1636: Jim Rickards on The Death of Money, Aftermath, Currency Wars & The New Great Depression

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 episode 1636. 1636. And I've gotta say that I miss all of you. I really do miss you. You know, this three day a week thing, I'm not sure how long I can handle it. Maybe you're having withdrawal symptoms. I know I am. Anyway, we had a close relationship with five days a week, and now we're only three days a week. Monday, Wednesday and Friday. And with so much going on in the world, it feels like just too long. So since we have talked, boy, there is a lot going on. We are leading up to a major situation in Washington dc. Who knows what the situation is? I don't know. You don't know. But we've got censorship that is so blatant, obvious and frankly arrogant by the Communist Party of Silicon Valley. The Communist Party of Silicon Valley is literally deleting and rewriting history before our very eyes. We all know. We should know. Maybe we don't know. We should know that throughout history we should know that censorship is tyranny. One of my stupid friends. Yeah, I've got a few. You've probably got a few too. You know who they are? They're the people that make idiotic comments on Facebook and make you think, why exactly am I friends with this person? Suddenly when they talk about politics, their IQ dropped like 35 points. I don't know. Anyway, he says, well, Jason, do you think it's okay to yell fire in a movie theater? And that's such a stupid comparison. Seriously, it is so stupid, it's really dumb. Why is that? Because, ladies and gentlemen, people, this is political speech. This is dramatically different than any other type of speech. Political speech is the most protected type of speech under the First Amendment. That's what it was designed for. No, you should not be able to say anything you want. You should not be able to defame another person. You should not be able to yell fire in a theater and cause a massive stampede and get people hurt in the stampede. No, you should not be able to do that. But should you be able to speak out against your government? Yes, you should. That is called political speech. It is what our brilliant founding fathers had in mind when they created the First Amendment to the United States Constitution, the most liberating document the human race has ever known, ever. And guess what they did after that? They created the Second Amendment to make sure the First Amendment would stick. That's exactly what they did. And if you're listening from one of the 188 other countries, not the U.S. just think about the power of these incredible people back in the 1700s who thought of all these ideas, who believed in the idea that government is from the consent of the governed when George Washington was president. And he could have been the king of the universe, he could have been the ruler, the emperor, but he stepped down voluntarily. Okay? Now granted, he did not have a fraudulent election, so that's a whole nother issue. Don't start sending me emails about this whole Trump thing, because this election, and you know, I just want to be clear about this, the election was certainly a cluster bleep of fraud. There's no question there was massive fraud in the election. And elections always have fraud. There's some degree of fraud in every election. Whether or not the fraud would have amounted to a change in the result is unknown. I'm not saying it would have. We might still have seen the old man with dementia who doesn't believe in anything, who, by the way, came into politics in this anniversary year. Okay, we are in the anniversary year. I think it's August, right? Was the exact month that Nixon took us off the gold standard. And right after that, Joe Biden showed up in the political game and the whole thing went downhill. I got some interesting stuff coming up on that from our prior guest and speaker at our last live Meet the Masters conference, none other than the brilliant George Gilder. I'm going to share some good stuff with you about that. But yeah, I also interviewed last week, seifudine Amos, who wrote the Bitcoin Standard, which is a fascinating book. And he ties in the decline in morality and the time preference concept and how it plays into our psychology as people into fiat money. And his new book is called the Fiat Standard, which I don't think is out yet or it's going to be out momentarily. Fascinating premise. And we talked to him about that. So we'll have that interview next week. But today we have none other than Jim Rickards. Jim Rickards is our guest today and on Wednesday he'll be back because we had a lot to talk about with Jim Rickards. He's written a lot of really interesting books on monetary policy, on the future of what is going to happen with money and gold and so forth. He's definitely a bit of a gold bug, not a bitcoin fan, not a crypto fan. So that's just kind of where he stands, just so you know, going into the interview. And I decided to do this interview today because last week we announced our contest winners and one of them was Ashley. And she said she just got Jim Rickards book and was starting to read it, I believe yesterday. So I thought, hey, we might as well put Jim Rickards up for this week. And he'll be here with us in a moment. Now, I've talked to you a lot over the years about, of course, my ten commandments of successful investing. And the most resonant of all of the commandments, the most resonant to everybody is none other than commandment number, you know what I'm gonna say? Number one, two, three. Commandment number three has been the most commandments compelling, I think, for people. And it is, of course, thou shalt maintain control. Remember your money, you've earned it, you worked hard for it. Or maybe if you're in politics, you just cheated people for it or, you know, in some other cheating profession. But whatever, you cheated hard. I hope you like my jabs that I constantly putting into these discussions. So, you know, you work your way to the top. Or you could be like Kamala Harris. You sleep your way to the top or you cheat your way to the top. However you got it. We know it was hard for you to get the money right. Yes. Willie Brown, Kamala Paris, boyfriend who got her into politics. Right. I met him, by the way, former speaker of the House in the Socialist Republic of California. I remember I met him many years ago because my uncle knew him. My uncle was a famous restaurateur in San Francisco back in the day. My uncle Jackson, he knew everybody in that city. And I remember once I was with my uncle and