1967: Alabama Property Tour, Debt & the Millennial Mayhem, Inflation Induced Debt Destruction

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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 1967. 1967. Thank you for joining me today. First of all, join us for our Alabama Property Tour. We're going to cover two markets in Alabama coming up very soon. Go to jasonhartman.com and get your tickets for that. And by the way, this picture is not very representative. If you're watching me on video. This was another property tour we did. The one we're doing in Alabama is a much smaller property tour. So it'll be a more intimate group than this. This was a big, big property tour that we did in the past where we needed two giant buses, if you can believe that. These buses hold about 50, 55 people usually. And this will not be like that. It's just a picture of a past tour. This will be a smaller tour. So personal savings rate as we have talked about, you know, Americans are not very good at saving, okay? That goes without saying. You know, Asian countries much better at saving. A lot of, lot of countries better at saving than Americans. Americans sort of look at the world with the prosperity lens that they've always been fortunate to live under, at least for the last many, many years, since World War II and even before that. And they are not very good at savings. Now. We had a big thing happen in the post World War I era where we had the rise of modern public relations and modern advertising. And I talked to you in the past about this key figure in that, and that is Edward Bernays. He was the one that got behind and created that campaign for women's empowerment, okay, because women should have the right to get cancer just like men. What do I mean by this? Well, that was the famous publicity stunt that he orchestrated during, I believe it was The Macy's Thanksgiving Day Parade, if I'm not mistaken. And he had these women in the parade walking along, and at one specific moment he had them pull out cigarettes. And that was at the time socially unacceptable for women to smoke. And the tobacco companies thought, hey, we're missing half of the market here. Actually just a little less than half because there's always more men than women being born, just slightly more. But hey, the men die younger and they also die in wars at a much higher rate than women do. But suffice it to say, we'll call it half the market. And so with this half the market, he got women to get into the consumer game and start consuming. And this whole explosion of American public relations and American advertising, you know, Mad Men, you've certainly seen the series Madison Avenue, you know, the history, right? This was really a distinctly American thing. Now, because America had Hollywood behind it and because it was the most successful country and arguably still is, it was able to spread these ideas around the world pretty successfully. But before that, it's very interesting, you know, before, before Edward Bernays, Americans were really a pretty content group. They weren't very materialistic. And I know that's hard to believe as we sit here today and we look at the era in which we live and all of us have lived in really for the past, we'll call it 70 years is the biggest explosion of materialism and advertising and consumption. So we've got these economies built on consumption. And that means saving is bad, debt is good, consumption is good. And I'm not saying this like I believe it. I'm just saying that's the narrative they're telling us. And so the personal savings rate, back to this. During the COVID era, you know, everybody was sitting at home and they didn't have much to spend money on. So we see that it spiked to a very, very high level of almost 35%. And then it went down. And then another set of lockdowns started and then it went up again. And people were getting some stimmy checks and some aid, and there were some moratoriums on student loan payments and, you know, people could go into a mortgage forbearance program. There were, in essence, moratoriums on rent in some places because you couldn't evict people and so on and so forth, Right? But now we see the personal savings rate has just plummeted. It's gone way down. So check this out. This is an article I just saw in one of my newsletters yesterday, and it's about the High cost of living and how it's a absolute crunch on the millennial generation. Not exactly news here. We've all heard this for quite a while now. The millennials have certainly complained about it a lot. You know, they've got their hey, Boomer meme and so on and so forth. I'm a Gen Xer, so I'm just a little older than a millennial. You know, I'm talking about them like they're another group, because they are. They're a different demographic cohort than my own. What's interesting, I mean, is you gotta balance this stuff out, right? They like to blame the boomers, and certainly the bo Their parents have some blame in this. There's no question about it. They lived in a very prosperous time and they spent and they expanded government like crazy, and government spent into oblivion. Lbj, Lyndon Baines Johnson, our former president, who probably was possibly an illegally installed president after the assassination of jfk, which, by the way, if you don't believe in conspiracy facts, well, you're missing out because there are tons of conspiracies going on all the time. You don't have to have a tinfoil hat. You don't have to be a wacko. As I always say, the United States of America was a conspiracy against the British crown. I mean, big deal, right? Lots of conspiracies going on all the time, right? People are conspiring against you right now. Trust me, they are. Someone wants to take away something you have, whether it be your life, lifestyle, your money, your freedom, there's lots of conspiracies going on. This is just life. It's not like any big deal. It's no woo woo thing. It's just a fact of life, right? So anyway, that's when the social programs just expanded massively, right? You know, that was his whole Great Society pitch. And then in 1971, after