2294: Invest in Hard Assets Now! Mike Maloney on Monetary Policy, Stock Market Craziness, and Modern Monetary Theory

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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.

Greetings, empowered investors. We are coming to you from Irvine, California today where we just finished a fantastic empowered Investor live. And one of our great speakers was Mr. Mike Maloney who is with me right now. If you're watching on video, you see him obviously. And it was a great weekend, great event. We had so many people here just enjoying it, networking, making new friends, making new contacts and learning lots and lots of things. I just really appreciate Mike being with me. We were just having a little bit of breakfast together and as you know, probably Mike Maloney is a fantastic author and educator on monetary policy, the history of money, the Federal Reserve, and all of this absolute craziness that we have to deal with in our lives. Mike, how are you doing?

I'm doing great and that was an awesome event. I just had a great time.

Yeah. And thank you for being one of our keynote speakers. We really enjoyed you.

Well, you need somebody to bring the gloom and doom.

Jason always talks about, you know, don't fall for the gloom and doom is because you miss out. If that's just Your total life. But I don't see what I present as gloom and doom. I just see there's opportunity. If there's gloom and doom on one side, there's opportunity on the other. And so the information that I presented had to do with the economy and where it might be headed in the short term.

Absolutely. And by the way, we would be remiss if we did not talk for a moment about the absolute scary craziness stock market is going through the last few days. Yeah, I mean, why don't you speak to that for a moment. And as you do that, I'm going to check the stock market. I have not checked it today on my phone, but you know, look, I'm not a stock guy, as you know, but it is definitely an indicator of what's going on with the economy. So it looks like the S and P is up a little bit. The Dow is down. Everything was down last week. The last few days of last week it was red, red, red on all indicators.

But, and what was interesting is it started to look very much like the 1987 stock market crash. And after closing on a Friday, when Black Monday happened, that was the single largest percentage drop of stock, the stock market in history. And the charts, the up and downs and the patterns that it makes was almost identical for like a two year time frame between today and 1987. So good. It broke that. I was saying it'll probably bounce tomorrow. The.

Or today.

Now.

Yeah, so it bounced a little bit. But, but look, Mike, you know, the.

Thing is though, we are the, the public is more exposed to stocks than at any time in history.

Right.

The percentage that the individuals own is greater than at any time in history. And the stock market, there's only one way that you can measure it that doesn't show us in the greatest bubble in history right now. And that's PE ratios. And that shows us as being in the third greatest bubble.

Yeah, PE ratios are pretty high, but you're saying they've been worse before or higher or more out of whack, I should say before, right?

Yeah, yeah. The NASDAQ bubble in particular.

Yeah, yeah, good stuff. So, you know, what do you think this is showing us in terms of all the craziness that's going on with the stock market for the overall economy? And what are your predictions on the stock market? And I should say the few of you who don't know Mike Maloney and his legendary work, he's a sound money guy. You know, he runs GoldSilver.com and, and he Likes hard sound money. You don't like the financialization of the economy, the fiat money situation.

The way our, our monetary system works is currency creation is now based on theft and fraud and enslavement. Years ago we had a gold standard and the gold. I don't like gold standards. I like gold. It's the least dumb monetary system that we've ever had. But the modern monetary system, you know, when we were under gold to create a gold coin and save it up to buy a house, it took a certain amount of work. You had to prospect for a mine and then turn that claim into a mine and then dig up 30 tons of dirt on the average to create, to get one ounce of gold, 30 tons of ore, there's about one ounce of gold in it.

That's a lot of energy and a lot of work to get to that goal.

And then you have to refine it and pour it into a bar. And then the bars get melted down and minute into coins. Now that creates the currency and there's a certain amount of work in that currency. If you then work to save up to buy a house, you've got this stack of coins and the work that you've got to put in pretty much equals the work that it took to make those coins. And then you're going to buy a house. And the chopping down of the trees and the digging up the cement, that's all energy. Paying all the guys to hammer that thing together. These three different things, it was a fair trade each way. The amount of energy required to have that purchasing power, that stack of coins equaled the amount of energy that went into building the house. Today, the way the monetary system works, most people don't know that about 92% of the currency supply is bank credit. If you've got something digital, if it's in your bank and says you've got a certain amount of dollars, the bank created those, not the Federal Reserve. The Federal Reserve only creates bank reserves, which we never get to touch. That's a separate monetary system. And they create the paper notes, the Federal Reserve notes in your dot IN your wallet and so otherwise known as.

