1351 FBF: Long-Term Tenants, Rent Increases & What Taylor Swift, Uber, and Robots Tell Us About Money with John Tamny

Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now, here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating Wealth show, episode 10031003. Boy, those are high numbers. Thank you for listening all this time. This is your host, Jason Hartman and I'm coming to you today from Philadelphia. We just held our Creating wealth seminar, the only one we plan to do this year, yesterday here in Philadelphia. Thanks to all of you who came out for that. That was a fantast and we got such positive feedback on it. So thank you so much for joining us. It's always great to do that. Every one of those events is different even though they have the same basic structure and outline. You know me, I'm the king of the tangents, right? So I always go on a tangent or a rant about something. So anyway, I'm glad you enjoy those. And I surveyed, since we just passed the 1000th episode, I surveyed the audience and about 25% of the audience said they listened to over 2500 episodes. So wow, this show must be interesting to at least some of you to listen to that many episodes. Thank you for doing that. But one person in the room and I know there are others out there, some of you listening. And please, by the way, if you are one of those people that I'm about to mention, contact me and let me know what you think@jason hartman.com ask jason hartman.com ask because I'd love to have you raise your hands, mention you on the show and know who you are and know your feedback if you have listened to all 1002 to this time. Episodes. 1000 episodes. And Mike in the audience here in Philadelphia yesterday listened to all 1000 episodes. So, Mike, thank you for listening for so long and we really appreciate it. We had a father, daughter. The daughter was here at the event and she listens to a lot of the episodes and her dad listens to all of them and they brainstorm about them together. So I thank you all so much for being such loyal listeners and for also telling your friends, your associates, and even your enemies about the show because they need to know, too. You know the old saying, I think it was Abe Lincoln, keep your friends close and your enemies closer. Right. Today we saw the Barnes Collection, which is this amazing collection, a private collection of impressionist art here at the Barnes foundation in Philadelphia. And there's a big controversy surrounding this incredible multi, multi billion dollar, that's billion with a B dollar private collection of impressionist art. Really an incredible thing. If you want to know more about that, watch the Netflix documentary entitled the Art of the Steel. Well, it's not a Netflix documentary necessarily, but it's on Netflix. I don't know, maybe it is a Netflix. Whatever. Anyway, the Art of the Steel is the name of it. I saw that and I thought I've got to come and see this collection of impressionist art. It's incredible. Incredible. So we just finished that and we're going to relax for go to dinner. But I've got a couple of our attendees here from yesterday that wanted to share a few comments. And today, by the way, we have a fantastic guest. Remember I told you last week I had a really good interview? Well, this is it. You're going to hear it today where we are going to talk about a really unique new idea as to how to solve recessions and cycles in the economy. This guest today, who wrote a book about the Fed and several other books as well about robotics products and automation. We're going to dig in some some really good stuff with our guest today. So you're going to like this interview a lot. I really enjoyed this guest. So he'll be coming up in a few minutes. But some of our attendees from yesterday are here. One of them is Nate and the other is my mom, who's been on the show before and shared some of her thoughts yesterday at the Creating wealth seminar about self management and about preventing tenant turnover, keeping your tenants for a long time because you know that the tenant turnover is an expensive thing. You want to keep your 10 for a long time, but don't keep them for too long because if you keep them for too long, that might be a sign that your rent is too low. So remember the old adage that I've talked about, you know, you gotta raise the price until the demand falls off. In other words, till you have some degree of vacancy, a palatable degree, but not too much. So that's always a balancing act there. But first, one of our new attendees who hadn't attended any of our events before is Nate. And he's here and he just wanted to share a few thoughts about the event. What did you think, Nate?

Jason, thanks so much for having me. I thought the event was amazing. I thought that I knew a lot about real estate. But coming to your seminar, I realized there's a lot of things that I don't know. And one thing that you did, besides teach me a lot about real estate, is you inspired me to look beyond where I live and to, you know, kind of shrink down the world and make it smaller so that I can invest in places that are further away and get better returns. So I really appreciate that and I'm excited to be here this weekend. And again, for me and from all the people I heard there, thanks for doing these events because they're great.