him, you know, Richard Nixon took us off the gold standard. And then the spending of government was completely untethered to anything, right? They could spend on whatever they want. Every stupid program that came along. The government spent, spent, spent, and they had to grow the economy because they were spending, spending, spending, so they knew they could inflate away the debt. And they've certainly done that. And they've impoverished millions and millions, tens of millions, hundreds of millions of people, really. Actually, possibly, if you look at the way they've exported inflation, impoverished billions of people, right? But the thing that cures that, there's a couple things that cure it. Number one, demographics can paper over a lot of these problems because that's a rising tide that floats all the ships. But that's changing. And we're going to talk a lot about demographics in upcoming episodes. Not that we haven't already, but more to come because I've got some new studies and new information I want to share with you there of how that's going to affect the economy going forward. But then Nixon went to China, and I'm the only one I've ever heard saying this, thinking this, and I believe that Nixon's opening of China was a move to offset that rampant inflation that Nixon knew was coming because he had taken us off the gold standard. Now, look, you can hate Tricky Dicky Richard Nixon as much as you want, and I'm not necessarily going to disagree with you, but the one thing I will say is he was a very smart man. He was not stupid. He was definitely not Joe Biden. Joe Biden is stupid, okay? But Nixon was smart, even if he was a crook. And, you know, maybe he was a crook. I don't know. You know, whatever. That's a lot to talk about on that. But I'll tell you, there's a great book by Richard Nixon that you should read because it's got a lot of good life lessons in it. It's called in the Arena. I've quoted it before on this show. In the arena by Richard Nixon. Excellent book. Excellent book about overcoming life's challenges and dealing with setbacks. And, you know, Nixon has had, like, more challenges than setbacks anybody. The late Richard Nixon, of course. Anyway, so we look at this debt level of millennials, and as I've been saying since 2010, right here on the show, this is a generation of people that we need to serve, we need to cater to. They are our biggest customer base as investors, as landlords. And just going back for a minute, I know I'm kind of jumping around here. I always do that because, well, I need another cup of coffee to keep my mind straight. But the millennials blame the boomers, right? And there's definitely some blame to be placed on the boomers. But, you know, also, the boomers built the modern world. I mean, they invented so many things. They were so innovative in so many ways. If you want to see an incredible time of technological innovation, look at the 60s. Man, the 60s was like an amazing decade. I know most people think of it as free love and Haight Ashbury, Timothy Leary and LSD and all of that stuff. And it was that, too. But it was also a time of tremendous innovation. The people that weren't the hippies, the people that weren't at Woodstock, they were working in labs, they were designing aircraft, they were building the space program. I mean, it was an amazing decade of innovation and invention. And that's all thanks to the baby boomers. So you want to insult the baby boomers, think again. Right? You know, everybody has given and taken from society, right? We all do that. But the millennials today, even though they have this massive amount of debt, and remember, debt is really just a wealth transfer mechanism, and inflation is transferring the wealth slowly through that debt from their baby boomer parents to their millennial children through inflation induced debt destruction. Now, sadly, most of the millennials don't have good debt, but they do have debt nonetheless. And there is some wealth transfer going on because they borrow in Today's dollars or 10 year ago dollars or 20 year ago dollars with their student loan debt or whatever. And I think student loan debt's a complete scam, but it is what it is. It's here. And then they pay it back with cheaper dollars as that debt is inflated away. That's inflation induced debt destruction. Now they'd be much better off having a house with a mortgage or some rental properties with mortgages, because that would be a much more better type of debt than credit card debt, student loan debt, etc. But it is what it is. I just want you to notice the wealth transfer is there to some extent. You can't deny that. So there's the baby boomers and the millennials. But one more thing I want to say about millennials is, you know, they need to be a little more grateful maybe of the baby boomers. And I'm not on either side here because I'm in between. I'm a Gen Xer, so I don't really have a dog in this race. But I'm not like sticking up for either generation or promoting either generation. I'm just trying to be objective about it. But the millennials, even though they have all this debt and they are taking advantage of some inflation induced debt destruction, they have better lives in so many ways than their baby boomer parents did or even my Gen X generation did. They are traveling the world, they are having av. Avocado toast. They are having. That's a meme, by the way, if you don't know the reference, look it up. They are having avocado toast. They are traveling around the world. They get to be digital nomads, they get to be remote workers, they are into lifestyle extraordinaire, and they have all These modern conveniences, they're almost digital natives. The gen zers definitely are digital natives, but they're mostly digital natives. Millennials. They have all of these advantages that really should be appreciate. Look at the picture on the screen. It tells a lot. Okay, if you're, if you're watching me on video, look at the picture next to this article. Now, I got this from one of those clip art sites. It is licensed, okay? And this millennial woman, okay, I mean, I would