1641 FBF: Inside The Web of Debt - An Interview with Ellen Brown

What I've learned is you like to.

Mention be area agnostic is one of.

Your commandments and that I love that.

I like to look at this as also be when it comes to real estate investing.

Be age agnostic.

Who cares what age you are?

You can start doing this at 19 like you did.

You could start doing this in 20s. You can start doing it in your 50s. I started in my 50s. 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.

Please note disclaimers at end of show.

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before and a new slant on investing fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Hello and welcome to another edition of Creating Wealth. This is your host, Jason Hartman, and I'm glad you're with us today. We haven't had a show up in about a week and a half. So glad to be getting this one out. Thank you so much for continuing to listen everybody. It looks like we have quite a following out there and we're happy to be here giving you the best investment advice, the most uncolored and hyped advice we can find out there at least. And you know, really trying to be impartial and serve your needs and give you good ideas that you can use. Obviously, we are ultimately in the business of investment property brokerage in arranging referrals to the different markets in which we operate all around The United States, 39 markets now, by the way, I have to mention we opened a new market that we're quite excited about and that is Denver, Colorado. I've been looking at this market for several years now and it's always been a little too expensive and the rents haven't been good enough. But now Denver is good and we like Denver. Now we've been waiting patiently to do more in Colorado and I think the time has finally arrived. We had our Masters weekend last weekend and that is a twice yearly event. Our next one should be in March. Maybe we'll even move that up to February. It was really well done. I think we had a good event. The room was packed. People said they learned a lot. It started Friday evening where we played the cash flow game and then we went all day Saturday and Sunday. And I tell you, by the end of it I was exhilarated but also exhausted. It was a long weekend, so be sure to join us for our next Masters weekend. And at the Masters weekend, we had our Colorado broker fly out among many other experts. We had actually 17 experts on different areas from different real estate markets as well as different areas of the law. We had two attorneys speak. You know, all of the people in the audience got their advice for very, very low price versus their normal hourly rate. We had a tax specialist speak. We talked about asset protection, saving money on interest cost, loan modification, loan auditing, personal bailouts. You know, we're all probably somewhat upset and maybe a little envious of these bailouts for the rich that are going on in Wall street and bailouts for the irresponsible. How do we get our personal bailout? So we entitled one segment, dude, where's my Bailout? We had a whole bunch of different speakers. One of them was our Colorado broker, as I mentioned, and he flew out and did a great presentation on the Denver market and the surrounding markets and we're just really excited about that. So if you're interested, go to our website. By the way, we have a new part on our website that we just launched last week and if you go to jasonhartman.com click on properties, you will see the map of the US as it was before, but you'll also see a whole bunch of PowerPoint slideshows and we have a really nice player for them where you can watch them and just click play and sit back and watch as the slides change. Or you can actually go and click on the PDF and download the PDF, print it, email it around, whatever you like, and I think that will be very helpful to you. We don't have all our areas up yet, obviously, but we have about six or eight of them I believe. And the Denver presentation is up there. So take a look at that and we have an exciting show for you today. I was very fortunate to interview Ellen Brown. Ellen is the author of Web of Debt and she is a frequent guest in various radio shows. I've heard her on the radio several times and has a really interesting take on the 300 year Ponzi scheme that has been going on with the fractional reserve banking and central banking and just the way the whole system works. It's constantly amazing to me the way things are handled at the highest levels of our global financial system and how if the little guy isn't paying attention and isn't playing the game right, is really in danger. There's a real threat to their wealth. So I'm sure you'll enjoy my interview with Ellen Brown that's coming up here in just a couple of minutes. And also I want to say that we had some very good presentations at the Masters weekend last weekend, and some of them were by yours truly. Yes. I'll pat myself on the back and say that we had some good presentations that I made and I'm going to, as soon as we get the audio from that, I'm going to take selected parts and put them on the podcast. So look for that on future shows because we really wanted to present some new stuff and I think we did and make that available for the very first people who had attended the Masters weekend. So we will be broadcasting an abridged version of some of those presentations on future shows. So you can listen in for that as well. I have been a little bit behind on the Ask Jason questions, as you know, I love to get your questions and we haven't had time to answer them because we've had so many guests and long interviews on the show. And next week I'm really excited. I'm interviewing Harry Dent. He's a big name, obviously, and many of you know who he is. So that'll be next week, that interview. Not sure we'll broadcast it next week, but the interview is going to be next week. And also this week I am interviewing the head of Consumer Credit Counseling who will talk about how to handle and settle credit card debt, consumer debt. And I'm sure we'll go into the mortgage topic as well. So I think you'll like that. So let's answer a couple of these Ask Jason questions. First of all, one that I cannot find, but it was asked and, you know, I can't remember the name of the listener, but I do appreciate you sending me this feedback. One of the shows we did recently was about the money merge account and it was about how to save interest on your mortgage or any debt you have, whether it be credit card debt, home equity lines, first mortgages, whatever. And you know, this was a little bit critical. The person said that they really liked my show and they liked listening to creating wealth and had referred friends to listen to it as well. And I appreciate you doing that and felt that that was a bit of a pitch for the Money Merge network marketing program. And let me tell you something, I am probably one of the most skeptical people you will ever meet. And I have been looking at that program for about a year and a half now, and I turned it down over and over. Several people approached me on it and I did not like it and they made some modifications to the program and I started thinking about it and I started thinking about we're not into paying off mortgages. We love our debt, as long as it's good debt, as long as it's fixed rate debt, as long as it's attached to good assets and it has a negative interest rate. What I mean by negative interest rate, of course, is it's lower than the real rate of inflation, which is the big opportunity of our day. But even if we're borrowing at 6.5% and the true rate of inflation is 10 or 12%, you know, we're getting paid to borrow and we've talked about that on prior shows and that's great. But what if we could effectively reduce our borrowing costs from 6.5% to maybe 3.5% or 3% and we still have a rate of inflation of 10 to 12%? Well, then we're getting paid a lot more to borrow. So I think that program is a good deal. I do think that the software is a little bit pricey and some people have said they can do that in Excel. Let me tell you something. If you think that, wake up and check your thoughts there, because you're wrong. You can't do it. Okay? That is a very sophisticated system that is being offered. So I think it's worth it. I finally decided I would expose it to my listeners. And again, it took me about a year and a half to come to that conclusion. So I'm pretty skeptical. And I don't like sales pitches and I didn't promote that and I didn't talk to you about it for a long, long time, although I heard about it a while ago. And my personal