2001 FBF: Declining Marginal Utility with Bill Bonner of Bonner & Partners and Agora Financial - Author of ‘Financial Reckoning Day’

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Welcome to the Creating wealth show. This is your host, Jason Hartman. This is episode number 425, number 425. And our guest today is none other than Bill Bonner. Bill Bonner, founder of Agora Financial, one of the most amazing financial authors of our time. I think you'll really enjoy what he has to say. And I, I gotta tell you, I was really excited about getting Bill Bonner because he rarely, rarely, rarely does radio interviews. This is a treat indeed. Consider this a special episode since we've got Bill Bonner. But before we get to Bill Bonner, I want to talk to you a little bit about the Elon Musk announcement last week about the new not driverless, not self driving, but semi self driving and semi driverless car. And that is the Tesla Model D that he announced last week. And you know, I've talked before about the Hyundai Genesis if you want to, I think it's called the Ghost Drive. Look up that video on YouTube, it will amaze you. And this goes back to what I've been saying about investing in real estate and how the three cardinal rules of real estate have always been, what are they? You know what they are. They're location, location, location. And I say that geography and location are certainly important. They're not unimportant by any means, but they are less important than they've ever been in human history. And many things, as times are changing so quickly, are less important than they've ever been in human history. Having a college degree is you could argue certainly less important than it's ever been in, you know, modern history since we had colleges and that became a big deal because nowadays it's more, the world is more based on what you do, what you get out there and make happen yourself and not necessarily on some piece of paper. Having a pedigree is less important than it's ever been before. And what I mean by that is a family pedigree. You see all kinds of people, yours truly included, that rose up from having no connections or no family pedigree. Certainly you don't have to be born into royalty anymore to be successful. Thank God, you know, everybody's judged more or less on their own merits nowadays. And this whole thing about location and the self driving car, I'm telling you, this is a major, major game changer. So Peter Diamantes, who is the founder of the X Prize and the author of the book the Future is Better Than youn Think, we had his co author Stephen Kotler on the show before. He wrote a great, great email just the other day and I'll just kind of paraphrase it and you know, actually read most of it to you because I'm a big fan of Peter and his work with all that he's doing. And he says Elon Musk's announcement of the semi autonomous Tesla Model D this past week is one of many autonomous vehicle announcements coming your way. And the implications of self driving cars will be staggering. In this blog I want to outline and explore those implications, give you a context for dematerialization, demonetization and democratization of transportation, transportation in the area. I spend time thinking about my Abundance 360 community, the first real autonomous cars. And then he goes into the history and talks about how in the 1980s and 90s the Defense Department spent hundreds of millions of dollars on this. And then in 2005 the DARPA Grand Challenge with a 2 million dollar prize to go a 150 mile route at speeds in excess of 30 miles an hour, it came into existence and Stanford University racing team won the competition with a car named Stanley. And he talks about that a little bit. And then of course we've all heard about Google's involvement and I'm just talking here and kind of paraphrasing Peter's email a little bit, but I'm going to get more specific on it here. And he talks about how Google basically, you know, in May launched its prototype of a driverless car that cute, I'm going to call it ugly two seat vehicle sporting no steering Wheel, no gas pedal and no brakes. 100% autonomous. And they are not the only player in this game. And Peter, in his email he talks about Audi, BMW, Cadillac, Ford, gm, Mercedes, Nissan, Toyota, Volkswagen, Volvo and others are rumored to have autonomous vehicle initiatives underway. Combine that with legislation passed in four US states and Washington D.C. allowing driverless cars and you have the beginning of disruption. Staggering implications. What will happen when roads are ruled by autonomous vehicles? Here are some of my favorite implications. Now he talks about some different ones than I've talked about with you. So that's why I wanted to share this with you and think about the impact on real estate and what it means to have a prime location and how much that really matters when you have autonomous self driving cars. Okay, so here are some of Peter's implications. Number one, reduced deaths, reduced accidents. In the US alone, there were 33,000 automobile deaths in 2013. For those aged 5 to 34 in the United States, motor vehicle crashes are the leading cause of death, claiming the lives of 18,266Americans each year. Number two, saving lots of money and time. It's estimated that AVs, these are the autonomous vehicles. AVs, could save over 2.7 billion unproductive hours commuting to work. This in turn translates into an annual savings of, get this folks, $447.1 billion per year in the US alone, assuming a 90% AV penetration. And some people might doubt that number. You know, none of us know when that will happen, but it's coming. And I think this is going to be adopted pretty quickly as the price drops and people see the value in this kind of thing. Okay, so that's half a trillion dollars, Half a trillion dollars in now rescued unproductive work. Okay, this number was calculated by taking into account crash cost savings, congestion benefits, reduced travel times, fuel savings, parking savings, changes in total number of vehicles and other factors. And one of these, not the next one, but the one after that, is going to be big implications on real estate. Okay, so stick with me. Number three, massive fuel savings. Today a 4,000 pound SUV spends less than 4% of its energy moving a 150 pound driver around. I mean folks, my words. Think of how inefficient that is.

