to own Saskatchewan farmland. And they eased those rules and so investments started to flow in and so there’s a lot of interesting opportunities in Saskatchewan.

Jason Hartman: It seems like really, the safe play for the future is commodity oriented things. You mentioned manufacturing companies, companies that make something, tangible stuff. It’s always great to hear about high fliers like Groupon, that may not be such a high flier when it finally has its IPO.

Chris Mayer: $50 billion in Facebook or something.

Jason Hartman: Right, and Facebook and all these kind of virtual companies. But if you ask me, the population is increasing dramatically, we’re going to hit another billion mark this year or maybe we did just hit that… nobody exactly knows the world population but they have lots of stats on that. But people consume. The three things people need Chris, for sure, which we absolutely know they don’t need a new pair of Nikes, they don’t need a new iPhone, they’d love to have all these things but we know for sure they need food, clothing and shelter.

Chris Mayer: Yeah, food, water. Those are big investment themes.

Jason Hartman: Yeah, no question about it. But people don’t have the chance to do those directly in most cases, and we’ve talked about the deal maker philosophy which I couldn’t agree with more. But talk to us a little bit about housing if you would.

Chris Mayer: Well, a little background first because I have been a housing bear for a long time.

Jason Hartman: I know that, and that’s why I want to hear from you on this.

Chris Mayer: That’s right, and I can go back as far as I think it was late 2002, I wrote a piece saying that Fannie and Freddie Mac would go bankrupt and the tax payers would eventually have to bail them out, and I’ve been a long time talking and writing about the housing bubble. So only recently this year, I reversed that position. So I think now that we went through this whole big housing bubble, and I think the thing is dead, and we are closer to the bottom than we are the next peak. I think that’s for sure. You never call the exact bottom, but I think housing looks interesting.

And I’ll tell you I talk to a lot of different investors and people who are doing a lot of different things, and one of the things that has struck me recently is the amount of institutional money that has started to look at housing as an investment where they’re renting out the house. And there’s all kinds of boots on the ground, view points from different people. But in general what I’m hearing is that it’s not so difficult to buy a home today and rent it and get 8-10% cash yield on your investment. And I love that idea, because I think, if you look at housing prices they’ve come down tremendously. They’ve plummeted.

In some markets it depends. There’s a lot of ways to measure this. You can look at priced income and all that sort of thing but we’re definitely on the bottom rung of all these different evaluation methods. So I think, though it may take years before housing prices surge forward or we have another housing boom, now I think is a pretty good time to establish some positions in say, the rental home market and just sort of wait out the storm.

Where can you get 8-12% on a physical, tangible asset that has value? And this is another point in the evaluation is that most of these houses now, you can easily find houses trading for well below replacement value what it would cost you to rebuild them. So I think it’s a very interesting place to be right now. And I would say things look up from here for housing. As crazy as it sounds to say it.

Jason Hartman: But I don’t think it’s crazy at all. I agree with you completely. It’s interesting to hear that from somebody who’s been bearish on housing for years. You thought housing was a bad deal in 2002, and then of course the speculative frenzy and the greenspan pump, post 911 greenspan pump, was just kicking out ridiculous amounts of money into housing for years and the price was just absurdity.

Chris Mayer: Yes, and we’ve seen this happen with all kinds of speculative blow-offs. I remember writing bearishly about the stock market in ’97, and of course there were three years to go before it peaked and they were tremendous. There was just a lot of tremendous room on that. So these things always go longer.

The reason why I say it sounds naive, it doesn’t sound naïve to you and I’m not surprised because you’re actually more of a practitioner who’s in the market and sees the deals he can do. And most people I talk to like that completely agree with the position I’m saying, but I do get a lot of resistance from readers who don’t see that and they just read the headlines, which is still a lot of scary stuff about housing.

So there’s no question if you look at the US mortgage market, something like 45% of the US mortgages that are still in some state of trouble, they’re either under water or they’re in foreclosure or something, but if you look at the individual deal as an investor I think it’s pretty attractive.

Jason Hartman: So when you invest in stocks and when you invest in companies, are you an income oriented investor or are you capital appreciation? I have a feeling I know the answer to this, but I just want to ask you.

Chris Mayer: I would say that I’m indifferent to it when I’m looking at stock. I’m looking at total return. So sometimes income will play into it, but sometimes I won’t at all. If I can… It just depends on the situation. What I want is the greatest total return overall that I think I can get.

Jason Hartman: See, I would say that what people just fail to understand about real estate is that it’s a multi-dimensional asset class, and companies, if they’re dividend paying have two dimensions. They have capital appreciation, and they have income. But with real estate you have several dimensions. You have income, and that’s what you’re saying when you say just get 8-10% rental yield return and wait it out with no capital appreciation. Who knows which way that’s going to go, right? So you’re basically investing in a bond or a dividend paying stock. The principal value of the bond or of the stock can go up or down but it still spins off the income for you.

And then you’ve got the potential for capital appreciation. And I just want to propose an idea to you Chris. I don’t think we’re going to see much, if any, real appreciation measured in real or constant dollars for a long time. because for that to happen we have to have incomes increase, and I don’t think that’s looking good for the foreseeable future here for the next five years or so. But I do think we will have inflation. So I think in nominal dollars we’ll have increase in prices.

Chris Mayer: Yes and I think if you look at different times of rapid inflation that real estate in general has been a pretty good hedge on that.

Jason Hartman: Certainly they have, but it gets better. Because if you leverage the property, say you put 20% down, you don’t just hedge against inflation… I had a guy on my show…

Chris Mayer: You have an active short against the dollar basically. That’s the brilliant thing about it. And you can fix it at such low interest rates now. I think it’s incredible.

Jason Hartman: It is, because if you put 20% down, you’re leveraging or shorting the dollar by a 5-1 ratio, right? so if the inflation rate is 5% but you’ve leveraged and you’re not paying the debt surface cost on the leverage the tenant is, you’ve really outmaneuvered inflation assuming that real estate keeps even pace with inflation by a 5-1 ratio. So that’s wonderful. But it gets even better. I don’t think we’re going to have any real appreciation for a long time. But I think we could have what I call a regression to replacement cost.

So if you buy a property now for say, $50 a square foot and say that it costs a hundred dollars a square foot to rebuild that rebuild that property today, plus you’re basically getting the land for free. So in some of the markets we like, like Dallas, Phoenix, Indianapolis, Atlanta, and some others, the lot values are cheap in those markets. It only cost for a single family home lot, 15-25 thousand dollars.

Chris Mayer: Yeah, I’ve heard some prices in Phoenix have been rolled back to where they were in ’94.

Jason Hartman: Oh yeah, it’s amazing. I just recently moved to Arizona from California. I left Newport Beach to move to Scottsdale, and some people think I’m crazy but I think I’m brilliant. But I like it a lot better out here. But it’s amazing. Things are half price. This was obviously a huge bubble here and it blew up. So even if there’s no real appreciation, all you really have to have happen to really double the price of these properties or even triple them because sometimes we buy at 1/3rd the value of replacement, is just have what I call regression to replacement costs. What do you think of that?

Chris Mayer: I think that’s exactly right. I think long term you do have a regression to replacement, and I see that in the stock market also. A lot of different assets, things will fall dramatically out of favor for a while, but over time markets kind of correct themselves and I think that will happen to housing one way or the other. I think there will be some supply that will disappear, there will be houses that are torn down or whatever. Demographically, the US is still in a pretty decent place especially compared to Western Europe. We’ve got a country of 300 million and still growing.

That’s going to just naturally soak up some supply. Household formation in the US is still growing at a pace. And it will be patchy. So you mentioned your specific market, and I think that’s important to note that there are some markets that will come back and be attractive and there are some that may never come back. I know reading different stories about whole towns in Florida that basically grew up only because of the housing bubble and there’s no reason otherwise for the town to exist. I’d be much less inclined to make an investment there, than say Tampa. You know Tampa. That’s a city. It’s got a reason for being. It’s been there for a long time. That will come back.

Jason Hartman: I think what you’re referring to in Florida is the central Florida areas. Those were literally nothing more than a symptom of Wall St and bank money flowing at developers.

Chris Mayer: Whole town’s created just out of credit and all they are is houses in the middle of nowhere.

Jason Hartman: Right. The point I want to make there is I think regression to replacement cost is not appreciation. It’s just regression.

Chris Mayer: Right, although it depends where you bought, right? If you bought half replacement value it will be appreciation for you specifically, but it’s just getting back to a more normal market.

Jason Hartman: So Chris, that’s interesting what you say about housing especially because you’ve been a bear for so many years, so I really like to hear that. It gives me a lot of confidence that I’m doing the right thing. But I’d be interested to hear your take on Warren Buffett. Because I’m beginning to think that Warren Buffett is like a shill for the Obama administration. He’s throwing fundraisers for Obama, and he’s doing things that just don’t make any sense. But he’s got a huge insider advantage. He just bought a bunch of B of A stock. Did that make sense?

Chris Mayer: And he was also quite hypocritical because he’ll talk about taxes and then he’ll be sure that when he does these deals he’s in preferred stocks, 70% of the dividends which are tax deductible and so forth. His actions betray what he’s saying. If we wants to pay more taxes, that’s just one issue.

Jason Hartman: But for some reason he says that his taxes should go up yet he doesn’t do that.

Chris Mayer: He doesn’t do that.

Jason Hartman: What I heard about it was his famous line, his secretary pays more taxes than he does, is that he only pays himself a 100 thousand dollar a year actual salary and he takes the rest of his money in a more preferred means that’s taxed at a much lower rate. And it’s interesting to me that Warren Buffett’s secretary doesn’t make a hundred grand a year. You’re the secretary for the second richest man in the United States of America and one of the richest people on the planet… I don’t think he’s paying her enough.

Chris Mayer: When it comes to Warren Buffett, I think that as investors it’s definitely when you’re looking to learn about investing to study his career. Because it has been a remarkable run. But the Warren Buffett of the last 3-5 years or so has been much more of a political animal. Not just the taxes but on all kinds of issues like you say. So he’s fallen down some pegs in a lot of people’s minds.

Jason Hartman: But one of the things, like when I read Buffett biographies and so forth, I kind of like his philosophy. It’s sort of the value investing, buy good sensible companies, not the high fliers that just have underlying value and operate and hold. And that sort of strikes me as a good philosophy.

Chris Mayer: Yeah, and I think you could kind of divide Warren Buffett kind of in three careers: So the early Warren Buffett, when he ran the first Buffett partnership and he was involved in special situations and then there were sort of the middle years where he became more of the Warren Buffett that most people know, the guy who espouses all that folksy investing wisdom and then there’s the latter years where he’s become so large where he can really only buy whole companies and where he’s become much more less interesting to study as an investor, and where he’s become much more political.

Jason Hartman: Yeah, it’s interesting. That’s a good way to divide him up. Well hey Chris, what else would you like people to know before you go and of course give out your website. You published two different newsletters. Tell us where we can get those.

Chris Mayer: Yes, I would say the best place to go is thedailyreckoning.com – I write columns there. It’s a free e-letter that comes out every day, and you can find out more about my newsletters there and like I said it’s free so you can’t beat that.

Jason Hartman: Absolutely, and it’s a great newsletter. I just really enjoy the philosophy. I will say it’s a little longwinded, but it’s entertaining. I love the way they just sort of bash the left leaning political world and so forth. It’s funny. Really good. But in closing, what thoughts would you have for people looking forward, and any thoughts you have about the future of the economy: inflationary, deflationary, insolvency for the United States, whatever you got.

Chris Mayer: The inflation thing, I tend to think that we’ll see it sooner or later. This is one of those things where a lot of people are looking for it and have been wrong for a few years, but I think it’s inevitable. And this most recent episode with Operation Twist where they’re driving down interest rates even further… there just can’t be much more room to go there. Overall, I would say that there’s still a lot of investment opportunity out there.

So I try not to get so down too much on the macro economy because there’s lots of instances in the past where you can look at the two and they don’t necessarily dance together. In other words you can make pretty good investments in bad times, and there’s lots of examples of that. So I would say to stick with those basic principles that we’ve been talking about in this interview.

Look to invest with people who know who have track records, that incentives are lined up with yours. Stay picky – the great thing about investing is that you don’t have to invest. You can sort of wait until that perfect pitch comes along. So that’s really my parting wisdom I guess.

Jason Hartman: Fantastic. Well, Chris Mayer thank you so much for joining us today.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation, which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation, and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by the Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email media@HartmanMedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

The American Monetary Association Team

Transcribed by Ralph

The post AMA 39 – Capital Crisis with Chris Mayer appeared first on americanmonetaryassociation.org.

Apr 04 2013

43mins

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Rank #3: AMA 38 – Aftershock with Robert Wiedemer

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Join Jason Hartman and coauthor of Aftershock, Robert Wiedemer as they discuss the fundamental underlying problems of printing money, the inevitable results, and how investors can still profit as the world heads toward yet another global economic crisis. Robert talks about the effects of the government bubble and the dollar bubble, when we can expect these to pop once again, and how these events will affect our government and the world. Mr. Wiedemer is a Managing Director at Absolute Investment Management and co-wrote the landmark book that predicted the current downturn in the economy in 2006, America’s Bubble Economy, published by John Wiley.

As Paul Farrell, Senior Investment Columnist at Dow Jones MarketWatch recently said, “In short, America”s Bubble Economy”s prediction, though ignored, was accurate.” Kiplinger’s chose it as one of the best business books of 2006.


His following book, Aftershock, was published by John Wiley in November 2009. It was chosen by Smart Money magazine as one of the five best investment books of 2009. Aftershock and America’s Bubble Economy have been the subject of articles in the major press including the Wall Street Journal, Financial Times, The Hedge Fund Journal, Euromoney, Barrons, Reuters, AP, Bottom Line and others. Aftershock is in its 16th printing and has sold over 250,000 copies. He speaks to groups of investors, financial analysts and economists including the New York Hedge Fund Roundtable, Association for Corporate Growth, The Turnaround Management Association, the World Bank, the CFA Societies of Chicago and San Francisco, and the National Press Club. He is a frequent commentator on TV including CNBC’s Squawk Box and Fox Business News.

Check out this episode

The post AMA 38 – Aftershock with Robert Wiedemer appeared first on americanmonetaryassociation.org.

Apr 03 2013

23mins

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Rank #4: AMA 37 – Debt Ceiling Increase Means Profit for Investors!

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Jason Hartman talks with Daniel Amerman about the likely results of the recent multi-trillion dollar increase in the debt limit. Dan is a Chartered Financial Analyst with MBA and BSBA degrees in finance. More at: http://jasonhartman.com/radioshows/. He is a financial author and speaker with over 25 years of professional experience. Years of studying the costs of paying for over $100 trillion of US government retirement promises, as well as the costs of cashing out an expected $44 trillion of Boomer pensions and retirement accounts, have convinced him that too many promises and too much paper wealth chasing too few real resources will likely lead to substantial inflation in the years ahead, with potentially devastating implications for many savers and investors. A problem that will also apply to many other nations.

Mr. Amerman spent much of the 1980s as an investment banker helping Savings & Loans and others try to survive the effects of the last major bout of inflation in the United States. There is a basic economics principle that much of the public is unaware of inflation doesn’t directly destroy the real wealth of goods and services, but rather, redistributes the rights to that real wealth (a principle which unfortunately will likely destroy much of the investment wealth the Boomers plan on enjoying in retirement). The author worked with the effects of billions of dollars of such wealth redistributions, and saw how there was not only a loser for each dollar of wealth redistributed but a winner.

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at AmericanMonetaryAssociation.org or the website for the foundation which is JasonHartmanFoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Start of Interview with Daniel Amerman

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at Americanmonetaryassociation.org. That’s Americanmonetaryassociation.org. Or the website for the foundation which is jasonhartmanfoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Jason Hartman: It’s my pleasure to welcome back to the show Daniel Amerman. I’m a big follower of his work, I met him about three years ago and we had him on the show quite a while back. He talks about turning inflation into wealth, and with all this talk in the news about the debt ceiling and the huge, huge fiasco related to that, I thought it would be a good idea to have Dan back on the show to talk about that in terms of current events and also to talk about some derivatives as well. Dan, welcome. How are you?