Yeah, thank you so much, Nate. I really appreciate it and I'm glad you attended. And then you will be with us next weekend as well in New York City for the Venture alliance event. You got the big public seminar and then you'll be at the smaller Mastermind group next weekend. Any thoughts about this coming weekend in New York City?

What comes to mind is the amazing people that are going to be at that event. So I'm excited to just be around and listen and again learn from people who are high level achievers and the areas of life that they're working in. So basically I'm really excited for the people that I'm going to meet there.

Good stuff. Well, thanks a lot for joining us and thanks for sharing some of your thoughts about the event. And we had a couple people there yesterday that shared some thoughts about the event with our videographer, Ben, who came out and videotaped. He came down from Baltimore. He actually works for one of the Agora financial companies. So you've heard many of the Agora Financial guests on the show over the years, including my very favorite financial writer. Even though I disagree with him about the solution, most of these Agora guys, I, I don't agree with their solution, but I love their analysis on things. You know, they're all generally kind of gold bugs and stuff like that. And I'm definitely not a gold bug and I'm not a cryptocurrency bug either. But they do have some interesting thoughts. And I love Bill Bonner's writing. He, of course, is one of the Agora or the Agora Financial founder. And he's been on the show before.

Before.

So we'll get him back. He just has a great way of writing about stuff and I just love. I love his style. So that's good. Yeah. So we'll share those later on a future episode, some of those comments and maybe some tape. Well, not tape, but, you know, digital audio files from the event yesterday on the show in the future, just so you can get a sampling of that. Also, my mom was there. She doesn't come to many events, but she's been to several over the years, you know, but not many lately. And mom, welcome back on the show. You've been on a few times before. So what did you think about yesterday?

Oh, I enjoyed the seminar very much. I had never attended your actual Creating World seminar.

Oh, you haven't been to that?

No, no. That was brand new for me. And I also enjoyed the providers from Ohio. Yeah. The local market specialists from Dayton, Ohio, and from Florida. So it was very interesting and, and it was great to meet all of the attendees from Philadelphia.

Yeah, there were a lot of people from Philadelphia. We had quite a few people from like New Hampshire and then Minnesota obviously was representing pretty heavily at this event too, which was kind of interesting. People from all over. But, you know, this was our first event in the northeastern United States. Well, I take that back. We did a Venture Alliance Mastermind event a few years back in Newport, Rhode island, and saw the Newport, Rhode island mansions and stuff. But this was our first sort of public seminar up here. So it was kind of fun to do it. And you know, Philadelphia, I haven't been to Philadelphia in a long, long time. So it's good to be back here. And the sun is out now. It was raining yesterday and the day before a little bit, but it's beautiful weather now. So we're gonna go to dinner at a beautiful rooftop restaurant. That ought to be fun. But do you want to share any thoughts though, about tenant turnover and keeping your tenants? Just some practical advice for our listeners. Just really quickly about that. I know you shared some great stuff yesterday in the seminar just about self management. You know, I give you a hard time about being the extreme do it yourselfer. But I tell you, folks, I am more and more, as you listeners know, recommending self management of your properties because it's so easy to do nowadays with some of the technologies and tools available to you. And and you can do it from a long distance, which is a great, great thing. But I don't know, I'm kind of putting you on the spot. But do you have any quick thoughts about that you want to share?

You have heard about this tenant, Toodaloo? Yeah, the long term tenant.

We gotta explain that to the listeners. So my mom was on the show before and we did this, we did this episode where she shared her longest staying tenant who's been in a property of hers, a rental property, since 1989. Now just note how long ago that was. That was right around the time the Soviet Union collapsed. Okay, so. And the cold war ended. So, you know, that's a long time ago, folks. Anyway, this tenant is a truck driver. But you know, I ask you, I mean, that's a long running tenant. My longest tenant ever stayed nine years. And interestingly, that was a property I self managed. I kept the tenant a long time. So for some reason, you know, it seems that some of these property manager properties have more turnover. Now I don't know if there's a specific reason or conspiracy behind that, but I just know that it's happening. So some of your tips, mom, on long term tenant retention, but you also raise the rent every year, right? Talk about that a little bit.

