1637: Biden Manchurian Candidate, Tax Credit, Jim Rickards, Inflation, Gold v. Bitcoin

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 1637. 1637. And I am broadcasting from the People's Republic of China. Yes, the US Was taken over today by the Chinese government, or at least a puppet for the Chinese government. His name is Joe Biden. Thought you'd enjoy that. So here we are and we have a new president. We have a highly contentious, highly disputed, unreliable election to say the least. But let's get past all that. We have what we have. You know, I remember many years ago I took this course on mastery. And the first step toward mastery was experience your experience. You know, just take it in and experience it and feel it, right? How do you feel? What do you think? Just experience it, right? And then the next step toward mastery was communicate your experience with the intention of others getting it. Communicate your experience with the intention of others getting it. And then the next step was, and I can't remember the way it was said in the course, but it was basically, you know, take action, do something about it. Right? But then the fourth step to mastery was have what you have. And that is to an extent, a surrender. And I don't mean surrender in the sense that you give up, but it means be somewhat at peace with it, right? Have what you have. Have what you have, and we have what we have. So what does it mean to us as real estate investors, what this mean as I talk to you at 5:05pm here on inauguration Day, what does it mean? Well, it means so many things. There is no way we will be able to cover it in this election. It means higher taxes, it means significant inflationary pressure. It means a significant change in tax law for two years. The Biden administration will be able to run roughshod over the country. There's really almost nothing stopping them. I mean, they have the government, okay? We have this three tier government which is fantastic. It was set up by the founders of the country, and it's brilliant because it has the checks and balances of the legislative, the judicial, and the executive branch. Right. And so that's a wonderful thing, certainly. But look, I don't know that the Supreme Court will need to be getting involved in much of what is about to occur in the country. So it's just really two branches of government. And hey, that party is in control, but is it really the Democratic Party? I would argue that it is not the Democratic Party in control. So maybe if you're not a Democrat, you feel some sense of relief from that statement. Well, don't be so fast. Don't be so fast. Because I would argue that really, and I kid you not, that the Biden person is really a Manchurian Candidate. And if you haven't seen the Manchurian Candidate movie, there are, I think, three movies. You know, Hollywood ran out of original ideas a long time ago, so they just keep doing remakes. And I think there are three versions of the Manchurian Candidate movie actually. So check out one of them. You know me, I like watching old stuff. I like new stuff, too. Of course. It's got way more bells and whistles. It's better looking. It's got better sound. But, you know, the old stuff has a certain quality to it, doesn't it? It just has a certain character. That's why I love old movies, old TV shows, old books, old music. And when I say old, my special favorite is the 70s. Yes, the 70s music. That's when. I don't know, it was just. It was kind of a chaotic decade. The economy sucked, but the music was so genuine, you know, so romantical. Very romantical music in the 70s. Anyway, enough of that. Enough of that. But Biden is a proxy, right? Even, like, I mean, seriously, even Democrats. Even the most democratic of the Democrats. Right? You can't deny that Biden is a proxy for corporate America, big tech and the Chinese government. There is so much evidence for this. It is absolutely incredible. So let's talk about tax for just a moment. I mean, this is such a big subject. We need multiple episodes on this, and we will have multiple episodes on Biden tax plans. But very briefly, we have got. And you know, this is extremely likely to happen, and it's likely to happen quickly, and it's good news for you. Are you ready for some good news? Real estate investors, get ready, because you're about to profit. Yep. You're about to profit from this. Biden is going to very likely provide a $15,000 tax credit. Now remember, a tax credit is different than a tax deduction. A deduction just means you take your income, you deduct the amount of the deduction, which in this case $15,000, and then whatever's left over the net income. So if you make $100,000, you take a $15,000 deduction, you've got 85,000 left over. That's what you pay tax on. No, no, no, no, no, no. Is much better. So what that says is okay, if your tax bill, for example, the amount of money you owe to the government is $30,000 and you have a $15,000 first time home buyer tax credit, then you only pay $15,000. You got a coupon that says $15,000 off. That's a tax credit. Much better than a tax deduction. A credit is, you know, dollar for dollar. So it's really, really good. And what is going to happen? Look, remember the Cash for Clunkers stupid program? Remember that dumb, dumb Cash for Clunkers program that comrade Obama did years ago? It was a disaster. Cash for Clunkers. Basically you turn in your old clunker of a car that's not fuel efficient, that doesn't have all the latest emissions controls, you know, seems like a good idea, right? And we'll give you cash for it in the form of a tax credit. Right? And Obama did that. And so everybody turned in their clunkers. Well, what happened? Right, what happened? Well, the used car market, the used car market just totally dried up because there was like no inventory. Right. Because everybody was turning in their clunkers. And what did they do with those? Well, some they sent them the junkyard, some they sent them to Mexico and other countries. Right? And so it's not like as the great, by the way, the great John F. Kennedy, former president who went up against the Federal Reserve and against the establishment and you know, was assassinated. Of course, he said we all breathe the same air, right? That was one of his great quotes. We