CW 278: The New Housing Bubble & Quantitative Easing 3 with Peter Schiff

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Welcome to the Creating wealth show. This is your host, Jason Hartman. And this is episode number 278. Wow. 278 episodes. We're almost at breaking the 300 barrier here and so many people like Roger Bannister's four minute mile and Chuck Yeager's sound barrier thought it couldn't be done, but here we are. Hey, I've got a guest host on with me today and that is Brandon Laws coming to us from Portland, Oregon. Brandon, how are you?

I'm doing great, Jason. It's great to be part of your show. Thank you for having me.

Well, thanks. And you've attended a few of our events. You've flown down to Southern California to attend a few of our events before.

I have, yeah. I've been to the Creating wealth show, I think a few years ago. And then I came to the Meet the Masters last year.

Right, right, the Creating wealth seminar. I believe you meant we're on the show now.

Yeah, that's right. That's right.

And so you know, you've been a listener and a follower for a few years now and you know, you just have some interesting comments and folks be careful. I have to warn you, listeners, be careful. If you send me an email, watch out because this thing today that's happening with Brandon might just happen to you. Here's what I mean by that. Brandon said he wrote me an email the other day and he said, hey, Jason, you know, I think that's a great idea. Why don't you talk about some of the good books you're reading on the show? And I said, okay then, Brandon, you are officially deputized to co host that show with me. So here you go. Huh? That's right. Good stuff. Well, hey, you wanted to start. I know that when I did the interview and talked about it on prior episodes a few times, too. But when I did the interview with Steven Kotler, who co authored the book Abundance with Peter Diamantis, you were interested in that and you've been reading the book or I think you finished the book, right?

I actually have not picked up the book yet. It's on my list of books I.

Want to read, but it's on that big list. I've got.

A big list was pretty interesting. I actually listened to the interview with Stephen Koller that you had and just had some few, few questions that I hope you kind of dive into.

Sure, sure. Well, ask away. Yeah.

So in the book they mentioned that the world is getting better. To me, it seems like there's a lot of negativity out there. So what do they mean by the world's going to be better long term and that there's a lot of abundance in terms of the. Maybe the goods that we'll have?

Well, I think that this whole thing is the. The question of will technology save us? Can technology save us?

If you look at the revolutions that have happened in technology throughout history, it certainly has saved civilizations before. And it could save us too. Of course, from a governmental perspective, we're doing almost everything wrong, not just in the US but globally. I mean, it's like an infectious virus. The mismanagement has just spread all over the globe. And what I'm talking about there is pandering to buy votes the way politicians do. This is like the tyranny of the majority, which has been talked and written about over the years. And where you get, you've got 47% of people in the US right now that are somehow on the dole, as it were, that are getting benefits from government. And as soon as that tips to 50% or God forbid, 51 or more percent, you're going down to pure socialism.

Because the politicians will always pander to buy votes. And as they do, that just means spending, give away more free goodies. But all of that would cause inflation, dollar collapse. And we're going to talk about that in a minute when we talk about Peter Schiff here and Dan Ammerman. But maybe, maybe, just maybe, and it is possible, I think some technologies will come along that make everything so cheap and so accessible and advance civilization so much that it would play against some of these very negative factors that are going on out there. One that you mentioned to me before and you talk about is education. And I know you have a question about that. Maybe that's a good one because I haven't really talked about it much on the prior Episodes. But, you know, what are your thoughts on that from the Abundance book?

So my thoughts with that is how can technology actually produce top tier education that everybody can access? So not just in private and public schools, but how will technology drive top tier education for everybody?