feeling is that it is worth checking out. I think it can reduce your interest cost and I think it's a pretty reasonably good deal. So take it for what you will. That's my opinion. Okay, so another Ask Jason question here. This one comes from Joe Marshall. Joe, I appreciate your note and I appreciate you being a listener. He says, I've been a listener to Creating wealth with Jason Hartman podcast from the early days and have never written to say thank you, Jason. On a more recent podcast, you apologized for ranting and blamed it on too much coffee. Yes, I remember that one well. Well, I had to write and say that this was one of the best episodes I have listened to. I thought I actually heard from the real Jason Hartman and not just the company that he stands behind. I understand that some listeners would rather just hear about real estate and not the broader economy in general, but. But they are certainly tied together and both need to be addressed. Please know that your commentary on the economic crisis is not going unheard. You refer to some of your guests as doom and gloom, but they are realist. And you know what, by the way, I have to comment on that. I just want to sort of balance the opinion out because I think you're referring to the interview with Peter Schiff a couple shows ago. And you know, I like Peter Schiff's philosophy. I think he's mostly right. I think he's about 80% or 85% right. You know, he's a gold bug. I'm not a gold bug. I think gold would be a good deal if it wasn't manipulated by central banks and other of the, you know, rich and powerful that run the world. And also if you could rent it out, if you could finance it over 30 years at low fixed rate interest and get tax deductions and rent it to somebody else, I think gold would be a pretty good deal. But you can't do any of that. So I'm not a gold bug. Again, I've said it before. I like their premise, but I don't like their conclusion. So Peter Schiff, I think is great. I really like him, but, you know, I think he is a little too gloomy. I'm not quite that gloomy and most people accuse me of being too gloomy. Compared to Peter, I'm a bit of an optimist. So, you know, for whatever it's worth. So Joe goes on to say, I listen to that show at work and it always makes me feel better knowing that not everyone is going to just let themselves be robbed blind by this economic heist without putting up the fight. And people are paying close attention to the grunch. Now, I had to say when I read that, Joe, I thought you meant Grinch, like the Grinch who stole Christmas. So I typed it into Google and the definition of that came up. Maybe many of you don't know this because I certainly didn't know what this acronym was. Grunch is an acronym. Which stands for gross universe Cash heist. Okay. And it talks about the trillions of dollars that are basically being diverted from society, which I couldn't agree more. That's definitely happening, Joe. So thank you for telling me about that new acronym. Anyway, he goes on to say, so thank you for everything you have done. When I get better positioned from the benefits of this economic crisis and what it's creating in the future, I will know who to call to buy my first six pack of diversified properties. In thoughts and friendship, Joe Marshall. Thanks for the note, Joe. Appreciate you listening and appreciate your comments. Okay, another question comes from Ray Lopez, and Ray is a KBC radio listener. Ray says, Jason, I'm 30 years old, married, with one child. I work at Pepsi, and I'm tired of living paycheck to paycheck. I sold life insurance for three years and I did well at it. But I couldn't keep the fire burning and couldn't see the light at the end of the tunnel. How does someone like me who thinks that the majority of people I know can't afford a home, get into this, meaning, you know, investing and get financially free without burning out like I did when I sold life insurance. Well, Ray, keep the faith. Look, we all started somewhere, I tell you, I started in real estate back in 1980, 1985. I got my license when I was in college. I was 19 years old, okay. And you know, I started selling real estate. I bought my first investment property from a client, actually, a little condo in Huntington beach on Coventry Lane. And then I bought my second property, which was another condo in Irvine. I lived in that one. But it really turned out to be quite an investment, even though I lived there for 11 months. I borrowed my down payment from my grandmother and then I paid her back and made quite a bit of money. And over the years, I just kept buying more properties and more properties and investing and I had some luck in there. I had some hard work in there. And you know what? You will be surprised how quickly time passes and how quickly wealth can build in the real estate business. If you go back and listen to the two shows we did on the Refi Till youl Die, you really see that in seven short years you can build some significant wealth by investing in sensible properties in diversified markets. Be careful, be prudent, use debt responsibly, but use debt, because we love debt. And just follow the techniques we've outlined here for you. It's all free. You're in Southern California, so I hope you'll come to one of our events and I would love to meet you in person. Thanks for the question. Last question before the interview with Ellen Brown on the Web of Debt. This one comes from Adrian McMillan. Adrian says Jason, I listen to the Creating wealth podcast religiously. Thank you for continuing to provide the great information. I have a few investment properties and I'm very interested in working with Platinum Properties Investor Network on my future purchases. One of my investment properties is in Galveston County. The property was damaged by Hurricane Ike. I am trying to navigate my way through the insurance claim process. By the way, I have to mention that we had a lawyer at the Masters Weekend speak on insurance bad faith. Let me go on and read the question, then I'll make the rest of my comments here. So I am requesting advice on number one, how to verify I'm being treated fairly by the insurance adjuster and the insurance company. Number two, how to expedite the process if possible. You have mentioned on your podcast that your lender is your ally in this situation. How do I leverage the power of my lender? Any assistance would be greatly appreciated. Thank you for your time. Well, your lender is your ally. So what I'm saying to you here is, number one, Adrian, I hope you didn't have much equity in that property because the higher your loan balance, the better your insurance, so to speak. In other words, your lender wants to protect their collateral and whenever there's a claim and whenever there's a problem with the insurance company. You know, insurance companies love to collect premiums, but they don't like to pay claims very much. So when you have a high loan balance, your lender wants to protect their collateral and as such they are going to go to bat for you and be your ally. So the first thing I would do is I would pick up the phone, I would call my lender, I would write to my lender and I would say, hey, I have damage to this property, I'm in trouble and I need some help here to make sure I can keep paying on this loan. That will get their attention. And you tell them who your insurance company is. Provide all the contact information for the adjuster and the insurance company and also talk to your insurance broker, the person who sold you the policy, and get everybody involved and have them bug that insurance company and you keep bugging the insurance company as well. And if worse comes to worse, you might have to hire an attorney. But certainly there are tons of resources out there. The legal system is riddled with cases for many, many years of insurance bad faith. When insurance companies don't want to pay claims and you just got to make sure that you get as many allies on your side as possible and certainly one of them is your lender. So I wish you the best in this and I hope that you have a high loan balance because the less equity you have, the more motivated your lender will be to go to bat for you and protect their collateral. Okay, go to AskJason section of the website@JasonArtman.com Ask and ask your questions. And before this goes too long, let's go right now to the interview with Ellen Brown. I think you'll enjoy this. So listen in. It's my pleasure to welcome Ellen Brown to the show. She is very knowledgeable when it comes to talking about Federal Reserve monetary policy and so forth. Ellen, how are you? Welcome to the show.

