2357: The Coming 50-Year Mortgage Housing Boom and Gold's Untapped Potential: Putting the $24 Trillion Asset to Work with Jeff Deist

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com.

Hi, I'm David Krantz. I've known Jason Hartman for 15 years now and I wish I came here 15 years ago. This has been a great event. I really appreciate you having me here, Jason, and your crew. It's been a terrific event and I've been so impressed with what you've done. I can't wait to be back here next year, not just as a vendor, but as hopefully a new client for you. Well, if you're thinking this event is for you and you're not sure if coming here or not, spend the time. A little bit of the investment for yourself is well worth the investment for your time and the money. Thanks, guys.

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, 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.

If you're happy and you know it, clap your hands.

If you're happy and you know it, clap your hands. If you're happy and you know it, then the 50 year mortgage will surely show it.

If you're happy and you know it, clap your hands. Greetings, empowered investors.

We had the official, well, I guess it's not official, but the official goal to have a 50 year mortgage in the United States. Now, while Dave Ramsey is having a heart attack because he's the elementary school version of personal finance, I am having a party because this is some of the best news ever. Think about the factors that are making real estate more affordable and more appealing.

That are going to create more demand.

And cause prices to go up, up, up, up, up. We got a 50 year mortgage coming down the pike which will save people almost $300 per month on a $400,000 home. That's going to create more demand. We have very limited supply. Just over 850,000 homes actually actively for sale. I know there are different surveys but.

That'S the actual active number, about 850.

Which is very low inventory compared to the historical norms. We have that. And then we have this big movement to end property taxes which I have predicted will basically cause an instant 15% increase in real estate values. Because if you could end property tax, that would be a phenomenal thing to make housing more affordable and more desirable overall. So longer mortgage, the rates are sliding down, the money is getting easier, the quantitative tightening is over and the quantitative easing is in the offing. It's starting to begin. And lower rates and a 50 year mortgage. Wow. And we're going to replace Jerome Powell, the too late Powell guy. Right. So many incredible things besides all of the demographic and psychographic factors, besides all the pent up demand where we've had such a reduction in sales for the past three years, all of this is adding up to be the perfect storm. I mean I am like out of my mind. I'm so giddy, I'm so happy about all of these factors now. People that think the 50 year mortgage is bad are stupid.

They're dumb.

They don't get it. They don't understand how inflation induced debt destruction works. They don't understand negative interest rates. They are just small minded people that say, oh, we're gonna have to pay more interest, we're never gonna really own our homes, we're gonna, we're gonna be in debt forever. We're gonna be debt slaves. The reality is for those sophisticated people that follow my work, that get it, that understand negative interest rates, and I'm gonna show you an example here in a moment and understand inflation induced debt destruction. The hidden wealth creator that has made hundreds of millions of people very, very wealthy. Okay, the thing the sophisticated investors use, the thing the Wall street tycoons use, the LBO or the leveraged buyout, which is basically the same strategy we use as real estate investors. Those people in the know see how incredibly beneficial all of these trends are that are converging to make an incredible time and they see the 50 year mortgage as a key benefit to this whole strategy. I have to redo my calculations because for 21 years I've been talking to you about how inflation induced debt destruction pays you to borrow on a 30 year mortgage, but it's going to pay you even more, much more on a 50 year mortgage. Imagine if you could rent money and get paid to rent the money because that's what you're doing when you pay interest. You're just renting money. You're renting the use of the money. And you could buy a Property today, in 2025 and not have the last payment due that until 2075. Whoa, when it was previously due in 2055. This is some of the best news ever. Okay, now, you know the way an amortized loan works. You pay mostly interest upfront. And amort is from the Latin word which means to kill. To kill the mortgage.

Amortize it.

Amort, okay, Amort the mortgage. And you're killing it off, right? So you kill it off very slowly by paying mostly interest up front. Now, the average American only stays in their home for what, like seven years or so? I got some stats on this. Don't quote me on the exact number, but it's around seven years. The median is longer, and the tenure of homeownership is getting longer. Why? Mortgage lock. In effect. People got these low Covid rates that they don't want to give up. All the world has finally realized what I've been telling you for 21 years. The mortgage is not a liability, it's an asset. It's an incredibly powerful financial planning tool. But the uninformed, they do not understand that. Great, if everybody got it, everybody would be doing it. You get it, you understand it. So take advantage of it. It's better. You know, like in business, there's this thing, you know, you go out into the marketplace and you see all these people in business that just aren't very good, right? They don't return calls, they're flakes. They break their promises. They outright rip people off. Like Marco Santarelli and Nerado real estate, right? Just ripping people off, right? With his $62 million or $63 million Ponzi scheme that he was indicted for in federal court in Orange County, California. Sentencing coming up next March. Can you believe how much time these people get before their sentencing? So, yeah, that's the guy that hosts the passive income podcast.