we were in San Francisco and he was shopping at the super high end men's clothing store, Wilkes Bashford, and in walks Willie Brown. Yeah. And none other than Willie Brown, the man who slept with Kamala Harris to launch her political career. Anyway, so he was there and he was very much hated by the right side of the Political aisle. He was a disaster. Of course. And the whole state of California is a disaster. Even Bill Maher agrees with that. Okay? And Bill Maher is pretty darn liberal, but he thinks California is an epic disaster. And he's right. So, yeah, Willie Brown, I met him and my uncle started talking to him and he introduced me to him. And then he went out and had a drink with us or, I don't know, did we have something to eat? I can't remember. We went to a little cafe with Willie Brown, my uncle, myself, Willie Brown. There you go. I could have met Kamala Harris. What was he, like 40 years older than her when she got together with him? Hey, you know, whatever. It's a political career. You got to do what you got to do. Kamala. Okay, well, anyway, she will be president of the United States probably pretty soon because I cannot imagine that good old sleepy Joe is going to last four years. But we'll see. Anyway, back to commandment number three. I don't know how we got off on that tangent. Commandment number three, thou shalt maintain control. When you relinquish control of your money, you leave yourself susceptible to three major problems. Number one, you might be investing with a crook, and I've got a story about that. Number two, you might be investing with an idiot. And number three, assuming they're honest, assuming they're competent, they take a huge management fee off the top for managing the deal. Well, let's talk about number one. Remember, you want to be a direct investor. Take your money and buy your own stuff that you control by your own properties that you control. You decide what to buy, where to buy, when to buy, how to finance, who to rent it to, how much to rent it for, when to sell it, when to refinance it, when to do a 1031 exchange. It's your deal. It's your deal. You're not relying on someone else and leaving yourself susceptible to those three major problems. So here's a story about a real estate fund manager who is charged with misappropriating funds. Imagine that. Imagine that. And charged with misleading investors. Oh, come on, that never happens. It doesn't happen with any syndicators, any fund managers, any Wall street people, any of the C class, or the boards of directors of publicly traded companies or companies that you might do a private placement, memorandum in and invest in privately. People are all honest. You know, I tell you, folks, I am no longer a, you know, a doe eyed business person. You know, I've been through the wringer. I've been ripped off so many times I can't even count that high. But, you know, I do more stuff, right? I'm willing to do more things and try more things, or at least I was. I'm much less willing than I used to be. And so you try more stuff, you do more stuff, and you're gonna get ripped off more often. Things are just gonna go badly more often when you try stuff harder. So when you try more things, you take more risk, you're gonna have more chaos. And I've certainly done my share of those things. But you know that when it's a pooled money, asset pools are for fools, right? You get into this type of situation. So the sec, securities and Exchange Commission, or you could call it the Scoundrel's Encouragement Commission. The Scoundrels Encouragement Commission announced Tuesday that a real estate fund manager named Eric Malley of MG Capital has been charged with defrauding investors and misappropriating funds, is a licensed real estate broker and allegedly misappropriated over 7 million bucks. 7 million bucks. That's a lot of money, isn't it? 7 million. It's 1 million more than 6 million and 1 million less than 8 million. Either way, it's a lot. Yes, it is. Okay, so seven million bucks. While lying to investors about his management experience and their risk exposure, and not only that, his firm's capabilities. So apparently his firm, they started deceiving people back in 2014, and they blatantly misrepresented things. They raised a total of 58 million bucks and promised people their capital was 100% protected from loss. And this guy solicited investors, managed two different real estate funds with a portfolio over $1 billion. See, using leverage. And I bet the creditors are going to get burned, too. Or the lenders probably got burned, too, and asserted that the fund was able to significantly outpace the S&P 500. And of course, that's a common comparison for investors. Bernie Madoff. Who? Madoff, with billions of dollars, did that, too. He also said that the capital was secured via balance sheet valued at over $250 million. And six years after this began, the SEC alleges that none of these claims were true. None. None. Nothing's true. So this is how it is, folks. People can just lie, lie, lie. Liar, liar, pants on fire. Yep. So hopefully that guy will be in the slammer. And, you know, his investors, I'm sure, lost a bunch of money. Because what happens is they can never recover all the money, whether it be Madoff or any of these Crooks, they can never recover at all because, you know, they spent it, you know, mostly. And I just want you to understand something. I want you to realize that these folks that do this, like, if you ever watch that great show, CNBC show, American Greed, which is excellent, it's always a fund manager. And the common thread is that these people are always super well liked because they're throwing money around, they're really generous, everybody likes them, and they're always donating a lot of money to charity, and they're always a pillar of the community. And, you know, that's what they do. They might be raising money for a Broadway play or a syndication on a development deal or whatever. And I will guarantee you that hundreds, if not thousands. Well, I can't guarantee this, so I shouldn't say I'll guarantee you, but I'll bet you. How's that? I'll bet you that hundreds, if not thousands of these current fund managers, syndicators, et cetera, out there are crooks. And they just haven't been figured out yet. Okay? So let the buyer beware. Let the buyer beware. Buyer beware. Okay, what else do we have? Oh, I gotta play you a little quick clip from some of our other contest entrants. Our producer Josh, who's fantastic, by the way, made a quick little montage and then we'll come back and we'll get to Jim Rickards. Hello, Jason.