all breathe the same air. And he's right. Well, you send the clunkers to Mexico and guess what? They're still polluting over there. Comrade Obama, you know, another ill conceived, you know, left wing government program. It's just absolute stupidity. You can't make this stuff up. But the point was cash for clunkers. Everyone went out and bought a new car. So all those new cars had to be manufactured with incredible damage to the environment, of course, because the old thing, you didn't need to make a new thing. So if you didn't need to make a new thing. You didn't need to pollute any rivers or pollute any air or, you know, make any new steel or anything. You just had the old thing and it was there and it was fine. Okay, so cash for clunkers was like an environmental disaster. But also notice what happened to the economy. It pushed up automobile prices. So now this $15,000 tax credit that Biden is going to offer, it's going to push up real estate prices. So all of the real estate that you're looking at today, because all of these properties that you see@jasonhartman.com properties are in the first time buyer price range. Well, all of those properties are suddenly going to have a $15,000 upward pressure on their price. And you know what that means if you buy now before the $15,000 tax credit goes into effect and before every first time buyer rushes gobbles up all the inventory. Because they were just incentivized to remember the greatest management principle in the world is what gets rewarded gets repeated. What gets rewarded gets repeated. So everybody's going to go out and buy a house and inventory is already extremely low and all the libtards are saying that there's a housing shortage and we need more affordable housing. Well, providing a $15,000 credit is going to make the problem even worse. But fine, go ahead and make the problem worse. What do I care? Rome is burning. The Titanic is sinking. You know, let the band play on, on the Titanic as the ship is sinking. You know, let's rearrange the deck chairs. And you know, sadly, sadly, sadly. I'm not saying this is good. It's not good, it's sad. But it's the way things are. Remember, have what you have, have what you have. And as you have what you have, profit from it. Profit from it. And I'm here to help you do that. Okay, so this is just another wealth transfer. And the Biden administration will be a wealth transfer, a massive wealth transfer to the cantillions. And we've talked about the cantillion effect before. So not going to go into it now, but many times on prior episodes talked about that. And the corporatocracy and the big tech firms, it's simply a wealth transfer. But guess what? You're going to get in on it. You're going to be a part of it, and some of that wealth is going to be transferred to you because you're going to go to jasonhartman.com properties right now and you're going to reach out to One of our investment counselors. And we're going to help you find properties before there is more upward pressure on price due to this $15,000 tax credit. Okay? So congratulations. Also, the 1031 exchange rule is under attack and the rule about step up basis when you pass away. So if you want to pass away anytime soon, do it before Biden passes his new tax law. Just kidding. I don't really mean that. I like it when you're alive. Because you know what, at the very least, you have to be alive to be one of our clients. So that's a requirement. So stay alive please, because we love you clients and we need you alive. Okay? Do not die. But from a tax planning perspective, it wouldn't be a bad idea for people to die before this goes into effect because what it does is it basically is an attack on estates. So now wealth will be again transferred from people to government. And then guess what else is going to happen. There is a lot of talk that the Biden administration, and this is not about real estate specifically, but it's about socializing bad behavior and losses. And you're going to see a lot of this coming up. Okay. A lot of it. Here's just one mega huge example of it. And it is going to be the failed states that we've talked about many times. My former home state, the Socialist Republic of California and the Socialist Republic of New York and the other failed left wing states, they are broke, they are going under and there is a high likelihood that they will get a bailout from the Biden kleptocracy, the Biden federal government. And as such, that means their bad behavior and their losses will be socialized among all American taxpayers and all American consumers. Why is that? Because of course, the government will have to spend money to bail out California and New York, for example. Okay. And that will be a huge amount of money. It will not be a small check. You know, we see these multi trillion dollar packages, right? Well, when the state bailout packages come, it's going to be really big. They will be really big packages. That's coming. How will it affect. That's taxpayers, but of course consumers, because inflation, there is a lot of pressure for more inflation. Now literally, just by seeing Sleepy Joe get sworn in today is just, they might as well have written on the screen inflation. It's not the British are coming, it's inflation is coming. That is another thing. And that's a large part of our strategy, by the way. I'm interviewing Dan Ammerman next week to be back talking about that. I got say Fadin Amosa on the Bitcoin standard and he talks a lot about that. Fascinating discussion. That interview is already in the can. It's coming up. So stay tuned for those. But I want to just before we get to Jim Rickards who's back with us today. He was with us Monday, of course, and we got more Jim Rickards today coming up. But before we get to that, you've just got got to hear this piece. And this is not don't read this as some political thing. This is just a factual thing. This is about just who do we have as president now? Who do we have and what is the corporate influence on this president. It's extremely important to consider this. This is obviously pre election results this and it's a Tucker clip that I'm going to play for you. But it is very telling because this is exactly what we are going to see and I think it is telling us to who we have in the office.