I'm fine, thank you.

Good to have you. Tell us a little bit about what's going on in our country and what's going on with the monetary system. And I really like how you Refer to the 300 year Ponzi scheme and that will maybe start us off.

Okay, well, the reason we've had this sudden collapse in the market, it's actually been going on for 300 years. The way our money comes into existence is actually based on a fraud or a Ponzi scheme or a pyramid scheme where the banks, banks create all of our money except for coins which are 1/1,000th of the money supply. All of the rest is created as loans by banks. Most people think the government creates money, but that's not really where it comes from. So when you go to the bank and you take out a loan.

They enter the money as a deposit into your account and they do it by double entry bookkeeping. So they have another entry that they count as a. On one side it's an asset to themselves and on the other side it's a liability to themselves. So it comes out to zero. And so they will say, no, we don't create money because our books balance. But in fact that deposit is spent into the economy and that's what becomes our money. But that means all of our money is debt and all of this debt accrues interest. And the banks create the principal, but they don't create the interest. So you have this whole exponential curve that is a function of compound interest where the amount of money necessary to service the debt that is our money supply gets larger and larger and larger. And that's why we have an increasing debt and increasing money supply and inflation all over the world now. So with this scheme which has gone on since the 17th century called fractional reserve banking. It grew out of the Goldsmith. With that scheme, they've had to find more and more debtors to be sucked into the bottom of the pyramid to support the creditors at the top. So we pretty much indebted the whole rest of the world. I shouldn't say we. It's not us personally. It's the private international banking system.

Every country in the world now has a central bank and a fiat currency, right? Virtually virtually every country that is playing.

The big game, they're not necessarily private. I mean, almost all of them are. Iran, for instance, has a nationally owned central bank. And you could make an argument that that's one reason that they're one of our public enemies. I mean, it's a public enemy of our private banking system. Because in Iran, they. Well, in Islam, they don't believe in interest. They think interest is sinful.

They have other ways of structuring interest.

Without calling it interest, though it really is interesting. But even so, it is a threat to the Western banking system, which is all built on interest and U3 and so forth.

Well, talk about that a little more, though. That's really interesting because I know that, I believe at least that you're certainly not in favor of the Federal Reserve. I am not as well. So we're in agreement there. But as I understand it, you believe that the government should control the money supply but still have a fiat currency. Is that correct?

Well, I think we're past having anything.

Else because going back to the gold standard would be virtually impossible, is what you're saying.

Right. Well, and the gold standard was a ruse. So it was what got us into this mess. The idea that these paper bank notes were backed by gold when most of them weren't. I mean, there was only one tenth as much gold in the bank as there were banknotes supposedly drawing on it.

So there was always fractional reserve banking.

Right? Right. It was always. It was always a fraud. But that the easy credit part of it was actually a good thing. The problem was that it was controlled by private bankers and the interest went back to the banks and it was drawn off the top all the time. But in Pennsylvania, they had a public credit system, which is what I think they should put in place, and just let the banks collapse and don't bail them out or, you know, don't, don't change things because they're going to collapse of their own accord because of this quadrillion dollar or at least it depends on how you count it. But at least $180 trillion derivatives on their books. They have to collapse. But anyway, so just let the banks go do their own private thing, but set up a public credit system so we can unfreeze the credit that is now frozen. They're doing that anyway. The Federal Reserve is doing it. The thing that supposedly was responsible for this dramatic reversal in the market was that the Fed stepped up with this lending window for virtually anybody to use for their short term loans the short term paper that they use to pay payroll. So the federal, and the federal government, I mean the Federal Reserve has never done that before. They're stepping way outside the parameters that are normally considered. You know, with their area of what they have control over. Supposedly originally they only lent to their member banks and then they expanded that as an emergency measure. I mean there are a couple of clauses in the Federal Reserve act that say that they in exigent circumstances they can lend to. Well first they expanded it to.

Non member financial institutions, for instance AIG and Bear Stearns.

Right. Certainly not banks that are part of the Federal Reserve System is what you're saying.

Right. So they expanded it that far and now they're expanding it to every sort of company.

So the interesting thing here is of course that is very inflationary with all of these activities. I mean, the Fed is becoming such an activist organization and they are just pumping money into the system like crazy.