My name is Ashley Marie Slater.

I am from rural upstate New York.

I'm an opera singer. And for the past few years, I've been working on cruise ships, bringing great.

Classical music to the people on board. It's been really devastating not to be.

Able to sing and share music with people. And recently I started trading my time for money working at a local warehouse. But the silver lining is all of this is that while working, I was able to listen to audiobooks and the like. And that's when I discovered you and your podcast. And Jason, you have been educating me. You have been inspiring me. I had a mentor in college who told me to always be thinking about the next step and to never be complacent or satisfied where you are. I'm the kind of guy who's always thinking about the future. I love thinking about the what ifs when it comes to what I could do or accomplish. And if one quote could sum up my life's mantra, which happens to be from my all time favorite movie, it is get busy living or get busy dying. After college, I was a sponge for seeking wisdom, and I subscribed to a ton of random podcasts. Luckily, one of those was Jason's and I fell in love with the idea of my Financial Independence Day.

This is.

My name's Steven Bertolotti. I live in California, San Francisco, California. And I'm entering the Jason Hartman contest. Number one, I want to by the end of the year have six properties under management that I own. My fourth goal is to help at least three people with their inner well being this year.

Hey everyone. My name is Himan Gupta and I'm making this video for Jason Hartman's real estate contest. My goal for the year 2021 is to actually buy my first real estate property. I have a long term goal where I want to start my with my first property this year and then I want to buy one property a year. So nine properties in nine years. I look up to Jason and I.

Learn a lot from him.

Good evening.