Okay, 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.

Imagine if a car could be significantly lighter because they don't crash. Getting four times the fuel economy. Okay, number four, less roads and less traffic. Autonomous vehicles packed with sensors can drive fast and efficiently at eight times the packing density of today's human driven cars. This means no traffic jams, no need to build new roads. Plus, when they pack closely together, the reduction in wind drag alone could reduce fuel use by 20 to 30%. So you all know if you've ever watched a bike race or you're a bike rider or a cyclist, you all know the idea of how they get behind the other cyclists and they get their draft and they reduce their wind resistance a lot. And that's a big deal in racing of cars and bikes and anything like that. So another benefit of driverless cars. Okay, number five, no ownership, just on demand usage. Today, your car is an unused asset 95% of the day. Why own a car when you can have access to whatever car you want, whenever you want it? On demand car usage will change the future. Who wins? You do. Who loses? Detroit. Now, I'm not exactly sure why he's saying Detroit loses, because they could be part of it too. Maybe they won't be the leader. They usually aren't. But it's kind of interesting. It is estimated that 90% of AV penetration would actually reduce the number of cars on the road by 42.6%. Number six, there's a little bit of kind of big real estate stuff in here. No garages, no driveways, no parking. In his book, Aaron Ben Joseph notes, in some US cities, parking lots, parking lots cover more than one third of the land area. What if you never need to park your car? What if it just drops you off and goes and does something more useful? No need for parking garages, parking lots, or even driveways. Plus one MIT study found that 40% of the total gasoline use in cars in urban areas is spent while drivers look for parking. Number that's amazing by the way. Number seven, no mandatory car insurance. Self driving cars won't crash. And that will disrupt the 200 billion dollar year auto insurance industry. A cultural shift to sharing. Now, you know, on prior episodes I have talked a lot about the sharing economy and the incredible value of putting all these unused assets to work. It's really, really exciting. Okay, so before we get to Bill Bonner, just a few more things here. The true future of Uber is autonomous cars. Today, an Uber X in Los Angeles cost me about $2 per mile. But the majority of the cost of my Uber X ride is the driver in the front seat. Take out the driver and the cost drops five to tenfold. Now, a comment on that. I've talked a bit about robotics and the potential for increasing unemployment with robotics, which I think is very, very useful to talk about that. However, if employment declines at the same time that the cost of some things drop while the population is increasing, and you have other things like packaged commodities used to build houses and apartment buildings increasing, and you have the terrible monetary policy that our government and central banking cartel is engaged in, well, you have a recipe for deflation in some areas, lower cost of living in some areas and higher cost of living in other areas. So it'll be interesting how that plays out. And I've got a good show coming up for you where I debate with another person about robotics and what robotics mean to the future of business and employment and so forth. So stick with us for that episode coming up. So just to finish up this email. So to summarize, deceptive While autonomous cars have been in a period of deceptive growth for the past 30 years, they are now poised for disruption. Every major car company is making investments in the value proposition of saved money, saved time and saved lives that will drive disruptive change in the decade ahead. Dematerialization. Car ownership will begin to dematerialize as the cost per mile plummets and convenience skyrockets. Uber has already started that process. Of course, it's not just Uber, it's Lyft and all the other ride sharing companies out there. And they're even trying to do this in airplanes, although the FAA has not allowed it yet. But when that comes, I think it will be phenomenal. I think you can tell when I'm reading and when I'm commenting, I hope. Right listeners? Anyway, that was just my comment. Okay, so we talked about dematerialization. Well, a little more on that. Why own a car when you can have access to a car, any car, plus have no cost of insurance, maintenance, repair or parking? Demonetization. As mentioned above, autonomous cars have the potential to drop the cost of transportation per mile by tenfold. Can you imagine that tenfold drop? Okay. Add to this the cost of acquiring the asset up front and there's no cost there, right? It is true Demonetization. Add to this the future of a fully electric vehicle and and in the sunny parts of the world, transportation gets even cheaper. Democratization. Everyone will have access to autonomous vehicles, including those who previously couldn't drive. Kids. Hey, you want to stop chauffeuring your kids around, right? Senior citizens, disabled people, and the poorest among us. So there you have a glimpse of the future of autonomous Cars. It's an area I am monitoring closely. Peter goes on to talk about his Abundance360 workshop coming up. So it is really, really an exciting time to be alive. And we will continue to explore on future episodes the implications for real estate investors of autonomous cars and all these other technologies. People, you know, possibly your tenants being displaced by robots. These are things we need to think about. But overall, I think we have a very, very bright future ahead of us. So without further ado, let's get to our guest, Bill Bonner, one of the most prolific financial writers of. I think I have read every one of his books. And by the way, you know, I knew about him many years ago, but it was really my friend and client Mark, who's been on the show a long time ago, who really got me to pay more attention to Bill Bonner and his fantastic work here he is. It's my pleasure to welcome one of the most distinguished financial writers of our time and that is Mr. Bill Bonner. He's a big favorite of mine. I've been following his work for many years and he's co author of the New York Times best selling books Financial Reckoning Day. Surviving the Soft depression of the 21st century, Empire of Debt, the Rise of an Epic Financial Crisis, Mobs, Messiahs and Markets, Surviving the Public Spectacle in Finance and Politics. And he's founder and president of Agora Publishing and writes the daily financial newsletter Diary of a Rogue Economist. His daily letter is published in four countries and reaches more than 250,000 subscribers. And Bill, I have a feeling those stats are a little bit, I'm just getting that feeling. But welcome. How are you?