Dollars, the Federal Reserve notes, right.

And so the way that currency is created now is you go out and you find a house you want to buy and it's a $1.2 million take. Go to the bank and you say, I found this house and it's $1.2 million. I need to borrow a million dollars. And the bank looks at you and they say, well, you've always Paid your loans in the past and they look at the collateral and go, yes, you've got, you know, the right loan to value ratio here. And so yes, we will loan you a million dollars. And they type new dollars that did not exist before, that there is no work put into to create into existence. They credit your checking account with them. And when you pay the seller, those new dollars that are empty basically have no real purchasing power. It's like counterfeiting. It steals purchasing power from all of the rest of the currency that's out there in circulation through inflation.

A couple things I want to just point out here. Number one, the rabbit hole of understanding how money is lent into existence is really interesting and everybody needs to understand. It's hard to get your head around it. It's such a crazy system. But money is lent into existence through fractional reserve lending or fractional reserve banking, I guess you could call it either one. Now when we talk about how that causes inflation is you create new currency units, limited supply of goods and services, more currency units, chasing those. And you know, as I always say, and I said yesterday from the stage at Empowered Investor live here, is that there are two primary value drivers for everything. And I don't know if you agree with this or not. I'd like to, you know, challenge me on it if it's. If you don't agree. But the two primary value drivers are scarcity and utility. That's what makes anything valuable, right? Is how scarce is it and how useful is it? You know, money is not scarce or currency. We should distinguish that. Right? Money, things with intrinsic value, whether they be precious metals or building materials, those have intrinsic value because they are used by every human on earth. We all need food, clothing and shelter. They have intrinsic value. It doesn't matter what currency you're trading them in. They're valuable because they exist. And so scarcity and utility. So maybe you can kind of speak to a couple of those things for a second.

Sure, I will. But I do want to mention my last book. Great Gold and Silver rush of the 21st century deals a lot with this and there are a couple of free chapters that. Chapters three and four are online. They're available for you right now for free and you can download them, send them to anybody you want. I just want as many people to.

See where do they go to get that?

That would be ggsr21.com so it stands for Great Gold and Silver rush of the 21st century. GGSR 21.

So, so that's for the free chapters yeah.

Chapter three is going. It's a primer on how to read charts. And anybody that's got a chart in an article, you really got to look at that chart because typically they'll do something to manipulate it and put a spin on it, just try and prove their point. But you are being manipulated if you don't know how to read them, if you're fooled by them.

Well, what. What chart are you referring to? Any chart.

Any chart that somebody makes. There's like, if you change the scale on the side, instead of starting at 0 to from 8, from 90 to 100, it can make a little tiny correction that you can barely see on the chart, actually look huge, right?

Yeah.

And if you put two scales on the chart, you've got two lines on the chart. If those scales aren't, if they're different, again, they're lying to you. And it's entertaining. It's a fun chapter. Then the hardest chapter is the one on how currency is created. And that's what we were just talking about. And it is a deep dive into the Federal Reserve. And I take apart parts of the Federal Reserve act, and I'll quote this whole page of federal. And then I'll just highlight some words in red and you read the red words and you can understand what they're actually saying in this thing. And our modern monetary system is actually quite evil. It is based on fraud, theft, and enslavement. When they type currency into existence, that did not exist. And by the way.

And you said type currency into existence. That was interesting.

Yeah, yeah.

Were typing it rather than mining it.

Exactly. You said that it's loaned into existence. And the bank of England finally confirmed this several years ago when they said, you know, the old fractional reserve model that was taught in schools that I learned when reading Milton Friedman and great economists, is you deposit a hundred bucks, the bank keeps 10 on hand in case you want some of it, and loans the other 90 out. That's not true. They cannot loan a liability. And to the bank, your deposits are a liability.

Oh, interesting. That's interesting.

So the bank of England said, no, no, no. Loans create deposits, not the other way around. Deposits do not create loans.