At some point soon, we're told maybe tonight, possibly Joe Biden may take the stage to declare himself effectively the president elect of the United States. But as a highly aggressive and very unusual move, keep in mind there is vote counting still underway in a number of states. But then the Biden campaign's behavior in the last 48 hours, like so much we've seen recently, raises profound questions about our electoral system and whether it's really what we've assumed it was. We'll address all of that in a moment. But the first question tonight is far more basic than that. Who exactly is Joe Biden? This man who claims to be our president? We probably ought to find out. Put that on the to do list. The truth is, as of tonight, we don't really know. We have no clue what Joe Biden actually thinks or even if he's capable of thinking. He hasn't told us. No one's made him tell us for a full year now. That's by design. In fact, it's becoming clear there is no Joe Biden. The man you may remember from the 1980s is gone. He no longer exists. What remains is a projection of sorts, a hologram designed to mimic the behavior of a non threatening political candidate.

Relax.

Joe Biden's here. He smiles a lot, everything's fine. That's the message from the vapor candidate. Don't think too much.

Do you notice how that's the perfect Manchurian Candidate? I mean, it's the puppet presidency and I think that is really what we are going to see. We're going to see so much of this puppetry. In fact, one of my friends posted today that Joe Biden begins his ninth year as vice president. I thought that was pretty good. Joe Biden begins his ninth year as vice president.

So who's running the projector here? Well, the first thing you should know is the people behind Joe Biden aren't liberals, though we've often called them that incorrectly on this show. A liberal believes in the right of all Americans to speak freely, to make a living, to worship their God, to defend their own families, and to do all of that regardless of what political party they belong to or what race they happen to be born into or how far from midtown Manhattan they currently live. A liberal believes in universal principles fairly applied. And the funny thing is, all of that describes Most of the 70 million people who just voted for Donald Trump this week. Most of them don't want to hurt or control anyone. They have no interest in silencing the opposition on Facebook or anywhere else. They just want to live their lives in the country they were born in. And it doesn't seem like a lot to ask. So by any traditional definition, they are liberal that way, though our language has become so politicized and so distorted that you would never know it. What you do know for certain is that the people behind Joe Biden are not like that at all. They don't believe in dissent. You think one thing, I think another. That's okay. No, that's not them.

We're going to get to the corporate stuff here in just a moment, so keep listening at all.

They demand obedience, diversity. Which is to say, legitimate differences between people is the last thing they want. Diversity. It's a cruel joke. They must mean it. Ironically, these people seek absolute sameness, total uniformity. You're happy with your corner coffee shop. They want to make you drink Starbucks every day from now until forever.

Starbucks is poisonous. Remember on prior episodes when I've read you the nutritional value of the poison they serve at Starbucks? You know, I was thinking when I went to a Starbucks recently, by the way, I must just break in and mention this, that you know the concept of workers compensation, right? You know, we carry workers compensation insurance because if someone gets hurt on the job at my company, they can file a workers comp claim, right? Well, have the employees of Starbucks ever sued the company under a workers comp claim or even filed a workers comp claim? Because I don't know about you, but whenever I see a new person going to work at a Starbucks and then I see them four months later, they're suddenly becoming obese and diabetic and future cancer patients. You know, it's unbelievable the poison Starbucks is foisting on the world. But it's funny how no one attacks them the way McDonald's used to get attacked for this, right? No one complains about Starbucks because it's a protected, woke leftist organization. Unbelievable.

No matter how it tastes. That's the future they promise everyone doing the same thing. Now, if these seem like corporate values to you, uniformity is the most basic corporate value. Then you're catching on to what's happening. The Joe Biden for President campaign is a purely corporate enterprise. It's the first one in American history to come this close to the presidency. Its values, its slogans, its goals come straight from the HR department. If a multinational corporation decided to create a presidential candidate, he would be a former credit card shill from Wilmington, Delaware. And that's exactly what they got. What's good for Google is good for the Biden campaign and vice versa. We have never seen a more soulless project. They literally picked Kamala Harris as the vice president. Someone who can't even pronounce her own name. Not that it matters because it's purely an advertising gimmick. We watched all of this come together in real time. We stood slack jawed in total disbelief as a man with no discernible constituency of any kind rose to the very top of our political system. As if by magic. We look for wires. How did he do that? He keeps rising. It's possible in the end that Joe Biden himself never convinced a single voter of anything over the entire duration of the presidential campaign. Not one.