I'm fine, thank you. It's good to be with you.

Yeah, it's good to have you on the show. Tell us about your newest book and pronounce the name and tell us about the name.

Well, the title is Hormageddon. And when I say that to people, they think it's about some terrible, terrible disaster that's about to befall the prostitute community. But it really has nothing to do with that. There's no W on there. And it comes from a phenomenon that was observed about a century ago in biochemistry where they would take an organism and give it a little bit of something it didn't, could be something good, could be something bad. But the like bacteria in a dish or something and they would notice that a little bit of it did, did wonders. It really helped the colony of bacteria grow, for example. And then they give it a little bit more and they'd all die. And they called that hormesis, that process hormesis. And it was really Nassim Taleb, you know, in his book Antifragile, who suggested that maybe this process, this phenomenon, ought to be examined in public policy matters. And so based upon that, I did. I started thinking about it.

That would make a lot of sense. It is too much of a good thing. I mean, the state has become giant. Probably an understatement. We're just making people happy. Pathetic, aren't we?

Yeah. Well, I think people a lot of times when you're having these left right debates, you know, you're saying. You say, gee, they ought to do away with that agency or whatever, and the people come back and say, well, what are you, some kind of an anarchist? You know, we. Without a government, we couldn't. We would all be dead or something, rather. And. Right. But that's not the issue. I mean, that's the whole principle of hormesis is that, you know, it's like everything else a little bit is a good thing, you know, to provide order and whatever they.

But whatever they do, love it.

Yeah, but. But it's every institution and everything, almost everything in life, and there's one big exception. But almost everything in life is subject to this rule which the economists saw many, many years ago, and they called it the rule of declining marginal utility. When they noticed that you take something and you start using it. Investment, water system, roads, whatever they are. And the first use of them is very beneficial. You know, like when they put in a highway, you go flying, you know, like the highway system in California they put in the 1950s, and it was so beneficial. Everybody was out driving around there. You know, they were making up songs about driving down the freeway in California in the 1950s and 60s. But then as more and more people got on the roads, they built more and more roads. Now it's a perfect nightmare. You know, you start with a little bit of something or take anything. Take like dessert. You know, you eat some dessert and it's good for you. It's plainly good for you. Everybody needs food. But if you eat too much dessert, it's not good for you. Then it turns bad. And that's true of almost everything. I say there's the one exception, and even that I'm not sure about, but the one exceptional is what Mae west had in mind when she said too much of a good thing is wonderful.

Right. I love that quote, by the way. That's a great Mae west quote. Maybe take us back a little bit. Your Writings are so great, Bill, because you just mix in really interesting history and just tell things in such a great story. I love reading your work. Tell us how we got here, if you would. I mean, post World War II and the Great Society and all the rest, you know.

