CW 238: Price Inflation vs Hyperinflation with Daniel Ameduri Chief Strategist for FutureMoneyTrends.com

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

Welcome to the Creating wealth show by yours truly, Jason Hartman, your host. Thank you for joining us today for episode number 238. Boy, we have been recording so many great shows for you. We have got just amazing stuff coming up. You're gonna love it. Amity Schla's, I think she'll be our next show. She's the author of the Forgotten man and the Greedy Hand, very famous best selling books and she's really interesting and I think you'll like those shows. We've got Joel from Property Tracker coming back on. He's got some great freebies for you, some total giveaways, no strings attached. And we've got some client interviews coming up just to share their real experience with their investments. And some best practices in property management, some best practices in acquisition and vetting properties and so on and so forth. So I can't even remember what else we've been recording so much lately. So it's just going to be a fantastic year of education and investment. And I tell you, in 2012, these opportunities are phenomenal. Do I sound like a salesperson there? I hope not because I'm very sincere about it. Just amazing opportunities out there right now and that's why we're so busy. People have been clamoring down our doors to invest in properties and just finding so many good, good opportunities out there that I think you'll be really, really amazed. So you know how we talked recently about institutional properties and how institutional investors are so willing to take lower returns on their investments and we talked about the reasons for that. When it's everybody's money, it's nobody's money. That's one of the reasons. Needing to just simply deploy money. That's another reason. These institutional investors, many times they have too much money coming at them and they've got to deploy it. It's like that Old government thing. If you don't spend all the money your program is given, if you don't spend your grant, if you don't spend your allotment, well, you get less the following year. So institutional investors just very frankly take some really rather lame deals if you ask me. And here is an example of one. The Stan Johnson Company, a commercial real estate brokerage. I'm on their email list and they sent me a net lease offering. And this is for a Bank of America. Yes, one of the most hated companies in America. B of a sublease or I should say a B of a absolute net ground lease. So this is a triple net lease where you can own the property, you can be the landlord for a Bank of America branch and you can pay over $4.6 million for this single tenant property. Now I don't know about, but B of A is having a lot of problems. I'm not sure you want to be their landlord right now, but even if you did, who knows if they'll close branches or what they'll do. But even if you did, and even if that company had a great future, which I don't think it does, but even if it did, you would, on this ground lease, you would make a cap rate, a capitalization rate of only. And this is terrible folks, this is terrible. Cap rate of 6.56%. This is junk. Why would you ever take that deal? That deal stinks to high heaven. And that's assuming they pay and that's assuming they are a performing tenant. 6.65% on a 4.7 million dollar deal, basically. So again, our deals are much better than that. If you see a cap rate on the jasonartman.com website below 9%, I would be astonished. You'll see lots of them higher than that. So again, just a lousy deal. These institutional investors, we do much better as scruffy investors that are looking for smaller deals that make a lot more sense that we have control over just far better investments. Okay, so today we're going to talk about some predictions for 2012. We've got Daniel on the show. He's been on before. He's with futuremoneytrends.com so I think you'll like what he has to say and some great stuff coming up in the year to come. But before we get to that interview with Daniel, let's talk a little bit about some things going on out there. And recent article, this is entitled New Cars Getting big Changes to Lure Younger Buyers. Now why do I even bring this up? I mean, we're talking about investing in real estate, we're talking about private money lending, we're talking about all of these great things. Why would we care about what's going on in the new car market and what they're doing, these car manufacturers to lure younger buyers? Well, we care a lot about that because they see this as a huge market. Remember, Gen y consists of 80 million Americans, the largest demographic cohort in history. So this article talks about all the changes that they're doing to attract this very lucrative block of prospective customers ages under 30. And as real estate investors, we've got to think the same way because those people are renters. They will be moving into the ownership market eventually. But again, I don't think there's any urgency on their part to do so. So you see a lot of businesses catering to this demographic cohort because it is such a large group, 80 million people, larger than the baby boomers by 4 million. A huge marketplace here that we have got to think about. And Trulia, the real estate website Trulia, that releases predictions and so forth. One of their predictions, their crystal ball, as they call it, for 2012, I found one of these things interesting. Item number two on their prediction list here was rents will rise, which is a bad thing. I don't think it's a bad thing, but apparently they think it's a bad thing. I think it's a great thing as an investor. And it goes on to say with fewer people buying homes and more people losing their homes to foreclosure, the rental market is only going to get tighter. Now that's good. They're portraying it as though it's a bad thing. It's good for us as investors. The rental market is only going to get tighter, especially in older, dense cities. And it talks about Washington, D.C. new York, San Francisco, and you know, that's true. But the thing they don't mention there is the rent to value ratio, which totally stinks. So it reminds me of that article a few years ago I saw about how Oklahoma City, the media says, because they're stupid and they don't understand the details and they don't drill down and they don't understand simple things like rent to value or RV ratios. They're saying this article I saw a couple years ago, it was saying that you wouldn't want to be a landlord in Oklahoma City, but you would want to be a landlord in Los Angeles. Well, what is the obvious thing? They didn't consider the value or the purchase price of the property. The rent to value ratio. So the casual observer reading that article I saw a few years back would say, well I better run out and invest in Los Angeles, but not Oklahoma City. When the truth was the huge difference is you would have been so much better in Oklahoma City where you could buy a house for $80,000 and rent it for about 1% of the price. Whereas in Los Angeles at the time you would have to buy a house for 4 or $500,000 and rent it for about 3% of the price. But again, the idiots just reading that article, just skimming the surface, they don't get it. So again, the Trulia point here misleading. Saying that rents are only going to get tighter in New York, Washington D.C. and San Francisco. But folks, we all as prudent investors that get it, we all know those ratios are totally out of sync. Yes, those rents may rise, sure, but they still are so far out of sync with prices that those cities just don't make sense for investors. And, and what do all three of those cities, Washington D.C. new York and San