That's why the Biden campaign. And we'll stop talking about this, but it just doesn't even pass the smell test. Like no rallies. When he had a little rally, like nobody showed up. Hardly. I mean, this whole thing is just such a. It's such a Manchurian event. It's a puppet show. It's truly amazing. I could totally understand, even though I was not a supporter of Obama, I could understand why Obama is an exciting candidate. Or was an exciting candidate, I should say. I mean, Obama was the first half black president, right? That was exciting. That was interesting. I mean, we're breaking ground here. This is a new chapter for America. He was a great speaker. I mean, at least when he was reading a teleprompter. He was inspiring in some ways. I mean, I even felt that way. I hated his policy, but I kind of liked Obama in some ways. But there is nothing exciting about Biden whatsoever. I mean, just nothing. Nothing. There's zero passion in this candidate at all.

But he didn't have to. Joe Biden won the Democratic nomination because he wasn't Bernie Sanders.

Now, Bernie Sanders, on the other hand, even though I don't agree with Bernie Sanders, he's an exciting candidate in some ways, right? He had, like, different ideas, new ideas. He was like a man of the people, supposedly. He's just not in the club. And corporate America can't buy him as easily. But they could buy Joe Biden where.

He is today because he isn't Donald Trump. That is the entire story. It's the shortest political book ever written. Now, whatever you may think of Donald Trump and Bernie Sanders, they did it the traditional way. Each one of them had the support of actual voters. Living, breathing people, loved them, believed in them, vested their hope in them, and by the way, agreed with their ideas, which they articulated clearly. But corporate America hated them both. They couldn't be controlled. Particularly Donald Trump, whose complete unwillingness to submit made him the greatest possible threat. And that's why they hate Donald Trump. That's the reason. Because he won't obey tonight. It's possible that these forces may be winning. We can't say that now, of course. We would never say that until it is absolutely certain, but it could happen. What then? Who will we say really won the election? Joseph R. Biden? Please. That's insulting. The tech companies will have won. The big banks will have won. The government of China, the media establishment, the permanent bureaucracy, the billionaire class, they will have won. And not in a way so the.

Cantillion effect is coming big time. The Biden presidency is going to be a massive, massive, massive wealth transfer. And I just want to make sure that you get your cut of this massive wealth transfer that is going to occur under the Biden administration.

The democracy promises, with numbers alone, if a single person equaled a single vote, a coalition like that could never win anything. There aren't enough of them. But as a group, they have something that Donald Trump's voters sadly do not have, and that is power. They have lots of power, and they plan to wield that power whether you like it or not. It's all starting to look a lot like oligarchy at this point. The people who believe they should have been in charge all along now actually may be in charge. So what does that mean for the rest of.

It's a kleptocracy, it's a plutocracy, it's an oligarchy, and it is a massive, massive transfer of power. By the way, if you want some homework and you want to look up and learn about something that really changed the character of our politics, go research, don't Google it because Google's evil use duckduckgo type in Citizens United. Okay, Citizens United. And just learn about Citizens United and it'll help you understand why we are where we are, which is in a bad place for the country. But hey, we can all profit from it. So that's the good thing about it. Okay, we'll wrap this up here and get to Jim Rickards in just a moment.

For the rest of us, now that corporate America controls everything, which is what they wanted, will they declare victory and back off? Finally, can we speak freely again? Will they take the boot from our necks? Can we have America back? Now that the great orange emergency has passed, Will the mandatory lying orders finally be lifted? Those are the questions we'll be paying attention to since we plan to stay in this country. And one other thing, by the way, while we're at it, who's excited to greet our new corporate overlords? Who plans to collaborate, particularly who on the right side, the Republican side, the side that said it was defending you? Who's happy about all of this? That seems worth keeping track of just so we know who we're dealing with here.

All right, well, I think Tucker summed it up pretty well. It's a corporate takeover and it's a Chinese takeover. But we have profit strategies. We will continue to explore them as we go forward on future episodes. But we've got Jim Rickards back with us today. So let's get to Jim Rickards right now. So the government and the central banks all around the world have created an unprecedented, absolutely mind boggling amount new currency. Jim, what does that mean to us? 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, your Austrians and your monetarists and your neo Keynesians, they're going to say inflation, 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? There's no inflation.

Well, there's a lot of, you know, I mean, I don't want to like belabor the point, but some would say there's more inflation than is Disclosed. Of course they'd say the indices are misleading, but that's fine. But then others would say, look at the asset inflation. I mean, there's a lot of inflating of assets, right? Maybe not consumer prices.