Yes, it's just simply much more profitable to keep a tenant in your property for a long period of time. Number one, they begin to treat it like their own home. And instead of bothering you for little fix it items and you're having to pay for them or hire someone to do them, the tenant ends up doing most of that himself. I just can't recommend that you keep tenants for a long term.

Well, you can recommend it. You mean you recommend it. Well, that's what you meant to say.

Yes, I recommend it highly. That you try very hard to keep those tenants on a long term basis. But you must not forget to raise their rent each year, even though it is only a token amount of $25. This is part of your training that tenant to expect that there will be yearly increases.

Okay, good. So you raise rents. That's your policy. You always raise rents every year. Is that pretty much the deal? And you raise it about 25 bucks. Now there's a. I've talked about that philosophy many times. Okay, calm down. She's motioning at me, folks. I know you can't see that, but she's. I want to talk. Hang on, mom. Okay. One of the philosophies I've shared with you over the years, listeners, is that you Raise the rent, you know, and it depends on the price of the property, the amount of rent you're charging. Of course the base rent is relative to the rent increase obviously. But you know, if it's a thousand dollar property or a fifteen hundred dollar a month property and you raise the rent 25 or $50, whatever it is, even if it's a token amount, it's not worth moving for such a small amount of money, right? It's just enough to increase your yield, but not enough to get the tenant to move away. Now rent increases, talk about that on a kind of a maybe a percentage basis if you can, rather than a dollar amount, it's more relevant.

Okay, sometimes I will just figure the rent at 4% and if the tenant is really right, at the maximum, a 4% increase. A 4% increase. And if the tenant is at the maximum rent for that area, Simply give a $25 increase because that's part of letting that tenant know that they will have yearly increases and not have a fit once you increase the rent.

So you're kind of training them to expect that. Now I'm curious, do you charge pet rent? I don't know if I've ever had this conversation with you mom, but I am really recommending and hey, I love animals, I have a dog. I huge fan of animals, right? But I think that all regular single family home independent landlords need to get in the habit of following what the institutional landlords in apartment complexes are doing and charging pet rent. People will pay $25 or $30 a month per pet. And it's magic the way that increases your yield. I mean think about it folks, that's $360 a year if it's 30 bucks a month, right? That's a significant increase in your yield that someone will barely notice.

Yes, I charged pet rent of it was either 25 or $30. Right now I don't have anyone I know about that has pets, so that doesn't apply. But I have charged it and they seemed accepting of it.

I remember I had a tenant once in one of my properties that I was self managed managing and he had two dogs there. Didn't tell me about either of them but I caught him and because the neighbor told me actually and then I just back charged him for all the pet rent and he was happy to pay it. It was like no problem. He was happy I didn't kick him out, I think so for violating a covenant of the lease. So yeah. And by the way, let me just address that for a Minute, because someone asked me about that question last week, the lease. You know, everyone knows that you can kick someone out of a property, you can evict them for not paying the rent. That's sort of obvious. But there are other issues in the lease that you can kick them out for. And one of our clients thinks that, you know, the tenant may be doing other wrong things in the property. And those are covenants of the lease. You can also evict someone, you can start eviction process for violating a covenant of the lease. So say, for example, you know, they have an animal there and they didn't disclose it to you. Say, for example, they're doing something, God forbid, doing something illegal. You know, maybe they're doing drugs in the property. Now look, marijuana is legal in a lot of places now. The trend is going to be that it's going to be nationally legal, probably. But you know, other drugs, more serious drugs, obviously, right? Say they're having big parties and they're getting noise complaints all the time. You know, these are things that could fall under covenants of the lease, obviously. And you can also evict people, people for that or you can sanction them for that or negotiate with them for that. So, you know, remember, there's more to it than just paying the rent. You have more power than you think, landlords. So keep that in mind. Another tip, I wanted to share with you that my mom brought up recently. One of my properties in Texas that I purchased a long time ago needs a new fence. I've owned this property for maybe 14 years and the fence is looking pretty shabby. You know, it's just a cheap wood fence, right. My mom says, jason, you know, the neighbors have to share the cost of the fence with you. The property manager didn't bother to think of that, but mom did. And I thought, I didn't even think of that. Why didn't I think of that? Of course they have to share the cost. And so now the property manager went and got one of the three neighbors that share the fence. You know, there's three sides of the fence in the backyard that are shared with neighbors. They got one of the neighbors to share the cost of the fence. That Neighbor would contribute $644 and I would pay $644 and that would replace one of the three sections of the fence. So I said, mom, okay, what do I do now? My ultimate self manager mother, who's pretty good at getting deals on stuff. She says, jason, what you do is you collect that $644 from the neighbor and you replace only the one section of the fence. I thought that's a pretty good idea because it's going to make the other two neighbors jealous that there's a nice new fence on that one section and that's going to motivate them to contribute so we can replace the other two sections. Look, I want to replace the fence. As the landlord, I don't mind spending the money. It's not that big a deal. It'll last a long time. We'll probably put in a nice vinyl fence that'll basically last forever and really upgrade the property. So it's fine with me to do it. But again, the neighbors have to contribute half the cost for the section they share of the fence. You know, they're getting half the benefit. Why should I pay for it all? So, mom, thank you for that advice. I liked it.