Daniel Amerman: I’m doing really good Jason. Thanks for having me.

Jason Hartman: Good, well it’s a pleasure to have you back on the show. So what are your thoughts on this whole debacle with the debt ceiling? I have a feeling I know what they might be, but I’ll let you tell the listeners the at the same time I hear it.

Daniel Amerman: What we’re seeing with the deficit limit was more or less just a surface cover up of the symptom of the problem. And what I mean by that is that when we look at the deficits themselves, they’re not the problem of course. It’s not the deficit limit being 14.2 trillion or whatever the number was. But the problem is the astronomical rate at which the US is racking up new debt.

Jason Hartman: Well I think it was John Boehner who said that the problem is not the debt ceiling, it’s the debt.

Daniel Amerman: Oh absolutely.

Jason Hartman: And I thought that was a perfect, simplistic way to put it, but it’s absolutely true.

Daniel Amerman: Absolutely. And to really understand what’s going on, at the same time we have all this discussion about jobs and unemployment. Which is very appropriate. And as you may have seen, I believe the number that just came out was there were more layoffs in the last month than we’ve seen in the last sixteen months. So things appear to be getting worse then. But the real problem is what happened in 2008 not having been fixed yet.

What I mean by that is if you go back to 2007, we were in a situation where the private economy was 65% of the total economy. And of that approximately 9.4 trillion was the private economy. And that fell to 8.1 trillion in a very fast implosion kind of associated with the events of September 2008. Which was a drop of about 14%.

Jason Hartman: In the private economy. Now, I assume you’re going to talk about the government economy as well.

Daniel Amerman: Absolutely. You can’t understand any of this as long as you fall for the illusion that is usually presented in the financial press that there’s one economy. Because that’s what enables the deceit. The way we usually read about the economy is a sum of both the private and the public sectors.

Jason Hartman: Right, and the public sector has been increasing so quickly it’s scary.

Daniel Amerman: It’s at a fantastic rate and it’s worse than most people understand. What happened was the private economy fell by 1.3 trillion. In effectively a period of months, which by itself is depression with a capital P. But we did see that happen because simultaneously the total spending by federal, state and local governments rose by 1 trillion dollars. So when we look at the two separately, we see this fantastic fall in the private economy, we see this fantastic surge in the public economy, but between the two it was only a small drop.

And the heart of the problem that we run into is that the private economy has never rebounded. So if you look at these current approximate deficit levels, these fantastic levels of about 1 ½ to 1.6 trillion dollars, and one way I like to explain that is if you took every household in the country and they ran a monthly deficit of a thousand dollars a month, that’s equivalent to what’s going on in the federal deficit right now.

So as long as we have the federal government creating an extra trillion dollars a year on top of what was already a problematic deficit of about 450 billion a year in 2008, then we’re going to be at this extraordinary level of government spending. And probably the best way of presenting this that I’ve worked out, and this is part of an article of mine that will be coming out tomorrow, is that if you compare the ratio of the private economy, that’s what pays for everything is the private economy, to the public economy… in 2007 there was a dollar and eighty six cents in private economy for every dollar in government spending.

By 2009 that had dropped to a dollar and thirty four cents in private economy for every dollar in public spending. So we went from a little bit shy of two dollars in private economy for every dollar in public spending to not that much of a dollar in private economy.

Jason Hartman: And I believe the federal government’s share of the GDP now is somewhere around 20%, isn’t it?

Daniel Amerman: I don’t even look at the federal government because you have accounting games that go on there. Because what happens is the federal government essentially creates or borrows money and then it passes the stake to the local governments. Without which the crisis would have been much worse.

Jason Hartman: Right, right. It kind of reminds me of how Enron used to use SPVs or special purpose vehicles, and that’s really what happens. It goes both ways, where the federal government sends money to state governments but then it also takes money from them in the course of unfunded mandates and regulatory burdens and so forth, so it’s really hard to keep track of. You’re absolutely right.

Daniel Amerman: It’ really federal spending but it’s not shown in the federal budget because it’s kind of a transfer, so to speak. And then what makes it much worse than that is the amount of Federal Reserve spending that’s entirely off the balance sheets never even authorized by congress and so forth. But the way I prefer to look at it is total government spending federal, state and local compared to the total economy. And it was 35% in 2007, it jumped up to 43% by 2009 and it’s still at 41%.

Jason Hartman: Oh my gosh. That is a mind boggling number. This is what socialism looks like, or maybe communism almost. That’s crazy.

Daniel Amerman: It’s a pretty amazing number but it’s very hard. If you don’t understand that number, you’re not going to understand what’s going on with the economy or the deficit limit, the hidden depression and so forth. I wrote an article at the end of last year, beginning of this year called The Hidden Depression. It’s gotten a lot of circulation. And what I did there was I took a look at what’s really gone on with unemployment, which is something that most people are just not aware of. What the government has done has taken unemployment and then split it out into three separate boxes and those boxes are never added together.

Jason Hartman: I’ve talked on the show many times about the discouraged workers falling off the unemployment rolls, I’ve talked about underemployment, I’ve talked about independent contractor employment… And I know that one first hand because back when I owned a traditional real estate company that I had sold in 2005 to Coldwell Banker, I had many independent contractors working for me and Dan, I can tell you they show up as employed but I promise you some of those people, a year would pass by and they wouldn’t receive a check.

Daniel Amerman: Yeah that’s been one of the unfortunate side effects is the sheer number of real estate agents who’ve fallen far below the poverty line.

Jason Hartman: And when people try and compare, like Paul Krugman for example, he tries to compare the unemployment rate now and he goes with the official numbers more often than not to the great depression, and back in the great depression people either had a job or they didn’t. It was much more clear. You worked in industry then or you didn’t work. Nowadays there’s this huge gray area of all this self-employed and independent contractor type people.

Daniel Amerman: The issue is when you take a look at those numbers, though, what we do with it or don’t do, which is if you look at official what’s known as U3 unemployment, that’s right now about 9.1% expectation is the next time it comes out it will be about 9.2%, which is bad but it’s a recession level of unemployment rather than say a depression level.

If you go to what they call U6 which is as high as the government goes in its estimates, that includes both discouraged workers and involuntary part-time workers, that’s the engineer that has a part-time job working at McDonalds that the US government now counts as being fully employed. That takes you up to about 16.2% right now. But where the heart of the issue comes in with the deficit and with the debt, is this artificial and very inefficient economy that the government has tried to create to cover up that implosion of the private economy.

If they stopped running those deficits, then the real state of the economy becomes true in an instant. And right now the deficits are running about 10% of the total economy, which is a fantastic number. 10% economy is based on a bankrupt economy borrowing what it can’t pay back, or else just flat out creating the money through the Federal Reserve and effectively funding Treasury bond purchases. If that government deficit spending disappeared, and 10% of the economy disappeared, at the very least without including multiplier effects, we have another 10% unemployed right there.

And that would take us to 26% of the economy, which is greater than seen in the very depths of the great depression. But it’s just split out into these three boxes of official unemployment, the unemployed who aren’t counted to their discouraged or involuntary part time, and the people who have jobs only because the government is creating money at a fantastic rate.

Jason Hartman: And unfortunately the government, although it can be an employer, it’s a terribly inefficient employer and a terribly inefficient, if you will, broker. It doesn’t create anything and when you send it money, it largely wastes the money.

Daniel Amerman: It does. It’s a very ineffective source. But that’s not even the biggest problem. The biggest problem that I see is that we’re engaged in a cover-up. Essentially, we’re taking these massive fire hoses worth of created or borrowed money, and we’re blasting it at the economy in a very ineffective manner to create a semblance that has more employment than we have right now. But we’re not fixing what really needs to be fixed.

Jason Hartman: So what needs to be fixed?

Daniel Amerman: Which is the private economy. And all that we’re doing by spending these fantastic sums in order to cover it up, is we’re bringing forward the day when we collapse the value of the dollar. And once the value of the dollar collapses, that real unemployment that’s been there the

whole time comes out. The only difference being that you’ve wiped out everyone’s savings in the meantime.

Jason Hartman: Well, here’s the thing that I really wrestle with when it comes to a dollar collapse or just further debasement of the dollar. It’s the big issue of compared to what? Compared to what? Gold, silver, the Swiss franc? There is no place really in the world that precious metals are truly used as a currency. The Swiss franc is sort of a symbolic currency in a way almost in that it’s not widely traded.

And so the dollar’s a disaster, I couldn’t agree more. But the problem is, what else are you going to do? When you have the size of the US military that’s rapidly using up its resources unfortunately, it just seems like the US although it’s a poorly managed house, it’s a poorly managed house in a neighborhood of homes that are inferior largely. Am I wrong? Please debate it with me!

Daniel Amerman: Oh, no. Your heading into an area where I have been in the years we’ve known each other in strong disagreement with some of the other people that ride in this area. Because what they recommend is effectively shorting the US dollar against other currencies. And this is a great way of generating a lot of brokerage commissions in the short term. But the problem is that we’re actually in pretty good shape compared to Europe at the moment. They’ve got even worse problems than we do. And it’s a very dangerous strategy to try to do that as well because the central banks are liable to intervene at any time. And when regulators intervene they can very deliberately punish investors and speculators.

Much like what happened with silver. Not too long ago when there was a four margin call raises in a very short period of time that temporarily knocked $6 off the price.

Jason Hartman: Well actually, with silver though we went from about $50 down to about $35.

Daniel Amerman: I’m sorry, I was off a digit there. It was 16, after a few days was about 34.

Jason Hartman: Right, right. And that was in a period of just what? A week or so. I remember when that happened. It was a real calamity.

Daniel Amerman: Yes, absolutely. And it was because the regulators changed the regulations in a deliberate attempt to destroy the speculators. So that’s an issue currency speculation as well. Now, when you say what really happens when you have a high rate of inflation, what happens is the savers get devastated. The average person gets devastated. Someone who has been for decades leading a productive life, working hard, making a net contribution to society…

Jason Hartman: Saving money.

Daniel Amerman: Setting that money aside as they’ve been told to do, and inflation takes it all away. And that’s where the real damage is done. So the place that I’ve been recommending people focus their efforts on are not complicated international plays where everybody’s in trouble and it’s hard to say what will happen at any one time with the exchangers and the traders in the markets and so forth, but the simple domestic plays where the more the purchasing value of the dollar in your savings is destroyed, the more you own real wealth grows.

Jason Hartman: And what are those plays? I know that you and I are both, or at least you were, and I haven’t talked to you in a while, a fan of using long term fixed rate debt to have that debt become debased by inflation. I actually coined a phrase around that, and I don’t know if you use this one too, but I call it inflation induced debt destruction.

Daniel Amerman: Yep.

Jason Hartman: And when I read your work Dan, and I’ve been following you for a long time, I’m just in so much agreement with what you say. It’s amazing. Sometimes I recommend that people read your work and follow your work, and of course we’re going to ask you to give out your website for the listeners, and then they send me back one of your articles and they say Jason, this is exactly what you’ve been saying and I go I know, Dan is like my kindred spirit. It’s amazing.

Daniel Amerman: Well let me get a little more, maybe I could use a little bit of a metaphor to answer that. What I really like is the combination of a hard asset that generates a cash flow, because when you have a hard asset that generates a cash flow unlike let’s say cash or silver, you can borrow against it if it’s considered to be a reliable cash flow. And you can usually borrow against it. At the height of a credit crisis you can’t, but typically you can borrow against it.

And think of it in these terms. Let’s say that you’re in a valley, and you know a flood wave is coming down the valley and the floor of the valley is covered with sand and around you are all these other savers and baby boomers and so forth, and everyone is building their sand castles out of their savings and conventional investments in dollar terms. And you know that what’s going to happen is an almost inevitable result of what’s going on with debt and the deficit and social security promises and so forth. It’s going to be this wave of inflation coming through and it’s going to knock away all the sand or a good piece of it.

Now, for me the ideal strategy is you get yourself this great big boulder that’s not going anywhere. And you pay for not all of the boulder, I don’t recommend that people take chances, particularly at the time, I’d say, listen, leveraging too far or anything. .But with a controllable debt burden that you’re very comfortable even in a very poor scenario that goes on for years where you’re going to have enough money coming out of that property to cover the debt service and the mortgage, you more or less surround that boulder with sand, the sand is the prudent level of debt that you took on to buy the boulder in the first place.

The title wave or flood wave, whatever you want to call it, comes down the valley, it wipes out the sand castles all around you and it washes the sand around your boulder away. And what you’re left with is a much bigger boulder exposed than what you started with.

Jason Hartman: Ah, that’s an interesting metaphor. And what you’re saying is that the boulder is a piece of income property, it’s a piece of rental real estate, right?

Daniel Amerman: It has two things in common. One of them is it’s a tangible asset, and one of them is that it generates a cash flow. And because it’s a tangible asset while there’s never absolute guarantee, the odds are it’s going to maintain its value to at least some extent if we do have a high rate of inflation in the future. And because it generates a cash flow, if you borrow prudently against that you have the money to pay the debt on an ongoing basis as that debt is wiped away. So that’s a pretty potent combination. And then you’re left with both the asset, most of the value of the debt’s been wiped away and you have that ongoing cash flow coming in as well.

Jason Hartman: Now, in an inflationary environment, where at the same time you have credit destruction though and higher unemployment, the debt will be wiped away, the debt on that income property will be wiped away which is great but what happens to the value of that property, Dan? Vis a vi other assets? Maybe I don’t want to say value, or maybe you want to distinguish the value in real terms and nominal terms, you’re welcome to do that. But maybe I don’t want to say value, maybe I want to say price of the property. I’m not sure which. It’s a complex question.

Daniel Amerman: We don’t have nearly enough time to cover this, but my own background is in institutional finance. Years ago, besides financing many billions of dollars’ worth of real estate, I also used to structure what were known as synthetic securities. And it’s how in real terms the major wealth in the world is actually invested. And a problem in the personal finance world is that people focus on what you were just talking about which was asset value, and the institutional world at the highest levels takes a different perspective, and it focuses not on the value of the asset but the value of the differential. You’re actually indifferent to the value of the asset. All that matters is the difference between the value of that asset and the value of the debt that was taken on to finance it because that represents your equity portion.

So if let’s say the value of your asset drops 40%. If you take a conventional personal finance perspective you say that’s a disaster scenario! My gosh, look at what just happened to me there. But let’s say that we’re looking at this in inflation adjusted terms, and that’s what really matters and that’s the approach I take when looking at all investment alternatives, is I do something few people do because most investments can’t handle it. You look at everything in terms of after inflation and after tax. That’s a deadly combination for a lot of investments, but when you take a look at that perspective and you say if in inflation adjusted terms, the value of that hard asset fell by 40% but the value of the debt used to finance it fell by 80%, then you haven’t taken a loss, you’ve taken a fantastic gain. You’re playing the differentials.

Jason Hartman: Exactly. Playing the differential. It’s really an arbitrage. And one of the things that’s really interesting…

Daniel Amerman: It’s a hard arbitrage for people to understand, think in just asset terms. It’s hard to get your mind around that it’s okay if your asset plummets and as long as your liability plummets more in real terms.

Jason Hartman: Absolutely, and that’s a really good way to put it. It is amazing to me in working with real estate investors that I find sometimes people are complaining but they’re actually winning and they should be celebrating, but they just don’t know how to properly keep score, do they?

Daniel Amerman: And the point of the matter is, as you and I have talked for quite a while, and in fact the real estate scenarios that I was running and still run call for substantial deflation in real estate. And what I would show to people that’s still very true today, is if they bought a property and it went down sharply in market value in the first several years, that it could be one of the best things that could happen to them long term. So long as that property is throwing off the cash flow to make the payments. Because as long as it does that, really with property, and I’m not a flipper and I don’t think you are either you’re working with long term values there. If you’re not approaching this from a short term flipping perspective where the play is all in the dollar value, what happens there is that if you’re playing for the long term what matters in the short term is not the value of the property so much.