Well, the problem is they're getting their money from the treasury, which is us. So we the taxpayers are supposedly on the hook for all this money that they're lending to. I mean actually it's not so bad if they're lending it to GM and things that are actually producing things. But still we the taxpayers are on the hook. So it seems to me a better system would be for credit to originate with the government, but it's still credit because it goes out as a loan. I mean we need loans right now. We're desperately short of credit and that's why they've done this. So it's not inflationary in that sense that you're making loans because those are loans that businesses can't even operate if they can't meet their payrolls. And they've relied on those for decades. And now suddenly that's been shut off because the banking system is all screwed up. The Federal Reserve is doing it by putting us in debt. We the taxpayers. And the Federal Reserve is a private banking corporation. I mean we have no control over what they do, but they just report every few months or whatever, quarterly I think, or Whatever it is they report. But that's all it says in the Federal Reserve act that they have to report to Congress. That's all the control there is. We just wait to hear what it is they've done and then everybody rushes out and invests accordingly.

So as long as they're virtually going to be the bank of the country anyway, I mean, that's the way it's going. They're, they're nationalizing all these banks. They're buying equity in banks, but they're only half nationalizing them. I mean, they're still letting the CEOs control. Well, first of all, they take huge salaries and bonuses or I guess they're going to put some cap on that.

But that'll be abused. I mean, we know that that won't really come true, of course.

And they can still use the money. There's no requirement that they take this money that we're investing in these companies, banks, and use them for loans, which is the whole idea to get the credit market going again. They can use that money to clean up their books and their books can't be cleaned up. I mean, it's impossible to wipe out those credit default swaps that are on their books without bankrupting the taxpayers in the meantime. So they can still go bankrupt in the end, but what they can do is clean up their stock enough that they can make out with, you know, make off with, settle in South America somewhere. You know, I think what they're doing is just bailing out of a sinking ship, trying to preserve as much of their profits as they can.

Well, what I see happening is really, really scary in my opinion. I see this huge transfer of wealth going on into, and the consolidation in amongst the very wealthy. It seems like the world's wealth is being pulled into private vaults and that is definitely not benefiting the middle class. And in fact it's dramatically hurting the middle class because this bailout, I don't think the government will make a profit on it. I don't think the government will get its money back. And that's inflationary to all of us. Do you agree with that?

Totally.

So this will be nearly a trillion dollars down the drain and it will really enrich certain very wealthy people and companies that are on the insider's game. Goldman Sachs, of course, being one of them. And we're going to see the rest of us get hurt through inflation by.

This and by interest rates on the federal debt that are going to be so high that at some point they're going to take over the Whole debt. I mean, we won't be able to be paying anything but interest.

Yeah, exactly.

Or we'll default. Although we can't. One thing about, because our debts are in dollars, we can't really default. What we can do is drive it into hyperinflation because they've always got the power to print the dollars to pay this thing off.

And the real benefit we have there, and the reason the world still seems to be playing along is number one, where the world's reserve currency is the dollar. And I don't know how long that will stay that way. I'd love to get your take on that. Any thoughts?

Well, they're definitely switching over. We're not the sole reserve currency. Many countries are trading among themselves without dollars.

Right. In other currencies, of course, and many people. And it's sort of been a funny thing to watch. About a year ago in Amsterdam, the exchange houses wouldn't accept dollars. They wanted euros, at least at that time. And then Giselle, the famous supermodel, wanted her pay in euros, not dollars. And you know, we're starting to see little signs of this all around. And of course opec, they want to get off the dollar as well. But when you talk to someone about this subject of inflation, personally, I believe we're in a period and we're going to be facing a lot more of it in the future of rampant monetary inflation. Well, we seem to be having asset deflation. Do you agree? And if so, or if not, can you smoke out your thoughts on that a little bit?

I think it's manipulated. First of all, it was driven artificially up. I mean, gold, silver, oil, food, they were all driven way, way up by speculation. I mean, it was a huge pump and dump scheme, really. And then it was all the plug was pulled in July when intentionally, in order to turn things around. That's when gold was shooting through the roof and the dollar was plunging. And the Federal Reserve got together with the central banks of Europe and Asia and they all bought dollars. And then that drove the dollar up and it made other currencies weaker. And they trashed the price of gold and brought down oil. And you know, they can manipulate. Now Paulson's got $700 billion that he can do whatever he wants with it. Who knows what he's doing? He's busily printing federal debt. We know that. And nobody's really, as far as I know, nobody's really overseeing what he's doing with it. So I don't know if you noticed gold plunge yesterday by $60, like in the space of a few minutes. And absolutely nothing happened to cause that. I mean, if anything, it should have been going the other way.

It's because our new fourth branch of government, you know, the Plunge protection team, and Paulson and his gang seem to be just interfering in the stock market and the commodities market dramatically. Right.

Well, the old idea is to hold commodities down so you don't want a go to investment. Historically, people have fled to gold and silver when the stock market goes bad. So in order to prop the stock market up, they have to make everything else look bad. There's no other alternative that's better. But it's no longer capitalism. I mean, it's enough to make. I'm ready to pull all my money out.

Well, where would you go? What would you be doing with your money? I mean, see, that's the problem with precious metals. They're a flight to quality type investment, but they're subject to so much manipulation. And the question you have to ask yourself is how long can they continue to manipulate them? And so what do you think about that?

Well, they've certainly been doing it for decades.

Oh yeah.

Paul Volcker said that his big mistake, and that was in 1980, was not suppressing the price of gold. And I think they've been doing it ever since.

And Volcker was sort of a tough character. You know, he was willing to let the economy take its medicine and break the back of inflation. Kind of traditional in that mindset. Well, what do you think of the future of gold and silver prices? How do you see it?

Well, you know, you can't get gold and silver anymore. You have to wait for months.

Well, for the physical stuff, yeah.

The real price of gold is going up and up.