You're very welcome, Jason.

Okay. Hey, we got a really good guest today. We'll get through half of the interview today. We're going to talk about some really interesting stuff about the concept of recessions and cycles in the economy. This is a fascinating interview. I think you'll really enjoy it. Also, if you want to join us, we have a couple more people that have joined us for the Venture alliance next week in New York City, or I should say this coming weekend. If you want to join, go to venturealliancemastermain.com and check out the Venture Alliance Mastermind group. You can go to jasonhartman.com and purchase a one time guest ticket for that. Or you can reach out to anywhere through our website and contact an investment counselor and they'll help you with that. So more to come on that. And here is our guest. It's my pleasure to welcome John Tamney to the show. He is director for the center for economic freedom at FreedomWorks, Senior Economic Advisor at Teodor Research and Trading, and editor of Real Clear Markets, best selling author of Popular economics what the Rolling Stones, Downton Abbey and LeBron James can teach you about economics. And also who needs the what Taylor Swift, Uber and robots tell us about Money, Credit and why we should abolish America's central bank. But his new book is entitled the end of why robots won't take your job and might get you one you love. We got a lot to talk about today. John, welcome. How are you?

I'm great, Jason. Thanks for having me on.

Yeah, it's good to have you. These are great topics. And let's talk a little bit about, I mean, what Taylor Swift, Uber and Robots can tell us about money, credit and why we should get rid of the Fed. I mean, make the connection for us.

Well, it's a surprisingly easy connection. Several years ago, my wife and her friends went to a Taylor Swift concert in Washington D.C. at National Stadium. Afterward, as you can imagine, there was a rush to the exits to get home. And so if you want to ride the Metro from that stadium, it was going to take at least two hours to get on one, cabs were non existent. And so my wife and her friends tapped the button and Uber showed up. Uber charged four times the going rate, surge pricing. And my wife was home within a half hour. And so it was a reminder right there that even if you take the Fed seriously, its interest rates are wholly backwards. The Fed during periods of economic distress, pushes the rate that it targets down to zero. Well, why on earth would it do that? That's the equivalent of Uber during mass demand for its drivers, setting the rate as low as possible. Well, if it did that, there wouldn't be drivers at NAT Stadium to take my wife and her friends home. The fact that they had surge pricing is what brought the drivers to the stadium. Sure, the Fed and its infinite wisdom does the exact opposite of what it should do. It tries to push the cost of credit down at a time when you want it to rise to a level that brings in savers who will be there for those who need credit.