Because really, when you look at the total amount of debt and so forth and look at a variety of other factors that I’ve discussed in my books and DVDs, there’s a very high chance that we have a high rate of inflation coming ahead of us and that’s going to risk those property values regardless of what’s happening with real values right there. The key is what your short term coverage is coming from. And right now we’re looking at falling the vacancy rates, we’re looking at rising rents, we’re having more and more people enter the rental market. So if we’re comparing the size and the likelihood of our cash flow coming in versus the cash flow coming out, we’re already if you’re focusing on that factor in a very positive real estate market even today. But people don’t see that.

Jason Hartman: I know they don’t.

Daniel Amerman: People see the asset value falling, and they’re saying oh I’m getting annihilated here. No, you’re not. Not if you’re in there for the long term. It’s just a strategic opportunity to acquire even more real estate, you could argue.

Jason Hartman: Yeah. Real interesting. Well Dan, let’s wrap up on a little discussion about derivatives. Because you made a prediction back when I met you and attended your event back in 2008 in New Port Beach. And that prediction has largely come true, hasn’t it?

Daniel Amerman: It has. It has. And it kind of introduced a principle that I think has really worked out well. I used to, and I hope you don’t hold it against me, this was back in the 1980s, I was one of the leaders in structuring derivate securities. And I found an honest living after that point. But I understand very well how they work because I used to create them.

And what I had predicted to you in early 2008, well before the crash in September, was that the derivatives market was almost inevitably going to be destroyed, that it was going to crash. Or at least would attempt to do so. I was one of the minority of people that were talking about that.

But the really essential point as you might recall is I said that wouldn’t be allowed to happen, there wouldn’t be a melt-down. There would be a bail-out that the government would do with the large banks that would require the creation of money without end, that would lead to massive government deficits and eventually to the point where the Federal Reserve was creating money out of thin air to fund those massive deficits, which is exactly where we are today.

And the key point that I’ve been making is that sometimes people get in this mindset where they think well, the whole world’s going to collapse right here. That does happen with society every now and then, but more often you have to anticipate what the counterpunch is going to be from the people holding the power to try to keep from losing that power and losing that wealth. And unfortunately that’s where we’re all stuck in right now. It’s the bail-out rather than the crisis itself that has dominated economic invests for the last three years and still is. And that’s what we need to be investing for.

Jason Hartman: That’s a really good point Dan. Because it seems, and I’ll criticize especially the gold bugs on this one. It seems that they’re always putting forth these disaster scenarios, these society collapse survivalism, etc. I think there is some validity to that, but my criticism is this: that they talk about all of the reasons this will happen and they outline them and they do that very well, but they never talk about the counter punches. For example, with the precious metals people they never talk about GATA and the concept of gold price manipulation. You talked about it in the silver market just a few minutes ago. But there are always countervailing factors and counterpunches that are done specifically by the powers that be that really have a huge impact on these things.

Daniel Amerman: There certainly are. And that is part of the reason that, and I don’t want to knock gold bugs by any means, I have a lot of readers that are heavily invested in precious metals, and I do include some strategies that very heavily involve precious metals. This has been some of what I’ve been doing since you and I have last talked. But the difference is that if you risk everything you have on one vision of the future and that vision doesn’t come true, you just lost everything you have. So what I like to have and what I recommend that people have is a vision where you’re prepared if there is what’s called a societal breakdown, but you’re also prepared if there isn’t.

Because the other big issue that’s been coming out and it’s been a hot buzzword over the last few months, and I don’t know if you’ve read a recent article I did on that or not, it’s financial repression. It’s kind of the other path that we go down. And in some ways it’s the direct opposite of the usual gold approach. And I would say in many cases it looks unfortunately more likely to me in some ways.

We’re going down this approach, meltdown approach. And that is where by law the government, because it has messed everything up, takes ever greater control over money and what can be done with money and so forth. And if we go down that route and you’re in an investment the government doesn’t approve of and you’ve got everything you have in that investment, the government can pull the rug out from underneath you at any time.

Jason Hartman: Well it’s kind of like being a bond holder in GM, right? Look what happened to them. It’s a very good point.

Daniel Amerman: So there’s a really good case to be made for structuring a flexible strategy that handles either melt-down or repression.

Jason Hartman: Very good way to look at it. Well Dan, give out your website if you would so people can learn more. And do you still have your reading course available? I really enjoyed those. Those were fantastic.

Daniel Amerman: The website is www.danielamerman.com and yes I now have a new version of the Turning Inflation into Wealth mini-course available. It’s basically a free book that’s delivered to you at a rate of about two chapters a week once you subscribe.

Jason Hartman: And that is a fantastic course. I love it. I’ve recommended that a lot of my listeners take advantage of that course, and I’d really encourage everybody listening today to make sure they get a hold of that. Dan, thank you so much for being on the show. Any final remarks you’d like to make?

Daniel Amerman: No, I think that took care of it and I sure enjoyed it.

Jason Hartman: Alright, I appreciate it.

Daniel Amerman: Thanks a lot Jason.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation, which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation, and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by the Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email media@HartmanMedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

The American Monetary Association Team

Transcribed by Ralph Jordan

The post AMA 37 – Debt Ceiling Increase Means Profit for Investors! appeared first on americanmonetaryassociation.org.

Apr 03 2013

29mins

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Rank #5: AMA 36 – Don’t Sell Your Gold or Silver…Yet!

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Jason Hartman talks with James Anderson, managing director of GoldSilver.com, about the historical cycles of gold and silver and other precious metals, against the monetary cycles. As the world’s fiat currencies continue to be debased through inflation, regulation, and irresponsible spending, precious metals investing is on the rise. But do you physically own your gold? Join Jason and James as they revisit the history of market cycles, talk about where the future of precious metals is heading, and discuss why people must take physical ownership of gold and silver.

James explains why you should NOT sell your gold or gold jewelry now. After his first exposure to Austrian Economics at the Loyola University New Orleans with his favorite business professor, Dr. Walter Block, James Anderson received his BA in Finance in 2002. He spent two years traveling and working throughout Latin America where he witnessed first-hand the dramatic effects of the 2001-2002 Argentine currency collapse. In 2007, James became heavily involved with Dr. Ron Paul”s 2008 presidential run where he further awakened to our monetary history and the fractional reserve banking. James has since been very interested in free market economics, tangible assets, and sound money investing, seeing his work as a humanitarian effort to educate mankind on the importance of gaining financial independence and freedom.

Check out this episode

The post AMA 36 – Don’t Sell Your Gold or Silver…Yet! appeared first on americanmonetaryassociation.org.

Apr 03 2013

41mins

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Rank #6: AMA 35 – Rich Man Poor Man with Bill Whittle

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Jason Hartman talks with Bill Whittle, host of Afterburner, regarding poverty levels in the United States and the strategies that undermine democracy and free markets. Bill’s opinion is that America has the richest poor people in the world, versus countries like Africa, where millions of people live in dire poverty, with starvation and lack of healthcare. Bill discusses how everything people in the U.S. have ever needed in life is present at birth, including food, side effects to lasix shelter, and healthcare. There’s no need to want for anything. Yet people accept their lot in life as the natural order of things. With history on his side, Bill Whittle challenges widely held misconceptions about politics and society. Frequently asking the difficult ethical questions, Bill attempts to underscore conservative values and philosophy through logical reasoning. Bill Whittle is a writer, pilot, and TV editor who lives and works in Los Angeles, where he hosts Afterburner on PJTV.

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at AmericanMonetaryAssociation.org or the website for the foundation which is JasonHartmanFoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Start of Interview with Bill Whittle

Jason Hartman: My pleasure to welcome Bill Whittle to the show. He is the host of Afterburner and the creator of the Rich Man Poor Man video that I saw that was extremely enlightening. And he just has a lot of interesting perspective on society, on history, on social issues and political issues, and really kind of debunks a lot of widely held misconceptions about politics and society. So, it’s just gonna be a great pleasure to talk to Bill today. And Bill comes to us from Los Angeles today. How are you, Bill?

Bill Whittle: I’m doing great. Thanks very much for inviting me.

Jason Hartman: Good. Well, my pleasure. I love your work. Friends have sent me videos.

They’ve circulated around the social media, Facebook, and so forth, and very enlightening. Tell us what your perspective is. You can start with the Rich Man, Poor Man video if you want. I mean, that was just a very enlightening video I thought.

Bill Whittle: Well, thank you. I’d done one a little bit earlier, maybe a month or two earlier. The Afterburner videos are the ones I do at PJ TV and I did one independently. It’s a firewall series called Eat the Rich. And they’re kind of connected.

The Rich was based on some statistical work done by a brilliant guy on our team named Iowahawk. He’s the funniest guy on the internet and he’s a hot rodder and he just loves to tinker with cars but he’s also a mathematical genius. And basically, in Eat the Rich, he looked at what the federal budget was, about $3.6 trillion which turns out to about $10 billion a day. And so in Eat the Rich what he did was he looked at the fact that if we spend $10 billion a day and if progressives tell you I cheated off of Michael Moore saying that there’s tons of money in America to spend, it’s just that the rich are holding it all. So if you take a look at the fact that if you take all of the combined profits of Exxon Mobil and Walmart, the two most evil companies in the world, that’s $40 billion dollars. . .

Jason Hartman: And you’re saying that sarcastically, of course.

Bill Whittle: Of course. $40 billion dollars, that runs the federal government for 4 days. So that gives you from January 1st at midnight to January 4th if you take every penny of their profits. And looking at the world that way, take all of the money that the top Forbes 400 have and that buys you maybe 23 days of federal spending or something. What it does is it takes a look at the fact that if you were to take everything from everybody you might be able to run the federal government for one year, at which point you would have nothing left, nothing. The spending is out of control.

And when they justified the spending, the reason they used to justify the spending is always the poor. We have to help the needy, we have to help the poor, we have to do this as poor people are starving in America and all this other. . .

Jason Hartman: And really what they should be saying is we have to buy votes so I can get reelected and maintain power and expand my bureaucracy in my power base. That’s really what they’re doing.

Bill Whittle: So what they do is they hand out benefits to a country where half of the people don’t pay income tax, so they’re buying their votes. And the justification that they use to inflict it on the other half is need. This is how socialists always work. They always talk about the need.

Now, I’m not particularly bragging about this – this is not anything to brag about. But just so people are aware of this, I’ve been dirt poor for a fair portion of my life and I had to decide whether I was gonna pay the electric bill or the rent for years and years and years. So I’m not unsympathetic to this position. I mean, it can drive you fully mad just worrying about things. I’ve been there and know what it’s like. But when you get down to an actual analysis of what the definition of poor in America is, you realize that the progressives are using this idea, this Dickensian idea of people have to decide which one of their children they want to sell so they can find a crust of bread to eat for the night.

And in Rich Man Poor Man I took a look at data gathered about the state of poor people in America. And, again, not saying their life is cushy or easier or anything. It’s never good to not have enough money. But with that said, you find out that 82% of all Americans have air conditioning and I think it’s 76% of poor people do. 31% of average American households have a game console like an X-Box, and 29% of poor households do. So if 1 in 3 average Americans have a game console and 1 in 3 poor Americans have a videogame console, you have a different idea of what poverty is by the American definition. So we’re the first society in history to produce poor people whose primary health problem is obesity. That’s a remarkable thing if you think about it.

Jason Hartman: It is. A few years back I did Thanksgiving at a food kitchen, a soup kitchen, and I couldn’t believe that I was serving food and I was one of the thinnest people there. All the poor were coming in. Granted, I know that a lot of this is because it’s just junky food and bad nutrition, but most of it is bad habits. The point is there is enough food. I just couldn’t believe here I’m scooping out food for people that are far more obese than I am. And I just thought this was kind of ironic. It’s crazy.

Bill Whittle: So you have to ask yourself, in the west today, in America today let’s say, you have to ask yourself what poverty is. Is poverty a state of insufficient resources for you to be able to function as a human being or has poverty become a definition? And one of things I said in an essay many years ago is that if you have a club of billionaires, the guy with $900 million is a chump. He’s the poor guy at the table.

When you understand that the poorest Americans are wealthier than 90% of the rest of the world, and that includes places like Europe and Japan and China and so on. . .When you realize that statistically the living standards for the poorest Americans are better than they are for 90% of the rest of the world, you have to start asking yourself some fundamental questions. And one of the questions you have to ask yourself is, has poverty in its original meaning been eliminated. Because, as you will know, if you define poverty as the bottom 15% of any population, that can never be eliminated. By definition it can’t be eliminated.

Jason Hartman: Because there’s always a bottom 15. If the poorest people in say one of these oil rich countries have a net worth of $400,000 which they probably do, frankly, in Kuwait or Saudi Arabia or something, I don’t know which one, but say they’ve got a high net worth, there are still people that have billions and multi-millions and deca-millions and centi-millions. So, certainly by definition there’s always a bottom 5% or bottom 15% of every strata.

Bill Whittle: And this is kind of the point that I’m trying to make. Again, with the caveat, I know what the left is and I know how they function and how they like to defame people. I’m not saying poverty in America is swell. I’m not saying it’s a wonderful condition. I’m not saying everybody should enjoy it. I’m not saying any of that. I’d like to see people have as much money as they need in order to achieve their goals in life. That would be my goal. That’s why I believe in free markets. But with that said, you begin to approach a definitional strategy of poverty that is based on a percentage of the population, not upon some objective need, some objective condition.

And I’m not launching a war on poor people. I’m not attacking them. What I am attacking is this idea that people who work hard for a living have to continue to make sacrifices. And you give up half of everything, half so far, of everything they make, to go to other people for the stated purpose of eliminating poverty when that poverty does not really exist in any meaningful sense anymore.

Jason Hartman: In the US. And of course it does exist around the world.

Bill Whittle: Of course. You go to Africa or you go even into Mexico, South America, you see grinding poverty, people starving to death in the millions in Africa all the time. And this kind of also breeds into the health care issue, not a bad turn of phrase there actually, because if you listen to European intellectuals, you just walk through an American street and you don’t know whether to step over the bodies of the starving or the bodies of the dying from their injuries or their diseases which go untreated because of lack of health care. And it’s simply not true.

The health care issue, the whole point of Obamacare was to take care of this vast unprotected group of Americans who don’t get any health care. That’s what they say. They have no health care. First of all, we all agree that 93% of the American population was covered and so that meant that 93% of our population had the best health care in the world. So what does that say about the 7% or the 6% or the 30 million or 40 million or whatever that number is? It says that those people have not bought health insurance.

But I was living without health insurance in those days and I ruptured a disc in my neck and they went in and gave me the surgery and it got written off which means that somebody who was more responsible than I was paid for that operation. Taxpayers of Florida paid for that operation. People who had their act together a lot better than I did paid for that operation. But it got taken care of. You don’t see people sitting outside of hospitals with broken legs or dying of tuberculosis because they don’t have health care. Those people are taken care of and the rest of America pays for it. And I have been doing my very best since the years since that incident to be as successful as I can, not only to take care of myself but to pay back some of that money through taxation and so on.

This whole thing is endemic, it’s a pattern. When you have half of the population that doesn’t pay anything, you have got a very, very, very dangerous situation because you’ve got the one thing that the [00:10:19] among others said would be the death of democracy when people realize they can vote themselves money out of the treasury, it’s all over. And when politicians pander to half of the population and say you guys don’t have to do anything other than vote for us, we’ll take it from rich people, sooner or later that’ll be 50% then 60% then 80% of the people don’t pay anything and the burden on the producers get higher and higher and higher. And then what happens? We all know what happens.

Jason Hartman: We all know what happens and what happens is called Michigan.

Bill Whittle: That’s beautifully said. That’s exactly what happens. Michigan happens. And Michigan means that the people who create wealth, the wealth creators either stop creating wealth, they just take their money and go and retire, or they go someplace else. And that’s what happens. And then people look around and go we can’t figure it out. It’s an utter mystery why Detroit is in ruins. It must just be bad luck.