guess she's a millennial. You know, she's looking at her bills with disdain. Like the bills are too high. But I just want you to look at the background of the picture and look at how she's dressed. She's dressed better than her baby boomer parents would have been. She's in a nicer house or apartment than her baby boomer parents were in. It doesn't have avocado green formica countertops. She wouldn't accept anything less than quartz or granite for her countertops. It is like life is better in so many ways. And I mean materially. You can argue every other aspect, but that's a whole long discussion we don't have time for. But just notice the type of house she lives in today versus the type of house her baby boomer parents lived in years ago. And really, in a lot of ways, life is so much better, materially speaking. You know, she probably owns or leases or whatever, financed and has a late model car. She has access to all sorts of great technology through the sharing economy. She probably shops at Whole Foods and eats organic everything that her parents, you know, her parents were eating hot dogs and, you know, with hot dog buns and disgusting mustard and ketchup. She probably has gray Poupon. Right? You know, like just, you gotta appreciate, appreciate these nuances here, folks. There's just a lot to this when you start to peel back the onion and you look at lifestyle. But let's look at here, it says higher learning. Well, we actually go here. In all, Americans in their 30s saw their total balances of debt over $3.8 trillion in the fourth quarter of last year, according to the New York fed. That was up 27% from late 2019 and more than any other age cohort. Okay. Unlike older borrowers, TransUnion says more millennials are behind on credit card payments since the start of the plan. Demic, intentional Freudian slip of the tongue there. Well, the New York Fed also found rising car prices have younger borrowers further behind on car payments than older generations. Okay, that's true. But look at the car. Like, does anybody ask, well, what is the house like that they're getting? What is the car like that they're getting? It's way better than the old one, right, that their parents had. So, you know, my mom, she had a broken down Buick when I was a kid. I mean, it was a piece of junk, right? You know, so we did. We just have to understand that there's just a lot more to this stuff than meets the eye. But the point of what I'm saying is that this is a demographic cohort that as our biggest customer base as real estate investors, and we need to serve them by providing rental housing. They are. They don't care that much about homeownership like prior generations did. I mean, they care about it, they like it, sure, of course they would. But it doesn't live for them the same way it did for, say, baby boomers or even my generation of Gen Xers. It's just a different mentality. They like being mobile, portable, remote, work, digital, Nomad, all this cool stuff. And yes, as they start to kind of settle down a little bit, the home becomes more and more important as they age. But I just want people to realize there's a lot of layers to this onion and distinguish all of that stuff. Okay? It says millennial mayhem. They may whine a lot. This is not me talking, this is the article. They may whine a lot, but the 30 somethings who make up the bulk of the millennial cohort have been dealt a pretty bad hand. Their working lives began in earnest right around the financial crisis of 2008. The pandemic arrived when many began to turn the corner in their careers. Now that's true, and that is unfortunate. I mean, think about it. A millennial saw their parents get beat up in the Great Recession. They saw their parents stress about bills. Their parents probably took a loan on an adjustable rate mortgage on a house they couldn't afford, and they got into trouble. A lot of them went into foreclosure or went into default at least, and had to do short sales, workouts, loan mods, whatever, when the pitter patter of tiny feet arrived. So they were turning the corner on their career, having kids. Now, these are my neighbors, by the way, that they're describing here, because they had had two kids during the pandemic, right? Two kids during that time. And by the way, my neighbor owns a small kind of boutique grocery store. And so, you know, he's out working and doing that all the time. And during the pandemic, that was obviously hit hard, as, you know, most small businesses were. I mean, at least he wasn't in the restaurant business. He had a grocery store, so that's better for sure, because grocery stores were definitely needed. But being a small business, I would venture to say that was tough. Okay. And so, you know, the timing is not ideal. But, hey, look, you know, I was talking to a zoomer who was at our Jekyll island retreat for the collective over the weekend. And when we were in Jekyll Island, Georgia, you know, he was kind of talking about. He was one of the kids of our members, and he was talking about how hard it is today and, you know, what his generation thinks about the future. And I said, you know what? On Wednesday, you're not being shipped off to Vietnam to fight in a foreign war. Right. Just think about this. There are a lot of things that are just way better. And he had to appreciate that when I said that to him. Right. But anyway, complicated subject, but the point is, the demographics coming at the housing market over the next 10 years are nothing short of phenomenal because a lot of these people either aren't interested in buying or they can't buy because they've got this ridiculous student loan debt. And I thought this was an appropriate topic given the Supreme Court this week taking up the subject. And it looks like they're not buying it. They're not buying the Biden administration's bs. Hopefully that was the news as of yesterday, but it, you know, might change again today. I don't know if they're still deliberating on this stuff. Okay, so Alabama Property Tour. Join us for that. And here is a short, short educational clip for you before we wrap it up.