Interesting, interesting. You know, I haven't heard anyone express that before and maybe you haven't either and that's why you thought of it. It's an interesting hypothesis because, you know, when we look at the supply and demand curve of anything in any market and money is just another commodity, credit is just another commodity, like gold, silver, concert tickets for Taylor Swift, one of my favorites. Whatever, Right, So you're right, it makes sense. But the way the Fed would say seem to view it, John, is that they would say, well, we need to pump money into the economy. And since they don't really play by normal rules, they play by fiat. They can create money out of thin air and adjust the abundance of credit and money supply. Money supply and credit supply are kind of the same thing, but not exactly. By just lowering reserve ratios or creating money electronically out of thin air. I mean, you know, we used to say printing, but they don't even print anymore. Printing is now too much of a burden running a printing press. So it's not really the same, is it? Because they don't really, they don't really play by the rules that Uber plays by. Do they?

Ultimately they do. The Fed can't change reality. The Fed cannot increase credit.

They can certainly distort it for a while.

My take is that the Fed's ability to distort much of anything is overstated. Let's never forget that when you borrow dollars, you're not borrowing dollars. My argument in the book is that money and credit are totally different. You're borrowing dollars for what they can be exchanged for. You're borrowing access to trucks, tractors, computers, desks, chairs, buildings, most important of all, labor. The Fed cannot increase what it is you're seeking when you seek credit. And so my take is, okay, assuming the Fed were to print trillions and trillions of dollars, it's not going to change the on the ground reality. Just because the Fed prints dollars doesn't mean that people are going to release their trucks and tractors to those who are in need of resources. And I would just add that the Fed can't pump money into the economy in the first place. Let's look at quantitative easing. The Fed tried to do that. And the reality is that tens of billions of dollars quote, exited the United States on a monthly basis. Let's look at, on the local level, let's say The Fed dropped $10 billion into the center of Baltimore. That money would exit Baltimore as quickly as it arrives. And it would, because there's no economic growth taking place in Baltimore. Conversely, let's say the Fed drained all the banks in Silicon Valley of the money. If it raised the reserve requirements substantially, it would be utterly meaningless simply because people around the world are line trying to have exposure to Silicon Valley. And so my take in the book is that we vastly overstate the Fed's importance. It's dealing with antiquated banks that are no longer major players in the credit space. And so, sure, I'd love to see it end, but even if it doesn't end, I think market forces are ending the Fed for us.

Well, listen, you're not going to get any argument from me. In principle, I agree with you and I like what you're saying. I do think, however, obviously the ivory tower theory and practice are two different things. And I'm not saying you're coming from the ivory tower, because I don't think you are. I mean, this is popular economics we're talking about, right? But look, I mean, there's no doubt that the Fed, by managing interest rates, massively influences markets. I mean, look at what's happened over the past several years coming out of the Great Recession in the housing market in the Stock market. I mean, the money is just flowing and, you know, it's finding places to go. I, I admit that there's a. You know, I like it. John, let me give you a little more. Let me give you a little more to chew on. You argue with me all you want about it, no problem. But one more thing to chew on. I'd liken it more like to pumping oneself up with caffeine or going out and partying and having a hangover the next day. Of course, the crash is always present when you do that, but you definitely can stimulate for a little while. Right? Okay, go ahead.

I really question that. I do and I question it in the book. If quantitative easing is what powers markets forward, well, then let's explain Japan because they've been conducting quantitative easing in Japan for 30 years now with no corresponding market rally.

I can explain that, by the way, if you want me to, but go ahead.

Why didn't it work in Japan, but it worked in the U.S. yeah.

My theory about Japan is Japan has a wholly different problem. Number one, of course, it doesn't work as well for anybody else because they don't have the reserve currency in the bully pulpit like the US does. But that aside, Japan has a demographic problem. Japan is very insular. You know, there's really almost no immigration. Okay. And they're not having any kids. And you can't build an economy on that. That's a country that's extinct economy.

Would you agree that this demographic problem is exponentially better than the one after World War II, when the country was literally destroyed? That was a major demographic problem if the economy boomed. And I just, I think that it's so easy to make. I think it's more ivory tower to say that, well, we've got the printing press here. Markets respond to all this.

Sure. They adjust for it, though.

Investors are stupid.

You know, they're not.

So I hear. Well, yeah, but see, the Fed kept interest rates low, and so there's a flight into yield. Oh, really? Funny how that didn't happen in Japan. And let's never forget that Japan is still a major economic.