And there's no such thing as passive income.

It does not exist. Not even a savings account is passive. I've explained why. But there is a spectrum of passive to active. And you know, things fall at different places on the spectrum. But I digress. Tangent alert. So the typical person rents the money to buy the house or the income property because they own it about seven years on average. Okay, so they're not paying down any principle anyway. And the 50 year mortgage gives them almost a 300 per month discount on a $400,000 house. And what could you do with that extra money as an investor?

If it's an investment property, You've got.

More positive cash flow than you had before. It's like turning back time to, you know, when I was talking to you back in 2012, I mean, I've been talking to you on the podcast for.

21 years now, right?

Very early in the podcasting game. I have the one of the oldest real estate investment podcast in the world. Okay, Is this show right here. So when I was talking to you back then, we were basically looking at all of these factors and in about 2012, people started to move back into the market. They were scared because the Great Recession. Now, of course, we sold properties to.

People in 2008 right in the thick of it, okay. And they got the best deals of all, right?

But you know, most people gotta wait a while before they can feel some confidence to get back in the game.

After a tough time, right?

During the Great Recession or the gfc, the global financial crisis, whatever you want to call it, the worst economy in over seven decades. And back then you could buy properties that had 300amonth, positive cash flow all the time, sometimes even better than that. With a 50 year mortgage, it's like.

Turning back the clock.

You thought the train left the station, you thought the ship left the dock. Turn back time, because here's another chance. All you're really doing is renting the money anyway. So if you're watching on video on the screen, I've got the 30 year mortgage on a $400,000 house, 20% down, 6% interest rate.

I know we're not quite there yet, but we're going there. We're at about six and a quarter now.

So that payment, $19 a month, 19, 19. But on a 50 year mortgage, that same exact house, that Same exact, only 1684, you got almost 300amonth extra cash.

Flow that you can invest, that you.

Can do something with, you can make.

That money work for you.

This is a phenomenal opportunity. But wait, there's more. Let's look at the real cost to rent the money. I always want you to think of it this way. When you finance anything, all you're doing is renting the money. The interest rate is the cost of the rent. So say for example, you have a note rate where you think you're paying 6%, but if you have, and I'm using a 40% tax bracket, you know, state and federal. Depends what state you live in, depends how much money you make and how much you deduct. I know, I know, I know, but I'm just rounding it at 40%. Your interest is Tax deductible. And by the way, Tom Wheelwright told me to use 40% because I was doing a livestream with him last night. He says just use 40% as the tax bracket. So 6%, you get a 40% deduction. That means you get to take off 2.4%. So that reduces your real interest rate. But wait, there's more. It's better than that because you get to take off inflation because inflation is debasing the interest rate, the payment and the balance, right? This is inflation induced debt destruction. And we're not even going to go into that today. Inflation induced debt destruction makes this example much better. I'm just doing a simplistic interest rate example to show you the real cost of money. So the CPI right now is about 3%. We know it's the CPI. And the real inflation rate is really higher. I'm going to share with you an example of that in just a moment. But you take 6%, your note rate, you take 2.4%, your deductible interest, then you take 3% CPI and the real interest rate you are paying on this money is point. Well, I should say it this way. It's 0.6%. It's less than 1%. That's the real cost of borrowing the money before the benefits of inflation induced debt destruction. This is just a simple interest rate calculation. But it's really better than that because we all know that the Consumer Price Index, the cpi, is the CP lie. It is understated for all the reasons we've talked about before. Three of the main ways they do that is weighting substitution and hedonic indexing. So it's understated. And the government has huge incentives for understating the inflation rate. So let's look at it with a realistic example. Here is how you get paid to.

Rent the money or to borrow the money.