This is my video entry for the Jason Hartman goals 2021 contest. I'm also currently in the process of trying to set up my own rental income business and llc. Llc. The slightly unfortunate thing about this is that I come from a blue collar society. Nobody in my family or network has known anything really about really investing how to leverage their money, how to really use debt as a tool. My goal really for the next five years is to build my network so that way I could have my own $500 that I'm generating. Give a man $500 and he'll eat for a day. Teach a man how to make $500, he'll never be hungry again. So December is a great time to talk about goals. And about two years ago, I set the biggest goal in my life and that was to become financially free to be able to do what I want with my time, not worry about the bills, etc. And that was to get into real estate and become a better and healthier person. Friday, 13th March 2020. The stock market is crashing. The global pandemic has been enough. People are freaking out, everybody's scared. Interest rate drop too, and we took advantage of it and we got into our first real estate deal.

All right, now let's go to Jim Rickards and he'll be here today and on Wednesday talking about all of the issues going on in the markets and with money and monetary and fiscal policy. So let's take a listen to my interview with Jim Rickards. It is my great pleasure to welcome someone who I've been following for many, many years, and that is none other than Jim Rickards. I'm sure. You have seen his work out there. Maybe you've read his books. I've read several of them. He is the editor of the Strategic Intelligence Newsletter, the best selling author of several books, including Seven Secrets of Wealth Preservation and the Coming Chaos Currency wars, the Making of the Next Global Crisis, the Death of Coming Collapse of the International Monetary System, the New Case for Gold, the Road to Ruin, the Global Elite's Secret Plan for the Next Financial Crisis, and the new books, the New Great Depression Winners and Losers in a Post Pandemic World and the how to Prepare for and Profit from the Turbulent Times Ahead. And he co authored that one with Robert Kiyosaki, who's been on the show a couple of times. Jim Rickards, welcome. How are you?

I'm fine, Jason, thank you. Great to be with you.

It's good to have you on. By the way, I'm curious, I don't know where you're based. Where are you located?

I live in Portsmouth, New Hampshire. So that's our motto here, is Live free or Die.

Excellent. Well, that's a good libertarian motto. I like it a lot. When I see your interviews, sometimes you're in a different environment. Do you have a cabin somewhere or something? Where I see.

I have a farm in the mountains. We go back and forth.

Excellent. Good stuff. Well, just give us your overall macro view, if you would, Jim, as to what is going on in the world. It is certainly a turbulent time. No one would deny that every crisis leaves open many opportunities at the same time. We'll take a deep dive into that today, I hope.

Sure. Well, that's exactly what the book's about, the New Great Depression. And when I was first discussing it with my publisher, my editor, last April when the idea came up, of course, by then we were into lockdown. The economy was collapsing. The stock market had just dropped 30%. They said, Jim, we want a book on this. There'll be a lot of interest in it. You know, the economy, you markets, capital market. You're just the guy to do it. And I said, thank you. And we got going on that. And they said, but keep away from the pandemic and the epidemiology because you're not a doctor. And I said, no. I said, that's what gets me to write about property damage in New Orleans in 2005 and not mention Hurricane Katrina. I said, you cannot understand the economy. You cannot dive into the new Great Depression without looking at the pandemic and what caused it. They agreed that that made sense. I know I'm not a Doctor But I said, kind of joking, go to Johns Hopkins. So I'm not intimidated by natural science. And I was able to read, I did read over 100 peer reviewed academic papers on the immunology, the epidemiology and the virology. That doesn't make me a doctor, but the science is very accessible. When I started, I thought to myself, well, there's going to be a whole bunch of conspiracy theories and fringe theories and everything over here and there's going to be good science over here. So all I need to do is keep away from this and focus on the science. The first part was easy, discard the fringe theories. But when I got into science, what I discovered is that the scientists don't agree with each other. And that's a much bigger challenge because you hear certain politicians and it's a shame the way this has all been politicized. That's really unfortunate. But politicians will say, believe the scientists. Well, anyone who says that doesn't know anything about science. I mean, scientists argue with each other all the time. They debate, they challenge each other's assumptions. New research comes along and the science as such evolves. But it's never settled.

By the way, just to comment on that, you're so right, Jim, because if we believed the science in the old days, we would still think that everything revolves around the Earth. You know, I mean, that was the science of the day.