Francisco, have in common? They are extremely landlord unfriendly. They are very liberal. They think that landlords are evil people and the tenants have all the rights in cities like that. New York and San Francisco have huge swaths of rent controlled areas. I don't think Washington D.C. ever had rent control. I cannot be sure on that, but I know from evidence that I have heard from many investors over the years. Of course, all three of those areas very landlord unfriendly. If you ever have an eviction, you're going to have problems. Those are where tenants have all the rights and landlords just don't have any rights, it seems like. Okay, so the article goes on to say high rents will hold back economic growth if businesses can't pay workers enough to have a roof over their heads. True, that's a good point. Squeeze city dwellers won't get relief until late 2012 when a wave of new multi unit construction projects that started late this year will be completed and available for rent. And folks, let me tell you something. Yes, there is construction in the large institutional landlord arena because they see how great the rental market looks for the coming decade. I mean, it's just phenomenal. The demographics coming at the rental market right now, great for investors, but the amount of construction is minuscule. It's negligent in comparison to the demand. Again, this is really just showing how phenomenal the opportunity is for us as investors in the coming decade and really in the coming several decades. Because when you combine the lack of construction, the increasing population, the bad credit worthiness of so many millions of people now, and many by choice, through strategic default, many by choice are deciding that their credit is only worth a certain amount of money and those people will make great renters for us for many years to come. And you combine that with the entitlement, time bomb, inflation, all the stuff we've been talking about on all the previous 230 episodes of this show and my other shows, the holistic survival show, the Jetsetter show, the American Monetary Association's podcast, the Young wealth show, all of my other shows, the heroic investing show, etc. Etc. Etc. 15 other shows that I do with over 400 episodes in total. You know that the opportunity coming at us as investors, nothing short of phenomenal. And couple more things here, of course, join us for our Meet the Masters event. It's going to be at the Hyatt Regency Irvine. And by the way, we did settle on the date. It is firm. It's March 24th. That's Saturday and March 25th on Sunday. And again, a lot of people coming in Friday evening. So we can have a dinner together then. And that'll be at the Hyatt Regency irvine. Register jason hartman.com and by the way, if you want to pick up a couple of our fantastic products there, we've still got a little promotion going on. Actually, it's pretty big promotion for the Creating Wealth Home Study course. Promo code to get $200 off of that is CW200. That's CW200 promo code for $200 off the creating Wealth Home Study course. And the Financial Freedom Report, our highly acclaimed newsletter that so many of you are subscribing to. And I hear such good things and such good feedback from you. Thank you for that. Is $100 off. And the promo code there is FFR100. That's FFR100. So start the new year right by taking advantage of the event and those products. Last thing before we go to our guest today on show number 238. Here is I had a really interesting little discussion about gold. And you know how I feel if you're a regular listener to the show about gold and silver and the precious metals. I think they are okay. I don't think they're great. I think they are defensive, not offensive. I think they're better than dollars or better than whatever fiat money you use in whatever country you happen listening to this show in the 26 countries where people listen. So I think they're fine. I think they're a defensive strategy to preserve wealth, but I do not think they are like income property, an offensive strategy to create wealth. And there is a big difference there. So I had a little interesting exchange with one of my Facebook friends and his name is Bob. I won't give out his last name here, but it's interesting. He posted an article and he said, I totally agree. In the art iteration was a graph. And the article said, gold is not a bubble. It's going to $10,000. The best time to plant a tree is 20 years ago. The second best time is today. So, you know, again, I always love debating with these gold bugs because it seems like they only have one level of understanding. Again, their premise is completely accurate. I couldn't agree more with their premise. Uncertainty in the global economy and the geopolitical environment. Fiat money spending that we've created. All this new fake fiat money. It's really fiat currency, I should call it. That's the right name for it. Out of thin air in the past several years. And look, folks, this game cannot be perpetuated forever. We all know that. We all get it. They keep kicking the can down the road. It's amazing that the house of cards has lasted this long. Fine and dandy, but again, defensive. So here's the exchange with Bob and myself. He says, gold going to $10,000. He totally agrees. So I say, in nominal dollars, maybe not in real dollars. Bob says, what real dollars? Three question marks. Nothing but fiat currency. And I say, constant dollars. Real dollars equal the same thing. And Bob says, gold is not expensive. The dollar has lost 98% of its value. So what real dollars are you referring to? You know, this is the typical thing I get. And I said, agreed. That's my point. Has gold gone up or has the dollar gone down? Bob says, dollar is down. I said, yep. So the question is, did people make money with gold or just keep pace with inflation? And then I put a link to an article that is a blog post on my website@jason hartman.com. the link is rather long, so you can just go to jasonartman.com and search for the article because we do have a great little search engine on the website you can take advantage of. Powered by Google. And you won't get any ads or anything there either because we actually pay for that little widget. And so the article is entitled 7 Reasons Real Estate Is Better Investment than Gold. And in the article it talks about the seven reasons and it says in order. Number one reason is that there's no financing, no leveraging. To allow you to build wealth quickly and outpace inflation. The metals, the silver, the gold, they don't have that advantage. In contrast, income property has tax deferment opportunities and the tax advantages through depreciation while owning income property are a non cash or phantom deduction. Nothing short of phenomenal. Again, metals have no tax advantages. In fact, they have huge tax penalties because they are taxed at the collector rate. So when you sell them, you pay not the long term capital gains rate, but you pay 28% as a collectible. Number three, no rental income. You can't rent out your gold bars or your gold coins. So again, there's no income generated from them. Number four, your investment could be subject to confiscation. Now, the arguments are that collectible coins are immune from seizure or confiscation. But you know, I think this is flawed because who knows that they won't just change the law. They've done it before. They did it during the Depression. It could happen again. Precious metals are prone to manipulation by forces much more powerful than any of us. Central banks hate precious metals. They want you to denominate your wealth in their fiat currency game. Okay, so they're constantly manipulating these precious metals. A lot of the silver bugs, they're saying, well, JP