Jason Hartman: And California’s about to become the new Michigan.

Bill Whittle: Watching California go from being the most innovative, free, dynamic society in the world to becoming the union of socialist soviet republics is the most heartbreaking thing that I have witnessed in my lifetime. It is just heartbreaking to watch this. It’s just unbelievable.

I’ll give you an example of California. A friend of mine has a nice pool deck but he wasn’t able to swim all summer because they were working on his pool. Pool was torn up all summer long. Why was the pool torn up? Well, the pool was torn up because apparently some girl one place, one time, was swimming at a pool and she got stuck at the bottom of the pool by the suction on the drain and she drowned. And so now every single pool in California has to have two drains, every single one of them. And some politician somewhere decide, well, we can’t let this happen again, obviously this epidemic that’s sweeping the nation of children being sucked to their deaths at the bottom of swimming pools by the unbearable vacuum of the drain.

So some guy passes a law and every single apartment complex in California has to spend 50 grand or whatever it takes to be compliant with this.

Jason Hartman: Bill, listen, I own a bunch of rental properties, and I remember I don’t like owning condos but I do have a couple of them in my portfolio. And then I have apartment buildings and a lot of single family homes which I like a lot. But condos are not my favorite. But I’ll just tell you I got a notice on that exact issue you’re talking about right now where the homeowners association sent out a notice to all the residents that they had to create a special assessment to update the pool drains because of that exact story, that exact accident.

The thing that happens here, certainly tragic, nobody wants anybody to die. But life, we just gotta understand life is fraught with risk. I’ve seen people’s little 2 year old children pass away of heart condition and another friend 25 years old killed by a drunk driver. I mean, it’s tragic but you can’t tell everybody they gotta stop driving. You just can’t solve every problem. I mean, that’s what it seems like the left doesn’t understand.

Bill Whittle: I’m really, really glad you mention this risk issue because I think if I had to stand as far back as I could stand and look at America from geostationary orbit here and try and put my finger on what is going wrong, American life has become asymptotic. And let me explain what I mean by that.

Jason Hartman: Does that mean the nanny state?

Bill Whittle: No, it’s a bigger issue than that I think. Everybody knows what an exponential curve is. It’s a curve that as you move to the right, as you advance in time, the rate of crime becomes ever steeper, and at infinity it becomes vertical. So, an exponential curve is one that rapidly, rapidly accelerates. The faster you go, the more numbers go up. An asymptotic curve is just the opposite. It’s one that starts out very steep and as you get further and further in time it starts to level out and level out and level out.

So what do I mean when I say American society has become asymptotic? In my father’s time or certainly in my grandfather’s time, if he worked hard his entire life and really did well and saved his money, he might be able to electrify his house. And electrifying his house means that he does not have to get up in the morning at 4 o’clock, march down to the well or the river with a bucket, pump that thing, carry water, water is heavy. . .Most kids sitting never had to carry any water – water is heavy. You don’t have to get up in the morning and chop wood because chopping wood takes a lot of work. I’ve chopped enough wood in a half hour to know that it will practically kill you. They don’t have to do any of these things.

So a man who worked hard his entire life could show real progress for that, right? Suddenly you have hot and cold running water and you have electricity and you have all these things like a toaster and an iron and maybe even a washing machine. And you’re making progress in life and you’re grateful for your progress.

What I mean by saying American culture today is asymptotic is simply this: If you’re 17 years old today in America, what does your life consist of? Well, you have 24 hour entertainment, 24 hour television, you have 24 hour games. You have absolutely unfettered access to all of the information available to the human race at any instant that you want it. Your electricity has never been off. You have all the food you could ever eat at any time of the day that you want it. And if there’s something special you want, you simply get in your car, which you’ve always had, and go get it. You simply go get.

And when I say go get it, that doesn’t mean you have to hike over mountains or go kill bears. You make a 5 minute drive and you go get it. Every single need that you’ve ever had as a human being that people have struggled for for millennia is present at your birth. You’ve never had to want for everything. If you’re a 17 year old in America, with virtual certainty you’ve never been cold, you’ve never been hungry, and you’ve never been in pain, not for more than a few minutes, not for the time it took to get you to the hospital or the medicine cabinet.

So the question is where do you go from there? What do you do to have any sense of accomplishment or improvement in life? I don’t know where you can go. You’re trapped under this asymptotic curve of prosperity that has given you so much that it becomes virtually impossible to improve on it. And the problem here is not that things are great – I love the fact that things are great. The problem is that people assume that this is the natural condition of life and that it can never change. So, when you get into a world where no one dies until their baby and when everything is supposed to be protected and all of your needs are met, no one has to deal with the idea of risk. If some kid is killed on a bicycle, then either we didn’t wear enough helmets or we didn’t have enough stop signs or we didn’t have enough this and we gotta improve this, we gotta have video cameras. It assumes that the world has become perfect and the world is never perfect, it never has been perfect.

The next video I’m gonna do as an afterburner has to do with this Rena Air Race crash. And my understanding is that Rachel Maddow and others have been calling for air races to be banned. And the reason they call for them to be banned is because they don’t go to air races. It doesn’t cost them anything to ban air shows because they don’t go to air shows. So, this is the great American pastime now is calling for the banning or the regulation or the removal or the destruction of things that we don’t do but we happen to decree are harmful to society because one person or two people or 12 people got killed. Well, we simply can’t have this. This has to be banned and eliminated.

Our response to people like Rachel Maddow to these people who live in skyscrapers in New York and talk about banning air shows because they never go to air shows.

Jason Hartman: They’re sort of like the academics. . .

Bill Whittle: Of course they are. Well, 12 people were killed at Reno. Of course that’s a tragedy and I’m not being callous to their loss. I’m not saying I don’t care about them – of course I do. But they assumed a risk when they went to that air show. And I’m sure all of them knew they assumed a risk. They assumed a risk when they drove to the air show. They assumed a risk the minute that they entered this world that something would happen to them. And the price of entering the world is that something could happen to you.

Jason Hartman: The only secure place is death.

Bill Whittle: Well, that’s what they want first really when you get right down to it. So when you get the people like Rachel Maddow who want to ban all these things, in the public interest of course, never for them, they never come out and say I don’t like this so we’re gonna ban, it’s “In the interest of public safety so that nobody else gets killed in air show, I think maybe we should ban air shows.”

Well, 12 people killed at Reno. Last time spectators were killed at the Reno air races was 47 years ago. My response to Rachel Maddow would be if you really want to ban thing that are killing people, if you’re all about the public safety as you claim and you really want to shut down these murderous things, well, why don’t we shut down something that murdered 600 people last year and 700 people the year before that and sometimes murders 1200 people a year, Rachel? If you really want to do something for the public safety, why don’t you ban New York City? Why don’t you just shut down Manhattan where 600-700 people are murdered every year.

If it’s really about public safety, why don’t you close your apartment where you live, lock up everything, leave it there, get on the last bus, blow the bridges and seal the tunnels and then we don’t have to worry about all those hundreds of people dying every year. And if that sounds a little ridiculous to you and a little absurd it’s probably because somebody’s talking about shutting down something that you actually enjoy. You’ll say, well, that’s the price of living in New York.

My response to that would be, well, that’s the price of watching airplanes fly at 500 miles an hour because you kind of enjoy that kind of thing. It’s assumed risk. It’s living like an adult and understanding that there are no guarantees and there are no receipts, that you’re not promised a life of 100 years of perfect health and longevity, interrupted only by a quick and painless death. No, that’s not how it works but that’s how we think it works, and that’s the American disease today.

Jason Hartman: Well put, definitely agree with you there. Bill, I want to go back to this issue of the rich and the poor for just a moment if you can. I love that video that you did, that you talked about initially, where you looked at the number of days we could fund the ridiculous out of control federal government. And we’re only talking about the federal government there, not all the states and municipal governments which add to the problem. There’s simply not enough money to take. The concept of let’s just tax all the people that fly private jets more and not understanding that of course a gulfstream jet costs somewhere around $50 million and very few people actually have those, what really the left is proposing, what Obama’s proposing is he’s saying tax everybody that makes over $200,000 a year. And if you live in California or New York or any expensive place, that ain’t much money by today’s standard.

And so there’s not enough to get. The taxing of the rich is not a solution because there’s just not enough to get first of all. And that’s what your video so beautifully illustrated. But, in addition to that, of course, and Reagan proved this I think very well, the more you tax, the more you suppress economic activity. And so you actually reduce the amount of money coming into government coffers with higher marginal tax rates.

Bill Whittle: They don’t care about that. Barack Obama was asked before he became president, if you could be proven, categorically he can be, that raising tax rates actually lowered federal revenues, would you still be in favor of it? And he said yes, because it’s not about the revenues, it’s about the equality.

Jason Hartman: That is a scary, scary response. It’s about the equality.

Bill Whittle: Let’s just look at what’s really there and let’s look at what these people say in their own words. It is not about raising revenues to provide services to people who need it. It’s not about grandmom’s social security. It is about wealth redistribution by people whose primary motivation in life is envy. That’s the first thing we need to understand. The president admitted it verbatim. I’m not putting words in his mouth. He said this. This is why the guy’s always on teleprompter because when he’s not on teleprompter he says what’s on his mind. And when he says what’s on his mind, people begin to go “Wait a minute now”. So that’s the first thing we need to understand.

The second thing we need to understand about this federal spending is it is an addiction. It is the greatest addiction of all. If you had a credit card in your wallet that had no limit and you never had to make payments on it, what would your life be like?

Jason Hartman: It would be wonderful.

Bill Whittle: It would be extravagant. When people talk about spending, the thing you need to ask them about the federal spending is this. . .People say we just need a little more money and then we’ll be able to pay for everything we want. You just ask them this. How much cocaine does a cocaine addict use? And the answer is all of it. They do all of it. There’s not a coke addict in the world who says, you know what, that’s enough. I think I’m gonna go to work for a while, I’ll put this away for a couple weeks and come back to this maybe on the 15th or something, they do all of it. It’s an addiction. These people are addicted. They will take every penny you have.

If they’re taxing you 50% now, then they’ll take 60 and 70 and 70 and then they’ll take 100. And, buddy, I have to tell you something. I remember when I was a young guy – I was probably 23-24 years old. I briefly dated this girl who was from Britain. Her father was a tax refugee from Great Britain and she was talking about the tax rates on her dad who was doing real well before he left. And she told me the story. I don’t know if it was true – she told it to me, it seems reasonable. And she said you know what they taxed my dad the final year before he left, what percentage of his income? I said what? She said 103%. I said that’s impossible. She said no it’s not. They took everything he made that year plus they took 3% of his earnings of that year from his savings.

Jason Hartman: Unbelievable, a wealth tax which Obama has pondered by the way.

Bill Whittle: Yeah. Where does this end? It never ends. Where does the democrat revenue line cross the spending line in the future? They never say because it doesn’t. They don’t understand it. They’re too stupid to understand the things that every single regular American understands and that is you cannot spend more than you take in over any length of time.

Jason Hartman: I say, Bill, that they’re not too stupid. They know exactly what they’re doing. And they’re simply either conspiring to bankrupt and destroy the country or they’re just sleep pandering to get more votes and maintain the power and kick the can down the road. It’s one or the other. They can’t not understand it. I mean, come on, this is just so beautifully simple.

Bill Whittle: Maxine Waters doesn’t understand it. I’m convinced that some of these people don’t understand it. She’s complaining why there are no jobs. . .These are her words, these are not my words. “If Barack Obama was not black, we would be marching on Washington with torches and pitchforks.” I think she said that verbatim.

Jason Hartman: Well, she’s the one who said no justice, no peace during the LA Riots encouraging violence.

Bill Whittle: There are a lot of people saying that. The thing that she said that is so indicative is there’s a person that doesn’t understand why there aren’t any jobs. She can’t figure it out. It’s another mystery. And then she says to banks if you do not comply with our will and basically forgive these mortgages, “We will tax you out of existence”.

Jason Hartman: Then there will be no loans and no banks.

Bill Whittle: When a representative of congress says you do what we say or else we’re going to tax you out of existence, what the companies in the private sector naturally and very intelligently do say to themselves is this: Here’s this threat looming out here. We better save every single penny we have because we never know when these idiots, these malcontents and these charlatans are going to put a gun to our head and tax us out of existence. So I don’t think we’re going to hire this new person or buy this new truck or open this new factory because we’ve already been threatened, we’re threatened every day by this administration by people who make us into villains and say we’re the source of all our problems and it’s those fat cats with their corporate jets, of course businesses are sitting on money. I would too. They’re waiting on this storm to pass. They’re waiting for some certainty.

And even more than these repressive tax rates and these unbearable regulations, the one thing that the private sector cannot abide is uncertainty. They don’t know. Nobody knows. For the first 2 months of its administration, when the Obama administration can come in and buy fiat, simply declare that Chrysler’s shareholders are not holding the papers that they thought they hold, that we just decided to come in and buy legal fiat, say no, the money that is owed to you is not owed to you anymore. We’re sorry.

Jason Hartman: We’re just going to give it to the unions basically.

Bill Whittle: It’s been done and tough luck for you. When that happens, we are now dealing with a very different kind of America. We’re not talking about liberals or democrats. We’re not talking about conservatives or republicans. We’re not talking about any of that anymore. We are talking about whether or not we are under the rule of law or whether we are a lawless society determined by the whims of the people in power.

Jason Hartman: We have a dictatorship.

Bill Whittle: When politicians can break contracts at whim, private contracts, when a politician can go in and declare it void legally, we no longer live under the rule of law. And then you live in the kind of world that is the third world. And it’s just a matter of time before the living conditions mimic the legal structure.

Jason Hartman: It’s a slippery slope, there’s no question about it.

Bill Whittle: And it’s a steep slope, too.

Jason Hartman: It sure is. Listen, I pretty much agree with you on all of this. I want to ask you a question and I want you to help me sort this out. I think conceptually you’re absolutely spot on. However, in today’s modern world of business with internet, with scalability, with lobbying of congress especially and the lobbyist scam which I think is a scam in a lot of ways, big corporations, the “evil rich” as the left likes to call them which I don’t think they’re evil, however I interviewed the author of Winner Take All Society. And I don’t know if you’re familiar with that book, but he is a professor and I like the concept of the book. I was interested in it. But when he got on my show he started talking about how the government needs to do more and regulate this and regulate that, and I thought oh my god, this is just going to be another disaster, right, if this happens.

But these big Wall Street companies, they’re not existing in a truly capitalist environment. They’re going and they’re lobbying the government to make laws that regulate them more. They go on TV and they say, oh, it’s too much government regulation. They’re playing both sides of the fence because what they’re doing is secretly they say regulate us more. And the reason they say that is because they know it keeps out competition. I’m not gonna compete and open up a brokerage firm or an investment bank and compete with Goldman Sachs any time soon. The entry is impossible. They’ve raised the bar so much that it’s not a fair playing field anymore and I really do think that.

Bill Whittle: You hit upon the economic system that is always kind of working in the background. But when you have this kind of political cronyism, this kind of basically lawlessness in terms of contract law, then what emerges it in its place rapidly is mercantilism. Some people call it crony capitalism. I never want to hear that word used again because it associates capitalism with this. It has nothing to do with capitalism. It’s the opposite of capitalism. Free market capitalism says that laws protect people against things like fraud and maybe insider trading and that’s it. But mercantilism is the use of Portico influence in order to set your business up for an advantage that it has no right having.

Let’s say GE for example. GE paid no income tax. How is that possible? Jeff Immelt is Barack Obama’s go-to guy. Wasn’t he given the medal of freedom? No, that was Warren Buffet. Another guy. . .

Jason Hartman: Another hypocrite, yeah.

Bill Whittle: I’ll talk about Buffett in a second. Here’s the guy who’s like the water carrier for the Obama foundation on the big business front. So GE is a massive company. And when Barack Obama was elected, I actually asked myself, I said how can these big businesses support the socialists? And it’s exactly what you said a moment ago.