Yeah, but that's not inflation. I mean, asset prices are up there, bubbles all over the place. I agree with that. Bitcoin stock market, some sectors of real estate. Not all those are asset bubbles. That's not inflation. Inflation is the consumer price index or the ppi, the purchasing index, Producer price index, rather. And you say, well, I got my own definition. Well, fine, good for you. But you're not going to be able to forecast policy if you're making up definitions. You got to look at it the way the Fed does. And I'm not saying that there are no problems with it. I'm not saying the models are right, they're not. But if you're trying to forecast Fed policy and forecast markets, which I do, you better look at it the way the policymakers are looking at it, because that's going to guide their actions. If you want to stay ahead of the curve in terms of policy changes, you have to look at it through their eyes, whether the models are right. I know the models are wrong. I get that. I do my own modeling. But you can't just make up your own definition. If you're talking about. Well, the official. The inflation benchmark that the Federal Reserve uses is pce, price deflator, personal consumption expenditure price deflator. That's the one that's used to determine GDP. And their target for that is 2%. And they've hit that target about two months in the last 13 years. In other words, they don't know how to cause inflation and we don't have inflation. But just to come back to your point, Jason, we printed the $7 trillion over $7 trillion we talked about. The Monitor said all that money, you're going to cause inflation. We have not. Money printing does not cause inflation. What causes inflation is the velocity of money. It's the turnover. So I go to dinner, I tip the waitress, she takes a taxi home, tips the taxi driver, taxi driver puts gas in his car. So in that example, my dollar tip had velocity of three. There was the waitress tip, the taxi tip, and the gasoline. $3 of goods and services for $1. That's velocity of 3. But if I stay home and watch TV and don't spend any money, my money has velocity of zero. So a nominal GDP is money supply times velocity. What's 7 trillion times zero?

00.

Right. If you don't have velocity, you don't have economy. So you can think of the money. There is money printing for sure. But think of the money printing as piling up wood. As piling up. Piling up piling. A big pile of wood doesn't start a fire. You need a match. You need a bolt of lightning, you need a blowtorch, you need some catalyst. So if you're worried about inflation, and actually right now deflation is a bigger problem. But if you're worried about inflation, don't worry about the $7 trillion pile of wood. Ask yourself, where's the spark?

Okay, so could that spark come at any time? Could it just suddenly create a lot of velocity? And also, is the lack of any significant inflation in the system a how do we know that it's a result of velocity versus just technological progress, that technology is deflationary? I think we'd all agree with that because it just makes things better, faster, cheaper, which is it? And could that spark come at any time?

Well, it can come at any time. Which begs the next question, which is, okay, what could it be? And am I looking for it? Do I see any signs of it? So I'm not saying let your guard down about inflation. I'm just saying there's no inflation right now and there's nothing on the horizon that's going to cause inflation. You're asking a good question. Is there something that could. Yeah, I can tell you what it is. Actually, I tell the reader in the conclusion of my book what could cause inflation. In fact, I recommend it because we've got another problem which I just explained. Why monetary policy does not work. Fiscal policy does not work either. You can have deficit spending, but stop calling it stimulus because it's not stimulus. And why is that? You have to look at another metric which is the debt to GDP ratio. So how much government debt is there and what's gdp? And simple example, let's say, and these are not the right numbers, but just as an example, let's say a $10 trillion in debt and $20 trillion of GDP. Well, in that example, the debt to GDP ratio is 0.5. It's 50%. The debt's 50% of the. Sorry, yeah, the debt's 50% of GDP. Well, what are the actual numbers? The actual numbers today are about 25 trillion of debt and about 22 trillion of GDP. In other words, the debt to GDP ratio is actually around closer to 130%. Now what's the significance of that other than the fact It's a bigger number, this research, this is from number sources. But Kenneth Rogoff, a professor at Harvard, Carmen Reinhart, who was a professor at Harvard, she's now chief economist at the World bank and others and their collaborators in books, papers, studies, numerous time periods, markets, emerging markets, developed markets, all markets, et cetera. And they show very conclusively that your Keynesian multiplier works up to a debt to GDP ratio of about 90%.

And we're at about 130%, I believe, right?

Correct.

In Japan is at 230%. Somewhere around that.

Correct. Japan's a special case. Not going to explain that. But just to come back to the other research, so what's the Keynesian multiplier? Keynesian multiplier is when you're in a liquidity trap and you want consumption and people won't spend, they save. That's what they're doing today. The stock market was up today because, okay, so Biden's going to be president, so the Democrats control the Senate. So that means we're not going to get $600 checks, we're going to get $2,000 checks and more. So the stock market, which usually gets things wrong, by the way, but they said, well, all the stimulus people are going to get the money, they're going to spend it. Here's your inflation, kind of what you were asking about, Jason. Here's your inflation. So interest rates are going up. That's not what people do with the money. They will get the money. I agree with that. And there will be more deficit spending, but they're not spending it, they're saving it. They're either paying down debt, which economically is the same as saving, or they're actually saving. And look, if you lost your job, of course you're going to save money. You're not going to pay the rent or whatever, but you're not going to go spend it on vacation or whatever. But even people who haven't lost their jobs worry that they might be next. Maybe their neighbor lost their jobs.