Exactly. The sun revolves around the Earth. It took even when Copernicus said that wasn't true, that the Earth revolves around the sun. It took Kepler and Tycho Brahe and others 100 years to change the consensus. So yeah, even bad science and there's a lot of it around doesn't change overnight. So that's exactly the issue I was confronting. And I can show you PhD peer reviewed articles that say you have to wear a mask. You're a fool if you go out without a mask. It's the only way we're going to stop the disease, et cetera. I can show you other PhDs that say, no, masks don't work if you understand the virus particle. The virus itself is smaller than the weave. And the mask. Masks are not well constructed. People don't wear them correctly. They're mostly for show. So take a pick. I lean a little bit to look, I wear a mask. I'm not going to fight with the greeter at Walmart. If he says, you got to wear a mask, I'll put a mask on. But I think we are right to be skeptical that they do very much Good at all. Washing your hands helps. Social distancing helps. So I spent several chapters on that, including the origin of the virus and the effect of the lockdown. But the lockdown was the segue into the economy because the evidence is very clear that lockdowns don't work. I know that may not be a popular view, but that's been true. The scientific consensus around that has been true for a long time. Lockdowns are what politicians do when they don't. Don't know what else to do. This guy Fauci, I don't have a lot of time for him. He's a. He's an over the hill bureaucrat. You know the old saying, if you're a hammer, everything looks like a nail, right? If you're an immunologist, everything looks like a lockdown. But the fact is, lockdowns don't work. If you have an island someplace and you can only get there by boat and you close it off and nobody.

Can come, and nobody, then a lockdown works.

That'll work. But try the United States of America, North America, Europe, with 300 million people, or 400 million people in the case of Europe, it simply doesn't work.

One thing I want to say, though, on this is, you know, if we try to put this video on YouTube, there is a high likelihood it will be taken down. Having this blasphemous conversation, I just, you know, want to.

Well, no, you're right about that. I always hope you can fly under the radar screen a little bit. It's one of the reasons I like writing books. I think books are the last thing that are not being censored. You're right. YouTube will take it down. Twitter will take it down. Facebook will take it down. I applaud my publisher. My publisher may have other authors who disagree, and they'll publish them also. And that's the way it should be.

But, Jim, we should be outraged at this. This is insane. I mean, yesterday the president of the United States was banned from social media. It's. This is. I mean, I can't believe we're living in these times. Like Orwellian nightmare.

Imagine you were in the Soviet Union in the 1960s. It was the same thing, but here we are. Well, in some ways, but they survived. They had Samizat, which were kind of handwritten manuscripts, and they would secretly copy them on a Xerox machine and pass them around in envelopes at cafes or whatever. Boris Pasternak got Dr. Zhivago out and turned into a pretty good movie. But you have to fight back. I agree with you. The censorship is oppressive. It's not scientific based. It has nothing to do with civil liberties or the First Amendment. It's just Silicon Valley trying to control the dialogue. And you know, when they ban somebody and it's kind of high profile, of course you've shut down one voice. But that's not the worst part of it. The worst part of it is millions of other people who are intimidated. It's like, oh, gee, I better say the right thing or I better not speak up because they'll do or I'm.

Going to get sent to a re education camp, which means I'll be banned from Facebook.