Morgan is manipulating the silver market. Well, sure they are. Of course they are. And so silver value is much higher than it's stated to be at what is it now? About $36 per ounce. Right, but the point is, the question is, folks, how long can it be manipulated for? Well, the answer forever. Who knows when the manipulation will end? So again, not a solid bet in my opinion. Again, a defensive strategy, it's fine, but it's not an offensive strategy. Okay, so manipulation. Another big problem. Number six, the myth of superior liquidity of precious metals. Well, most gold and silver investors and platinum and palladium investors, by the way, they don't sell their metals. Well, as an experiment, I inquired about selling my metals. You know, I invest in this stuff a little bit. I inquired about selling them myself and I found that you have to send them to a place where supposedly they will count correctly and count the number of coins you send them and so forth. And they supposedly do it with cameras and stuff. Well, say you get past all of that, they charge you a premium for buying it, a premium for selling it, and you have that lack of security where you need to let it out of your hands and hope that someone will count it correctly. That is a big deal. And I just simply don't like that. If I'm going to sell my metals, I want to hand it to someone over a counter and I want to trade the fiat currency for it or the value of it, whatever I'm exchanging it for and the ease at which you can sell it. It's like the same problem with stocks and other traded assets that creates volatility. And volatility is bad. That's one of the great things about income property. It's not very liquid. In fact, it's pretty illiquid. And liquidity creates volatility, illiquidity creates less volatility. I don't care what you've heard if you've heard opposite, because I heard an idiot on CNBC saying, well, liquidity in a market helps reduce volatility completely untrue. Liquidity creates more volatility. And the other thing here is that the tax advantage is you can trade your income property all your life. It's the most tax favored asset in America. 1031 exchanges. You can defer, defer, defer and never pay gain. And really, if your metals go up in value, is it real dollars or is it nominal dollars? So just getting back to this little exchange here, we're almost finished with it. So Bob says after I send him that article, I post the link for it. He says, dude, seriously, with about five question marks. And I said, yes, I do a lot with precious metals. However, it is a defensive strategy where income property is far more powerful as an offensive strategy. Metals are a one dimensional asset class and income property is a multi dimensional asset class. Another person, Patrick chimes in, says, amen, Jason, preach on. Bob says, you're preaching to the choir. I guess you didn't look at my profile, but real estate is still losing value. The bottom hasn't hit yet. The big real estate investment is apartments. Right now, single family homes are flooded with foreclosures. I'm all in with Karatbars. And he says, go to karatbars tv.com and you'll see why. And then Patrick says, I agree with what Jason says in regards to offensive versus defensive. As far as what you say, I agree too. He's talking to Bob. Not all real estate markets are going to be hit like California when it comes to when the flooding of foreclosures begins. And what he's referring to here, by the way, is how banks are holding back a certain amount of foreclosures and releasing them slowly so as not to really, really impact the market in any big way. And you know, I agree there is some truth to that. But again these are all high land value markets that people are comparing to the low land value or really free land markets that we recommend. Okay. Where you're buying far below cost of construction. So there's your safeguard. Okay, so what I go on to say here is, well wait, first there's an exchange from Bob here. Bob says everything goes in cycles. Look up Mike Maloney. And again we've had on the show Mike Maloney's number two guy and then he says he's Robert Kiyosaki's gold advisor. Well, we had Robert Kiyosaki on the show. We are in the precious metals cycle right now. When it peaks, you turn that gold into cash flow producing real estate. Well folks, that sounds like a good strategy to me. If the metals market wasn't manipulated, wasn't subject to manipulation and if we knew when that manipulation would end, none of us do. And I said, Bob, yes, real estate is still going down. If, and that's a big if. You look at the completely limited, in other words bogus in many ways. Case Shiller index that only profiles 20 of 400 markets, that's just 5%. The 20 markets. Case Shiller does profile include 14, nearly 75% that I wouldn't touch with a 10 foot pole. So again, completely ridiculous. And then Bob says, did you go to karatbarstv.com yet? And I said yes, I agree that gold is better than fiat currency, but that isn't the issue at hand. Gold and silver are money, but money isn't an investment, it's just money. I've been predicting the FDIC collapse and bailout for three years now. So when I say that I was referencing his website that he recommended in his video. Folks, the gold bugs, they are right. They have the absolutely correct premise but they have a limited defensive only solution. That's what I want you to understand. Yes, that was me pounding on the table on purpose because I want to drill that point home. So with that let's go to our guest today, a friend of mine, a very knowledgeable guy and a gold bug, I have to say. Think that's a fair statement. Daniel, what do you think? Are you a gold bug? I think you are a little bit of one. So I thought this was timely to bring that up and compare and contrast the gold versus income property difference. Again, I think the metals are fine. I just think they're a limited defensive strategy. That's all I want to say. I hope everybody gets it and I won't belabor the point anymore. All Right. Let's go to our interview. Join us for Meet the Masters. Call us. If you have any questions on income, property Investing, go to jasonhartman.cominquire on our website. We'll be glad to help you any way we can. And we will be back with the interview here in just less than 60 seconds. Are you aware that the largest transfer of wealth in human history is underway? Are you concerned about protecting your income, savings or home equity? All these bailouts benefit the Wall street crooks and the Washington elites while costing the middle class. Experts are predicting difficult times ahead. The only question is where will you and your family end up with the haves or the have nots? My name is Jason Hartman with Platinum Properties Investor Network. For two decades, I've made a small fortune in the most historically proven wealth creator. Don't be the victim of Wall street fat cats who line their pockets with your pension funds. We can teach you how to protect yourself and your family in these wildly turbulent financial times. Create and protect your nest egg the same way 85% of America's wealthy do. If you're interested in the most innovative financial education around, it's urgent that you register for our next event. Learn more about this outstanding event. Get your free CD at Jason hartman.com that's, that's jasonhartman.com or call 1-840-Jason that's 1-800-405-2766. Your investments could be gone tomorrow. Protect yourself and act today. My pleasure to welcome back to the show Daniel Ameduri and he's with futuremoneytrends.com he is the chief strategist and an expert on inflation. And you've heard him before on the show and I'm sure you'll find this interview to be quite fascinating. Daniel, welcome. How are you?