One of the things GE makes is the MRI machines, magnetic resonance imaging machines, these medical devices. And it is a much tougher thing for GE to go out and try and sell 600 of these things to 600 different individual private hospitals than it is to pay a little money, get a little political influence and sell 1000 of them to the federal government. That’s one sale. And it’s not even a tough sale. And you don’t have to worry about competition because you bought the political influence. Then they write laws that say that this has to happen and there you go. They write laws that protect you against competition.

Mercantilism is the opposite of a free market. It’s not an outgrowth of the free market. It’s not a mutation. It’s not what the free market is. It’s the opposite of the free market. And when you think of all these images you have in the pop culture of capitalists, the fat cat guy you know with the top hat and enormous stomach, holding a sack of money, that image. . .

Jason Hartman: That’s Mr. Potter from It’s a Wonderful Life.

Bill Whittle: The image, the monopoly guy image of the guy in the top cat and the waistcoat, the fat guy holding a big bag of money, was drawn by Thomas Nast back in the 1800 and it was done to represent the trusts, these mercantilist monstrosities that existed back at the time of Tammany Hall, which were all democrats by the way – just feel like I need to add that. But Tammany Hall was Boss Tweed in New York City. And at the end of the 1800s, It was open knowledge, it wasn’t secret, it was openly known. If you wanted to do $100,000 worth of renovations to a building in New York City under Boss Tweed, you had to come up with $100,000 to do the renovations and $100,000 to pay to the democratic political machine which went directly into Boss Tweed’s pocket.

It’s mercantilism. It’s this unholy alliance of an aneurysm of government regulation and private enterprise. So, yes, this is a problem with these big business guys, with these mercantilists. And I don’t know what the answer is. But when you got a guy like Warren Buffet saying they should raise taxes on me, they should raise taxes on me, I’m a billionaire I should be paying more. . .

You know what I found out? I found this out yesterday. Do you know what Warren Buffet’s take home salary is? His pay? His taxable income? $100,000.

Jason Hartman: Yeah, I had a feeling it wasn’t that high.

Bill Whittle: It’s $100,000. I make more money than Warren Buffet takes home. I am taxable, let me rephrase that. I don’t make a 100th of 1% of what Warren Buffet makes. But my taxable income is higher than his. He makes $100,000 in taxable salary because he has sheltered everything, and not just unfairly, it’s all done legally, but also because almost all of his money is through capital gains.

Jason Hartman: Let’s go see if Buffet is gonna start lobbying for a wealth tax. Like your ex-girlfriend there, let’s see if they can take 3% of his multi-billion dollars of wealth away every year.

Bill Whittle: Yeah, let’s see how he feels about that. And the fact that they’re not talking about that means Warren Buffet is an enormous hypocrite. He is a mercantilist. He is taking a position which sounds very noble, which endears him to be progressive. “I’m a billionaire, I think you should raise my taxes.” See, even the billionaires say that we’re not taxing him enough. Well, Warren Buffet makes $100,000 a year taxable income. He’s actually probably not paying any income tax. He’s certainly under Barack Obama’s magical $250,000 limit.

Jason Hartman: You’d think that Warren Buffet’s secretary is a pretty special person and he’s not paying her $100,000. I would think that’s a pretty high end secretary there to one of the richest men in the world.

Bill Whittle: This is how the whole thing works. It’s all about political influence. Leave business alone. And some people say oh you free market guys, you don’t want any regulations. That’s like saying I’m a football fan who doesn’t want any rules. Of course I want rules. I want rules about penalties, I want rules about out of bounds, I want the clock to stop when the guy runs out of bounds, I want a touchdown to be worth 6 points, but what I want is I want a touchdown to be worth 6 points every time. I want a field goal to be worth 3 points every time. I don’t want a referee to be able to throw a flag at a guy because he doesn’t like the way he looks at him. And I don’t want a referee to throw a flag at another guy because he doesn’t like orange – the guy wears an orange uniform. I want a limited set of consistent rules that are applied uniformly to everybody.

Jason Hartman: You mean like a flat tax? How’s that for an idea?

Bill Whittle: Yeah, how about that?

Jason Hartman: Steve Forbes, he got no traction. I remember I was in Russia and I was hanging out with a couple of Steve Forbes’s daughters and I asked what happened the last time he ran for president. They said it was just a complete media blackout. No one would cover him. He couldn’t get any traction. It sounds very much like Ron Paul and how he’s marginalized in the media and the guy has the support of the people. You just see it over and over. It’s unbelievable what happens and how they just don’t cover him. I don’t know if you saw the Jon Stewart video, which is actually pretty funny actually, about Ron Paul. You really should look that up. It’s mind-boggling, it really is.

Bill Whittle: Well, Forbes wasn’t covered because that idea, a flat tax idea, would destroy the democratic party. Forget the democratic party – it would destroy liberalism. If everybody were in this together and it wasn’t on how much you made but how much you spent – I don’t know whether it’s flat tax or fair tax, I lose track.

Here’s the thing. If everybody’s in it together, then everybody’s in it together. You don’t get to divide the country into tribes anymore and play them against each other. And for people who say that’s unfair, the rich should pay more, let me just ask you this. . .Let’s take an example that everybody can connect to.

Jason Hartman: The rich will pay more in a flat tax. They’ll pay 15% just like everybody else.

Bill Whittle: Let me take an example that most people can resonate with. When you’re standing in line at a grocery store on football Sunday and there’s a long line, it’s 15 people deep, and every single register is filled with people. And you’ve got all different kinds of Americans standing in line to go and get their stuff for their barbecue that day. No one for a second thinks that the guy in front of you should pay more of your grocery bill because he makes more money than you do. It never enters anybody’s mind. No one ever says I want to see your bank balance before you check out or maybe I should be paying for some of yours because you’re not doing as well as I am. Nobody thinks that way, but that’s what the income tax system is today. It’s a way of checking the wallet of the guy in front of you and if he has more money, then you take some of it. And if the guy behind you has less money, then he takes some of yours. No one ever thinks that way in public when you’re dealing with real people. It’s only when you demonize classes of people like these progressives are becoming expert at that people start thinking that way.

I think most people in a supermarket line would say, look, if there’s somebody outside the door who’s starving, every American who’s decent, just a genuine need, real hunger, there’s not a person in America that would walk by without chipping in. So with that said, why is it that we can all understand that when we go to a checkout line to get our Sunday groceries, it’s a question of, hey, this is my business. And if I’m buying T-bone steaks and you’re buying flank steaks, well, if you want T-bone steaks figure out a way to work a little harder.

Jason Hartman: Or sacrifice something else. Sacrifice a different part of your life. You don’t need the brand new Nikes.

Bill Whittle: If you’re texting somebody on your iPhone about how unfair it is that the guy in front of you has T-bone steaks while you don’t might be onto the nature of the problem here.

Jason Hartman: It’s very true. And it seems as though, as far as the unemployment issue, it seems like one way that you could just instantly increase employment is get rid of the minimum wage. Why doesn’t the free market dictate what we pay people? You see the left talking about how black unemployment is so high and teen unemployment is so high and teen unemployment is so high. And teenagers can’t get summer jobs.

How about taking away some of the regulations on the businesses? How about letting the businesses hire people for whatever people are willing to work for? In business, I only work for myself, really, because it’s my own company, but when I go negotiate with a potential customer, no one’s regulating how much that company should pay me for whatever I’m going to provide with them. It’s up to the free market.

Bill Whittle: Let me close my time with you today with a little personal story here. And I’m not trying to put myself on a pedestal here. This is not unique to me. There are millions of people who have done what I’m about to tell you. This is the idea of America. And I didn’t know it in advance, it just occurred to me.

I was 12 or 13 years old, I got into astronomy in a big way. I just loved the idea of astronomy. And I saw a telescope that I wanted for Christmas. My dad said if you pay half, I’ll pay the other half – you can get it for your Christmas present. I said okay.

So, I got massively into astronomy and I moved to Miami. And then on a field trip I went to the Miami Space Transit Planetarium in 5th grade. And when I walked into that building, I could feel neurons being burned into my head. I was absolutely overwhelmed. I said this is it, this is what I want to do. So I was 13 years old, I went to the show and I came back that weekend, took a bus there, and said I really just would love to be a part of this and I’ll do anything you need. I’ll take tickets, I’ll sweep the floor. Sometimes people get sick because of the motion there – I’ll clean up the vomit. I’ll usher people to their seats, just anything, I just want to be a part of it. The first words out of their mouth was well we don’t have any money to pay you. We’re a museum and we’re very tight budget. I said you don’t have to pay me – I just want to be here.

And this was not a ploy on my part. This wasn’t like this is my secret master plan. I just wanted to be there. I wanted to do it. It was a field I wanted to get interested in. At some level, I did feel like if I can show them over the course of a year or so that I’m actually valuable, maybe they’ll find some room for me. So I went in and took tickets and did all that stuff that day, and they said, yeah, nice. And they never thought they’d see me again but I came back on Sunday and I came back the following Sunday. And, honestly, I had been there 4 or 5 times before they said we gotta pay this kid something. So they started paying me $2.50 an hour. I still have my first check. I think I have a check for $37.50 for 2 weeks work or a month’s work or something. But the point is they started paying me $2.50 an hour.

And then I started watching what these console operators did. And when there was an opportunity to do a show and nobody to run it, it was an emergency, I told them I know how to do it because I’ve been practicing on my own time, because I loved it. So they gave me an opportunity. And the short form of this, I was a planetarium console operator at the Miami Space Transit Planetarium when I was 14 years old and it’s only because I wanted it. I didn’t have any special connections, I didn’t have any connections. I just wanted it and I came in there every day and showed them that I wanted it.

And this is the thing our listeners need to understand. You’re a businessman, you know this in your bones to be true. People like that make businessmen almost weep. Businesspeople live their lives to find people like this. And when people ask me, gee, how do I succeed in the world, I say there’s only one thing you need to know. You don’t need a college degree, you don’t need this money, you don’t need this capital, you don’t need this personality. There’s one thing you need in the world if you want to succeed and it’s very simple. Whatever job it is you take, you make sure you get there a half hour before the boss arrives and you stay a half hour after he leaves. And don’t mention it, don’t say a word about it. You do this for 3 months and you are on your way.

Because people who run businesses, start businesses, love what they’re doing. They’re not in it for the money. Money’s great. I’m not aware of anyone who started a business because I want to make money, I just gotta find a business. People do things that they love. And when they see people who are on the team who really get it, who seem to love it too, that person will be on a rocket ship of promotion and success and there’s no way to stop them. And it’s just that simple.

Jason Hartman: Absolutely. There’s no question about it. That’s one of the great things about the free market, Bill, is that people preselect themselves for the things they most love. And the money comes as a result of them doing what they love and expressing their love to the world and providing great products and services. And that’s why we must at all costs maintain a free market system and capitalism.

This is a very intense time in history right now of this country. And I sure hope things work out correctly because it can go either way here.

Bill Whittle: And I think if this guy gets voted out of office and we see low regulations and a lower tax rate, we’re gonna see 7% economic growth in this country. There’s so much pent up growth that’s just waiting this thing out.

Jason Hartman: I know. And it’s just been great talking with you today. Your videos are fantastic. Where can people find them?

Bill Whittle: Well, I’m on every week at PJTV.com. It’s a membership based thing but they let you watch 10 of them for free. And if you’ve never been there, you might want to check it out. I do an afterburner series, a show called Trifecta with two of my good friends Steve Green and Scott Ott. And if you get on YouTube and search for “BillWhittleChannel”, pretty much all of my other videos are up there and Eat the Rich is there and a number of others. So that’s generally the best way to find me. And you can always go to BillWhittle.net.

Jason Hartman: Fantastic. Great websites, great resources, and phenomenal videos. So thank you so much, Bill Whittle, appreciate having you on the show today.

Bill Whittle: My pleasure. You take care now.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by The Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email media@HartmanMedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

The American Monetary Association Team

Transcribed by Ralph

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Jun 25 2012

44mins

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Rank #7: AMA 34 – The National Inflation Association

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A look at Jason’s Ultimate Investing Equation followed by Daniel and Gerard Adams for The National Inflation Association (NIA) recently featured on Inside Edition and ABC World News Tonight with Charlie Gibson, The Wall Street Journal, MSNBC, ABC’s Nightline, KTLA News and CNBC. After being ignored by family and friends about the coming stock market decline and recession, he started a YouTube channel called VisionVictory with some very interesting predictions on record:

On March of 2008 in his first video, he accurately predicted that the Dow would fall to 8,000 in the fall of 2008. The S&P would fall to 800 in the fall of 2008. And that global stocks wouldn’t decouple until after the fall of 2008.

In July of 2008, he updated his prediction and told his YouTube viewers that stocks were set to drop on the 3rd week of September and they did, in a big way, from the 3rd week of September to the 3rd week of October stocks fell 33%.

In December of 2008 he made a new prediction, that stocks would make new lows sometime in late February 2009. On the 3rd week of February, guess what? The Dow and S&P made new lows.

in 2008 while Ben Bernanke, Jim Cramer, and college professors around the world were predicting that the U.S. would not enter a recession. Daniel predicted a severe recession that would break all previous records. While Ben Bernanke said a recovery would take place in the summer of 2008, Daniel correctly predicted that the world would acknowledge the recession after the summer of 2008, and they did.

He also correctly forecasted rising unemployment, a collapse of consumer spending and many more well timed predictions.

The VisionVictory Channel is now watched by thousands and has a subscription base of 17,500. The VisionVictory Channel is also part of the National Inflation Association and helped with the documentary, Meltup.

In 2008 while Ben Bernanke, Jim Cramer, and college professors around the world were predicting that the U.S. would not enter a recession. Daniel predicted on the record, a severe recession that would break all previous records. While Ben Bernanke said a recovery would take place in the summer of 2008, Daniel correctly predicted that the world would acknowledge the recession after the summer of 2008, and they did.

He also correctly forecasted rising unemployment, a collapse of consumer spending and many more well timed predictions.

The VisionVictory Channel is now watched by thousands and has a subscription base of 17,500. The VisionVictory Channel is also part of the National Inflation Association and helped with the documentary, Meltup.

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at AmericanMonetaryAssociation.org or the website for the foundation which is JasonHartmanFoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Start of Interview with Daniel and Gerard

Jason Hartman: It is my great pleasure to have the NIA on the phone today for an interview with us. And we have Daniel and Gerard. And NIA stands for the National Inflation Association. I have been following their work for a while now. They’ve produced some fantastic videos, and a new documentary entitled Melt Up. And these guys have some really interesting insights into what is going on and really, the scam that is being played. I’ll call it that – that’s not their words, it’s mine. At the highest levels of our financial system and how we can all best deal with it. Welcome guys, it’s great to have you.

Daniel: Hey, it’s our pleasure. Thank you for having us.

Jason Hartman: My pleasure. Gerard, maybe I’ll start with you. And just give a little background as to what NIA is and why you started it.

Daniel: Basically, NIA is the National Inflation Association. It’s an organization that we created basically because we were tired of all the propaganda that was being put out by the mainstream media. We felt that there wasn’t enough places for the people to go and get the facts about the economy, and why they should be preparing for hyperinflation, and we’re basically dedicated to preparing Americans for that hyperinflation and helping them not only survive, but prosper from it.

Jason Hartman: Excellent. Well that is a very noble mission, and I’m right with you there. So Daniel, what are your predictions for the future? Obviously you guys believe there will be a hyperinflationary future. What does that look like? Well, we’re looking at literally a depression in the United States but it’s going to be combined with inflation. Because we have all the statistics looking at baby boomer data, looking at peak spending for consumers. All of this is pointing towards a huge contraction in not only spending but revenues for the government.

But at the same point in time, we also will have the same projections for a huge increase in spending. So at the same time they’re decreasing their revenue and taxes as well as the local stores are decreasing their revenues and contracting and closing stores, we’re going to be matching everything that closes, everything that you look at would be vanishing in a depression-like situation. They’re going to be replacing it with more debt, with more printing of money. Because they don’t have a choice. They have an aging baby boomer generation that is yes, they’re going to be spending less in their older years but the way our entitlement system is built, we are going to be spending even more on entitlements.