Yeah. And by the way, in China, they're doing that. They have concentration camps in China, real ones, and they're removing organs from political dissidents without anesthetic and then cremation the body. So where have we seen that? But we're not that far from China. I agree that we're heading in the wrong direction. As far as what went on in Washington, it's interesting. I absolutely, unconditionally condemn the violence. I don't think there's a place for violence, property damage, et cetera. But having said that, the behavior, just as an analyst, leaving aside the politics, that is very much the kind of behavior to be expected as a result of the lockdown. And I would say the same thing about riots last summer. You know, a lot of people condemning the attack on Capitol Hill, and they should, I don't disagree with that, but they were pretty silent all summer when people were burning down Kenosha, Portland, Seattle, parts of New York, Brooklyn, et cetera. If you're going to be against violence, be against all the violence, not just the ones you agree with or disagree with. But the point I make, and this is in chapter five of the book. There's been enough talk and some science and publicity has said around the physical effects of the virus and the pandemic. But I don't underestimate, underestimate the mental health aspects of this. And this, by the way, this is another reason lockdowns don't work. Lockdowns kill more people than they save. You could probably find somebody who got locked down and say, well, gee, she'd be dead today if she wasn't locked down. I mean, that person probably exists. But what about the fact that the suicide rate has tripled, the murder rate has doubled, Alcohol abuse, drug abuse, domestic abuse, people who skipped cancer treatments and heart treatments died of heart attacks because of the lockdown. So the evidence and this is not just speculation. A lot of data is out there. We didn't necessarily. I didn't have the data, not all of it anyway. Last April and May when I started writing the book. But over the course of the summer the data came in and it bears out what I'm saying. So the lockdowns have killed more people than they've saved. They have not stopped the spread of the virus. And what you do, you lock the place down, maybe for a very short period of time, you contain the spread a little bit, but then what do you do? You're gonna martial law. You're gonna be locked down the rest of your life. So then they ease up and all of a sudden there's this huge outburst and explosion of the virus and you're back where you started from, probably worse. And then you lock it down again. Wash, rinse and repeat.

And you didn't mention that people's immune systems become weaker too. That's another part.

That's right, I mentioned that in the book. You're right, I haven't mentioned that yet. But there's more than one virus and bacteria floating around. And by just going outside and interacting, going to a bar or whatever, we get exposed to those other viruses and bacteria. And of course they're not as lethal as coronavirus, but they can make you sick and you build up immunities to those. Well, when you're locked down, maybe you're avoiding the coronavirus, but you're weakening your immune system relative to all those other pathogens. And so that's another problem coming out of the so called lockdown, which is you probably get sick of something else. So look, it just doesn't work. And in the book, in chapter two, I go through the history. Well, where does this lockdown idea come? Well, it was in a paper in a study in the Centers for Disease Control. Where did that come from? I traced it all the way back to 2005 during the avian flu, when George Bush was president and he read a book on the Spanish flu, a very good book by the way, called Great Influenza by John Barry. But Bush kind of freaked out a little bit. He said we need a plan. Well, they came up with a plan that was devised by a guy who was a modeler at the Sandia National Laboratory in New Mexico who didn't know anything about disease, and a toy model that his 14 year old daughter had come up with. She won a high school science, junior high school science project prize. Great. But that then morphed into this study. It was Carried on through the Bush administration, the Obama administration, and then when the Trump administration needed it, they pulled it off the shelf. Well, it was an instant return to the Middle Ages. There's a very prominent scholar, D.A. henderson, he passed away a few years ago, but he was credited with leading the movement to eradicate smallpox. We did eradicate smallpox in the 1970s, and DA Henderson is given most of the credit for that. He won the national, sorry, the Medal of Freedom, which is the highest civilian honor, kind of equivalent to the Congressional Medal of Honor, and was dean of the Bloomberg School of Public Health at Johns Hopkins. So you sort of can't get any more credentialed or accomplished than that. And he said lockdowns don't work. And I quote his study in the book, so that's clear. But they're not good at stopping the spread of the virus, but they're very good at destroying the economy. And that's what we did. But they caused all these other. Even if you don't have the disease, even if you are immunizer, you had it and you recovered and you got the antibodies, the lockdown still affects you mentally. It causes depression, anger, anxiety, and ultimately violence. So I trace some of the, not all, not the sole cause, but some of the violence we saw last summer in all these antifa riots and the violence we saw yesterday on Capitol Hill, in part because people's anger level is so high because of the lockdown.

Sure. One thought about it. I don't know if you've thought about this or really anybody has much. I've never heard anybody say it. But if you look back to the spark that ignited this, you look back to George Floyd, just think of his situation. So he was arrested for counterfeiting and he lost his job because the place he worked as a bouncer was closed. Okay. That business was closed.

Right.

And so he had to have money. And that was before any of the stimulus. I think I could be wrong on that, but I think it was right.

I think you're right.

And so he was counterfeiting and there we go. That led to the whole thing. Right. It may have never happened if he had been able to keep his job. Right.