Well, I mean, the story I like to go back because Italians just say abobo, you know, to the egg, to. In order to understand how, how we got where we are. But I think the interesting part of it is something that I've just really been aware of only recently, and that is that we. Most of humankind, I most. Most of our life on Earth as humans, and that's only 200,000 years. We evolved from some other species, but we've been on the earth for about 200,000 years. And during that time it took to become fully human. And after we became fully human, our lives on Earth had really almost nothing to do with our lives today. We were living in tribal societies.

In small groups, and so that we never had to deal in all those years in which our brains were formed and our muscles and our opinions and our attitudes and our sentiments and our emotions, all those times we never had to deal with quantitative easing. So we just don't, you know, it comes up in people. Most, most people. I say that I'm not saying this out of, you know, to, to criticize people because people are what they are and they're adapted to live in the air, breathe air, to walk on Earth, to do all the things we're adapted to do, but we're not adapted to deal with quantitative easing. And so when you tell the man on the street about quantitative easing and how it works or the credit cycle or any of those things, he's just. It's not that he can't understand them, but they're just going to be too foreign to him. And even. And then. So what happens is you get the great mass of humanity just incapable of dealing with these things. And, and, and what hap. Then what happens is that some people find they can deal with them to their own advantage. And so they are actually taking advantage of the fact that most people don't have any idea what this is all about, but the people who control the system. And right now the system is a system of money created out of nowhere by the Federal Reserve, by the central banks broadly, and fed into the financial community. And so we have huge, huge interest in both government and finance and a lot of other things too, in keeping the system going, feeding more and more credit, more and more money. Nobody knows what this money is because it's such electronic notations, but we're not adapted to that either. So if you tell somebody that the Fed is creating money and the guy says, how so? Well, they're just creating it on their computers. And he says, what do you mean, isn't money? What is this stuff? It's just very hard to understand.

I've always wondered when they do create this money, I've always wondered, they must go to a corner of the room at the Federal Reserve and there's like a big computer, computer on a table. I've always wondered if it's a Mac or a PC. And then Yellen will sit there and move the mouse and, you know, poof. Money's just created out of thin air, right?

It's just an amazing phenomenon that, you know, you can study all of your life. You can, you can try to figure it out. And you really can't put your finger on what is this stuff that they bring. They call it money.

I mean, where does it come from? Is money real? If it's real, how can the money. Can real thing be created out of nothing? Well, it's not possible. I mean, it's what it's really a kind of a. It's a philosophical challenge to try to figure out what it actually is.

Oh, it really is. It's a symbol. And, you know, it's a fluctuating dynamic, moving target as to its exchange and its value. Obviously, it's just a crazy concept. And to really get one's head around the idea of fractional reserve banking is that just is not easy. I mean, it took me years to understand it, and I don't know that I do even now. You know, the way money lent into existence.

No, I, I don't know if I do it. I've spent years trying to understand and trying to find a puzzle it out. But I know that there are some people who benefit a lot from it. I don't know what it is, but I, you know, you ask your, your, your listeners there, did they get something? Did they get any of this qe?

You know, the QE goes through channels of people, and those people get a.

Lot out of it. They get a lot of it, you know, but, but they'll always say, and you know, whenever they meet at Davos and you know, when meet and the G8 meet or whatever they're calling them nowadays, maybe it's seven, I can't even remember anymore. That's also a moving target. But whenever they meet, all they're talking about really is money creation. That's all they can do, is just create money.

Yeah, that's all they do. That's the only thing they have.

It's the only arrow. And I should say currency creation, obviously. Bill, tell us about the trade of the decade. You called that right in about 2000, early in the 2000s or so. And then you called another trade of the decade. And I'm kind of curious. I wanted to get a report card on. On the one that was from 2010.

Well, I got it. I got to say that the trade of the decade is not a prediction. I don't predict anything because I really have no idea what's coming in the future. All I do for the trade of the decade, I look and see what's up and what's down, and I look at what's up and I want to sell it, and I look at what's down and I want to buy it. And it's very, very. It has no predictive quality. So back in 1999, I looked at the stock market was way, way high and gold was way, way low. And I said, well, I don't know, this is probably not going to continue for another 10 years. So I'll bet that this is going to reverse sometime in the next 10 years, and that the best trade is probably now to sell the stock market and buy gold. And that turned out to be the very best trade you could have made. It was phenomenally successful, but keeping it. So then that was the year. Then 2010 came. People asked me, so what's your trade of the decade now? And I had to think real hard about it because it wasn't so obvious. The gold had already run up. I couldn't stick with gold. It already run up for 10 years.

Was it like Japanese bonds?