For example, during the 90s we had roughly 500 thousand people a year enrolling on social security. And basically from this day forward it’s going to be roughly from one and a half million to two million a year. So as you can see the situation, the storm we’re going into is not only a depression here in the United States, but it is a highly inflationary situation where the government has forced inflationary policies.

Jason Hartman: I would agree with you. The thing is that if we parse up what you just said, it’s kind of interesting because a lot of the stuff you said would really make one think potentially that we have a deflationary future. Think about it: if we have a contraction in the economy, if we have store closings, all of that adds up to just sort of a smaller economy with less demand, less capacity utilization. And that would indicate deflation on one hand. Why do you say we’ll have inflation though? I mean, certainly money printing is inflationary.

Daniel: Well the biggest difference is that this will be the first global downturn in world history where there is not one single currency that is connected to a precious metal – not connected to gold, not connected silver, not connected to any commodity. So when you look at economics 101, yeah it spells deflation. But you have to remember that all the books in history have a currency that is backed by gold. So when you look at the great depression, we still had a currency that was backed by gold. So trying to compare the great depression in the 30s and the great depression from 2010-the early 20s, it’s really comparing apples to watermelons. Because this time you have to look at the currency situation. It dramatically changes everything.

Jason Hartman: That’s a very, very good point. Every currency in the world is now a fiat currency. And so there, we really get to this sort of race to the bottom phenomenon where all of them will potentially become worth their intrinsic value paper in ink. But maybe the US is the better of the lousy currencies. We’re certainly seeing that right now with what’s going on in Europe where the Euro, once thought to be the sort of star of the show just a couple years ago is now looking like a real disaster, huh?

Daniel: Yeah, exactly and it’s very deceiving because people will follow the dollar index. What is it is it’s illusions priced against other illusions. And that’s why the National Inflation Association, part of their 2010 predictions list was really to have people start focusing on the Dao price in gold. And as you can see the Dao, and most things relative to gold are actually seeing a contraction in their price relative to gold. So if you look at the Dao Jones, it was roughly over 40 ounces of gold in 2000. Today it’s just hovering right around, just over seven and a half, just under eight and a half. Kind of bouncing around there. So that if you look at the Dao Jones, you’re not really gaining any value. All you’re doing is you’re seeing the result of inflation, and of course this is what the documentary Melt Up shows with overwhelming evidence.

Jason Hartman: Yeah, and by the way you guys did a fantastic job on Melt Up. I’ve really got to say I’m impressed. You had over a half a million views of that, right?

Daniel: Yeah in just three weeks.

Jason Hartman: Fantastic Gerard. That’s really good work. We look at this sixty plus trillion dollar time bomb of entitlement liability hanging over our heads. This has never happened before in world history, we have aging baby boomers, we have Gen X, my generation, that is much smaller coming behind them, and then Gen Y coming up after that. And yet at the same time we have a reasonable size chorus of people out there saying that the future is deflationary. I don’t agree with them, but I’d just like you to address what they say. And here’s what I hear them say. I hear them say things like, “there is so much deleveraging going on, and so much more deleveraging to come.” They quote numbers like 46 trillion dollars in potential defaults coming up on various forms of debt. And they say things like “the government can’t print enough money to create inflation.”

Well that to me on its face is a completely stupid statement. Because the fact is that there is no limit to the amount of money that can be created out of thin air. But what do you say to the deflationists out there? They are out there. And they say that everybody’s talking about inflation, but they say the future is deflationary. And the first part of this downturn really was deflationary in many categories, wasn’t it?

Jason Hartman: What you’re looking at is the perceived value of a currency. And so right now when things are kind of normal, the system is still you could say relatively intact, although it’s being held together with simply nothing but printing more money. It is the perceived value of the currency. And that is the biggest difference between the deflationists and the inflationists. Because if you listen basically to our arguments, we’re reviewing and looking at the same facts.

We’re looking at the same statistics and we pretty much agree all the way up until basically what is going to be the short term result? Even if you talked to some of the biggest deflationists. Even Harry Dent out there and Prechter, they will tell you that yes they believe in deflation. Of course they’re huge on deflation, but they’ll also say well, in about ten years though we will experience huge hyperinflation. So the timing is really different. I think both camps do inevitably believe that it is going to be a dollar situation.

So really that is what separates us. But just getting back to the currency, if you keep interest rates low and keep the quantitative easing, you’re going to experience the results of hyperinflation because you are already doing it. If you raise interest rates like everybody says it’s just going to be so easy to do, let’s be real, what would happen to the US economy if interest rates went up 5%? We can barely sell homes by giving people eight thousand dollar tax credits and having interest rates for the banks at 0%. If you raise interest rates, this economy will freeze up. And as it freezes up, just like the world is turning its back on Greece, they will look at the US dollar as no longer a stable currency because the US dollar is still backed by the US economy and the perception that we can grow ourselves out of this.

Once they see it freeze up because we raised the interest rates 2%, 3%, 5%, the world will know that the United States is either going to have to print to devalue their currency to pay off their debts or they’re going to have to default. Either way it equals people running from the US currency. And investor demand for treasuries will collapse. It’s already contracting. Some of our biggest treasury buyers are already contracting in their holdings. So we’re already seeing the world look at the dollar not like they have ever in the last 30 years.

Jason Hartman: Right, and those treasury auctions directly relate to mortgage rates, and that is why I agree that we must. It is absolutely impossible that we will not see higher mortgage interest rates in the future. We must see higher rates. There’s no other way.

Daniel: There’s no doubt that we might see more mortgage faults in the future and more forced liquidations on Wall St, but that’s not going to change the fact that the dollar would not be looked at as a safe haven and that people need to position themselves into gold and silver, which are the only things that will provide protection from both a deteriorating economy and massive inflation.

Jason Hartman: Very good point. So what’s odd is I’ve had Harry Dent and Bob Prechter on my show before, and oddly enough Bob Prechter is a very interesting guy, and so is Harry Dent of course. He still kind of believed in the metals it seems like, even though he’s a deflationist and he’s got that big report he wrote on coping with deflation. It’s sort of contradictory if you ask me. And then Harry Dent said something that I just don’t understand at all. He talks about the fact that young people are deflationary. When they enter the economy, and he’s referring to Gen Y, 80 million Gen Y-ers entering the economy and creating more innovation and that being deflationary. Well I guess it is from a technology standpoint, but food and energy and commodities are what we all really live on, not iPhones although they’re super cool. Right? I just don’t get it. It doesn’t make sense to me.

Daniel: Yeah, well what he’s basically reviewing is the fact that young people pay less in taxes and they make less money. People peak in income around 50 years old. They’re peaking and spending around 46-48 because they’ve got these teenagers in the house eating everything, they’ve got to buy car insurance, they’re paying for school. So I think that’s what he’s probably looking at.

But see we look at that and we put the math together and go wow, we’re probably going to have less income and more entitlement spending. More spending. The spending doesn’t contract. It doesn’t matter. If you look at republican, democrat, it doesn’t matter who’s in the house, who’s in the senate, who’s in the white house. We know one thing about this government, they spend. And if they don’t have the money, they have no hesitation to borrow it. So we know the result of borrowing and the result of printing is economics 101 which is hyperinflationary.

Jason Hartman: Yeah, no question about it. What do you consider hyperinflationary? Is there a percentage number? Does that mean 20%, 50% per year? Does it mean Zimbabwe ten zillion percent per year? What does that mean?

Daniel: Basically when you’re looking at hyperinflation by definition, we are already in a situation where we are hyperinflating our currency. When you look at the M3, how it shot up over the last two years. People talk about oh, the M3 is down.

Jason Hartman: They stopped reporting it.

Daniel: Well, it’s down from the moon but it’s still really highest. The Federal Reserve has so many bad assets, has increased its books in the trillions. Look at the US. It took 40 presidents to hit a trillion dollars of national debt. We just did a trillion in the last 7 months.

Jason Hartman: That’s amazing.

Daniel: So if you want to talk about hyperinflation, by definition we are already hyperinflating our currency – we are just waiting for the results. As far as what kind of percentage are we going to see in prices, that’s hard to say for sure. In terms of dollars I think you’re going to see double and certainly need items in the triple digits of price increases.

Gerard: We already believe the doorway of US inflation is already rounded to be 5-6%. There’s no doubt that we’re in a hyperinflationary period. It’s just that we’re waiting for the results of that to be price inflation.

Jason Hartman: So what has to happen for this hyperinflation to occur? By the academic definition that Daniel was talking about, which is just really money creation, we are already there. But people haven’t really noticed it yet. And I kind of like to say that we have inflation already in everything that really matters and everything that’s optional, we have deflation. But is it just a matter of that money trickling down from Wall St and the banks, are they just sort of hoarding that money and it hasn’t hit the streets yet, if you will? What has to happen for people to really notice this in their daily life?

Daniel: Well the average American is already noticing because they’re paying at the pump, food prices, this is a statistic that’s a month old now but they’re up 27% year to year. When you combine food and energy, that’s roughly 17% year to year. So the average person is already feeling this.

Gerard: If I could interrupt you one second there, even food stamp usage right now is at an all-time high over 40 million. People are definitely seeing it.

Jason Hartman: 40 million people on food stamps?

Gerard: Yeah, it’s at an all-time high. I think it just topped 40 million. I think it’s 40.2 million.

Jason Hartman: You know, the nanny state is here isn’t it? We are living in a socialist country. It’s just like everywhere you look the government is shoving out money it doesn’t have to buy votes. It’s just amazing to me. Incredible.

Daniel: I was at the grocery store today and I was with my wife, and I don’t know if anybody else has noticed but I sure did. When you look at the Dryers Ice cream, they are smaller than they were last year but they’re the same price.

Jason Hartman: Very good point. Another form of inflation: just shrink the size, keep the price the same.

Daniel: Absolutely. That’s a big thing and you see it going on with Frito-Lay. Here in Southern California there’s no more 24 packs of soda now, it’s 20 packs of soda but it’s still the same price. So there’s a lot of shadow inflation out there as well.

Jason Hartman: Yeah, that’s a very good point. A lot of people don’t really notice that packages are shrinking all over. I was out at dinner last night and I ordered a drink. And I commented to the person I was with, I said hey, this martini glass is actually smaller than it used to be. And I remember thinking before that this restaurant has very big, generous glasses. And the glasses are getting smaller, so you’re absolutely right. No question about it.

Talk a little bit more if you would about the Dao gold ratio. Because I think that is a very significant measuring stick. Gold is a very reliable measuring stick, and the old joke is 2000 years ago you could have purchased a toga and a pair of sandals with one ounce of gold, and today you can buy a man’s suit and a pair of shoes. And it’s pretty darn consistent. When you talk about the Dao gold ratio, Peter Schiff about two years ago had a very interesting interview, very telling on CNBC with Mark Hanes and he said that there has been no real appreciation in the value of the Dao since 1929. The returns have been dividends, that’s it.

Then he had this guy from B of A on, and you’re probably familiar with his video. It’s floating around. And he’s trying to argue that the power of a processor has increased and all of the hedonic scams that they use to measure inflation and lie to us about it. But what else do people need to know about the Dao gold ratio? Talk to us a little bit more about that, because I think that is a very, very interesting metric that everybody should be looking at.

Gerard: During gold’s last bull market, we saw gold rise from 35 dollars to over 850 dollars for over 2000 percent gain. And from gold’s low in 2001 of I think it was about 255 dollars per ounce, we saw the same percentage game in that bull market descended to over 6000 dollars per ounce back in 2001. The other way to look at it is with the Dao Jones and gold ratio, which in 1980 had bottomed at one meaning that the price of gold matched the Dao Jones. If we saw gold and Dao Jones meet at medium current levels, we could see it rise to over 5000 dollars per ounce today.

Jason Hartman: That’s incredible. We’re in this huge mess of entitlement liability and I’ve identified six ways that the government might get itself out of this mess, and I’d just like to run them by you guys and see what you think, if I may.

The first one is that they could just default on the promises. This of course is way too harsh, it’s politically unpopular, I don’t think this is going to happen but it may to a small extent where they just say hey, we can’t pay the Medicare, we can’t pay the social security, etc. Again, harsh, unpopular, unlikely. Number two, raise taxes. Of course, they can’t raise taxes enough to pay for this liability. It’s so under water, it’s just not possible. But I think it will be a blend of all six of these things.

Number three is have a yard sale. Sell off assets to raise money, a few years ago we thought about selling the ports of Dubai. That was a big political football. The BLM sells off land, now I guess we’re considering selling military equipment to Muammar Gaddafi, our former enemy. Foreign countries own toll roads and so forth in the US. Number four, the American Military or the economic hit man. I had John Perkins on the show, I’m sure you know who he is – really interesting guy. Just steal from other countries, steal their assets, their commodities. Number five would be good news and that would be innovation especially in the area of technology, energy, biotech, nanotech, that would be good news.

But number six and most likely, and I think this is what you guys really agree with, is just simply inflate their way out of the debt. Huge inflation. They’ll keep the promises in nominal dollars, while in real dollars everybody just gets poorer and poorer, and our debtor countries, China namely, will get paid back in more and more worthless dollars. Any thoughts on those six ways out of the mess?

Daniel: Looking at the list you just provided, certainly of course I agree with you. It’s going to be default by devaluation. The government has no problem doing this. If you look at… everyone runs around talking about our standard of living, how well it is compared to 20 years ago. But because of the results of all the money creation, all the borrowing, the borrowing from the future, the borrow prosperity. Here you have, it now takes two people to raise a family. It takes a credit card. It takes a [0:20:07.5] credit.

I just talked to a couple a few days ago and they told me how they were debt free now because they had lumped every credit card and loan they have into their house. So people don’t even understand the concept of really being debt free anymore. Because they’re just so used to this life style. 20 years ago it took a grocery clerk to raise a family of three or four and now it takes two people working full time jobs. So the standard of living has deteriorated. When you look at seniors, they’re absolutely being ripped off because as bad as it seems when you look at the debt for social security and the obligation for social security, it will be even worse if we just calculated inflation the same way we did 25-30 years ago.

According to John Williams from shadow stats, right now we’re underpaying our senior citizens 43% because of all the different gimmicks that you’ll see in Melt Up that we do with inflation. How we calculate the CPI, which is how we give them their standard of living increase. So if you watch the movie Melt Up, or for those of you who have already seen it, you’ll know that we’re no longer measuring the cost of living, we’re measuring the cost of survival.

Jason Hartman: Yeah, that’s a great point and you are so right about that. Because with substitution and weighting and hedonics, and then just out and out stripping things out of the index, it’s completely bogus and the government has a huge incentive for misleading the public. Number one, to buy votes and make them think they’re having a better life than they really are, but number two is all of the entitlements are indexed to the CPI which is controlled by the government. So there’s a huge motivation to mislead when it comes to this, no question about it. What do you think people should do? Really, what is the strategy of NIA and namely, what sectors do you think will see this hyperinflation? And this is in a good way for the investor? Obviously you guys like precious metals I think, right?

Daniel: Absolutely.

Jason Hartman: Are there any other areas where you see big opportunity for investment?

Gerard: Just so you know, we’ve released a review on our website. A gold and silver bullion review for those people who do want to invest into the gold or silver. Many websites out there actually sell the bullion right online. We’ve reviewed many of them and you can visit our website for those reviews. But we’ve made the best investment of the next decade to be silver. We believe silver actually has more upside than gold. In history it’s always outperformed gold and it’s actually a lot cheaper than gold right now.

We get a lot of questions and Emails from our members that say it’s hard for them when gold’s a

thousand two hundred dollars an ounce, but you can actually invest into silver and it’s below 20 dollars an ounce right now. And we feel there’s a lot of upside potential there.