Good, good. Thanks for having me on the show again.

Well, my pleasure. So 2012 is upon us and everybody's out with all kinds of predictions. Most of them are completely meaningless in my opinion. Some are meaningful. They all have maybe a little bit of truth in them, but that doesn't mean you should believe all the rest of it. And what are your thoughts about this year? A lot is going on. Europe is in major crisis. The US Is in crisis, although many refuse to believe it or act in any way that is in accordance with the crisis we're in. But what do you think is going to happen this year?

Well, you know, with predictions, when it comes to economics, they're always very difficult because of central planners. So not only do we have to look at the macroeconomic data like demographics and different things that are going on in trade and gdp, unemployment, so we can see those trends and try to make a prediction on what's going on with those trends. But then we always have to also predict what the human reaction will be at the central bank. So taking that into account, looking at how the economy is going right now, I would say when it comes to the highest confidence prediction that I can give you is that we will have some type of Quantitative Easing 3 begin. It might not even be called Quantitative Easing 3, but it will definitely be a new bond purchase program specifically of U.S. treasuries by the Federal Reserve. So this will be the continuation of the monetization of debt that we've seen since 2009, early 2009. And I really think this is going to happen for a few reasons. Number one, the economy is absolutely deteriorating. When it comes to the real unemployment number. We have a major debt crisis in the United States. When it comes to people purchasing our Treasuries, we literally had four weeks or five weeks of foreigners having a net sale of US Treasuries. In fact, a few weeks ago was actually a record exit of foreigners. So we're not seeing a huge avalanche of. But certainly foreigners are setting themselves up to slowly reduce their exposure to US Debt. Now we need more people to buy our debt than ever though. We have $15 trillion ARM and we need more debt. We're going to need another $1.2 trillion in deficit spending for fiscal year 2012.

Let me just break in there, Daniel, for a moment. I want to comment on or have you elaborate on some of those remarks. So first of all, you say the $15 trillion arm. You mean adjustable rate mortgage. Right. And so, so what that means is that the rate at which the US borrows to finance its completely ridiculous over the top debt is adjustable rate. Right? Is that what you're talking about?

Absolutely. It is adjustable. Maybe a three month treasurer, two year or ten year, but it is priced by the market. So without the Federal Reserve we would be paying a much higher interest rate.

Right. And so we've got to. The reason just to kind of come full circle on that and explain it, the reason the number of foreign buyers for Treasuries is so important is because that dictates our ability to spend recklessly and to not really let the chicken come home to roost, if you will, to keep spending and keep up the financing scheme that the US has created and foisted upon the world. But also it really dictates interest rates. And the amazing thing, Daniel, and maybe you can comment on this, is that we don't have higher interest rates by now. I am still shocked and awed at that, because by any sensible understanding of economics and international monetary policy, we should have higher interest rates by now. But somehow they have managed to keep the scheme going longer, longer and longer, and kick the can down the road more and more. Your thoughts?

Well, it's because of programs like quantitative easing that's causing an artificial demand. So as long as they have a huge demand for Treasuries, they can keep interest rates low. And that's exactly why the Federal Reserve will have to step in and continue this program, because there just isn't enough demand for Treasuries to keep rates this low. And of course, as you know, if rates go higher, it's going to dramatically increase our interest spending, and of course it will cause us and force us to borrow more money, because we're literally borrowing money to pay the interest on previous debts. We're not making any principal payments on our debt. So as long as the Federal Reserve is able to continue this quantitative easing, which they could forever, technically. However, we don't know how long people around the world will accept this. The only reason people want Treasuries is because they have to purchase commodities and do a lot of different transactions between other sovereign nations in dollars. So it's a strategy to hold dollars, since you're going to need them and use them. But if people continue to see that we're just out of control, which, I mean, to me and you, it's obvious, and to many people listening, it's very obvious. I personally think the $20 trillion mark is going to be a very psychological level for the market and for people who are interested in buying our debt.

Yeah, absolutely. Well, one of the things I'd like to just comment about that is the higher interest rates that we must ultimately, inevitably face in our future. There's just no way around it. And the question is just how long can you kick the can down the road and not see the consequences of this kind of spending and these kind of policies? But the higher interest rates really would lead to a stronger rental housing market. And I know we were just talking about real estate before we started on the show here, and it would lessen the home ownership rate. It would lessen the number of investors entering the market to provide rental housing. And as long as the population either stays flat or keeps increasing, which it is, that just means one thing. It means people have to pay more for housing. And it means a stronger and stronger rental market where landlords benefit. So one of my big strategies is you lock in on this three decade long fixed rate debt now and you let inflation pay it off. You look at these favorable trends where there's going to be a lower homeownership rate. Every 1% reduction in homeownership rates equals about 1 million new renters. And I just love that equation. I know even you, who's more of a precious metals bug than I am, and I agree that precious metals are fine, is seeing that. And it's a pretty good trend, I think, huh?