You're really renting it. So I like to call it renting it. Your Note rate is 6%. Your tax deduction is 2.4%. The real rate of inflation, and I'm probably being conservative by most people's view, is 5%. That means your real rate, your real interest rate is negative. I said negative. You're getting paid to borrow here. You're getting paid to rent the money. Negative 1.4%. You are getting paid to borrow money. Imagine getting paid to borrow money for 30 years. That's incredible. It's fantastic. But it's even better if you can do it for 50 years. Okay? It's even better if you can do it for 50 years. Now some people have said, well, you know, a 15 year mortgage has a slightly lower rate than a 30 year mortgage. And that's definitely true. I mean, the shorter the term, the lower the lender's inflation risk. So the rate is lower. The 50 year mortgage will probably be a little more expensive than the 30 year mortgage, but rates are on the downswing either way and it's probably not going to be enough more expensive to shy away from it. It is the greatest deal. And folks, if you're listening for the first time or you don't understand what I'm trying to get at here, the incredible benefits of arbitraging inflation, of using inflation induced debt destruction, of understanding the real interest rate, please check out my old episodes. Go to jasonhartman.com and in the search bar type in inflation induced debt destruction. Type that in on YouTube. Look for the podcast episodes on that or the YouTube videos on that. Also use my AI chatbot. It's right on the front page of JasonHartman.com it's this superhero image. There's a little superhero graphic in the lower right hand part of the webpage. Or you can go there directly. Jason hartman.com AI for artificial intelligence and my AI chatbot is smarter than me. And I know you probably think I'm reasonably smart and humble too. So the AI Chatbot has been trained on a whole bunch of my past content. It's free to use and the people that start using it, you know, every week we get a report and we see that the people that started using it just keep using it because they love it so much. It's so handy. You can talk to it in your voice on your cell phone. You know, there's no cost for this at all. Or you can type and text with it. You can, you can, whatever you like. You talk or text. Either way, it will answer all kinds.

Of questions for you, give you all kinds of examples.

Why is it smarter than me? Because it has the knowledge of the entire Internet plus my knowledge. So it's really good. Check it out. Use the AI Chatbot. Listen to the old episodes. Folks, this is so important that you understand this because this confluence of factors right now I know real estate's been really boring for the past three years. The market has been just muted. It's been very subtle. Sales activity has been down. Prices have gone up slightly, but not much.

Some markets are down, other markets are up more.

The national average is up about 2% year over year, which is nothing to write home about. The normal is around 6%. And I know it's not been exciting, but it's the calm before the storm because so many factors are just so favorable for income property investors right now. It is just amazing. And I know that in a year or two years, hopefully you'll come back and listen to this episode or the others and you'll see why I'm bullish. Because this is just the facts. It's not my opinion. It's just a well informed opinion based on facts and factors of all the things going on out there.

Okay.

All right. Today we have one of our master classes. You probably won't hear this recording in time to listen to it, but be sure to join us for our monthly masterclasses. They are 100% free. They're on the second Wednesday of every month. You just go to jasonhartman.com Wednesday and you register for those masterclasses and you've got me on there in person. Sometimes we have some guests, sometimes it's just me. And we've talked about the perpetual motion machine where your real estate buys more real estate for you.

It's the perpetual motion machine that the.

Physicists and mechanical engineers have been trying to invent forever. It works in real estate. The perpetual motion machine is a fact of life.

It's amazing.

So we talk about all these great things. We have guests, we have market profiles, we have all sorts of things. So be sure you're on our list and you're checking out our Wednesday masterclasses. If you'd like more involvement with us, our Pro Community community is really great too. Just go to empoweredinvestor.com and for the cost of a inexpensive gym for your physical body, you can get all sorts of resources to help you build wealth with your real estate portfolio in our Empowered Investor Pro Community. We meet monthly on Zoom small groups with me there. I answer your questions. I present things to you that I don't talk about widely on the YouTube channel or the podcast. Also, you know, you sign up for anything at our website, you'll be on our newsletter mailing list and you'll get our newsletter for free as well. So be sure to do that. We do have a guest today, so let me turn it over to the guest interview here and I think you'll find this interesting. It is my pleasure to welcome Jeff Deiss to the show. He is the in house counsel for.

Monetary Metals and formerly with the Mises Institute. Over the years we've had several Mises Institute people on the show and they always bring a really Interesting perspective to economics, monetary policy and what we can.

Do to defend ourselves against the ongoing ever present. And it's going to continue, I'm pretty.

Sure, that debasement of the dollar and protect our wealth. Jeff, welcome. How are you?

I am fantastic, thank you. How are you, Jason?

Good. Good to have you on. And you're coming to us from Alabama, right?

Indeed, yes.

Excellent. Good stuff. And you spent the first part of your life in California, which is a hometown for me too, or home state.

Yes. Which of course gives us both, I think, a little bit of a perspective on real estate, to put it mildly.

And it gives us a perspective on the disaster known as big overreaching government. Right.

Well, hey, you have some really interesting.

Perspective because you obviously believe in the cause of defending ourselves against the debasement of the dollar with all of your knowledge of the Austrian school of economics and so forth.

You know, let's just kind of talk.

A little bit about the problem. I mean, it's no secret really to anybody nowadays that we have $37 trillion in debt. We are increasing that by about a.

Trillion dollars every 100 days, or even.