Well, I just talked to a gold dealer today. The premiums seem to be going up or the spot price is low. So if you want to buy a gold eagle, your premium is almost $100, whereas just a year ago it was about $30. So whatever the spot price is, because it's so hard to get, they are saying that they have to just charge a big premium. And so it's this sort of disconnect between spot price and the physical market for these assets.

It's a clear sign of manipulation.

Right.

But it's so blatant. It's almost like. Well, I remember back in January when there was a big stock market crash and Hillary Clinton said, well, she thought that the plunge protection team should. Well, she called it the President's working group on financial markets should get in there and prop the market back up as if that was their job. And everybody knew that, which, I mean, she was kind of letting the cat out of the bag because people don't usually talk about it, but now it's like it's expected. And most people, I suppose, are with the regular. And so they think that's just fine, but it just means that you don't have any certainty in anything you do. There's another player in there that somebody is making a lot of money with all these market manipulation.

Right. It's sort of like a new version of Adam Smith's invisible hand. The problem is the invisible hand now is the government with an unlimited printing press. Isn't that amazing though? Yeah.

Connected to a big player or a hedge fund?

It sure is. So want to just make sure I get a clear take on this because we kind of diverged a little bit. Your opinion, if you have one, on the future of gold prices and silver prices, for example.

Well, they should shoot way up.

Okay.

And the question is how long? If you have 700 billion to play with, you could probably manipulate them down for a long time.

Do you think they'll go down further? I mean, there will be more manipulation. Right.

I bet next time they get up to a thousand, they'll push them back down again.

It's just unbelievable that they can do this. But I think you're seeing that disconnect like we talked about between the, the spot price and the, the real price, which is the real market, so. Good point. Clear sign of manipulation there.

I heard someone say, I can't remember who it was. It was on a talk show that said, I'm heavily diversified. I have some in the mattress, some under the floorboards, some in the backyard.

Yeah, right, exactly. See, that's why I like rental properties, because they're subject to relatively little manipulation whenever you can deal in anything in the real economy versus the smoke and mirrors economy of Wall street in Washington. I think you're better off. Of course, you know, if people can't obtain financing for real estate, that's a manipulation and a way. Right. Tax laws. There are factors, no question. But I want as little outside manipulation as possible in any investment I have. And it seems like the government really has a very vested interest in propping up the dollar. And every government has a vested interest in propping up their fiat currency. And they also, because the stock market is really a fiat currency. Also stock, you know, stock certificates, electronic stocks, they have a very vested interest in propping that up too. I mean, what is more Important to our government and to our central bank. Is it seeing inflation be under control? Is it seeing the stock market reach new highs? Is it seeing the dollar be strong? You know, to me that answer is they want to prop up Wall street and they don't seem to care much about anything else. But. But what are your thoughts?

Right. And it's the Roman circus of today where 50% of the population has been sucked into the stock market because bonds, the interest rate has gone so low that you can't really put your money away for old age. And bonds and expect to pay for your old age. Unless, I mean, you have to have at least whatever six or seven hundred thousand dollars to be able to live on what you can make on bonds, depending on your lifestyle. But anyway.

And after inflation, those bonds are just being destroyed in value.

Yeah. So people feel compelled to gamble in the stock market. And the dow only has 30 stocks in it, so it's actually fairly easily manipulated. They can drive the futures up every morning. That's very easy to do. It doesn't necessarily hold, but they can manipulate a few big stocks and. And then that's enough to get the ball rolling in a particular direction. So it seems to me that they use that as a measure. Well, before, when the Dow was doing well, you know, a year ago it almost broke 14,000. And they would point to that and they would say, what economic problems? Look at the Dow, it's doing wonderfully. And that was their standard of how the economy was doing. But of course, everybody knew that a lot of people were out of work and that companies were folding and things weren't really doing so well.

And when you adjust those new record highs for official inflation rates, you see that they're not too spectacular at all. And then adjust them for real inflation rates and it's really depressing. And now take them down by almost half.

8,000 on the downside.

I know. So it's really scary when you look at that. I mean, there's a lot of paper wealth has no doubt disappeared from, from the system, but it seems like all the insiders are still doing fine, you know, with their big salaries and their golden parachutes and so forth. What do you think the real rate of inflation is?

I think. Do you know John Williams site?

Yes, I believe so.

The last I looked it was something like 15%, but that was a while back.

So do you, I mean, you agree that it's about 15% or so?

Well, it's definitely way higher than what's the official numbers are. Yeah, you can Tell just by going to the grocery store.

Sure, no doubt. My opinion is I would have said about 12%. So I'm close. Yeah, yeah, no question.

Well, and gas, you know, has dropped down because it's sort of a showpiece, but I haven't seen the price of eggs dropping down.

Yeah. So inflation is 15%, but gas is getting a little cheaper. I mean, of course it's cheaper off a ridiculous high. Some things are getting less expensive. Certainly stocks are less expensive. Certainly land values are lower in most places. How do you reconcile that? I mean, our listeners have trouble with that because I know we get questions on it all the time.

Well, prices are going up. One reason they have to go up is because the whole money supply is created out of debt. You have to always be covering this interest. So you have to continually be raising your prices. So it's not necessarily a sign. It's not because things are necessarily more scarce. And then there's the speculation problems. So speculators are driving up the price of food around the world, and it's not because people are eating more or the population growth is nothing like the increase in the price of rice last spring, for instance. What's driven it up is speculation or money. I mean, and you don't have more people competing for the same goods driving the price up. What you have is more money competing for the same goods. And so that money. Well, in the case of commodities right now, it was the hot money that came out of the real estate market when it was no longer such a great investment. It had to go somewhere. And so commodities look like the next best thing. So everybody fled to commodities. But of course, that's what the plunge of the protection team had looked at and said, well, this is getting out of hand. And so they crashed the commodities market. But that's not a good thing either because then you have human beings who are in control of markets behind the scenes and there's such a great.