Right. What everybody needs to understand is that when you look at a balance sheet of a bank, it's flipped.

Yes.

It's not like we think of it. Right. When a bank has a deposit, that's a liability for the bank, not an asset. Right. You. You'd think, like, if you have money in your account, that's an asset. Right. A deposit is an asset to you, but it's a liability to the bank. The loans the bank makes are the assets of the bank.

Exactly.

Yeah. And a liability, it's reverse the way we think of it. Yeah.

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So anyway, what was the.

They can't lend a liability, which is a very interesting concept. So the deposits they have from all of us are their liabilities and they can't lend that. The way they get money to lend is by creating it, by lending it.

Into which causes inflation because there was no work or effort put into creating these new units of currency. So basically it's the same as counterfeiting. If you print a bunch of notes in your basement and go and spend them, you're getting purchasing power by diluting the currency supply.

Supply.

So you're stealing from everybody in society. And so this is the way that the banks operate. They steal from everybody in society. That is what causes inflation.

Yeah. So my solution to that of course is inflation induced debt destruction. But it could be used in lots of ways. I teach it for use with income property because you get long term 30 year fixed rate debt against hard assets. Those commodities, those materials that are used to build the house, that have intrinsic value. Your way is own hard assets and you know that require a really. And I'll use, I'll borrow a phrase from the cryptocurrency world, the bitcoin world especially, but proof of work. Right. There's work that goes on to create these assets like gold, construction materials.

Yeah. Now is the time to be in real Assets. If you're in the stock market, I would really do some research on this and consider changing that purchasing power into something like real estate or precious metals or something that's real.

Something real. That is the key point. You know, Mike, you mentioned a few times the modern monetary system and how it's evil and corrupt, and you're certainly right about that. But you made me think of modern monetary theory, mmt. Yeah. And now this we've talked about on the show before. We've interviewed some experts on mmt and, you know, ultimately, I think it's a fantasy, but it is pretty darn ingenious the way that circular system works. The Federal Reserve is created almost immediately after that. The IRS is created to. I believe the modern monetary theory people are actually right about some things. You know, they had to create demand for the fake dollars. Right. For the fiat money. And the way they create that demand is by putting people into debt because you have to pay the debts back in the same currency units and taxing people and requiring that the tax be paid only in the currency units.

Right.

It's pretty ingenious. You got to give them some credit. Right?

Yeah, yeah. It's. They've got you on this treadmill.

Right.

And you can't get off. So.

Yeah. But your thoughts on modern monetary theory, like, in general, you know, if you're.

Looking at it from a distance, it's. It seems like, well, this might be able to work.

It's this for.

For people. And then if there's too much currency in the supply and there's inflation, you can just increase taxes and suck up the excess. It's still an evil wealth transfer. The taxes aren't going to be increased evenly. It's not everybody that's going, you know, the. The people that are on assistance are going to be getting something for nothing. And that purchasing power, that economic energy, I call it, has to come from somewhere. So it's coming from people that produce more than they consume that actually are responsible for the prosperity in society. And the more that we take from them, the less they're able to create jobs and so on. I used to live in California and, you know, it took years to become successful. And I became very successful. And right away my taxes were up at 52% because I was.

Combined state and federal taxes.

Yeah. I wasn't doing real estate, where you've got all the tax benefits. I was doing business. So I left California. But I had created jobs, created hundreds of jobs in my life.

Yeah, me too.

Other people don't create jobs. And when you create jobs, it lifts all of society up. So basically modern monetary theory I believe is a fraud and another form of wealth transfer. And it's a top down, you know, centrally planned type of thing and it's a wealth transfer. And throughout history, everything that is centrally planned does not function as well as something that is just free market. It's the sum of all of our transactions that are going on, human interaction that is always much better at creating prosperity and creating a world worth living in.

Yeah, that's a great way to put it. That's an excellent way to put it. All right, Michael Maloney, thanks for joining us today. Tell them where they can get those free chapters again.

GGSR21 and if you're interested in precious metals, go to gold silver.com Good stuff.

Thank you for joining us empowered investors. We will see you on the next episode. And until then, happy investing.

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Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to itunes or Stitcher Radio or whatever platform you're using and write a review for the show. We would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.