Do you ever wonder why mass inflation is still a threat to rich countries? Some countries are privileged to have stable currencies. As the reserve currency of the world, the US Dollar has enjoyed an enviable position that most countries would die to have. Except for the 1970s stagflation scare. The US has cruised along without many inflationary hiccups in its recent history. Some countries haven't been so lucky. At one point, Venezuela was one of Latin America's wealthiest countries. In fact, its wealth was so impressive that by the 1950s, it became a magnet for migration from countries like Italy, Portugal, and Spain. Oil was its primary export, but it had a growing steel and mining industry as well. Its currency, the Bolivar, was one of the strongest currencies in Latin America. In this regard, Venezuela was indeed exceptional because Latin American currencies tended to be Very volatile. However, in the 1970s, Venezuela's economic model began to change. In the middle of that decade, its oil industry was nationalized. From there, the Venezuelan state began to embark on massive spending ventures and relied on high oil prices to finance such largesse. But when oil prices plummeted, economic realities set in. Government programs do not come cheap. Eventually someone must pay the bill. In 1983, the Bolivar underwent its most significant devaluation to date, ending a relatively unblemished track record for the nation's currency. Although many believed that this was a temporary setback, things never went back to normal in Venezuela. Towards the end of the 1980s and the early 1990s, the country attempted a series of market based reforms with limited degrees of success. That said, the government could never contain the inflation beast. In 1989, inflation stood at 84%, poverty was growing and the Venezuelan populace was growing restless. Eventually they took to the streets, with some protesters resorting to acts of violence. The government response was rather brutal, leaving hundreds of people dead. Known as the Caracaso in 1989, this crackdown was a major turning point in modern Venezuelan history. Venezuela's otherwise robust democracy started to be called into questions. To make matters worse, a rising lieutenant colonel by the name of Hugo Chavez launched two failed coup attempts against the government in 1992. Although Chavez was imprisoned for his actions, the damage was already done. On top of that, none of the country's structural economic problems, such as inflation, were ever really addressed. Inflation reached near triple digits 100% in 1996 and continued eating away at every day Venezuelans savings. By 1998, when Chavez threw his hat in the country's presidential race, Venezuelans were completely infuriated at the political system and pulled the lever for the former lieutenant colonel who marketed himself as the anti system candidate at the time. Unfortunately, Chavez's rule did not fundamentally address Venezuela's economic problem. In fact, his administration arguably made the situation worse, especially with regards to inflation. This goes to show that there is strong institutional inertia in politics. And even when so called reformers come onto the scene, they're unable to roll back the policies their predecessors put in motion. Chavez's successor, Nicolas Maduro, has also failed to tame the country's inflation scourge. According to recent figures from the statistics website Statista, Venezuela's current inflation rate is hovering around 2,300% to 6,000%, which is considered hyperinflationary. From a big picture view, inflation has been a hallmark of the Venezuelan economy for the past few decades. Here's some perspective. The last time inflation was below double digits was in 1983. In effect, the average Venezuelan millennial has never witnessed a year with inflation below 10%. Here's the thing about economic they can wreck even the best of nations, and they usually can't be controlled, regardless of who is in charge. There's a lesson here, and Jason has taught you this many times. You can't control the political or economic elements, but you can take advantage of crises and benefit from them. While I doubt that inflation will reach Venezuelan heights, you should always remain vigilant about the U.S. s economic climate. Currently, there are debates about whether the US's inflationary spell will be transitory or more durable. Jason tends to believe in the latter. Nevertheless, you should never lose your cool and think the whole world is doomed. To the contrary, inflationary moments provide a host of new opportunities for real estate investors to thrive in. And they can do so by using Jason's favorite four letter word, debt. In this case, he's referring to mortgage, not consumer debt. Consumer debt is a big no no in his book, but taking on a mortgage is a different story. You see, this kind of debt is an asset. When inflation hits first you acquire an income property. Then you rent it out to a tenant. In doing so, the tenant picks up the carrying cost of the mortgage. Meanwhile, the mortgage's real value depreciates due to inflation. This infuriates the banks but creates a great opportunity for you. So learn from Jason and take advantage of his inflation induced debt destruction strategy. It's a great time to be alive. For more information, visit Jason hartman.com.

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