Less, I think now than 100 days. So, you know, $4 trillion a year we're adding. How long can this continue and what will the result of this massively out of control government be?

It can continue a long time. And I would say it. What's it. It is a monetary problem. It's also a cultural problem. So we have to view it, I think holistically and say that this is a very deep kind of rot. And the economy is of course an important symptom of that, but it's not the entire story. You could go back to 1971 and there were a lot of really smart, well meaning people at that time. Mises was still alive, but like Doug Casey and Ron Paul were around and they were basically saying that this was the beginning of the end when Nixon ended any sort of redeemability for gold in the US Monetary system, that this would usher in an era of hyperinflation or at least bad inflation and dollar devaluation. Now that's been true in a very large and important sense, but it's been slow. And so we find ourselves in kind of a slow motion car crash. And if you're under, let's say, age, I don't know, 65, even 70, you've never really known what aggressive price inflation is like if you're, you know, blessed and fortunate enough to have been an American. And so we have entire generations of people Working in the financial industries who have never seen interest rates basically go up. From around 1981 or 1982, the end of the Volcker area, all the way till about 2022, which was getting out of the COVID era, interest rates in America basically went down not on a straight line, but inexorably. They trended downwards for 40 years. And so because of that, a lot of businesses and a lot of investments made sense, at least on paper. So now for the first time in most of our lifetimes, and certainly the financial press and the financial industry folks, lifetimes, we're going to see what makes sense and what works. When interest rates are going up, I happen to think they are going up regardless of what central banks are do, there are fiscal and monetary pressures beyond their control. And what I think that means is that a lot of BS industry and a lot of, you know, digital nonsense is going to be priced accordingly and painfully over the next coming decades. And a lot of physical stuff, look at the kind of stuff Warren Buffett invested in over the years. A lot of the old analog world, a lot of the infrastructure and a lot of commodities, a lot of stuff feeding people calories and energy and that sort of thing are going to go up. So that's my assessment of where we are. But it's really a tragedy because of course all of it would have been at least somewhat avoidable with a sounder dollar.

Yeah, there's no question about that. And people just don't realize how just reckless monetary and fiscal policy are and how it impacts their lives, how it.

Just robs their wealth.

It's just incredible. You so it's like you said, it's.

A slow burn so we tend not to notice it significantly.

I'd say it got really bad in the, in the 70s. Some of the inflation of the 70s and then some of the high interest rates to combat that inflation in the early 80s under the Volcker era and.

Then recently under Biden, you know, people were just outraged.

And if you think about it, the typical American, if they kept their wealth.

In cash, you know, they lost a.

Good 30% of their wealth in the last five years.

I mean, and that's just mind boggling.

To think about that.

And I'm going to share my screen.

Here because I you're going to have some good comments on this. I'm sure you're familiar with this website, WTF 1971. They've got so many great charts on this website and it just shows how.

Workers inflation is outpacing their incomes.

You Know, any chart you look at, real gdp, inflation is just destroying people income gains, you know, it just all.

Really started to shift in the early.

70S when Nixon closed that gold window. That final break from our tethering to Gold on August 15th of 1971, it just changed the world massively. You know, and if you care to just jump in and comment on any of these charts, I, I think they're quite fascinating, you know, well, it's been.

More than 50 years, which is incredible to think of, and it, it really is a tragedy. And it shows you that we collectively no longer really have a definition of money. We don't really know what money is. And arguably since 1971, across the west, money is basically a. A policy tool. It's an instrument to be controlled using fiscal or monetary policy. It's like tuning dials on a mean. And so we don't really have a widely agreed upon definition of money. There are lots of things that aren't money but have moneyness qualities, like U. S. Treasuries, for example. And so it's this moneyness which I think is now coming into focus because things like gold and bitcoin, I think very definitely have elements of moneyness. Now use the term tether. And that's interesting because I was listening to a podcast I don't know, maybe a year or so ago. Some of you will know Caitlin Long from the bitcoin world, started Custodia bank out in Wyoming. And Tom Luongo, who is a podcaster who opines on a lot of things. And so Caitlin was basically saying, well, you know, since there's no longer any redeemability, gold has no purpose. In other words, the only role of gold in the financial system is to act as a tether on government debt. And now that governments don't have to redeem their currency in gold, it has no purpose. And I thought about that, let's say other than industrial or jewelry uses. And I thought about that and I thought, well, that's interesting. I understand what you're saying, but I disagree simply because look at the price of gold. I mean, I think gold has a moneyness element that is baked into that 3400 bucks an ounce it sits at today. I think that's inarguable. If you were to say that gold could only be used as jewelry or something like that, there's no way it would be worth that much. So while we don't know how much is, is the moneyness element, and we don't really, we can't explain fully the psychology behind what makes gold markets move. I think we, we can absolutely agree that it is a bellwether of sorts, that in other words, it's an index of unhappiness and unease and uncertainty among people. None of us know the future, none of us can predict or you know, what of people are going to get up and do every morning. That's what we call the economy, by the way. But we know that something's off and something's wrong. And since we don't know any better, we do things like buy gold or if you're, if you're a believer, maybe you go buy us Treasuries. But I think that's such an important understanding to know that gold is something more than just a tether on government debt, on, you know, even unleashed. It is showing us that people on some level view it as having money ness qualities.