Room.

There for them to make huge profits themselves. They know which way they're manipulating things and we don't. It's very frustrating if you try to. Try to invest reasonably.

Yeah, no question about it. I think someone needs to sue the government for manipulating the markets. I mean, people are losing real money because of this. Investors who bought copper, investors who bought oil, investors who bought corn. They're losing money because of the government's really somewhat secret market manipulation. I can't fathom that in a capitalist society where we supposedly have free markets. It's unbelievable.

Yeah. And people have even come to Expect that. But I think that our real leverage, I mean, if we're, we do have to get organized in some way and that the only way we can stand up to the idea that electing one of two political candidates is going to solve the problem. I think everybody's seen through that by now. I mean, neither candidate seems to be apprised of the real issue. So if we want to have some leverage, what we need to do, I think is some massive lawsuits. That would be something that would, that would get some attention.

Lawsuits against the government.

Well, there are a number of different types of lawsuits you could bring.

Sure.

You could have homeowners, you know, subprime homeowners have a good defense to foreclosure if. Because often the trust is.

On these mortgage backed securities don't have the paperwork to prove that they have standing to foreclose. So that's a lot. I mean you could have millions of people who could stand up to their foreclosures. I mean, I'm not saying that's a good thing. A lot of people would get out of mortgages that they should justly be paying, etc.

I think that's going to continue to happen anyway though, right?

Yeah. And it is a form of financial clout. So if you. And then of course, the investors have been cheated. All over the world, investors have been cheated. All those people that thought they were investing in safe AAA securities or pension funds say they're only allowed to invest in triple A securities. And that AAA seal was a fraud. It was based on derivatives that were a form of insurance that is not insurance. And they don't have the ability to pay up. So they have a good lawsuit. They could have a lawsuit against the trustees, which are the banks, you know, that set up these mortgage backed securities.

Right. Certainly you can't trust Moody's for your future. Right. Because Moody's did the ratings.

Moody's going to have a claim. I mean everybody has been cheated here in one way or another. So if you had a lot of lawsuits going, of course nobody trusts the court system either. But at least you have many judges all over the place. It's not like you're going to subject to one particular. Yeah, the head of the Federal Reserve or something or, or to your congressman to get justice. At least you can go right into a court.

Okay, so that's good. Talking about action plans. So litigation, what else can we do to stand up to this tyranny that's going on?

Well, the more information that gets out there, I think the better because outrage is the first step toward changing things. Right now we don't have. We're still at the stage where people are blaming themselves, thinking they made a bad investment or, oh, darn, I should have put it here instead of there. But it's not really their fault. And the more they wake up to that and realize that they've been cheated, that the whole system is fixed. Yeah, exactly. It's rigged, right?

Yeah, it is rigged. So what is your opinion on the future of the Dow and the S and P? I mean, where do you think we'll. Two years from now, where do you think we'll see those numbers? Any ideas?

I think they'll go lower yet.

And you know what scares me the most about the stock market is the fact that we're in this position where we're seeing them go lower. And by the way, I do agree with you that they will go lower when this starts to sort of work its way through the system. There's always a business cycle to things. Ultimately, then we have the baby boomer retirement issue where we're going to start, see the entitlements being paid, and then at the same time, we're going to see the boomers sucking money out of the stock market and either spending it, which, you know, of course most of the spending is in the S and P. But I think that because this is a Ponzi scheme, it's more important that Wall street have shareholders than customers. By customers, I mean consumers of products the companies make. So 2012, you know, that's what's going to happen. We're going to start seeing all the baby boomers taking money out and we're in for a further collapse. Do you agree with that?

Well, it certainly could be disastrous if it continues to go the way it is. But that's why I think we need a totally new system. And I think it could be fixed. What you could do, what should be done, I think is in the 1930s, Hoover set up something called the Reconstruction Finance Corporation, which it was an. It was a government bank. Basically. It was set up to make loans to the banks and it was supposed to bail out the banks. But of course it didn't work because the banks didn't need more loans. They were drowning in loans. What they needed was some customers. And so Roosevelt came along and used that same mechanism and funded things that would put people back to work building roads and bridges and dams and, you know, all those projects that they did in the New Deal. And then they used the same same mechanism. The Reconstruction Finance corporation to fund World War II. And so they set up all these tools that then went on to make us a great industrial power for the rest of the century. But the only thing wrong with Roosevelt's that particular system was that they borrowed the money that they lent. So it seems to me what you could do, since banks create the money they lend out of nothing and the money they lend is only backed by the full faith and credit of the United States. The United States could set up its own lending system, its own credit system. Just ignore the banks, let them go bankrupt, don't bail them out and don't try to suppress them, just let them go and set up your own credit system that would then issue credit to state and local governments for half a percent interest or something very, very marginal to pull them out of it. They're all going bankrupt.

So California, where we live. You live in California, I believe I'm in Orange County. And so we're probably going to see our own state go bankrupt soon, right?

Right. So half of the cost of everything now is interest. So if you made like 0% interest loans or half a percent interest loans to state and local governments, they could be doing things well. For instance, they could buy up, they could do low cost housing or buy up all this subprime. They could fix all these neighborhoods that are falling apart and re rent them to people and then the rents would go back to pay off the loan. So it's not like you're just issuing money and issuing money. It's a loan and it's supposed to come back to the issuer, which would be the federal government. But the federal government doesn't have to borrow and go further into debt to find the money to make these loans. Credit starts with the federal government. That's what I think. That's the definition of credit. The full faith and credit of the United States. Instead of the treasury borrowing from the Federal Reserve, which is a private banking corporation, and the money is initiated at the Federal Reserve, the money should initiate with the government. The government right now prints all the money they need, but they print it in the form of bonds, which are debt. They print these little pink pieces of paper and they call them bonds. And then they trade them with the green pieces of paper printed by the Federal Reserve called Federal Reserve notes. Of course, most of them is just created electronically, but you know, that's the basic principle. And.