Well, yeah, I think when talking about paying off those mortgages or paying back or seeing those mortgages go down in inflation terms, you know, having the precious metals, you can use those precious metals at a later time to purchase more real estate or even pay off the real estate that you have. When it comes to what you're saying as far as the rental market, I couldn't agree more with you because that's exactly kind of what I'm seeing in my own personal area where I live in Southern California. There's a lot of foreclosures. A lot of people who are in foreclosure can't buy a home now, so they're renting. So as you see interest rates go up, as you see payments get higher for people, you're right, you'll actually see the rental market become even stronger. The only thing I would add, and I'm sure you probably agree with me, is you just want to be selective about where you're going to buy. You certainly don't want to buy in certain areas that may see economic devastation during an inflationary depression in the US So strategic areas that are booming, specifically the one that's going to come to the first top of my head is Texas. Strategic areas that are booming would be highly advised for rental property, especially right now. Again, you can lock in ridiculously low payments. I know people literally bear a $10,000 mortgage and they're paying around 400 bucks. That is just a ridiculous payment. Especially when you consider that you're locking it in in dollars.

Yeah, you're locking it in on ever depreciating dollars and you're locking it in until 2042. You know, Daniel, how much do you think is going to change by 2042? We're talking about predictions for 2012, but I think by 2042 we will see, maybe we won't even be on the dollar anymore at all. And we will see Pockets in various places around the globe of civil unrest, for sure, maybe widespread civil unrest. We will probably see states secede from the Union in the United States. That's been my prediction for a long time. Some people think I'm nutty saying that, but I think there's going to be a big states rights movement as they see a bigger, more intrusive, more irresponsible federal government than ever before. And Texas will probably be the first to go. My prediction's been it'll become the Hong Kong of the United States. In other words, the freer place where the ambitious people go to make money and produce value in the economy. And just a lot of stuff. It's an amazing time in history.

Yeah. And I agree with you about the currency. There's no way we're going to have the dollar in its current form. And if you go back, I mean, we had the greenback after the Civil War. We had during the revolutionary. We had the continental. Forty years ago, we had a dollar that was backed by gold. So today we have a dollar Federal Reserve note, an instrument of debt. So actually, people may be shocked to hear that, yes, we may have a different currency, but actually it's not that unusual in our history.

Oh, no, it's not at all. And we've had three different central banks in this country. It's not like we've had the Federal Reserve forever, thank God. We've had them too long. But that changes too. So, yeah, you're absolutely right.

Going back into the predictions as far as states proceeding from the Union. Yeah. And I think that's important for people to know that, because even if it didn't happen, we're definitely going to have civil unrest. Because the fact is, when you look at from here to 2042 or just from here to 2020, I mean, you're looking at situations where you've got ore grades in metals being mined have fallen 95% in just the last 75 years. So the industrialization and the idea of having everybody be like the west, where everybody has their cars, their iPads, their iPhones, the west did it and just completely depleted a lot of these huge resources that we haven't discovered anything like the resources we discovered in the last hundred years. The idea of China and the rest of Asia and the Middle east and Africa all becoming westernized, you're really looking at a situation where you could end up literally having resource wars. And we may already be seeing that with Iran and Iraq. So, I mean, if you look at the future, definitely the resources are Scarce. And people will say, oh, there's no peak oil, there's no peak silver, there's no peak gold. Fine. If you want to believe that, that's fine. I'm not going to argue with you. But if you look at the actual data, we have peaked in oil discoveries. If you look at how much silver was produced in Nevada 15 years ago, we were producing 25 million ounces of silver a year. And last year we produced 7 million ounces. So we're finding less of it and we're producing less of it. And it's across the board. For most resources.

There have only been a few ways to really create a lot of wealth throughout history. And the first one, my favorite, is real estate and resources. The other one would be banking. In other words, find a way to get in bed with the government and rip off the public. And you know that banking and Wall street, those kind of go together. So that's number two. And number three is media. Obviously the media business, whether you're a celebrity or you're Rupert Murdoch or Ted Turner, very lucrative. And then the other one is technology. Steve jobs, Bill Gates, etc. Etc. So those are really the four ways to wealth. And I'd say that the most accessible way for everybody listening is real estate and resources. You've got to consider those things. And if you control them largely with other people's money, using leverage to do it, you're really in the banking business in a way, too. So you know you've hard assets. Yeah, right. Real estate and resources are hard assets. Exactly. Physical assets. Couldn't agree more. Well, Daniel, what other predictions do you see for 2012? And even go beyond 2012 if you like, because obviously we're not just talking about one year here, but this is a rather ominous year. Some people think the Mayan calendar will come home to roost on December 21st. Who knows? There's just a lot of. Lot of really insane stuff going on right now. We've got an election. Any thoughts you have about the political environment too, would be great. We'd love to hear it.

Yeah, I think this is the year of Ron Paul. And not necessarily. That doesn't mean he's going to win the nomination, and it doesn't mean he's going to win the presidency. But this year, nobody will be more influential in the 2012 election than Ron Paul, because Ron Paul, when he converts somebody to the liberty cause, the cause of individual rights, I want to say live and let live, but what I mean is, as long as you're not harming other people. You're allowed to make your own choices and have free will and do what you want with your property and keep the fruits of your labor. Once he converts somebody to that idea, that's really a founding father's type principle and ideology. Once they're converted, there's no going back for them.

And that's a wonderful thing.

When Mitt Romney and all these other people think that, okay, at the end of the day, everybody's going to endorse Mitt Romney, we're going to move forward, it honestly doesn't matter. I don't think he would. But even if Ron Paul endorsed Mitt Romney, none of his followers are going to vote for Mitt Romney, because you can't. Once you know about the Federal Reserve, once you understand that we're literally allowing ourselves to be taxed on our income so we can prop up dictators and spend just billions or trillions literally overseas. Once you understand the difference between military spending and defense spending, Ron Paul did a great job in his debate. He talked about defense spending is protecting your borders. Military spending is spending a billion dollars on an embassy in Iraq, which he considered a waste of money. But I just really see this being the year of Ron Paul, and I think he does have a chance to win the Republican nomination. If he did win the Republican nomination, I have no doubt that he would go on to be our president because the avalanche of support for Ron Paul if he won the nomination would be so massive and he draws so many independents and he can even draw in liberal Democrats because of his foreign policy. Because in the end, there's one thing people can agree on that want to be fiscally conservative or just less empire like, and that's we have to change our foreign policy and the way we treat other people.