Oh, of course.

Oh, but see, The Fed created 4 trillion. It had to find itself somewhere. Well, it didn't. It borrowed 4 trillion from banks. But for a buyer excited by QE to enter the market, by definition a seller must exit it. It's not as though, implicit in this QE narrative that the Fed, uniquely among all central banks, had this ability to pump up stock market. It ignores all the times the Fed couldn't Pump up the stock market. But implicit there is that there are only buyers now. There are sellers too. Furthermore, markets price in the future. If in fact the Fed had been pumping up stock markets. Logic dictates that when the Fed announced well before 2014 that it would eventually seize quantitative easing, that markets would react to it and sell off for good. Except for they never did. I find the QE story so easy to discredit. I presented my argument in front of the best and investors in the world, including Cliff Asness at aqr and I've never been questioned because it's not a very compelling argument when you think about it.

Well, I only think, you know, listen, I don't want you to get the impression I'm disagreeing with you because in philosophically and in principle, I definitely agree with you. I'm just saying that people are creatures of instant gratification. You know, they know that it's a big game and it's a big sham. Of course, you know, and so do other countries that hold our debt. They know it's, you know, they know we're destroying the value of our debt with inflation ultimately. But, but you know, they play it in the small time horizon, right? They play these little, well, you know, and then, and then if it's a.

Small time horizon, it would show up in 30 year treasuries. I beg to differ. I've spent, doesn't make me an expert, but I've spent lots of time in China. And you talk to the government officials there, they point out that we're still not a rich country. We expect that money to be paid back. The idea that the rest of the world is in on some hey, wink, wink, nod, nod that, oh yeah, sure, the Treasuries are worthless, but we'll hold them. I don't find that compelling. I don't find it realistic. I'm not defending the debt, I'm not defending government spending. I'm a libertarian. But the idea that the rest of the world would sit there and just buy what is claimed to be worthless defies common sense. The reality is, is that the US treasury is backed by the most productive people on earth. We can talk about the Fed and all this other stuff and all these horrible things going on in the world, but the reality is the 10 most valuable companies in the world are based in the United States, right?

Yeah.

We attract more investment than any other country in the world. People risk their lives trying to get to this country. Is it any wonder that the rest of the world wants to hold U.S. debt. We want to talk about the dollar and everything. Different story.

Yeah, yeah, yeah.

Let' pretend that this is worthless.

No, you're absolutely right. The right question to ask is the one I always state, it's compared to what? You know, yes, the US has all these things and all this monkey business, but, you know, compared to what? Everybody's playing this game, okay? Every country does this stuff, you know. Couldn't agree more. Okay. So on the Japan thing though, Post World War II, I'm no expert on that, but my impression would be that, hey, number one, we were rebuilding Japan. Number two, we were moving into this baby boom time. Their exports, they were exporting all these cheap little products. Then the auto industry, the Japanese auto boom came along. And, you know, that's, I don't know, it's, it's complicated, but it's.

Yeah, no, I, but I just think it's dangerous to say that was a much bigger demographic difficulty and to pretend that, okay, so the way to fix a demographic problem is to go to war and have your country destroyed so you have to rebuild it. I don't think you believe that.

That's not a good idea. I'm just saying it happen.

Okay, okay. So that it happened did not improve Japan. Japan would be exponentially better off today, as would the US have been had we not been in that war in the first place. I really think it's dangerous to make an argument about, oh, yeah, well, the war saved Japan. Japan is a major, major economy. And implicit in the demographic argument is that somehow Japan's an island. No, Japan interacts with the rest of the world just as US Producers interact with the rest of the world. It would be an interesting argument if Japan didn't trade or import or export with anyone else, but that's just not true.

Yeah, of course, of course they're not isolated. I mean, they're just in terms of their immigration policy and the birth rate. That's all. But, and I wasn't saying that war was good for Japan.

Birth rates in the world are the poorest countries and the countries with the lowest birth rates get the most investment. And so I just think the demographic argument is, again, an exciting one that excites people who think that there are crises coming. But please, to spend time in Japan is not to spend time in a declining country. If that were true, you'd see a massive capital outflow. Markets aren't this stupid.