But other than silver and gold, we do believe that agriculture as we’ve seen food inflation, we believe agriculture is going to continue to rise and we’re very bullish in agriculture as well as oil. We’re getting ready to release our next suggestion which will be an oil play. It’s our first oil play, and we do believe oil has a lot of upside. Especially to take advantage of the recent BP oil spill. Again, if you sign up to our newsletter, we consistently put out different suggestions and different companies.

Not only do we suggest to invest into the bullion itself, but we also suggest to play the minors and there are companies out there that are actually producing the gold and producing the silver and farming. And these are the companies that we believe actually even have more upside based on the market. So again, sign up to the newsletter and you can go to the website and see many of the stock suggestions that we’ve had. Almost all of our stock suggestions have been up since we released our website, so definitely check it out.

Jason Hartman: Excellent. And I have to say that as far as the metals go, and I’m not as much of a metals bug as you guys are, but as far as they go I think you’re absolutely right that silver is the play. Because traditionally that silver/gold ratio I think has been about 17 to 1 and it’s currently 68-1. So, if that tradition holds or even comes anywhere near where it used to be, silver has a big upside. I absolutely agree with you there.

Gerard: The American silver eagles that have been sold is also at an all-time high right now.

Jason Hartman: In terms of the number being sold you mean?

Gerard: Yes, but there’s not a lot of supply out there compared to the demand. So there’s definitely a lot of different characteristics out there that point to silver being a huge investment opportunity right now.

Jason Hartman: And it’s truly an industrial metal whereas gold really isn’t anymore. So I do want to run a couple things by you in terms of the metals. I’m a metals investor and I agree with you that it’s not bad. I just kind of look at metals as the way to preserve your wealth. I don’t really call them as much as an investment as many other people do, and I’ll tell you why. And I just like to run this by you: they don’t offer any financing, or income or tax benefits. And if you’re a little paranoid like I am, they’re subject to confiscation potentially and also subject to manipulation by central banks. And I think they’re being largely manipulated now.

I know that you had a video on silver manipulation and you were right about your prediction there. That was just about a month ago I believe, which I found interesting. And I agree that manipulation can never go on forever, but the question is can it go on longer than any of us can wait? And there’s that old joke about, referring to the stock market, the markets are irrational. Well yeah, you may be right but the market can remain irrational longer than we can remain solvent. So I certainly think you probably agree that central banks are manipulating the prices of the metals, right?

Daniel: Yeah, there’s no doubt about it. It’s to our advantage. You don’t want to buy something that’s being manipulated up, you want to buy something that’s being manipulated down. So when you buy silver for 18 bucks, send a thank you card over to JP Morgan because they’re the reason why you can buy it for 18 dollars and not pay north of a 100-200 dollars for the price of silver. And as far as the metals not offering a dividend, specifically looking at what we believe, like Gerard said, it was the investment of the decade.

Silver, if you’re a technology investor or a commodity investor, silver is where you want to be because, let’s say that you think cell phones are going to do really well or you think China and Asia are going to industrialize. Well, that’s what the play is with silver. Silver is in all these different components that we use every day. It’s in computers, it’s in cellphones, it’s a catalyst for medicine, it’s in the windows for skyscrapers, so if you believe Asia is going to continue to industrialize, we are using so much silver.

Really the supply and the demand is the most bullish factor for silver. If you look at 50 years ago, above ground available silver was ten billion ounces. We have shrunk that within 50 years down to less than a billion ounces of above ground available silver.

Jason Hartman: That’s amazing. It really is.

Gerard: Yeah and we’ve already started to see that there silver tighten up, and we definitely believe that there could be a major squeeze in the near future. And that’s why we tried to expose it in Melt Up and we hope that many people out there see Melt Up and can help spread the word, and the more that we expose it I think the closer we’ll become to seeing that squeeze.

Jason Hartman: I agree with you. This is just such a big scam, and so few people are really aware of what is going on with the ultimate weapon against them, and that is the value of their currency. So in what form would you buy silver? Silver eagles? Is that your favorite?

Daniel: Personally I don’t think it matters. I personally just buy silver bullion or silver mining stocks. But one thing I can tell you what not to do, is don’t get into the collector value. Don’t start paying 200 dollars an ounce for a silver coin because it was on some ship. You want to buy the metal.

Jason Hartman: Right, the bullion.

Gerard: And the first quarter of 2010, the US Mint sold over nine million American silver eagles, just so you know.

Jason Hartman: Incredible. So there hasn’t been much talk about this, but I have read and heard a

little bit about it. And that is the possibility that the COMEX exchange is a Ponzi scheme. And I tell you, if that is true, boy we are in for a very rude awakening. A lot of people think they’re investing in the metals because they own it in a fund and an ATF, but that’s really to me just another fiat currency. They’re getting a piece of paper for their dollars, and they think it’s a piece of metal yet they’re not taking delivery of it. So I like your system which I think boils down to physical delivery and mining stocks. So if you’re into metal, you hold the metal. Have you heard anything about that in terms of the COMEX?

Gerard: Yes we have, and that’s the main reason why we’ve said I think there will come a time where people will call and ask for the physical silver and we could see a COMEX default. We definitely suggest like you said, to buy it yourself, hold onto it yourself, many of those companies that sell it are on our website. And we definitely believe in a lot of the minors. Right now there’s a lot of silver minors out there that we are researching and that we’ve also suggested that are on our website that are significantly undervalued fundamentally.

And we definitely think there’s a huge opportunity there. And again, once that COMEX default happens and people call for their actual physical silver, we can see one of the biggest short squeezes that the world has ever seen.

Jason Hartman: Yeah, I tell ya, if everybody asked and that run on the bank, if you will, on the COMEX ever occurs and people want to take delivery, I don’t think they have all the metal there. I think that is a very strong possibility that that is true. But again, there’s no way for me to personally know. What do you think about the other metals? What do you think about copper, palladium, platinum… do you guys have any thoughts about that or are you just kind of all-around silver?

Daniel: Well, I personally would sound like a broken record because I don’t buy the other metals as much because every argument you can make for platinum or copper, that same argument is there for silver. Only times a hundred. It’s just like the same argument you can make for gold. It’s all there in silver. But it’s not vice versa. I cannot make all the arguments that I can make for silver, for gold. I certainly can’t make all the arguments I can make for silver for copper and platinum. So when it comes to the smaller investor, I believe silver is without a doubt their best opportunity.

Jason Hartman: Okay good. What would you like people to know and do? Just kind of summing this whole thing up. Definitely people have got to see the documentary you’ve created, Melt Up, which is great – I can highly recommend that myself. What else should people know? You know what I want to know? When. That’s the million dollar question everybody wants to know.

Gerard: Everybody really needs to start paying attention and educating themselves, and that’s the reason why we’ve created NIA is to help educate people. People need to get educated, people need to start spreading the word to their friends and family, people need to start watching documentaries like Melt Up and they really need to start looking at the facts and not following the mainstream media. So, the first thing is basically I think people should go to inflation.us, they should sign up, they should sign up to many other publications out there and start following people that we also believe in like Ron Paul and Peter Schiff and Jim Rogers, and obviously we’ve had an exclusive interview recently with Gerald Celente ,which was great.

Jason Hartman: Had him on the show too, he’s great.

Gerard: Yeah, he’s great and we suggest checking out the Trans Institute. And we definitely think that people need to start getting out of the US dollar and positioning themselves into gold and silver and things that will preserve their purchasing power. But most importantly, we want people to start getting educated.

Jason Hartman: Very good advice. Well, thank you so much gentlemen for joining us today. I really appreciate it, and I want to just tell you to keep up the good work. Give out the website if you would.

Daniel: www.inflation.us

Jason Hartman: Inflation.us, everybody go check that out. Daniel and Gerard thank you for joining me today.

Daniel: Thank you for having us on.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation, which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation, and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by the Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email media@HartmanMedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

The American Monetary Association Show

Transcribed by Ralph

The post AMA 34 – The National Inflation Association appeared first on americanmonetaryassociation.org.

Mar 11 2012

33mins

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Rank #8: AMA 33 – Mark Kohler – Exiting A Bad Property

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Jason explores some ways to get out of a bad property then he interviews author/attorney Mark Kohler about his book “Lawyers Are Liars: The Truth About Protecting Our Assets.” 

Mark is an attorney, CPA and entrepreneur who has owned numerous businesses since high school, through college and even as a professional. Mark’s principal career has been as a partner in the law firm Kyler, Kohler, Ostermiller, & Sorensen, LLP. He specializes in the areas of business, estate and tax planning. Mark owns several commercial real estate projects and loves the people, transactions, and everything to do with real estate. You will be pleasantly surprised at how exciting and interesting a discussion regarding tax and legal planning can be. Jason and Mark will distill complex legal and tax strategies to common layperson terms, adding interesting stories and anecdotes.

Some lawyers, and others who are not lawyers, use fear tactics to sell the unsuspecting public various asset protection structures or strategies that are outright lies. Until now, no other professional has been willing to call out the frauds and cheats in this powerful industry where self-professed experts and do-it-yourself hacks wreak havoc on the innocent just wanting to protect their assets. This episode we will expose the liars. Undoubtedly, this book will become a desktop resource for not only the average middle income American wanting to protect his or her assets, but attorneys, estate planners and financial professionals guiding their clients through this complex area of the law. Learn the best kept secrets in asset protection planning, learn the truth about Nevada corporations, off-shore planning, land trusts and all of the so called silver bullet strategies!

The post AMA 33 – Mark Kohler – Exiting A Bad Property appeared first on americanmonetaryassociation.org.

Feb 06 2012

51mins

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Rank #9: AMA 32 Diane Kennedy, CPA: How To Save On Life’s Largest Expense

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Most of us spend lots of time shopping around for the best deal on the things we buy while spending more money on taxes than anything else.

Why not “shop around” to save money on life’s single largest expense? Join Jason as he talks with famed CPA, Diane Kennedy, about the tax strategies of wealthy real estate investors and business people.

Diane Kennedy, a preeminent tax strategist, is the founder of USTaxAid Services, a leading tax firm that works with clients throughout the U.S. and founder of TaxLoopholes, an award-winning online tax education site. Diane is the author of The Wall Street Journal and Business Week bestsellers, Loopholes of the Rich and Real Estate Loopholes, and co-author of The Insider’s Guide To Real Estate Investing Loopholes, The Insider’s Guide to Making Money in Real Estate, The Insider’s Guide to Tax Free Real Estate Investing and Tax Loopholes for eBay® Sellers.

The post AMA 32 Diane Kennedy, CPA: How To Save On Life’s Largest Expense appeared first on americanmonetaryassociation.org.

Dec 21 2011

34mins

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Rank #10: AMA 31 – John Stapleford: Ethics & Public Policy – Part 2

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No, the above title is not a typo. According this week’s guest John Stapleford, it is possible for ethics and public policy to have a direct correlation.

Stapleford is not only a senior economist for Moody’s Economy.com, professor emeritus of economic development at Eastern University and former director of the University of Delaware’s Bureau of Economic Research but is also the well-known author of Bulls, Bears & Golden Calves.

This book provides clear guidance for identifying and discussing important ethical issues connected to an economy’s organization and public policy issues from a faith-based foundation. Tune in to this two-part series and discover the crucial reasons why the study of economics should not be disconnected from ethical concerns.

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at AmericanMonetaryAssociation.org or the website for the foundation which is JasonHartmanFoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.


Start of Part 2 of Interview with John Stapleford

Jason Hartman: Kind of wrap up on the real estate market if you would, and I want to talk about your latest book. What are your thoughts on any particularly more attractive markets? I know there are a lot of unattractive markets for sure. You’re talking about migration flows and so forth.

John Stapleford: First of all, it’s going to be a long crawl back for regional housing prices. And the prices will still decline through most of the 2000s and then will turn around and start to rebound. But the rebound will take a good long while. Probably by 2010 the decline in prices across the United States will have been around 40%. But right now it’s at about around 25%.

Jason Hartman: Yeah, and I kind of personally see California declining about another 10% or so. Where do you think these declines will be worse? Will they be in the expensive markets, will they be in the over speculated markets?

John Stapleford: You had mentioned before that California, Florida, New York, Nevada, Arizona, those are the worst. The most modest declines have been kind of in the energy belt, the rocky mountains, Texas, Oklahoma, and Dakota and Montana. Actually, Louisiana. Anywhere where they have energy that they can get an economy that can still counter what’s going on. Actually the north east, like New York there was a lot of aggressive speculation, and in Massachusetts. But Pennsylvania wasn’t that bad. And Ohio wasn’t that bad. West Virginia wasn’t that bad.

So the downturn in those states is more modest, so the recovery should be a little quicker. Over all we think the last to climb out will be Florida and Arizona, and Nevada where they had the most aggressive speculative spending. New York has been hit by the whole financial industry front. Even that is more, you mentioned this earlier and it’s a really good point, that’s more been in terms of wages than it has been in point. The number of jobs in the financial industry, the loss there is nowhere close to the loss of wages and compensation.

California, the fact that you started in so early into this decline, we think it means that in fact, the downturn is trying to play out relatively swiftly. You’re already well into the foreclosure process. And when you look at income trends, and you look at how much the prices have fallen, in fact a lot of the housing is undervalued. The areas of the country, besides the North East and stable Pennsylvania, Washington, Oregon, Utah, they have relatively good economies. The areas that have fared the best have been Texas, maybe Oklahoma. And Texas and New Hampshire actually, which is interesting.

Jason Hartman: That’s kind of an oddball in there, yeah.

John Stapleford: Well yeah, and they’re kind of the oddball in the whole North East but they have the lowest state and local tax burden in the United States. And Texas is not far behind. Texas of course has the severance tax on oil to prop them up and keep taxes low, and they have probably the most free markets out of government regulation in those two states. So their economies have not taken as big a hit, and their housing market is going to come out we think a little faster. So it’s definitely, as you had started out saying, it’s definitely location specific. And it depends on the factors of that conceptual framework that we talked about. But things are starting to turn, and housing prices are starting to go up because there are so many bargains out there that there are people who are willing to consider buying, not at the high end of course.

Jason Hartman: On the bread and butter end. One thing that you didn’t mention, Tuesday, it’s the mid-Atlantic area, the Carolinas, North and South. Any thoughts on those?

John Stapleford: Okay, again that could be sort of location specific. Because South Carolina, not bad. North Carolina, worse than South Carolina but overall not as bad as the nation. Now Charlotte right now is a disaster because…

Jason Hartman: Due to banking.

John Stapleford: Wachovia and financial services. And again it’s that conceptual framework. When you stand back and you look at those states, the growth in the United States in the metropolitan areas have been growing over the last 25 years, have been metropolitan areas with higher temperatures.

So you look at North Carolina and South Carolina, do they have high quality of life in terms of temperature, air quality, relatively low cost land because most of those two states is undeveloped, yeah they do. And so over the long haul, do they have some real competitive advantages? Yes and with air conditioning and other telecommunications and so forth, also now you can locate your corporate headquarters there and you’ll be hardly disadvantaged. So in looking at those two states, South Carolina is doing better than North Carolina. Neither one of them has had the peak to drop decline that we’ve had throughout most of the nation.

Jason Hartman: I’m sort of surprised. We’re getting kind of interested in Phoenix again, and we haven’t looked at that market for about 4 years. I think our timing was pretty good. But prices have been cut in half, it’s cheaper to own a house in Phoenix than it is to rent the same house. It seems like Phoenix is getting pretty interested. Am I wrong on that?

John Stapleford: The question in my mind with regards to Phoenix is, is their growth rate going to be positive but at a decreasing rate? And I say that because they’ve grown so rapidly that I think they’re going to hit that minor brick wall. I don’t know if it’s minor or not, but that brick wall that fast growing areas do, which is congestion, crowded labor markets, rising prices on everything, higher levels of inflation. They have a cost of living that’s about 9% above the nation, and part of that is just because they were growing so quickly, cost of doing business is not bad.

But housing markets, they’re overbuilt. So it’s going to take a while for the inventory to go down. They have a concentration of course in aerospace, and that industry has kind of leveled off. They do have a lot of computer and electronics manufacturing but that has actually been in decline. They have a mortgage delinquency rate that’s higher than the nation that will have to be worked out. So I’m sure they have some mortgage resets that are still coming.