Yeah, well, and at the very least, a measuring stick. There's a great website that I've followed for many years called Priced in Gold. And you're probably familiar with this website as well. And you know, every week he'll send out an email and he's added cryptocurrencies to it too. You know, in the last few years he'll send an email and he'll say, well, you know, houses priced in gold or this priced in gold or that priced in gold.

And you know, you can just see.

How, you know, consistent that is as a measuring stick. I mean it's, it's not perfect. Nothing's perfect. There are a lot of things you need to kind of price to. I created an index that does this. It's called the Hartman Comparison Index. But it really is focused on real estate.

Right.

Because like you, I like things that are real and tangible and analog. Like you say, you know, it's, it's so easy to get distracted with all the seduction of the digital world.

Right.

And you know, we all love these great digital tools we use and so forth, but at the end of the day, we're all living in a physical world and physical things totally matter. I remember, you know, 25 years ago or 26 years ago when the dot com bubble was brewing and, and then it burst. It was like, oh, it's a new economy. The whole, the whole world has changed.

And it really didn't.

I mean, you know, regular analog stuff still mattered.

Okay.

You know, they tried to paint it as though that didn't matter and you know, all that stuff was, or as Greenspan would say about gold, it's a barbarous Relic. These are just interesting things, you know, these people are just proven wrong over and over again for literally thousands of years, you know.

Well, it's true. And the, I think the corporeal world is going to make a comeback because at the end of the day people need calories, people need energy, people need habitation, you know, as their baseline needs. Now we can argue over whether the world population is going to continue to grow at the pace it's been or whether it's going to level or shrink. But I think regardless, that certainly the aging of the population across the West, I think means that all that physical stuff becomes even more important. And so I don't love equity markets. I think that they're juiced, for lack of a better term. And I think that we have lost sight in markets of things that used to be considered fundamentals. For example, severely dislike the fact that Amazon's never paid a dividend. I mean Amazon is the most blue chip company probably of all, maybe next to Apple. And you think, well, okay, they've been public since 1999 and the Dirty little secret is that Amazon prime doesn't make money. You think, oh my gosh, I ordered these paper towels and I came to my house the next day. It's too good to be true. Well, it is too good to be true. They actually lose money on it and they make their money to the extent they make any in their web, you know, in their cloud services. So a lot of which they sell to the government, which I don't love, and so they pour it all into Capex. But at some point if you say what does it mean to own a company? You never ever get a dividend. Means there's always got to be a greater fool, a knife catcher to buy the stock and that it only works if number go up. Well, I don't think that's what owning a stock should mean. And I think we've lived in this in a bit of a fantasy economy for so long that we've come to accept that as normal.

Jeff, I agree with you about that. You know, I always say that, you know, with most investments it's a one dimensional asset class. Buy low, sell high. That's the whole play, right? Which like you alluded to is the greater fool theory. Right? If it's a dividend paying stock, it's buy low, sell high, get some dividends in between. Right. You know, I love income property because it's multidimensional. There's a, you know, a good six solid dimensions where you make return from Income, property.

But you know, someone who's kind of.

An anti gold bug, argue the same thing about gold previously to your company. Right. Which I do want to get into because I love the solution you guys present.

But wouldn't they say the same thing?

I mean, gold is one dimensional, like buy low, sell high. Right. Until, until you came along. But we'll get to that later.

Well, you know, its limitations are also its charm in that it just sits there over millennia and nobody's come up really with much better. Obviously the bitcoin maxis would argue that they have come up with a digital and superior form of gold. That's, that's.

And they have their own.

You know that.

Right. That's a debate for a different day. But, Right, but, but gold, a couple things. First of all, gold's never gone to zero. There's never been a day where grandpa dies with a bunch of gold and everyone's disappointed. On the contrary, lots of grandpas have died holding worthless stock certificates. And when you talk about it as a price, maybe a number that we use to view the broader economy. In other words, one of those really important baselines like the fed funds rate, for example. Well, when I started at monetary metals, which is only two and a half years ago, the entire market cap of gold was 13 trillion. It's now 24 trillion. And there hasn't been much dug up since then. It's not how many years.