So they're more. They're raining and they're pulling in their horns.

Correct, Correct. There's a name for that. It's called precautionary savings. Savings, just in case. Well, so if you get savings, you're in a liquidity trap. Nobody's spending the money. So what Kean said is, well, the government can spend the money. If people won't, the government will. And so you borrow a dollar and you spend a dollar and you get $1.25 of GDP and it works for a while.

Priming the pumps for a while.

The question is, when does it not work? And the answer is, it does not work at 90%.

Why is it so, Jim, My question is, why does it, you know, like the economy turns into sort of this zombie economy with too much debt, right? It stops working. It's sort of like maybe a metaphor would be, look, you know, I woke up, I didn't sleep well, I had a cup of coffee. It didn't do the job like usual. One cup is usually good enough. Well, I had three cups. And if I have ten cups, it's not going to make me ten times more awake. It's going to actually hurt me. What happens with the economy, though, when you do that?

It's the same thing. The concept is a diminishing marginal return. So at very low levels of development, of productivity, one guy has a bright idea. You got a bunch of farmers 5,000 years ago in China, and Guy says, if we got together and built an irrigation canal and brought the water over here, we could all grow more rice. Oh, yeah, good idea. And guess what? That works. But pretty soon you need an irrigation commissioner and he hires an assistant, and your bureaucracy builds up and the cost. So for each new investment, okay, you still get gains. You still have gains, but the curve goes up very steeply at the beginning, then it flattens out, and then it starts to go down, and then it actually goes negative.

Yeah, because you sort of collapse under your own weight without all bureaucracy.

That's exactly right. It's complexity theory and scaling metrics. But that's where we are now. We're in the negative return. That's what happens when you go past 90%. The Keynesian multiplier drops below 1. Now you borrow a dollar, you spend a dollar, and you get 90 cents of GDP. Not $1.25, but 90 cents or 80 cents and progressively less. But look at the math. What's happening? Your debt is still going up by a dollar, but your GDP is only going up 90 cents. So what's happening to the debt to GDP ratio? It's getting worse. That means the return of the next dollar is lower. This is why you cannot borrow your way out of the debt crisis. You cannot print your way out of the liquidity crisis. You need other solutions. I talk about the solutions in the conclusion of the book.

Okay, So I want to ask you about what people should do, but before we get into that, you, I believe, correct me if I'm wrong, are bullish on gold and silver. Is that correct?

Yes, that's right.

And most people would think, and maybe your idea is more counterintuitive or there's some distinction. Most people would say, well, people buy gold or silver if they're worried about inflation or they're worried about a general crisis or collapse of any flavor, I guess. Why are you saying inflation isn't the worry? But still buy gold and silver because.

Gold does very well in deflation. Also, you're right about the inflation. That's pretty intuitive and most people understand that. But again, just to give concrete data and concrete models, I don't make claims without backing them up. The greatest period of sustained deflation in US history was the Great Depression between 1929 and 1940. In that period, gold went up 75%. It started at $20 an ounce, $20.67 an ounce, and went up to $35 an ounce. In dollar terms, that's a 75% gain. The best performing stock market. Sorry, the best performing stock on the New York Stock Exchange during the Great Depression was homestake mining out in South Dakota, which again, because they were producing gold. So gold does very well in deflation. No. So why is that? Seems kind of counterintuitive. The answer is governments cannot afford deflation because you can't tax it. You can tax inflation all day long, governments love it, but you can't tax deflation. If I don't get a raise, but the price of everything goes down, my standard of living just went up because my same amount of cash has higher purchasing power. So my standard of living goes up in deflation, but the government can't tax it. So they want inflation because they want me to get more nominal dollars, they can tax it. So if governments can't stand deflation, and they can't and you have deflation, how do you get out of it? The answer is raise the price of gold, raise the dollar price of gold. Not to reward gold holders. In fact, FDR did it and he confiscated all the gold first. So the government, it was the ultimate front running, the ultimate inside check.

That was an absolute scam in 1933.

It was a scam, but it worked. It was a scam that worked. The reason it was a scam was the government got all the profit, not the individual investors. But as economic policy, it worked. Because what Roosevelt was saying is, I don't want to reward gold holders. In fact, he took all the gold. But what I want to do, I want the price of everything else to go up. In other wor if gold, I expect gold to go to $15,000 an ounce over the next several years. But let's just take $5,000 an ounce, which would still be a big jump. The world of $5,000 gold is also the world of $400 oil, $100 silver, $20 a week. There's your inflation. The price of everything else goes up. I tell people, if the dollar price of gold goes up, if you have gold, that's fine. You made a profit. Don't pat yourself on the back, because what's really happening is that the dollar's devaluing. It was just not. People say gold's going up, okay? But that's not really what's going on.