So the money that the government is printing as bonds might as well be printed as US Notes or whatever, as dollars, because it would not be any more inflationary than printing bonds. But because those bonds are never ever paid off, that debt just grows and grows and grows and that money goes out into the system and it's just rolled over and rolled over. And that is our money supply. But it's an interest bearing money supply that we the people have to service all the time. And it's holding this weight over our heads that we owe this debt to someone. Whereas if it were just issued outright, you would have this same amount of money in the money supply, but you would not have a debt and you would not be interest bearing. It would be a permanent money supply or you know, be out there until it was paid back for some reason.

So my question is, aren't you just making the Federal Reserve federal then that would work.

You could do it either way, you.

Know, instead of it being private. Right.

Or you can nationalize it. Either one would work.

So you're saying that a nationalized Federal Reserve is better than a private one. And I agree with you on that. But we're letting politicians control the money supply rather than private bankers. It seems like either one of them is going to end up in all sorts of crookery and well, but the.

Trouble is politicians are already controlling it because they're the ones that issued the debt. But they're at the mercy of the bankers. I mean the bankers are basically calling the shots. So if they, they should be at the mercy of the people, it should be the people calling the shots. Shots and overseeing this whole process. So if it was just our elected officials issuing it as loans, that would come back to the government. They wouldn't even have to, it wouldn't even have to involve taxes.

Interesting. Yeah, I agree on the first step. It just seems like we're going to have the same problem. It'll just be maybe a little more accountable and less of a problem.

Well, and we won't owe interest on it and we won't have a big debt over it.

Well, that's true. We're not paying the interest to private bankers. Exactly. In Federal you mentioned that about Iran, which I was not aware of at the beginning of our talk today. You said that Iran does have a central bank, but it's a government central bank. Is that the distinction?

It's owned by the government. I mean they are making steps toward complying with Western banking principles.

But they have terrible inflation in Iran. I mean I heard it's like 20, 23%.

I read that that was not true.

Yeah, you know, a lot of Western sources make things look bad.

Could be the Only thing I'll comment on that is I do have an Iranian friend who had put a bunch of money in Iranian banks and the interest being paid was really high, but the debasement of the currency was higher than the interest being paid. So it apparently didn't really work out as a net result to be a very good deal.

Yeah, well. And they're being boycotted and so forth. I mean, it's not easy to manage an economy all by yourself when you're that small. China did it, but China was huge. And so they managed to, you know, they were blockaded or boycotted by the rest of the world for years. And that's where they kind of got their strength. They. They developed on their own, the same as the United States did when back in colonial days, we didn't have anyone to rely on but us. And so we developed internally.

Right. We became rugged individuals. Right. So a couple more things here. You know, the government raised the debt ceiling a few weeks ago. So I think it went from 9 trillion with a T to 11 trillion because of this bailout. They had to raise it. And we have this huge debt. And I think this giant debt plus all the entitlements coming at us are going to create a lot of additional inflation. Is there anybody in Washington or anybody anywhere with any real plan? What will the government ultimately do? Just, will the US Government just default on all the money it owes to other countries and go bankrupt? In essence, could that happen? What would happen? How does this debt ever get repaid?

Well, it can't be in the way they're going now, but I think there's a solution to that, too. When a debt comes due, we have the power to print dollars. So when the debt comes due, they always pay off the bonds. They never default on their bonds, but what they do is then they roll it over with more bonds. You know, they raise more money by issuing yet more bonds. But nfc, and if nobody will buy the bonds, then the Federal Reserve funds them by just printing money. So it seems to me that what they could do is just pay off the bonds as they come due and don't roll them over. I mean, who's to even know whether they rolled those bonds over or not? They pay them in the ordinary way and then the debt's just gone.

Pay them by printing more dollars.

Right. And who's to know? You just, you just put it in the account. You just write up and that's. They've done that before where they actually have called bonds and that because the interest was too High. So all they did was they sent out this notice that said this bond series, whatever ever is now being recalled and you will be paid, you know, pay you the faith amount of the bond and. But the point is you're not going to get any more interest from us. You know, go invest your money somewhere else.

So we would say. So the US Government, for example, would say that to China.

Well, it would just. The bond would come, the bond issue would come due and then they just write into the Chinese account and say, your bond has been paid in full, but we're not renewing this series, so go invest it somewhere else.

So don't you think though that the bondholder would understand that there is a lot of money being printed just to do that?

And, but that's what happens anyway. They do pay off the debt, the bonds, but then they, then they allow them to roll it over into a new series.

And it's only a matter of an entry, an accounting entry. It's not like you even have to run the printing presses.

Yeah, interesting. Okay. What do you see as the future of the dollar? And I mean, do you see an Amero coming? You know, they're. There's a lot of talk about that now. It used to sound really conspiratorial and outlandish, but I'm hearing about it more and more.

Well, I think that that's definitely a plan, but I don't think they can pull it off. I don't think the US is that strong that Canada.

It's not to the benefit of Canada or Mexico.

Now why isn't it to the benefit of Canada or Mexico?

Well, Canada right now has a. They own their central bank. I mean they don't. They still borrow from it, which makes no sense. But at least the central bank is technically a government bank, nationally owned bank. And if the, and we. The Federal Reserve would be the head of this whole system, no doubt. I mean, their idea is to bring in Canada and Mexico to feed us oil that we don't have ourselves. Well, that's not going to help the Canadians any.

What about Mexico?

I wouldn't think it's help them either. I mean, we want them as our vassals.

Yeah. Do you believe we're. I mean, I'm sure you probably believe we're in a recession. I think we have been for about a year and a half, two years. Do you think we're in a depression or on the verge of one?