Well, fair enough. But I will say, Daniel, that as much of a fan as I am of many of Ron Paul's ideologies, I wish he would compromise a bit. I think he's just too radical on the foreign policy stuff. He may be as a purist, he may be correct. But you know, to just up and like, pull out of any support for Israel, to say that you can be so isolationist in today's world. It may be possible, but if it is possible, and I'm not sure it is okay, but if it is, it has to be gradual. It would be just too much of a shock to the system. I mean, the way we've been doing it is wrong. I agree. We're just making too many people angry at us. That there is definitely a blowback issue, but I think just start moving in that direction and start getting some of the people that won't support him over to his side. Because thing is, with Ron Paul, and I hate to keep, like, talking about him on the show because I feel like I talk about him too much, to be honest with you. But the thing with him is that he's the only guy that would really change anything. And I love that because we know a lot needs to change, but I think he's just got to loosen up on some of his. Yeah, I mean, he's not going to be pressed. I don't think there's any chance of it, at least not this time around. But, you know, I just think he's got to come to more of a move a little bit more toward the center on some of that stuff, that's all.

Well, on his foreign policy, I mean, for sure, in my opinion, he's definitely not an isolation because he doesn't want to trade with all people. He wants to trade just like we traded with China and Russia. He wants to trade with Iran. Typically, economies that have good business relationships don't want to go to war with each other because it's kind of like the situation China's in. I mean, you don't want to hurt the U.S. too bad because obviously you have a. You have a pretty good consumer here.

Nobody wants to kill their customer.

Yeah. So, I mean, and you know, as far as it's really rough and obviously, I mean, we would have to talk about this for days to go into the full aspect of the foreign policy, because a lot of it is our foreign policy has created a mess. And so now we've created this mess. And it's kind of like, you know, you put somebody who's in karate in a headlock and they go, okay, now get out of this. It's like, well, the whole point of karate is to get. To prevent you from getting me in a headlock once you've already got a headlock. Maybe, maybe they've already won, maybe they've already choked you out. But, you know, so. So we've created this huge disaster in the Middle east. And now it's like telling Ron Paul, okay, now fix it. And it's kind of hard to fix it because you've already, you've already messed it up so badly. And, you know, when it comes to Israel, I mean, we are sending billions to Israel, but we're selling. We're sending billions. Everybody around Israel.

I know that's the problem. We're doing, we're doing exactly what the Wall street firms do in a sense with our foreign policy. They support the left and the right politically so that they can buy off the politicians and get all the legislation passed in their favor with their lobbyists and so forth. And that's really what we're doing with our foreign policy. I mean, two years ago I was listening to one of my old seminars where I cited a news story about how two years ago we were talking, maybe it was two and a half years ago we were talking, it was in the news, it was major mainstream news where we were talking about selling military equipment to Libya, to Gaddafi and look what happened. I mean, all of these people like bin Laden, Hussein, 20 years earlier, they were our friends and we were propping them up and giving them money. Then they become our enemy. It's just the stupidest thing ever. It's, it's unbelievably ridiculous.

See, unfortunately, most people who do have issues with Ron Paul foreign policy, like you expressed, you have, most people don't even acknowledge that. So they just totally, completely write them off as a kook. And you know, for me it's really about, it all comes down to property rights and the fruits of my labor. Because the fact is I have a two year old and I have a four month old and I am unable to give them everything I earn and buy them the things I want to buy and spend the time, I want to spend time with them because I have a government that takes my income and then redistributes and distributes my wealth all around the world. So in the end, when it comes to our foreign policy, when it comes to our entitlements, whether it's domestic, for me it's a real personal issue because it's like I just don't like people taking my money to spread my money all across the world. And I think if Americans truly understood it, I mean, and it's so funny, Americans love to get caught up in, oh, we want a 999 tax plan or we want a 20% flat tax or we want, you know, we should have this perfect progressive tax. But it's like, wait a minute, you guys are fighting over what's yours, Fighting over what's yours.

That's a great quote.

It's your money, it's your money. You know, it shouldn't be, you don't need a 5% tax cut. You know, we had, we had no income tax all the way till 1913. I mean, you can still have a gas tax. You can still have local taxes and state taxes and sales taxes. There can still be taxes that fund government. But the taxing of the income is absolute tyranny because of course, as you know, you have employees, you get taxed on your income and then everybody you pay has to pay taxes on their income. And of course, everywhere we go and spend our money, we get taxed again, we get taxed on our property and then everybody who receives that money, I mean the A dollar is taxed an incalculable amount of time.

They've done studies about that. And I read one that was talking about how like a loaf of bread that you buy at the grocery store is taxed over 200 times before you buy it. So if you don't think that goes into the price and it's factored into the price we all pay, you're not paying attention because it certainly is. Let me take a brief pause. We'll be back in just a minute.

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But hey, let's get back to predictions. So another round of quantitative easing. Obviously they'll give it another name. What are we going to see inflation rate wise? I mean, you know, I keep waiting for this massive inflation to come. I think that the inflation rate now the real inflation rate is around 9, 10%. Of course that's not the official number, never is. But we've got to see a future with 20, 30, 40 or maybe a lot higher percent inflation annually. There's just no way around it. Ultimately the question is when your thoughts on that?