It's the measuring stick. It's the keeping pace.

I think of gold by weight. I think of gold by weight. And an ounce of gold is still an ounce of gold. If you stick it in a drawer, go away for a year, come back, guess What? It's not 2 ounces. It's still an ounce of gold. But if the dollar value is higher, what really happened is that the value of the dollar went down. That's inflation.

My listeners get that. So they're in tune with you there. No problem. Okay. Okay. So before we get to what to do and then we'll wrap it up, that question I asked you about bitcoin off air before we started, I found it very interesting that you said on another video I saw you on, that bitcoin will not become. Well, you're not a fan of bitcoin, right? Is that fair to say?

Yeah, I have no interest in it.

Tell us why.

Because it's not going anywhere. I mean, it might go down to $200 a coin or whatever. But here's the thing with bitcoin. I know where it is. It's $35,000. So I did an interview in December 2017 with Sarah Silverman. She's a journalist. And at the time, bitcoin was going up about $1,000. Well, certainly $1,000 a week was almost $1,000 a day. So it was gone at the time. It was about $8,000. So we had gone $5,000, $6,000, $7,000, $8,000.

It's highly speculative and very volatile. So be careful, folks. If you're doing it, be really careful.

Well, yeah, but there's. Yeah. Yes, I agree with. There's more to it than that. Sarah asked me the same question you just did. I said, look, Sarah, here's what's going to happen. It's going to go to $20,000, and then it's going to crash. And that's exactly what happened. It went to $20,000 in early January and then it crashed about 80%. All right, so now it's at $35,000. It's another bubble and it's going to crash. Bitcoin. But a lot of people say, well, bitcoin's going to take over the dollar. Bitcoin's going to replace the dollar as a global reserve currency and it's the place to be and it's the new gold, et cetera. It's all nonsense. And here's why. When people say the dollar is the leading reserve currency, and it is, 60% of global reserves are in dollars. And by the way, about 30% of global reserves are in euros. A little bit less. So the dollar and the euro together make up almost 90% of global reserves. All the other currencies combined, Sterling, francs, Canadian dollars, Australia. Together they add up to maybe 40%. No, not 40%, 10% or 15%. The dollar and the euro make up.

Oh, got it. I thought you were talking everything but the dol.

Correct. So those two currencies of the whole show. But it's not as if the people. So when you say China has $1.4 trillion in their reserves in dollars, which they do, it's not as if they have pallets of $100 bills sitting in the basement of the People's bank of China. They buy securities, they buy treasury bills, notes and bonds. So they're denominated in dollars. Yes, but they're not dollars, they're treasury notes. They're 10 year treasury notes or 5 year treasury notes, et cetera. In other words, the thing that makes you reserve currency is not the currency, it's the security. The liquid securities market you can invest in. You need something to invest in. You can't just pile up printed money. So where's your bitcoin bond market? It doesn't exist. Where's the Chinese yuan bond market? It's small time, but it essentially doesn't exist. Chinese yuan is not going to be reserve currency. Bitcoin's not going to be reserve currency because there's nothing to invest in. Oh, you think the Chinese yuan is going to replace the dollar? Fine. Where are your bonds? Where are your primary dealers? Where's your payment system? Where's your repo, your options, your when issue trading, your futures, your hedging, your settlement and clearance? None of that stuff exists. And even if it did, which would take 10 to 20 years to build, which they don't have there's no rule of law. You wouldn't invest in a Chinese bond if they can wake up and confiscate it just like that. So the only bond market. So it's not about the currency. I mean, the currency, it's a numerator. It's a way to count. But it's not about the currency. It's about the bond market. And yes, the treasury market is the largest, most liquid bond market in the world. By the way, there is no such thing as a euro bond in terms of. Yeah, there are dollars denominated bonds issued in London. They're traditionally called euro bonds. But when I say euro bond, I mean an instrument denominated in euros backed by the full faith and credit of the European monetary system. That instrument does not exist. If you want to invest in euros, you buy buns. Italian government bonds. Good luck with the Italians. You can buy Greek government bonds if you want to. They're in euros. But there's no unified euro denominated bond market. So how many German bonds are there? Not enough to absorb the savings of the world. So when I went to Washington, the first thing I learned, I was a lobbyist. My wife hates me to admit it, but I was. And the first thing I learned is you can't beat something with nothing. In other words, if you really dislike something, I hate this, it's awful. Get rid of it, et cetera. Fine, but you need something to replace it. You can write op EDS and rant and yell and scream on tv, but if you don't have something to replace it, you're not going to change things. And right now, there's nothing to replace the dollar.