I do, but it could be a good thing because it's only when systems break down that you have the possibility of putting in a better system. And we've been in a pretty oppressed system them for a long time. For most people, I mean now you have both parents have to work to pay off the mortgage and even then they can't do it and now they're defaulting, et cetera. So our lifestyle has gotten more and more difficult for your average middle class person than it was even like when I was a child. My dad managed to pay off the mortgage and you know, support us all and my mom didn't work.

I agree. And I think we're going to see that standard of living diminish even further for most Americans, especially those with savings or equity in real estate or money in the stock market bonds because it's all denominated in dollars and that dollar value is declining dramatically. And I think we'll see a further decline.

I've heard that things aren't so bad in depression in some ways because people have a lot more time to read if they don't have jobs. I mean, assuming you can.

Boy, you are a real optimist, aren't you?

Well, I just think we have to change the system and when enough people are out of work and are outraged, we will change the system. What you could do for instance in say in Michigan.

So a very bad economy like Michigan.

Yeah, a very bad economy. Somewhere where people are looking for solutions. Actually I have to give a lecture there soon. That's what I'm thinking about Michigan.

The first thing they could do is de unionize if you ask me, and bring some business back to Michigan. But go ahead.

Well, I'm thinking of how you could bring business back would be to have state owned banks. A state can own a bank, you know, I mean they do have such things as state banks. But a state bank could then issue dollars in the same way their private bank does, you know, issue credit. All the loans that banks create are created out of nothing. We'll have the state bank create loans out of nothing for state purposes and lend it to the state for all those things that Michigan thinks they don't have the money to do. And then, I mean it would be loans and it would be paid back. But all that credit that they think they don't have, they could easily create just with their own state banking system.

Boy, I agree with all of your folks philosophies until you get to the part where you just seem to have a lot of faith in government. And I think that's largely what got us into this mess. You know, a State owned.

Well, I think government hasn't had enough power. They've been crippled by a corporatocracy that has control. Robert Barron's took over 100 years ago, no question had a real government for a long time.

Well, in a sense, I do agree with you there. I mean, as much of a capital as I like to think I am, I do believe that the corporatocracy is running the government, essentially, and they're using the government as like a big vacuum cleaner to just vacuum up tax revenue and make regulations that help the big corporatocracy. And that's why I don't like big and I don't like unreal. By unreal, I mean smoke and mirrors, games like Wall street, central banks, et cetera. You know, the real economy is when I trade with you and we both benefit from the trade. That is the most real thing out there. If you need a place to rent and you rent my place, that is the real economy. We're engaging in commerce that benefits both of us. You know, if you need a widget and I sell you my widget, and the widget improves your life, it's all good that can't be manipulated very much. The problem is all of the money's been sucked out of the real economy and it's going to Wall street and it's all centralized. Just too much control in Washington, on Wall Street.

Well, it seems to me, though, to have a capitalism that works, you have to have this umbrella of a system that protects the weak, basically. So you have to have rules, you have to have a legislature, you have to have a judiciary, you have to have police and so forth. So really, all money is, is like you say, an agreement between people. You know, labor wants. Somebody wants somebody else's labor. And then they pay them with a little receipt acknowledging they receive value. And then that person can use that receipt acknowledging a certain amount of value to buy something else that he needs. But you need a system that enforces all those agreements. And that is what the full faith and credit of the United States means. It means that you can take your little agreement. Agreement, or let's say you're between. What banks do is basically be the middleman for. The seller wants his money now, and the buyer doesn't have it. So the buyer says, well, I'll pay over time. And the bank says, well, we'll take the risk that maybe you won't pay. We'll pretend to have advanced this money to the seller, although we're not really advancing real money. We're just going to write it into his account because it's really just a liability on our own books to ourselves. And then you pay us interest for us taking the risk that maybe you won't pay it back. But the problem is, of course, with the bank, then it's taking much more money in, in the form of interest and scooping it off the top. And so the system ultimately had to break down mathematically. But if you had, you could have that be a public function. Deposits and transferring.

Funds from one person to another, writing checks and so forth, and making. Advancing credit between people. So then you have this government. The first purpose of the government then would be to enforce, to make the rules to make sure it's fair. Like we need things like Glass, Steagall, and all those things are repealed. I mean, true that corporations are passing laws in their favor, but they've also gotten rid of all the laws that are in the favor of the small businesses or the little people, we ordinary people. So anyway, you need the legislature to make the rules that are fair. And hopefully you have a democratic government where you actually make fair rules. And then you have a judiciary that will enforce the rules and police that will do garnishments and all those things if you need it. And bankruptcy laws to let people off the hook so they don't have to go to jail for not paying if they're sick or something like that. So you have this whole system of protections in place that ensures a fair race, and then you can have competition within that umbrella. Fair competition.

Fair enough. I think that, you know, largely, I just think that I like a little more free market than that. But I think what you say is better than what we have now. We'll definitely give you that. Good. Well, any thoughts in closing, Ellen?

Well, I'm just writing on how the free market is dead.

I agree with you that it is dead.

So we need to do something to get it back. And it seems to me that we need to take. The first thing we have to do is take back our government.

Well, that's definitely true. Do you think that's ever possible, though, with everybody being bought and paid for in Washington?

I wouldn't think it's impossible just by voting for one of the two major political candidates.

No, the voting. Everybody gets so worked up about, you know, voting for McCain or Obama. And either way, in my opinion, they're both statists. They're two versions of the same kind of thing. And it seems as though that's all we get every election when it comes to A president. Well, I'd love to talk to you a little bit more about that. You've got some interesting thoughts there on a future show. And Ellen Brown, thank you so much for being on the show. You have a website, I believe?

Yes, it's webofdebt.com and my book on this subject is Web of Debt.

And it's an interesting read, so I'd recommend it to all our listeners. Thanks so much for being on the show. I hope you'll join us again.

It was nice talking to you.

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