Yeah. I looked at Japan, I thought, wow, over in Japan, they have a funny situation where their stocks have been going down for the last 30 years. I don't wait. Well, that's kind of interesting. And their bonds have been going up and they've been trying their damnedest to get it to reverse. But anyway, so I thought, well, probably sometime in the next 10 years they'll be able to work that out. It'll probably go the other way. So my trade of the decade for in 2010 was to buy Japanese stocks and sell Japanese bonds. And so far the stocks part of that's gone pretty well. Well, the bonds, they haven't really cooperated. But we still have a few years in this decade.

So you don't think Japan will default I mean, talk about debt. Wow, they've got debt problems.

I think they will default by printing right that money. There are almost no foreign buyers of Japanese debt. So what the Japanese did is they took the money from their savers. Japanese were good savers and they were earning a lot of money by selling their Toyotas and things overseas, mainly to American. So they took that money, the Japanese government borrowed the profits from that whole generation and they turned that, you know, they were trying to stimulate the economy so they would build a new road or bridge or do something or other. But the result of it was that they took the money from a generation of savers, people putting their money away for their retirements and they spent it. And now those savers have Japanese government bonds. And because they're retiring in huge numbers, they have the same kind of baby boom that we have. It's even more pronounced.

Oh, it's terrible. Because they didn't make up for it with any immigration like we did.

No. And they didn't have children. The birth rate in Japan is the lowest in the world. Next to Italy. Next to Italy, I think. So they don't have any new generation coming along. This very big, all the savers and all the people getting ready to retire or retired have these Japanese government bonds and they're going to present the bonds to the government and they want money for them. And so far, you know, using their, their trade surplus and, and very, very low interest rates, something like zero, they've been able to keep this financing going. But now they're reaching the end of that because now their trade surplus has turned into a trade deficit. And so they're running out of money. And that's in this guy, the current Shinzo Abe. You know, he came in with his three arrow approach. We shot the damn three hours. But it's made things worse. And they had the last quarter, they had the worst collapse in the growth rate that they've had in many, many years. So with negative growth of 6%, that's terrible. So I think we're going to see some big, big problems in Japan. And those big, big problems are probably going to be accompanied by lots of money printing.

Right, lots of money printing in. And it's not like they haven't been doing that for a while, but not an outright default. So the idea of like shorting Japan debt would not be the thing to do then.

Well, it might be. I mean, it's hard to know. Of course in this trade I am short Japan debt, but I don't really like to speculate on things like that. I think somehow, probably through inflation, the debt is going to be worth a lot less in the future than it's worth now. And probably because of this inflation, the Japanese are probably going to turn to stocks as a way to protect themselves. So the stock market probably will have a big run up and probably the bonds will crash. But that's just, that's guessing about the future, which I don't like to do still, I think that's probably what will happen. I think by the way, we should be watching Japan. Japan is like the US just a little ahead of us. I suspect that we're going to be in that trap too where we have more and more people retired, fewer and fewer people actually supporting the expense of government, the expense of all these programs, the expense of these wars overseas. And that will mean that we have to continue borrowing and we'll borrow from whom? We don't have a trade surplus. Talking about all this shale gas that we're exporting, we're going to need every penny of that money to support this thing.

That's the interesting thing, Bill. And this is where I sort part with the gold bugs and the people who believe that, you know, the dollar is going to collapse. I mean, I can understand that most definitely when you just do the math. But you know, there's so much more to that equation than math. Please poke holes in my theory. That's what I want you to do. So I sit here and I look and I think the US has massive debt. There's no way we can pay for it. There's no way we can fund these mandates and entitlements that we've promised over the next 15, 20 years. It's the 60 to 220 trillion. As Lawrence Cutlikoff who was on the show says, time bomb, right? And everybody's got a different estimate, but it's a huge number nonetheless. I'm just sort of wondering, I mean, can't we just kick this can down the road for a long, long time because we have reserve currency, because we have the biggest military, because we have the biggest brand. And you know, of course I'm talking about the USA when I say the this. It shouldn't be this way. I'm not saying it's fair or right, it just is. I mean we're going to keep that reserve currency status with aircraft carriers and F15 or well, not F15s, whatever the newest, hottest, greatest plane is. I don't think we're going to let that go.

Yeah, I think you're Basically right. I mean, I think that's the worrisome thing in a way. I mean, you can. It's worrisome in the sense that you want things to, to clarify themselves. You want what should happen. You want it to happen so that you can go on with your scheme of things. But I think that the US is in a situation in a position where we could see many years of this kind of Japan, like.