Well, I agree that the dollar has a much better future than many would say. But are we asking the right question, Jim? I mean, we kind of went from, is bitcoin an investment or is it going to become the reserve currency of the planet?

The answer is no and no.

Okay. But I think everybody listening, I don't know if they care about it being a reserve currency or not. They just care if they can make some money, I guess.

When I was in junior high school, there was a popular dance song. I think it was Dion and the Belmonts. The song was called shout, and the refrain was shout, shout, knock yourself out. Well, if you want to buy bitcoin, knock yourself out. It's a free country, you can do it. But it's never going to be a reserve currency because there's no bond market.

Right. Okay, so what should we do with all of this? Sum this up for us and give out your website any action statement, steps people can take in these absolutely turbulent times.

Thanks, Jason. It's all in my new book, the New Great Depression. And my other said, Jim, you can't write a book about a pandemic and a depression and not have a happy ending. And what she meant by that was, let's have some constructive advice for investors. And we have that at the end of the book in chapter six on the conclusion. So specifically, I like gold. I recommend that for 10% of your portfolio. People always want to put words in your mouth and say, Jim Rickards says sell everything and buy gold. Never said that. Don't believe it. 10%, 10%.

Okay, what else?

But there's 10 to 20%. In 10 year treasury notes, interest rates are going to go negative. The yield to maturity, not the Fed policy rate. That's different. I think the Fed policy rate will stop at zero. But 10 year treasury notes in secondary market trading, the minute you pay me a premium greater than the present value of the strip of coupons in principle, then you have negative return, you have a negative yield of maturity. Those could go negative. Right now they're about 1%. Take that down to negative 50 basis points, they're going to have huge capital gains on your 10 year treasury notes. I like cash. People say, oh well, cash has no yield. Okay, but in a world of deflation, cash can be your best.

Cash becomes more valuable.

Well, so they could actually be your best performing asset. The other benefit of cash that people overlook, it has huge embedded optionality. So, meaning there's a lot of uncertainty right now. I don't dispute that. And if you put a stake in the ground, you go all in any asset class, which should never be all in one asset anyway, but you make two or three bets on some private equity or some real estate or whatever, then a year from now you say, that was a mistake. I ought to go over here. You might be locked in. I mean, good luck getting your money back from Henry Kravis. If you invest, he's a good guy, but he's not going to give you your money back. Not soon, but. So the benefit of having cash is like an at the money call option. On every asset class in the world, you're the person. When we get better visibility, you can pivot. You're not locked in. It also reduces the volatility of the portfolio. Help you sleep at night. This room for equities, sure, but be selective. Like defense stocks. The world's not getting safer. Natural resources, for sure. Agriculture Water oil is going to do a lot better. It's had a bad year. Well, that doesn't tell you much about what's going to happen in the year ahead. I like residential real estate. They do not like commercial real estate. Commercial real estate has not hit bottom. You can look at it.

Couldn't agree more.

Wouldn't touch it until late 20, probably 2022 at the earliest. Residential real estate's different people. There's a mess. When I say mass I'm talking about millions of people migrating out of the cities and they're going to either the suburbs or other cities. So where are they leaving? They're leaving Los Angeles. San Francisco. Portland, Seattle, Philadelphia, New York, Chicago and Baltimore and a few other cities. Where are they going? Miami. Red hot Nashville. Fastest growing city in America. Phoenix. Scottsdale. I don't like the heat, but it's a lot of people do. So they're going there. Boise, Idaho. So figure out where people are leaving. Figure out where they're going.

They're going to the suburbs. I call it the suburban tsunami.

Right there is a suburban tsunami but to the extent they go to suburbs of cities, you're right. They're. There are particular cities and I would put Miami, Nashville and Phoenix at the top of the list. But there are other places. Austin is another one.

The only problem is that in that equation you've got to be able to make the rent to value ratio work in a lot of the cities. Even if there's a migration in pattern. You're speculating on buy low, sell high rather than buy low sell high and have cash flow. So some of those are too.

I agree completely. Look at real estate the way we just described it. There's some simple formulas. To me the differentiating factor is the management. Find a management company or investment company or a private limited partnership where people know what they're doing and have experience and it's easier said than done. But there is opportunity there.

Website.

Yeah jamesricordsproject.com but I also encourage people to follow me on Twitter amesgrickords. I use my middle initial G Records is R I C K A R D S amesgrickords and the book is the New Great Depression available on Amazon. Barnes and Noble will be in the bookstores on Tuesday.

Good stuff. Well, Jim Rickards, thank you so much for joining us. Appreciate having you on the show and hearing some of these insights.

Thank you.

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