13.

The two and a half years.

Oh, two and a half went from.

13 trillion to 24 trillion in just a couple years. So I think that's important to understand. And the idea that gold sits there. Well, if gold's money, and a lot of people think it's money, governments don't like to treat it as money in their, with their accounting rules, with their tax treatment, and sometimes with their actual currency laws that, that prohibit, you know, what we would call competing currencies. But nonetheless, the markets see it as having a money element. Well, like all money, it shouldn't just sit there. Why should $24 trillion sit around and not be lent or not be collateralized or not be used for all kinds of ways to finance productive activity?

Yeah, which, which is a very good question. And we're gonna, we're gonna dig into that because it's about time someone did that and made it, you know, more productive.

But you know, the gold is money thing, I mean, look, I've always said.

This same thing of cryptocurrencies. And I've said it from the day I learned about bitcoin. I literally remember the conversation when I learned about it. It was $74. I should have bought it, of course.

Back then, but I did start buying.

Some at about $400.

And you know, $400 is about where I got into the gold world too.

You know, and I started buying that as well. You know, those were different years, obviously, but, you know, you just look at any price chart and know what I'm talking about and get your reference point.

But I always said governments don't like.

Competition, just like businesses don't love competition either. Right. You know, they'd rather have a monopoly.

And the biggest product of any government is its currency.

That's the major product of a government is, in my opinion, is its currency. It's. Feel free to disagree with me, by the way, because I'd love to get some counterpoint on that. But I think that's the biggest product of any government is currency. Right. So for the US it's the dollar. For Japan, it's the yen, you know, for Mexico, it's the peso, et cetera.

Right. They don't like competition. They don't want to see gold succeed.

They don't want to see cryptocurrency succeed. Now, you know, the Trump administration's been pretty different on the crypto thing, but I don't know how long that's going to last.

You know, there's an organization called GATA.

Which is really interesting. I'm sure you know about gata, the Gold Antitrust Action Committee, accusing all of these central banks and governments of manipulating the gold price. And they may well be right about that.

You know, so speak to this for a minute. And how much of a concern is it for investors?

Well, look, I, I don't know about manipulation, but governments and central banks have every incentive to manipulate gold prices down because it's. Gold is generally seen as a referendum of sorts of right. On their malfeasance or their competence.

But interestingly, they like to buy it.

They own a lot of it.

They do. In other words, it's a, it's a typical case of double dealing. Central banks love it because they know it. Again, it just sits there. It's very, very stable. They don't have to worry about it. And, and that's what's so interesting here, is that what we think of. And I, I think you're correct. I think a currency is in fact perhaps the single biggest product of a government other than what we call bads. In other words, markets produce goods and services, governments produce bads. But yeah, Currency is definitely one of the main products of government. And we think, at least in the past, a currency was a calling card. The Swiss franc used to be a wonderful calling card. The British pound sterling, my goodness, that was a wonderful currency in its day. Spain enjoyed that for many, many decade. Sure. And so it's really a shame to think that, like so many other things in America, that the US Dollar has been degraded. That bothers me. And I have kids, and I don't want that for them. I don't want further degradation. So it really is. It really is true that the government produces a bad product. You know, our friend Hayek wrote a famous essay about the denationalization of money, spelling it with an S, the British way. And it's one of the biggest projects. I think monetary metals is part of that. The bitcoin maxi world's part of that. All kinds of people who are looking to divest or get into alternative asset classes are part of that. I mean, and governments will fight it tooth and nail. They'll fight it up to and including the point, I believe, of prosecuting or jailing people, because it could come to that someday. So. Well, we did.

I mean, all you have to do is look back to the early 30s. Right?

Right.

When people held gold. But what we. What we want to have happen is what Hayek said, which is something comes along so quietly that it just takes over before they can do anything about it. Let's say Uber would be an example of this when it was operating in sort of a gray regulatory area in so many cities. But then everybody liked it and it was superior to taxi service, et cetera. So I love that there's a lot of competing projects going on. I think some of them are, you know, not my cup of tea, and they may maybe even scam me. For example, I. I don't at all like Bitcoin treasury companies. But the point here, I think the broader point is that people know something's amiss. They know that the currency is really the. Like the blood that goes through pumps through the human body, and that something's got to be done.

Yeah, absolutely.

Well, let's talk about making precious metals.

Productive and how you're. How you're changing this whole thing. Because my big objection to metals, I mean, I always liked them, right? But my big objection was they don't produce any income. You know, that was always my problem with him. And times they are changing, as. As the famous line goes.