Slow growth, people retiring low, very low interest rates. I mean, Japan shows us that this could last for many, many years.

But it doesn't last forever. And the US may have aircraft carriers, but aircraft carriers cannot keep a reserve currency. They can keep, they can try to keep even these few Arab nations in line. But right now, China, every time they have some sort of trade agreement, they're putting in a, a renminbi, a Chinese currency clause. They want more and more trade to shift to the Chinese currency. And since China is the largest trading nation, over time we're going to see more and more transactions taking place globally that don't involve the dollar. And sometime sooner or later, the US is going to lose its reserve currency status, I think. I mean, I'd be very surprised. It happens all the time. Each empire gets to impose its currency and then it loses that ability over time.

And the famous last words of the investor who's about to go bankrupt is, it's different this time. Right. So the only thing I think about that about it's different this time concept is the concept of scale. When you have this massive amount of technology, and whether it be military technology or other technology, you know, even communication technology, maybe the window really can close and it's almost impossible to unseat an empire. I suppose the Romans thought that too. I don't know. None of us really know your thoughts, though.

Yeah, everybody thinks that for a while and then it turns out not to be true. The question is, how long does it take? And I would say it's hard. Nobody knows, of course, but what I see is the US trying to speed up the process in a way. I think the. I think that's the real meaning of all this involvement in the Middle east where we're spending enormous amounts of money. We're getting more and more drawn into these wars. And remember a few years ago, we had absolutely no enemies. Zero. But that did not suit the interest of the Pentagon very well. And so they've been working to create enemies. And now and then they had these shoe bombers and people like that, which were not very, not very effective as enemies. And they sent all this materiel in invading Iraq. They send all this equipment and stuff over there, and now that's in the hands of enemies. So now we have enemies with tanks.

It's ridiculous. You know, it seems like we always make these guys our friends, and then 20 years later, they become our enemy. That keeps the money in the pocket of the military industrial complex and the central banking cartel, who finances both sides of the war.

It's unbelievable. I mean, it's a terrible business plan.

I'm just saying that it's like the, just like the whole system of money creation. It's good for some people. Overall, it's not good, but it's good for some people. And it's hard to stop. You know, that's the point of my, my book, the Hormageddon book, is that once you get going in a certain direction, it's almost impossible to stop it because you end up with so many people who have an interest in seeing it go on. It's like. Well, on the simplest level, when people start retiring, they definitely want to see the system of public benefits, health and pensions survive. And if it means printing money, well, they're perfectly happy for the government to print money. And if it means high youth unemployment, they don't seem to care about that very much either. And we're seeing that all over the world now in the developed economies in Europe and America, particularly, where the youth unemployment and underemployment is very high. And so what they do is then they lend them some money so they can go to school.

I know, I know. And then they make the loans not dischargeable in bankruptcy. And they've got a whole generation of indentured servants or slaves, really. So you believe. Probably. I mean, don't let me put words in your mouth, but from your reading, I think you believe that we're going to have some pretty significant inflation in the future, ultimately. Would that be correct?

Ultimately, yes. Yes. Not necessarily short. In the short term, I think that's the big issue, because in the short run, we're looking at very low interest rates. And even though the Fed is buying, the QE is coming to an end this month. And as QE comes to an end, the Fed buys less paper and it buys less with cash, so it's not putting so much money in the circulation anymore. And even so, we're seeing bonds yields go down. To me, this means that the economy really is in a very, very slow growth mode, and so nobody is borrowing. We've seen this in Europe, of course, in Japan, too. So I think that this slow growth, remember it's a situation where people are getting older, there are fewer new businesses starting up, there is less, less demand for money. And so when we get in that stage, it could last for a long time. And while it lasts, you know, we're not going to have any inflation. Inflation is going to be very low. I think what, what happens to get us to inflation is that at some point government decides, the central banks decide they've got to do something. They just can't let this go on. And we're seeing that in Japan already where they're trying to take more and more aggressive policies. And so what we're probably going to see here and there and in Europe too eventually is where they start what they call direct monetary funding, where instead of lending money, they give money you'll get, everybody will get a tax credit for example, and that money will be gotten finally into consumers hands. They will spend and then we'll begin our inflation period.

It's just got to ultimately happen. I mean it's such a, you know, if you think about it from a governmental perspective, inflation is really a pretty good business plan. The government gets to reduce its debt through what I call inflation induced debt destruction. Consumers get to do that too. If you borrow long term money on real estate and it's low fixed rate, I mean the inflation just basically comes along and pays your debt off for you. It's amazing. It's a miracle.