Okay, all right, all right. Yeah, good. Points well taken. Points well taken. I mean, you know, if I had Harry Den on here, he'd be arguing with you, of course, you know, you know the arguments that you've heard them all. Okay, but listen, I want to switch gears. I want to just finish this topic, though, with. So during recessionary periods, it sounds like your thesis is that the Fed or, well, the Fed should go away, but the marketplace should just raise interest rates. Then more people would come in and want to loan money, and the lending of that money would act as a natural stimulus for the economy. Is that proper analysis?

Oh, yeah, for the.

Just surge pricing on money. We should have surge pricing on money.

Well, surge pricing on credit, you know, money is, Look, Mexico could lend the peso, but it wouldn't mean a whole lot. You know, the point is, is that credit is always going to find its level, and so the last thing you want to do is try to artificially lower the cost of it. Now, my book argues is look throughout the US and we act as though the Fed doesn't exist. Credit is so expensive in Silicon Valley that if you want to start a business, you're going to give up a big portion of it to a venture capitalist, and then you're going to give even more of it up to potential employees in the form of stock options. Credit so expensive in Hollywood that even the best movie producers are turned down well over 90% of the time. Donald Trump is our president. For decades after the early 90s, he couldn't get a loan from a US bank to save his life. My point is, is that while the Fed's often never never land, trying to set a zero rate and pretending, oh, yeah, there's now easy credit, in the real economy, we thankfully act as though the Fed doesn't exist, because if the Fed did have control over us, we would be in perpetual decline simply because who would lend at artificially low rates? And so in the real economy, rates are set by the markets. Thank goodness they are. If the Fed were a fraction of as powerful as we thought, as people thought it was, we'd be a very poor country.

Interesting. Okay, so the way the Fed looks at that equation, though, is they say we need to pump money in, so we need to artificially, admittedly make rates lower. And that pumps the money in. You say let the market decide. And if you want money, pay a surge price because you need it more and there's less supply of it because people are reining in their horns. So you should pay more for credit and then there will be more credit. I mean, that makes sense.

Yeah, well, yeah, of course. And, but, and that is what's Happening. The implicit is that when a recession hits, suddenly credit's easy, no surge pricing takes place. The Fed's over here decreeing zero rates, but no one borrows for zero. I mean, Apple's the most valuable company in the world. It still pays 3% to borrow. Small businesses in a recession are still going to be shut out of the credit markets. The Fed is this entity dealing with banks that just aren't very big players in credit in the first place. And so in the real world, credit costs what it costs. And so the Fed pumping up the money supply. Oh, please, where can it pump up the money supply? If it tried to shrink it in Silicon Valley, market actors around the world would run roughshod over that within seconds. Just the same, the Fed could put billions into West Baltimore tomorrow and that money would disappear instantaneously. Money flows to its highest use, so do resources. The notion that the Fed's a big player is defied by common sense. If it were, it could fix Baltimore tomorrow. Yet Baltimore still perpetually recessed in Silicon Valley. Well, banks aren't players in Silicon Valley in the first place. But the Fed can't change the on the ground reality in either place.

Right? Right. Yeah. Dear listeners, we can tell our guest today is not a fan of Baltimore.

Yeah, but I, no, I'm fully fan. I just don't think that the Fed. The Fed can't change it. The Fed can't change Cairo, Illinois. The Fed cannot change Detroit. Stockton, California. In my book, I make the Detroit argument too. Fed wants to drop billions into Detroit. It will disappear instantaneously because no business is going to expand based on a money drop. Money always flows to its highest use. The Fed can't change it in a city, state or country.

Yeah, no, absolutely. This is why central planning doesn't work anywhere, anywhere it's ever been tried. It really doesn't work. It only works around the margins. You know, it's, you know, and it's always temporary. Helicopter. Ben, are you listening? So, Ben Bernanke, of course, is who we're referring to. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own, and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to itunes or Stitcher Radio or whatever platform you're using and right around review for the show. We would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.