So yeah, they’ve been a high performing in the metropolitan area. But I think they’ve taken a larger hit than most areas of the country and right now, same things are happening other places where housing prices are starting to cause a turnaround in housing sales. But will it lead to a housing permit quickly? I don’t think so. With the low cost of doing business, they still are going to be attracted to businesses in Southern California. So our outlook for Phoenix is that over the longer haul, the entrenched tech industries and solid demographic trends will drive above average growth. But it won’t be the boom growth that you had during the last recession until the current recession. It won’t be at that level. It will be more in line with the growth rates overall in the United States.

Jason Hartman: One of the things we talked about on this show, and I know we’re going to build on here, I do want to get in some stuff about your book and maybe we can have you back on to talk about it in detail because it’s so interesting, but one of the things when you look at governmental policy, I heard just last week that Phoenix or not Phoenix, but Arizona passed a new bill. The attempt is to dis-incentivize foreclosures and make people hang onto their properties now that they’ve gotten much cheaper.

And they’ve done something with deficiencies saying that if you go into foreclosure, and of course there’s going to be a big deficiency probably, the lender can go after you. I think they’ve made it easier for the lender. I know that they can do that in multiple states, and judicial foreclosures and so forth. But that was just kind of an interesting point I wanted to bring up that may stem the tide of foreclosures a little bit there, I’m not sure.

John Stapleford: We’re seeing that the peak in the migration to Phoenix was when the population of Phoenix was about 4.3 million. And in 2006 they had net in migration of around 124 thousand. They’re running right now around 49 thousand. That is for 2009. So we see that net in migration picking back up for all kinds of reasons, including retirees and businesses moving from Southern California. So when you look at that you say okay, net in migration is going to pick up which is going to continue to drive the demand for housing. For a lender it really would make sense to hold onto a property as opposed to just bailing out completely on the property. So what they’re trying to do today in fact makes sense even from the self-interest standpoint of the people who hold the mortgages.

Jason Hartman: Okay, let’s talk about your book for a moment here. This is an interesting book. Your latest book is entitled Bulls, Bears and Golden Calves: Applying Christian Ethics in Economics. And you really mentioned some really interesting things here, just looking at one of your editorial reviews about how ethics are intertwined with economic and life analysis. Possibilities and perils of economic growth, the role of government. We’ve touched on some of these things. The growth of work and the loss of leisure. Lending and borrowing. Poverty and distributive justice. Environmental stewardship. Business and social responsibility. Legalized gambling. The pornography industry. Debt relief for less developed countries, economics of immigration, and population control. That’s a lot. There’s a lot in there. Tell us about the book.

John Stapleford: When you go back to Adam Smith, and he actually wrote two books. The first one was sort of a philosophy book and then he wrote Wealth of Nations.

Jason Hartman: The famous one.

John Stapleford: The famous one. And in his first book, The Theory of Moral Sentiments he actually said you know, when people come before God they’re going to have a tough time because most of us don’t live lives that are all that commendable. And that’s the basis for him going on to say, not all people but most people act in a self-interested way. Which is a Judeo-Christian element as well, that people are fallen. Well, Adam Smith says okay, given that, how do you turn that so people won’t destroy each other when in fact you could promote social welfare? You can promote the social good, given that reality of self-interested behavior.

He said well, the first thing is competition. The only reason that the 711 doesn’t charge you $40 for a Slurpee is because there’s other 711s and there’s other places like Dunkin Donuts now that give you something similar to a Slurpee. In other words, competition forces prices down. So that’s number one. Number two, you have a judiciary system that forces contracts and it kind of holds down abusive behavior. Number three you have private property rights, which is an incentive for people to be good stewards of their resources. So you have this combination of things that will work, that steer self-interested behavior into a way that in fact is positive for society.

But he also says you have to have some degree of moral consensus. The court system can’t do it all, and competition can’t do it all. If people don’t agree that child pornography is a bad thing you’re going to destroy your society. So he recognizes that there’s a need for some agreement on basic values like honesty. If you don’t have some amount of moral consensus, transaction cost goes sky high. Even though the courts will enforce a contract, it takes two or three years. In developing countries you can’t get a contract enforced because the courts are weak and they’re also corrupt. So if you don’t have some amount of moral consensus nobody’s going to trust anybody, and it’s very hard for an economy to function, particularly a market economy.

So taking a step further, our things has set things up in such a way that free markets and economies will function more efficiently if in fact people recognize natural law, recognize God’s law, recognize God’s law. So that was one of the compelling questions. Is in fact our free markets more viable in the context of Judeo-Christian ethics?

Jason Hartman: I would say they are because if you can’t trust the other party, it’s just too hard to hold them accountable. I always say the end result is the legal system. That’s the last step anybody ever wants to take. God forbid, you have to do it sometimes but it’s never profitable.

John Stapleford: It profits the lawyers.

Jason Hartman: Well, yeah but I’m not looking to profit the lawyers – I’m looking to profit myself! See? The invisible hand: self-interest. What is the alternative though? Are you comparing it to countries where people have less of an ethical context by which they govern their interactions just on an individual level? And like you mentioned before, a court system, a legal system that isn’t transparent, it’s more corrupt and inaccessible in many countries.

John Stapleford: Right. The Judeo-Christian position is that God’s laws have been revealed to everyone. So everyone down deep in their heart realizes that cheating and taking advantage of other people are really against God’s will. Now, the Judeo-Christian ethics also says the longer you violate God’s will, those natural laws, the easier it becomes. You can get hardened.

Jason Hartman: Like a moral relativism sort of evolves within an individual.

John Stapleford: The interesting thing in developing countries with regards to corruption is that in developing countries where you have a better flow of information, there’s less corruption. In developing countries where you have more newspapers, where you have more landline phones, more cellphones, more internet connection. In fact the level of corruption goes down. Corruption is measured by… there’s a corruption perception index put out by Transparency International. And this is statistically significant. I’ve looked at it. So what does that say? It says once somebody can find out that you’re being corrupt, you’re less likely to be corrupt.

It also confirms Adam Smith. Because for example now with cellphones, people leave the coast of India from the towns and villages, they go out in their wooden boats and they catch fish. They used to come back into the fish market and they would take whatever price they were offered. Now, the catch the fish, they get on their cellphones and they call four or five fish markets and they find out what price they can get for this, that and the other and that’s where they go. Part of this increase in communication is breaking down bottlenecks and monopolies. But part of it too is just putting the light of day on practices that people feel pretty embarrassed about once they’re caught. I’m sure Madoff isn’t delighted about what he’s done over this life now that he’s been caught. That is the tie-in.

In countries like Venezuela where it’s a totally centralized power and resources are allocated on the basis of who Chavez likes, and he doesn’t like. Economy breaks down, they’ve got the worst economy in Latin America. They’re actually starting to approach the African economies in terms of their standard of living. A coercive system like that just doesn’t function as well as the system where people are given freedom and freedom of choice. The interesting thing is Jason, when you go back to the garden of Eden… in the garden of Eden God gave men and women free choice. In the book you’re looking again and again at how well do these Judeo-Christian ethics function in particularly with regards to different market activity.

Jason Hartman: That’s a fascinating topic to take on. Few economists have approached it from that angle, I would have to say, at least not that I know of. One of the things that’s interesting about the communication aspect, shining light on people committing bad deeds… you look at the internet, and you look at something like eBay, which I think is really ingenious and so many other websites are using that type of model. You look at Amazon.com. I can go on Amazon.com, I look up your book if it’s a piece of junk, I’m going to look at the reviews. Knowing in looking at the reviews of a seller on eBay or a publisher of a book, that some of the reviews will be fake, take everything with a grain of salt.

You go online and you look at websites like rip off report. Everybody’s got some unhappy client out there somewhere or a competitor that is making false statements about them, but by and large I think as long as people are intelligent and they try to kind of sort in their own mind the wheat from the chaff, these things are great tools, aren’t they?

John Stapleford: Well Jason, I especially appreciate investigative reporting.

Jason Hartman: John Stossel.

John Stapleford: Yeah, and when Dan Rather came out with a condemnation of George Bush and these documents, within 15 minutes…

Jason Hartman: The bloggers got him.

John Stapleford: The bloggers said oh, these are off of typewriters that didn’t exist at the time that this document was written.

Jason Hartman: I know, that was great.

John Stapleford: Bang. And it just blew away the whole thing, and last night they came out with the information that Mary Mapes, the producer, actually knew that George Bush had volunteered for Vietnam in 1970. But the point is that as you were saying with the internet, so many people can quickly look at something, and it doesn’t matter whether it’s conservative or liberal.

There was something about Obama having a press conference or a town hall in Bozeman, Montana that we got that really was very, very critical of the president. And my wife looked it up, she couldn’t find it in the papers. She went to a number of these sites, like urban legend type sites and they say, yeah, this may be a little bit hokey. It’s terrific that the information exchange is so… but as you say, you have to be cautious. Take everything initially with a grain of salt. Don’t overreact to it. Back it up by looking at multiple sources of information.

The information is reducing the amount of discrimination, reducing the amount of oppression. Even what went on in Iran during this last election.

Jason Hartman: Oh yeah, Twitter could have saved the country. Unfortunately it didn’t quite work out, but… it was great to have it there.

John Stapleford: The whole world knows now that this is a sham. This government in Iran is a sham. So it really is terrific. So you asked the question in the case of Iran, do they realize that disadvantaging women is really not something that is in accordance with God? I think they do, because they’re so defensive of it. And the more the word leaks out that they’re beating the heck out of their wives…

Jason Hartman: The stonings and all this crazy stuff.

John Stapleford: All the stuff, yeah, the more embarrassed that they become the more likely that things will change in a more positive direction.

Jason Hartman: Yeah, that’s the great hope for humanity is that economic and informational freedom will really solve many, many of the world’s problems.

John Stapleford: Many of the economists, particularly Milton Friedman and his wife, they always felt that economic freedom was essential for political freedom. You just couldn’t have one without the other.

Jason Hartman: And that’s why I am very much in favor of a smaller government. It just seems like everything the government gets into either mucks it up over bureaucratic stupidity or corruption or some unintended consequence. I just think the whole thing is, just make the government smaller. We all have our complaints about it. Make it do the basics to protect our freedoms, to provide the basic foundational things that the founding fathers of our country wanted it to provide, and not get into all of these other things.

I mean, it’s just every time something is done like this health care debate that’s raging on right now, I don’t know, let’s just look at the health care in the VA hospitals. Let’s look at the efficiency level of the department of motor vehicles. Let’s look at the management of our social security system. No one would look at those as good examples.

John Stapleford: You’re actually right Jason, and this argument goes back further than Adam Smith, but there are certain functions like roads and stop signs and national defense, and bridges, that require some amount of liberty be given over to government. And there’s no question of that. Has it gotten out of hand? Oh my gosh…

Jason Hartman: It sure has.

John Stapleford: I think you’re absolutely right that it’s gotten out of hand. And the only thing that you can think of doing that’s effective is just reducing the size of the whole thing rather than arguing over the merits of…

Jason Hartman: This or that. Just make it smaller.

John Stapleford: Yeah, just reduce the size of the whole thing and that’s the only way to get back to some common sense.

Jason Hartman: The power grabs and the corruption, they’ll still be there, they’ll just be smaller and they’re have less impact. And that’s why you just make the government smaller, you solve a million problems.

John Stapleford: But you may have seen, I think it’s on YouTube, on the John Murtha Airport…

Jason Hartman: No.

John Stapleford: John Murtha Airport which is near Johnstown in the middle of Pennsylvania. And 150 million dollars have been put into it. They just got stimulus money to repair a runway. They have one runway that will accommodate any plane in the world, it’s so big. They have three flights a day out of there. All three are to Washington DC. Each one subsidizes the passenger’s tickets 100 dollars a ticket. They probably have 20 passengers a day.

Jason Hartman: Wow. It’s another Amtrak.

John Stapleford: Would a market economy have put an airport there? And the people who live there they interviewed say oh I love it. No parking problems are great.

Jason Hartman: Sure you do! There’s 20 people on the plane. Great!

John Stapleford: But that’s what comes when you have coercive power and resources coming out of the centralized source. You get a crazy thing like that. And for every John Murtha I’m sure there’s somebody in congress who’s a wonderful person and a forthright person. But once you centralize power like that and let somebody be able to grab money like that, you’re going to have somebody who’s not a good egg.

Jason Hartman: Yeah, no question about it. The central planning has never worked and it doesn’t work anywhere on the planet, it hasn’t worked anywhere in history, there’s no example of success that any of the proponents of it can give. When you ask them that, they just can’t come up with an example.

John Stapleford: And my feeling is, there are economists who are very much in favor of the stimulus package, and who in fact favor another stimulus. And to me, in talking to them, what they didn’t get is that you are going to lose freedom and liberty when government gets larger. And that’s not a damp in innovation and entrepreneurship. They didn’t understand the political economy. They just said, oh there’s the government multiplier, and the government chucks a couple trillion dollars out there, we’re going to get the multiplier 1.8 or whatever it might be. But you obviously grasp that. I think what’s showing up in these town hall meetings, the frustration is people see their lives being diminished because government is getting bigger.

Jason Hartman: Well, that leads me to my last question for you. And I think, of course it stifles innovation, entrepreneurship and all this stuff you just mentioned. It also I think has a devastating effect on the value of money. And I see a lot of inflation coming down the pike, maybe 18 months, two years away. I think we’re going to start seeing it. What do you think?

John Stapleford: I agree with you. We’re not in the majority. There’s a minority in the Federal Reserve and a lot of other economists that agree with you as well. But I’m in your camp.

Jason Hartman: What is that going to look like for people?

John Stapleford: I think we’re going to have a Jimi Carter economy. Because we already know that it’s going to take about four years… it’s going to take until 2014 for the national unemployment rate to get back down to between five and six percent. So in 2010, 2011 we already know we’re going to have high unemployment, 8%, 9%. And I think we’re going to have rising prices for the reasons that we talked about before. And just as you think we’re going to have. And that’s the Jimi Carter economy.

Jason Hartman: I agree. So investors need to concentrate on protecting themselves from inflation. We talk a lot about that on the show. We won’t bother getting into it now because I have kept you way too long! You are very interested John.

John Stapleford: Oh it was fun. It was fun talking to you. You really have a great deal of knowledge about a lot of things with regards to economics. So I think your listeners do well by tuning in to hear you. I don’t know about your guests, but…

Jason Hartman: Oh well, I love my guests too. John, thank you so much for joining us today. It’s been very enlightening. Bulls, Bears and Golden Calves available on Amazon.com and I assume in all the major bookstores, right?

John Stapleford: Right and it’s actually on Kindle.

Jason Hartman: Yes! I have my Kindle and I love my Kindle.

John Stapleford: Yeah, and for those people who are interested, there’s actually an addition of it that’s in Korean.

Jason Hartman: Well, fantastic. So for our Korean listeners.

John Stapleford: When I have to send a free copy to people I send them the Korean one.

Jason Hartman: Well you sent me the real one, so I appreciate it. Or the English version I should say. What other websites would you like to give out? Of course economy.com, I’m sure?

John Stapleford: Really, people are so internet savvy that I don’t have… economy.com is for people who are really interested in staying on top of what’s going on in the national level and then if they want to at the state or local level, economy.com our [0:27:08.2] website I think is just terrific. I enjoy it myself, so…

Jason Hartman: And that’s how we found you. Because I saw you quoted somewhere representing economy.com. And I’m glad I had you on the show. Well John, thank you so much for joining us today, I really appreciate it and we’ll let you go. Thanks for staying long!

John Stapleford: Okay Jason. Have a good day. Bye now.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by The Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email media@HartmanMedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

Transcribed by Ralph

The American Monetary Association Team

The post AMA 31 – John Stapleford: Ethics & Public Policy – Part 2 appeared first on americanmonetaryassociation.org.

Nov 20 2011

28mins

Play