It's almost perfect as long as you can control the rate. And they of course been trying that for years. That's what central banks do, try to control the inflation rate to an acceptable level which they regard as good as.

Kind of the Phillips curve stuff. But it amazes me that rates are this low, this long. How much longer can they defy gravity? I predicted higher rates a lot long time ago and I've been wrong about it.

Yeah, so, so have I. But things can go on longer than you think they should. And then when they finally do turn, they turn faster than you think they should. So it's all, all a mystery and it could go on much longer. Japanese experiences is 30 years of very low rates. So we, we could be, we could see a few more years of this.

Yeah, that's, it's amazing. Well, hey, back to the book a little bit. I appreciate all your commentary there. I just wanted to ask you about some of your chapter subheads real quickly as we kind of get toward wrapping up here. I love how you start out. Too much information, too much economics, too much security. Too much government, too much energy.

Tell us what you mean by those.

Well, in every case, each one of those things which we regard as good things, security, for example. But you run into the declining marginal utility, where you spend more and more money to get it, and then it backfires on you. And we're seeing that in that. In my chapter on security, for example, I show how this was the. This was the way in which the Germans operated up into and through World War II, where after World War I, they were convinced that they just needed more security. And Adolf Hitler came along and he had a. Had a whole business plan, and he was the man with the plan. And his plan was that Germany could only be richer if it had more farmland. Because after World War I, Germans were starving. Of course they were starving because the English had imposed a blockade. It's a long story.

The inflation.

He came forward and said, Germany must have more security. We need more land to produce our food, and we need an army strong enough to protect us. And that argument really, really connected with the German people at the time.

Yeah, it resonated.

And part of it was correct. You know, a part of it was true, but only a part. And when you get to get more and more. So they increased security spending in Germany to more than any nation ever spent on security. At one point, they were spending 50% of GDP on the military. Of course, that was in the middle of the war, but it really was an amazing thing. And the result of the security spending, which was supposed to make Germany more secure and Richard, was that Germany was totally bombed out and occupied by foreigners. I mean, it just totally blew up in their faces. But you see that every. Every aspect. Even in the. Even in things where you think, well, you can't have too much. Okay, that's one thing. Security people spend too much on military, and then they get in trouble. But take health and education. You wouldn't. You wouldn't think those things could backfire on you, but they do.

Oh, but education certainly has. And, you know, healthcare, that's such a murky one. But education is a disaster. What about energy, though?

Yeah, well, energy is tougher to understand. And in my chapter, I had a hard time dealing with it, because what happens with energy is you think you can't. The more energy you have, the better off you are. But in fact, what happens is a little bit of energy is a good thing, but you get a lot of it and you start to waste it, and next thing you know, you wasted a lot of energy doing all kinds of crazy things that really don't pay off. But the analysis of energy is more difficult because energy is part of everything. And so you could say this, you could say putting energy into education or energy. You know, money is energy. Money, time, resources, it's all could be described as energy putting energy into something. So the energy analysis is that energy invested too much into any place because you have to put it into something. You end up with this declining marginal utility eventually blows up on you.

Right. I think that's what happens. You know, too much energy, it makes us undisciplined maybe. And if we look at what happened during the first dot com bubble, we saw these overfunded companies with lame ideas because you have a sock puppet, let's give you a $100 million or something.

It's just we're seeing that now too. We're seeing what happens when you give too much money. We that money is probably the key to the whole thing. But if you're a dot com company and you get, you go public and you get $20 billion and you don't have a real idea that money's going to be wasted.

Yeah, it sure will. It sure will. I want to ask you also, Bill, about the financial services industry. You know, you've written some great stuff about it recently with a release of Michael Lewis's latest book, Flash Boys, about the high frequency traders. And one of these high frequency traders, by the way, his mansion in Houston just went up for sale for 43 million bucks.

What a rigged game. I like to call Wall street, the modern version of organized crime. And I just wanted to ask you if you had any thoughts on high frequency trading or just any of the Wall street scandals and things?

Well, I don't have any particular thoughts on it, but.

Wall street, like any industry, it's gotten rich. And it's gotten rich on a phenomenon which has been the expansion of credit. You know, all these things come together because it was only in 1968 that they took the dollar off of the gold standard, took the gold completely out of the dollar. Then 1971, they took it out for international purposes. But once they did that, it made it possible to expand credit without almost out any limit. And so who made money on that? Well, the people who were in a position to lend out money. And those were the big banks, the big Wall street institutions.