So, yeah, the police officers were arrested and they've been charged with a second one of them charged with second degree murder. They're going to run trial some, you know, you're innocent until proven guilty and let justice take its course. But. But these riots, many of them were justified in the name of George Floyd. Well, I could see peaceful protest. You want to Call your congressman. You want a peaceful march, that's fine. That's the American way. That's the First Amendment. Not smashing the windows and burning down. I don't care what.

Of course not. Yeah, and billions of dollars worth of damage, nothing compared to what happened yesterday.

The timing had a direct economic impact because you go back to. Okay, so March, April, May was the first lockdown. The George Floyd death was the end of May. And the riots broke out in June, July and August. Now what else was happening in July? Well, that was right around the time when the mayors and governors were saying, okay, now we can reopen. The worst is over. Looks like we've got the virus contained. Instead of we can reopen. Well, no sooner did the bodegas and the coffee shops and the restaurants and the bars reopen, here come the riots and they're getting the windows smashed and they're burned out and they're police in the streets and they're boarded up. So imagine you're a small business person, you've just gone through three months, half of them are bankrupt, okay, but they have to kind of survive and try to reopen. Now you got a crowbar smashed through your window. I mean, and then now, today you got a second wave, which is worse than the first wave. Again, more evidence that lockdowns don't work. And there you get into this difference between perception and reality. So you look at the stock market market. So the stock market indices are at all time highs. I think the S and P hit a new all time high today. The Dow Jones and Nasdaq, they're all close to their all time highs. And so people say, well, it went down 30% in March, but it's come back 70%. It's a new all time high. My 401k is restored. What's the problem? It looks all good. Well, the answer is that the stock market no longer bears any relation to the real economy. The S&P 500 is the S&P 7. And the reason is that's a cap weighted index, meaning your influence on the index is a function of your market capitalization. Well, there are seven stocks and we know what they are. I mean, it's Apple, Amazon, Netflix, Google, Facebook, Microsoft and Tesla. Okay, those seven stocks are 40% of the market cap of the entire S and P. So it's best understood as the S&P7. By the way, those companies are also the least affected by the pandemic. They're not bricks and mortar, they're telecommunications, they're digital, they're Advertising, they're online shopping, et cetera. So seven companies are 40% of the S and P market cap. They're least affected by the pandemic. And yes, their stocks are going up and their earnings are going up as well. But that means the S and P doesn't reflect the economy because that's not the real economy. How are the other 493 stocks? Well, the answer is they're not doing very well. They're flat to down. And what about the real economy? When I say real economy, I mean restaurants, bars, nail salons, gyms, dry cleaners, bodegas, boutique retailers, et cetera.

It's interesting that you're calling that the real economy, and I'm not disagreeing with you about this at all. But just one of the terrible, I think, side effects of this whole pandemic is the massive consolidation that is occurring toward the top. The bigger, getting bigger. And everybody else is going to need UBI Universal Basic Income to survive because, and this may well be very engineered or it's just a massively helpful coincidence to the central planners who like this idea.

No, that's exactly what Mark Zuckerberg wants. Mark Zuckerberg gave, I think, a commencement address at Harvard. He never graduated, but he got an honorary degree and was a commenced speaker. And he talked about ubi. But that's what they want. They want a world where 10 or 20 or maybe a couple hundred people control everything. And the rest of us are just getting welfare checks. And they say, hey, stay home, watch football, play video games. Here's your check.

Bread and circuses.

Yeah, correct. Except maybe, I guess you get bread and circuses if you count the NFL. So the point being, yeah, that is what they want. And Rahm Emanuel famously said, never let a good crisis go to waste. Well, this is a good crisis crisis and they're not letting it go to waste. But getting back to the people look down their noses at small and medium sized enterprises. They say, well, you're a restaurant with 20 employees, big deal. You're not Boeing, you're not Apple Computer. Well, I've news small, medium sized enterprises make up 50% of all jobs and 45% of GDP. So individually they may be small, but in the aggregate they are half the economy. And you've just crushed half the economy.

Okay, so Jim, say that again, if you would. I just want to make sure people really get those numbers and those ratios.