I don't think we're going to see it this year unless there's something a situation like where there was a war with Iran and oil went to $200 a barrel. Obviously if our transportation expenses you're paying $78 a gallon for gasoline, you're going to see a significant deflationary shock to the system in the sense that people aren't going to be able to consume as much. So there'll be a lot of businesses closing. But then you would also have that severe inflation price inflation on things you need like food. So if we were to have some type of oil shock, we could definitely see it this year. Otherwise I don't see the actual description of having that severe price inflation For a few more years, it's more of the loss of faith of the currency. So inflation is the expansion of the money supply. Hyper inflation is the loss of faith in the currency itself. And I think that's what we're going into. At some point in time, in 2012 or early 2013, I think we're going to see a deflationary shock to the system. I think it's going to be just like 2008. It's going to be a huge sell off in the stock market. People are going to be looking for liquidity. You're probably going to see a pretty strong dollar rally. And then at that point, I think the Federal Reserve will unleash everything they've got. The world will unleash everything they've got to keep the system propped up. And when they do that, I think that's where we cross the line from deflationary shock, which will be very short term, to a hyper inflationary event where literally the big money, the hedge funds, the big investors, foreign governments, are going to be flooding in the hard assets, like real estate, like gold, like silver, China. You're already seeing them make their strategic moves. And not only buying up hard assets, companies of hard assets, they're loaning money to the resource companies. They loan more money to resource nations than the IMF did. So I think that's at that point in time, and I would say that would be around 2014, maybe 2013. But 2014, 2015, you're probably going to see some type of major currency event with the US Dollar again. There's so many wildcards because we don't know exactly what the central bankers are going to do. But just to throw another wild card in 2012 that people should be watching is the euro. I mean, we can literally see Greece default any day. Even a chief analyst at S and P recently said that. He said we will see Greece default. So if you see Greece default, all of a sudden you've thrown in another wild card. You've got a huge dollar rally that's going to happen that will force stocks down. But at the same point in time, I think you could actually see gold and the dollar rally together this time. And if you saw the gold and dollar rally together at some point in time, we would either see the dollar eventually fall, gold continue to go up, because eventually investors would pick their safe haven. And David Morgan puts it best, when you step back and look at it, everything you sell is going to be converted into currency. So there will be a strong demand for dollars in any Crisis.

Yeah, that's an interesting point because that's what we saw happen in 2008, actually as liquidity events were occurring. It was soaking up dollars around the world. And so many people couldn't understand that. And then there's all this money printing and the bailouts and people were saying, why don't we have inflation? And the other side of that they didn't understand is because we had credit tightening. It's money supply plus credit supply that creates inflation or deflation. And it was amazing to me how I'd be watching cnbc, I'd be reading the Wall Street Journal, and all the renowned economists, economist didn't seem to ever address or understand this simple, obvious issue. That was obvious to me, but I guess it wasn't if you went to an Ivy League school, you know, it just kind of blew my mind.

And people almost even look at it as a stool with three legs. I mean, there's inflation, deflation and hyperinflation, which is loss of faith in the currency. So a lot of people think of inflation and then you move to a certain percentage of price inflation and then all of a sudden you reach define it as hyperinflation. I really don't look at it that way. There's inflation, there's deflation, but then there's a whole other thing out there called the loss of faith in the currency, which is hyperinflation. And so once people lose faith in the currency itself, once investors lose faith in the currency itself, that's when you have your big problems. And yes, you're going to see prices go up and it's going to feel like inflation, but it's actually going to be just a complete collapse of your currency. So whether the Federal Reserve prints trillions of dollars or just tries to maintain the situation, the dollar's entire value is based on the perception of the US having a strong economy. Once we have the next massive deflationary shock and our federal debt is nearing $20 trillion, it won't matter what the Federal Reserve does if they print money or contract the money supply. Deflation, inflation, it's not going to matter because. Because at that point in time, people are going to have a loss of faith in America. And when they have a loss of faith in America, that's when you have a big problem for the US dollar. So you could have a deflationary shock. And in my opinion, the next thing that would happen, it wouldn't take too long. I mean, I'm talking weeks or months at the max. At that point in time. Then you see a hyperinflationary event where the dollar itself becomes a weak.

That's a really interesting distinction because there's no academic definition for hyperinflation by the way. And you made the distinction. You call it correctly, you call it price inflation because the academic definition for inflation is simply creation of money, which everybody knows. We've been doing that for quite a long time and especially lately. So we already have inflation. We just don't see price inflation in everything. We do see it in necessity. Things like food and energy, the things that are taken out of the core rate and then that three legged stool where hyperinflation becomes loss of faith in the currency. I really like that. It's not like hyperinflation is when the rate hits over 30% annually, then we have hyperinflation or over 2000 or Zimbabwe ish 2 million percent annually. That's not hyperinflation. Hyperinflation is really something that's a loss of faith in that symbol, that currency. And not to be confused with money, currency and money are very different things. Money is something that has intrinsic value. Money is resources. Currency is a symbol of resources with a fluctuating value. And so that's a very important distinction there. I like that. So here's the thing that I always say, to be a bit of a skeptic, everything you're saying is quite completely accurate about the U.S. government and the Federal Reserve and our situation. However, and this is a giant however, aren't we just better off than everybody else? Granted, we may not manage our money better than every other country, although there aren't many that manage it very well. But we still have the reserve currency. And I admit that that could change at any moment if other countries just want to stop using our dollars, the reserve currency. But we've got this huge military that allows us to throw our weight around. We've got the economic hitman, I had John Perkins on the show. And we throw our weight around a lot of ways that I say is being used today to force the reserve currency upon the rest of the world. Your thoughts about that?