And they made a lot of money. And so you and people have written whole books about this financialization of the US Economy. It went from an economy where the big houses in Houston and New York and everywhere were owned by people who made things. That was the economy of the 1920s and the 30s and the 40s and even the 50s. But beginning in the 60s and 70s, with this new money that they had, the economy shifted to economy not of people who made things, but of people who traded things and people who lent money. And so you have these Wall street. If you go now to Connecticut to, you know, to the banks of the ocean there, the big houses which used to be owned by people who made mattresses and people ran railroads, well, now they're almost all owned by hedge fund guys. Hedge fund guys or bankers, some people like that. The economy has shifted to a financial economy. And it shifted because the money was phony. And the phony money allowed the financial industry to take a bigger percentage of the output of the whole nation. It was absolutely amazing. And that bigger percentage. And that was what really was in danger in 2000, that meltdown in 2008. You know, who cared if one bank went bust or another one? Who cared if they all went busted, for that matter? But the whole thing was in danger because they had all profited so enormously from this big run up of credit that they had to be saved. The system had to be saved. And that was why they. They bailed them out.

Yeah, it's amazing, and I'm going to say sarcastically, but, Bill, that's financial innovation.

Yeah, that's. It is financial innovation. Entirely financial innovation.

Run for the hills.

Finance is one of those things where innovation is not necessarily a good thing.

It's not always good. Yeah, no question about it. Look at all of the good things that are going on. I mean, technology is just blowing my mind. When I look at what's coming in the area of nanotech and biotech and I mean, just, you know, even more electronics. And it is an amazing time to be alive in so many ways. I sort of wonder, and I know it's a wild card if, with all the, this financial malfeasance that's going on, if. If technology might just not rescue us all, maybe technology will save us all. I don't know your thoughts about. There's some pretty amazing stuff happening.

I don't know. You're talking to somebody who can't figure out how to turn his radio on. It's gotten too complicated. And I tried to watch the other day.

You read and write about it.

I had three remote controls in my hands and I couldn't figure out which one to use. I'm probably not the best person to ask.

Good stuff. Well, Bill, thank you so much for joining us. Just tell us a little bit about Agora Financial for a moment, if you would, before you go. I mean, you've got an amazing company with offices all over the world, hundreds of employees, many brands.

We've learned over the years.

I was the first publisher of the Hulbert Financial Digest where we started analyzing what people, what investment analysts did and who made money and how they made money, what was really going on. And we realized that this is a long time ago that these guys, these independent analysts who are out there and working only for the customers, you know, they charge $99 or $49 for a newsletter. That's all they get. And they go out and try to find a company and they have no ulterior motive. And that is a pretty good way to get information and ideas. And that's what we've been doing ever since. You know, we're kind of like an alternative to Wall street in a way for the do it yourself investor. We have somebody who will give advice. Now, is the advice good? Well, you don't know until after the fact. But if the advice is well researched and honest and so forth, then there's a fair chance that it's a good way to learn more about investing, to get investment ideas and so on. So that's really the industry that I've been in all my career. It's fascinating, it's moved, it's changed a lot in the last few years because now everything is electronic and once we figured out what we were doing, we did, we took it on the road and now we're in about 10 different countries around the globe and a whole.

Bunch of different brands. I mean, it seems like an amazing business model you have where you partner with these people. I've had Harry Dent on the show a few times and I know you guys did a deal with him and yeah, yeah, seems like a really good, a good matchup. A win win arrangement.

We don't claim to have, we don't claim to know the answer. You know the answer. What, what will? What's the best way to invest? Where should I put my money? We, as a company, we, we don't claim to have that answer. What we, what we do. And that's why the company's name is Agora. We try to provide a marketplace for those answers. So if anybody's got a good idea, we, we want to put it out there because we don't know which will be the right, who will have the right idea, who will have the right advice.

Good stuff. Give out whatever website you think people should have. I know you've got a bunch of them. Tell people where they can find out more.

Well, I think the best thing to do is just go to agorafinancial.com or come to come to my diary of a Rogue economist is what I call it. And I write every day. I've been writing every day for the last 15 years.

You still writing for the Daily Reckoning?

I. Well, that's a separate website, but I do occasionally write for them too. So you could try that one, the DailyReckoning.com.

That'S the one that I read for so many years and it's just awesome. Very entertaining to read. So that's it. Well, Bill Bonner, thank you so much for joining us today.

Well, thank you. It's been a pleasure.

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