Small and medium sized enterprises again, your bars, restaurants, salons, et cetera, are 50% of all jobs and 45% of GDP.

Okay, so that's half of all jobs and almost half of the entire country's gdp.

Correct. And we've just crushed it. And then you got people like Larry Kudlow running around last spring. Lyric Cudlow is a nice guy, decent person, but worst forecasting record of anyone I can think of other than the Federal Reserve. And he's saying pent up demand. Pent up demand. The economy is going to come roaring back in July, et cetera. Well, there's no pent up demand. My wife and I were, we were locked down just like everybody else in March, April and May. And usually we go out to dinner on a Friday night and we didn't during that time period, the restaurants were closed and we didn't want to go out anyway. But by July, some restaurants reopened, so we went out to dinner. Well, we didn't order nine dinners. I just ordered one like I usually do.

Right.

There was no, there was no pent up demand. I didn't get nine. I got one. So that was the other nine dinners. That's a permanent loss. That's not a temporary loss.

I mean, people are thinking maybe you go out to dinner a little more often because it's like the Roaring Twenties, you know, you've been locked up and now you, you're out more, you know, but it's never gonna be the equivalent.

Yeah. First of all, that's not. I know people, some people might suggest that Larry Kudlow did. But that's not true. True, number one. Number two, by the way, even if the restaurant is open and you feel like going out, a lot of people are not going out.

Right.

Say the restaurant. But you know, hey, the people are still afraid that I'm afraid to go out. I'm not criticizing anyone's behavior. I'm just describing it for purposes of economic analysis. So. And that, by the way, I said the restaurant reopened. Some of them did. A lot of them are permanently closed. It's not.

First of all, they will never reopen.

Yeah, correct. Now, these businesses, again, I started. Listen, all the data is in the book that they have got work. They've got. See, how much working capital do they have? What varies by sector. But the answer is 10 weeks, 20 weeks. Most people don't have $5 million in the bank. They've got, you know, they have gross revenues, they pay their payroll and their suppliers and their taxes, and they make a little profit. That's it. They don't have working capital. But if you're locked down, you still have to pay the rent, you still have to pay the utilities, you know, you might have some benefits, et cetera, et cetera. And so you're running negative cash flow and a lot of them are just going bankrupt. So you go up and down, I don't care where you live, go up and down the streets, you'll see every fourth or fifth store, four lease closed, they're not coming back, there's jobs not coming back, the equipment suffered, fire sale prices. And by the way, they're not paying the rent because they broke the lease. That's the first thing you do when you file for bankruptcy. But a lot of places, New York City is one but not the other. The only one, they have rent abatement, they've told people you don't have to pay the rent and they've got anti eviction laws that say and by the way, if you don't pay the rent, you can't evict the person until further notice. Well that seems like, you know, okay, that's an accommodation to the economic distress. What about the landlord?

Probably then the commercial mortgage backed securities they're defaulting on? I mean and all those people. Yeah.

And who wants them? Well, your listeners should look pension plans, is it? Well yeah, pension plan. It could be your pension plan. Not you personally, but your listeners should look in their 401ks. You own a high yield commercial real estate fund that was dumped on you by Morgan Stanley or Goldman Sachs. Maybe, or maybe you have an index fund that's in the index and you don't even know. The point is there are ripple effects of this and it'll go from tenant to landlord to lender to security holder and it's going to take a year to play out. So we're nowhere near the bottom of this.

Yep, I, I agree. I think that's a, that's a huge thing. So the government and the central banks all around the world have created an unprecedented, absolutely mind boggling amount of new currency. Jim, what does that mean to us? You know, it's like money printer go burr as the saying goes. Right?

Sure. It actually means nothing. And let me explain what I mean by that. And by the way, you're, you know, you're Austrians and your monetarists and in your neo Keynesian they're going to say inflation. Right, inflation. Well they've been wrong for 13 years. That's how long this has been going on. In 2008 the Federal Reserve balance sheet was 800 billion. Today it's about 7.5 trillion. So they printed over almost $7 trillion of new money? Where's the inflation?

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