Yes, they don't produce an income. They're heavy. They're expensive to own. Oftentimes you need insurance or storage. So there's lots of reasons not to love precious metals. And of course if you're a, if you're an equity watcher and you look at markets over the, you know, the 20th century you say oh my gosh, look how great the New York Stock Exchange did. Well gold sitting there. And that's not, that's not entirely true. Gold holds its own over time, over decades and certainly over centuries against virtually any investment. So no apologies there but the treatment of it in terms of taxes, the regulatory treatment and also the storage and the insurance, the vaulting are not attractive qualities, no doubt about it. But there's so much gold out there. And increasingly family offices, institutional investors are starting to wake up to the fact that hey, maybe it shouldn't be 1 or 2 or even 5% of a portfolio. Maybe it should be 10 or 20% which suggests there's a huge amount of room out there. And then the question becomes well is it all just going to sit there and incur fees or is it, is it going to be actually used, loaned or leased to productive businesses so we can get some of the moneyness out of it and pull that value out, pay yield.

So tell people how it works. I mean basically the idea of I.

Remember, you know, and I've always talked about this. Years ago I got a call from a bullion and coin dealer, Monix, right. And the guy pitched me on the phone and he said hey you know, you got to buy this gold. Iraq, Iran, you know, the Federal Reserve, yada yada, all the usual arguments, right, which are true, you know, and I.

Said my problem is look I'll buy.

The gold from you but, but I don't love it because it doesn't produce income.

Right.

So how did you solve that problem?

Well first Monix is a pretty high pressure phone call for anybody.

No, I know it was a boiler.

Room, you know, it was a telemarketer.

But I agree.

I just bought it because I wanted to buy some more gold, right. You know, I just said to him look I bought it, you made the sale, stop pitching me. But it doesn't produce income. You got any solutions for that? And he's like no, nobody will rent my gold.

There's, there's a couple ways that we can use physical metal to produce an income. One is that we take a business that either produces gold or silver, uses it as inventory or work in progress or even mines it, pulls it out of the ground and we can offer to lend it or lease it to them. And here we don't have the balance sheet mismatch. In other words, if this kind of business goes out and borrows, let's say, dollars, well, that's not what they produce or in income or use as inventory or work in progress. So they have a little bit of a mismatch here. But more importantly, if, if we lease it to a business, we can provide them a fixed cost of capital, in effect, for, let's say, inventory. So think how you might think of floor financing inventory for a car dealership. Oftentimes the cars on the lot are actually owned by the, the finance company, by the, the manufacturer themselves. And so the dealer is simply trying, is simply paying rent and trying to sell the car and then, you know, have a fixed cost of capital. So that's in a certain sense what we do with big jewelry chains in the Middle east, for example, if they want to use a bunch of gold in the inventory, they can obtain that gold from us in a lease without having to put out, let's say, millions and millions of dollars of their own to actually purchase that inventory. They can know that regardless of whether gold's going up or down, they can replenish what they've leased from us and pay us back in ounces as they sell it. So they don't have to worry about this fluctuating price risk. They don't have to hedge or use futures against that price risk. And they can simply replenish our gold with each sale. And each sale is made at the then current price of the, you know, the ounces contained in the jewelry, plus the extra value of the jewelry, jewelry itself. So it's actually a way to provide financing for, in this example, a big jewelry chain, Whereas they have a fixed cost of capital, they repay us in ounces, and then we in turn repay our customers in ounces. So it's kind of an interesting approach to using gold not exactly as money, but as close as possible.

Yeah. So what are the benefits and the risks of this?

Well, the risks are there's always risk with the return. Any rate of return is not risk free. We always highlight that when we talk to our customers or in our marketing materials.

That's, by the way, I just want to comment on that. You know, it's known as the risk free rate. Right. Treasuries. And that is not risk free. Okay, folks, you know, the government might not outright default, but they're definitely defaulting through inflation. Okay. So the risk free return thing is a myth even.

Sure.

And whether you hold dollars or Treasuries, you have a counterparty risk in the form of the Fed or the US Federal government, its Treasury Department. So I agree completely. But the risk is that you are taking your own metal and you could keep it at home in a safe, you could keep it in a storage facility, you could keep it in a bank safety deposit box. I wouldn't recommend that, but you could. And basically other than let's say some sort of theft scenario, your gold secure because it can't really be melt, you know, there's not really a fire or water damage like there are with, with other kind of assets. So you, you again just sit there and you could enjoy the price appreciation of that metal and, and do nothing other than you might pay a little bit of storage or insurance. So that's the, the good news. The bad news is that you're not earning yield. You're not, you know, you, you have basically it's like having 50 or $100,000 or $200,000 or a million dollars sitting in a bank account earning zero interest as opposed to having it, let's say in your Vanguard or Schwab money market where it's at least earning 3 or 4% for you. So that's, that would be the analogy, is that your gold is safer but it's also not earning that interest for you.