It's true. The United States does have a significant advantage and we have the infrastructure through the businesses. The money flow is to the United States, it's not to Hong Kong yet. China is simply not ready to have a reserve currency. There just isn't the demand or the transactional ability for renminbi to be the reserve currency. In fact, the closest thing that could have been was the euro and nobody, it's not going to happen now. So the US does have some advantages that kick the can down the road. And here's the big wild card. The US has the advantage that we still have the most gold. So the US if it were to back its currency by gold and kind of reset the system, paying off its debt with inflated dollars, having some type of chaos for a few weeks or a few months, and then coming out and having a new dollar backed by gold or backed by natural gas or something, where the US would have the ability to have that, that ultimate strong currency again, where the dollar is as good as gold as it used to be. Yeah, there are ways that the US can get out of this where they literally screw almost everybody and still end up as top dog. Maybe that's what's going to happen. I mean, I'm not saying nobody can know what's about to happen for certain. We know that we're going to go through hard times. We know we need to prepare. We know we need to make certain plans when it comes to how we're going to make our income. We need to invest in our personal selves, invest in our own businesses, be wise about what we spend our money on. But when it comes to what's going to happen with the sovereign nations and what the central banks are going to do, certainly the United States has formed the whole situation of what's going on around the globe, financially and even regionally, on what's going on with different countries and their attitudes towards the US or towards each other. So yeah, the US does have an advantage in the sense that I can't think of a word for it, but I mean, I guess the, I guess they have the advantage because the US is the architect of the current financial system.

So that's why the sort of the doomsday scenarios, I can totally see how they play out on one hand, but on the other hand, I see exactly what you were just saying, that there's a lot of things the US can do even if everybody loses faith in the $$ to just keep it going. That's the wild card. The central planners are the wild card. You can't judge all these things based on pure logic because you just don't know the reaction of the central planners and what it will be. It's unpredictable and that's what makes it difficult.

Yeah. And if you look at like what China, China and Japan just did something to where they would be doing their transactions, direct currency trade. So they're no longer going to be getting the dollars, they're now going to be using their own currencies to do trade. Now, India and China have done this with Iran, so has Russia, so have a few other countries. So the dollar is losing some of its appeal as the reserve currency. The country would literally want to do their transactions in a stable medium of exchange. So in my opinion, I think the US Advantage is for a crisis to happen sooner than later. Because if these countries keep signing these treaties to do currency trades in their own respective currencies, if more countries in the Middle east want to accept different currencies for oil, then you're definitely going to see the dollar lose its reserve currency status in eight to 12 years. So if the dollar, I think the dollar is going to lose its reserve currency status. But if there's any hope for it to keep its reserve currency status, it's to the U.S. s advantage to have a complete currency crisis now. Let the Euro fail, the dollar will be the only thing left standing. And then if they did some type of reset where they converted the dollar to gold, I think that would be the best way out for the US with having a reset. Again, this doesn't make as far as what's going to happen with unemployment and the baby boomers and the retirement generation, but certainly if the US Wants to maintain that role as reserve currency, I think a Crisis happening from 2012 to 2015 is more ideal for the US than having a crisis in 10 years from down the road where China, the renminbi is a much stronger currency and already doing direct transactions with its major trading partners.

Yeah, very good points, very good points. Well, what other predictions do you see for 2012 just in wrapping up here?

Well, I can't end the show without giving you a prediction on gold. I really see gold ending the year somewhere between $2,500 to $3,000. And I have three reasons for that. Number one, we're going to see more quantitative easing. Number two, we're going to continue to see a euro crisis. Unlike the last two years, it's going to be looked more and more as a currency crisis. And number three, Iran, I might gut instincts when I look at what's going on. I really do think we are going to do something about Iran this year. It's an election year. I don't want to say that that's going to play into it, although it would be very beneficial for Obama. As you know, sitting presidents do not lose during wartime. But if we see that oil spike, we're going to see a huge gold spike as well.

Pretty interesting stuff. And then the Question will be, did the gold go up or did the dollar just go down a lot more than anybody's willing to. To admit? So very good point.

That's funny because they both might go up. You might see the dollar rally with a war in Iran and you might see gold rally.

Yeah, no, I know that you said that. That was an interesting point. That's a pretty rare occurrence, isn't it, that you would see both. It is a very rare occurrence. Countercyclical.

Absolutely. If you look at the dollar index chart and gold, they're literally. They trade inverse. There's an inverse trade there. When you look at it, it's just completely the opposite. But we have seen gold in the together in the last two years on occasion, and it definitely could happen. Even though the dollar would obviously be losing significant value against oil, that would really be not because of the currency itself. That would be because we're having an oil crisis. But that instability could cause people to obviously sell stocks and flood into dollars. And of course, people who are really concerned about major instability in the Middle east would be buying physical gold and silver. So you could literally see gold, silver. The dollar index could be at 90, silver could be at 75, and gold could be nearing $3,000 an ounce, and oil would be at $200 a barrel.

Really, just. It's amazing to contemplate that. But nobody thought any of that would happen when gold was $280 and oil was 20 bucks. And it's just sort of hard for people to grasp those ideas. That cup of coffee at Starbucks is going to be $17 someday. Maybe it'll be $92. It's just hard for people to think that way. But historically, it's absolutely happened. It's happened in the U.S. it's happened all over the world many, many times. So it shouldn't be that hard to comprehend. One more thing I gotta ask you about, Daniel. And there's an old saying about how our culture is so distracted with these stupid bread and circuses. You didn't give us any pop culture predictions. I mean, what's gonna happen with the Kardashians or something like that?

Unfortunately, I don't know anything about the Kardashians. I don't even know why they're famous.

Neither do I. They're famous for being famous. Kind of like the Paris Hilton syndrome. It's just absolute stupidity. And I really encourage folks, obviously the listeners to this show, I don't need to tell them, but don't be distracted by this idiocy in pop culture. Pay attention to the real stuff, the things that are underpinning our economy and our liberty. That's what is important. They're trying to distract us with that stuff, but we've got to make sure we have the discipline not to get distracted and to pay attention to what really matters.

Daniel Give out your website futuremoneytrends.com, sign up for our free newsletter. We give economic updates once or twice a week. We also have other investment ideas and we'd love to have you as a member. And I promise you we're one of those newsletters where we may send an email. We make it count. We will not flood your inbox with random emails.

Good stuff. And that's futuremoneytrends.com Daniel thanks so much for joining us again today.

You have a good day, Jason.

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