Yeah, so I just want to make sure we cover risk and benefit. I mean obviously you know, the benefit is you're going to get a return on an asset with no counterparty risk, no debasement. And that's fantastic. And the risk is what? That you could loan the gold to a company. Right. Or lease it to them and they might default. How do you manage that kind of thing?

Yes, absolutely. The risk is of course in with the company that we lease it to or with monetary metals, you also have a counterparty with us. What we do to mitigate that risk is a very long story. But our number, number one mantra, our number one directive is to never, ever, ever lose clients gold. So to do that first and foremost we do, you know, huge amounts of due diligence on the client. We use a variety of forms of insurance both at the client level and at the monetary metals level, at the vault level, at the transit level, you name it. And we use personal guarantees, corporate guarantees by the people that we're doing business with with to make sure that they're on the hook for it. And perhaps most importantly, we're very, very careful with our legal docs to make sure that, you know, the title issue is clear and that in the event, let's say a big jewelry chain to whom we've leased metal were to go out of business, we would approach that as our metal, as opposed to being just a creditor in a bankruptcy or foreclosure scenario wherein we're simply producing, positioning the court. Gee whiz, can we have $0.50 on the dollar, $0.20 on the dollar, whatever. We're a hapless creditor. No, no, no. We're an actual owner of that metal. Your title remains intact, and we hold it from you in a lease. And so that's a very, very different scenario from a legal risk perspective than it. Than a, you know, an ordinary creditor in bankruptcy.

Oh, that's. That's an interesting point. I'm glad you brought that up, because in the stack it goes, you know, the bondholders get paid back first, then equity, if there's any equity left over when a company goes. Goes under.

But if you're a landlord and say.

You lease the company office space and they go bk, yeah, you can evict them and get them out, you know, relatively quickly. The bankruptcy proceeding might go on for a couple of years. Right.

But if they owe you money, you're just a creditor.

The landlord is just a creditor like any other. So just tell us about how you do that differently.

Well, consider, let's say, a lease of a fleet of trucks as opposed to an apartment.

Right.

You know, if the, if the company leasing the trucks goes bankrupt, the actual owners or the finance company, the leasing company that owns the trucks gets their trucks back, you know, more or less immediately and the bankruptcy process. In other words, the trucking company doesn't name the trucks as part of its bankruptcy estate. No more than if a renter was declaring personal bankruptcy, he or she would not list their apartment as an asset in the bankruptcy estate. They don't own it. So that's the. The fundamental idea behind how we structure our contracts.

Yeah. Okay, good. Good stuff. What else do you want people to know?

Well, I think that we've let gold fall by the wayside. I think most economists haven't thought it through. Even monetary economists, which was considered a boring little niche of economics, haven't really thought this through and that there's just this huge, unrealized, untapped potential of trillions of dollars in physical metals sitting there, sitting around literally all over the world in central bank vaults underneath New York City, hopefully in Fort Knox, in safe deposit boxes all over the world, in. In untold amounts, in the Eastern world where gold is much more of a cultural matter than it is in the West. When you talk about India, when you talk about the Far east, when you talk about parts of Asia and Turkey and the Middle East, I mean, gold is part and parcel of culture. It's just something people own in much.

Greater measure than, and I'll just comment on that. Many people I've talked to, developers and also friends who've developed properties in Asia, for example, they said the people literally come in and buy the properties with gold. They bring it into the office and hand it to them and say, now I'd like the condo.

Sure. Very different cultural outlook. And so I think gold is rising. I think it's got a part to play in the financial system. And I think that central bankers and bitcoin maxis and everybody else who don't necessarily love gold are going to have a hard time suppressing or denying it. And let's put it to work. Let's put that huge asset to work. I mean imagine the insurance industry, they would never sit on that kind of wealth. Banks would never sit on that kind of wealth. Real estate developers would never sit on that kind of wealth. Heavy industry would never sit on that kind of wealth. It is, it is capex, in effect waiting to be put into a million industries. Nobody's even thinking about it. And, and like I said, It's $24 trillion worth of wealth.

Yeah, it's really interesting.

Give out your website.

We are monetary medals.com and our Twitter feed is that is the same onetary hyphen Metals.

Jeff, thanks for joining us.

You bet. Thank you.

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 shows specific website and our general website, hartman media.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.