Yeah, well, technology is a distribution platform. When you look at the Internet, it's the most incredible distribution platform ever invented. Before that, you know, it was shipping and railroads and trucks and so forth and television and radio and book publishing, all of that kind of stuff. But, but if you look at the Internet, it is the, it is the first way really to distribute things for free. I mean, any idea can be posted online. You know, Brandon, you know what? I really realized this. It just amazed me. I mean, it was about midnight, I think 12 years ago. And I remember the first book that I published was called Become the Brand of Choice. And it's a book about marketing and relationship marketing that many people, you know, had asked me about over the years in my traditional real estate career. And I went on Amazon.com and it took about seven minutes, as I recall, to post that book online. And I thought, what an amazing thing here. I have just posted my book and exposed it to. I think at that time Amazon had like 30 million customers. Okay, they have much more than that now. But back then it was amazing to me, it was about midnight and I thought I just exposed this to the whole planet. Anyone can get the ideas I have in that book for just a few bucks and they can do it almost instantly. It's an amazing, amazing thing. And in the book Abundance, the authors talk about the Khan Academy. And the Khan Academy is just a phenomenal thing that anybody listening may want to take advantage of right now. It was a person who wanted to teach, I believe his nephew some school lessons and decided to make a video. And in doing that, and that's, by the way, that's Khan Academy.org for the listeners who are interested in checking it out. And basically posted a video. And, you know, it was so well received that he started making all sorts of videos. And there have been so far, if you look at their website, 189,425,528 lessons have been delivered. And these are short videos that are maybe 7 minutes, 10 minutes long. And anybody in the world can go and they can learn about computer science, they can learn about Obamacare, they can learn about geometry, they can learn differential equations, they can learn linear algebra, they can learn trigonometry, they can learn. I mean, it's just this is Amazing. They can learn finance, value valuation, investing, venture capital. They can learn about the credit crisis. They can learn about history, American civics, art history. They can, you know, study for their sat, their gmat. It is, Brandon, it's amazing.

The Internet is amazing. It's allowed everybody a platform to, to get on there. Think about what you're doing right now. You're able to produce educational content via podcast and deliver it to the entire world. It is pretty amazing.

And we have listeners all over the world. And you know, something like the Khan Academy, I mean, really begs the question, Brandon, is college obsolete? Is college worth it? Maybe, maybe it's just not worth it anymore as long as someone is a self starter and a curious person and interested in learning. You can learn a lot of this stuff just online and it's free. It's amazing. I'll tell you something we're doing in a couple of my companies, we're creating online courses right now. And you may know about this already, what we're doing, I'm not sure if you do, but we're taking my Creating wealth home study course, for example. Right now, this is in production. And that has always been the live course that you've attended. You flew down to Southern California to attend that. And then it was a home study course where it's either on CD or audio download from the Internet, along with PDF files or printed workbooks and a transcript book. And now what we're doing is we're taking the next step in the evolution of that course. And we're creating an online course using an LMS system, otherwise known as a learning management system system. And these are the same things that a lot of colleges and universities are using nowadays to teach people. And the difference is this, it's far more interactive. People will watch video, listen to audio, they'll watch PowerPoint presentations on their computer screen. But the difference is every so often, maybe every 20 minutes or half hour in the course, they're going to have a little quiz and the computer grades the quiz and they have to pass the quiz before moving on to the next section. So it's interactive. It's like having a virtual professor. And some of the courses that we offer, we're actually taking this into the financial services industry, the one I criticize so much. And we're going to offer a continuing education course for certified financial planners that are interested in telling their clients about income, property and real estate investments. And the great thing is this stuff is inexpensive. It's totally accessible to everybody, anyone, anywhere on the planet with An Internet connection. And instead of that old version home study course type thing, it's really engaged, interactive, spaced repetition, all kinds of cool features. And even in the case of the financial planners, offers them a certification that they can use to renew their various licenses and comply with regulatory requirements that they've taken an online course. So really just incredible opportunities in education. Your thoughts?

I think that's amazing. Anytime you can make it interactive for people, instead of taking a physical course where you can get online, make it interactive. I think that's great for people. I think more people will be able to access the information you have. Jason?

Yeah, and that's what it's all about. Everybody can access this stuff all around the planet. So a real revolution is going on in education. Another thing they talk about in the book Abundance is they talk about the rising billion. Okay, so we've got about 7 billion people on Earth. There are economic divides, political divides, but there's also the digital divide. And the digital divide is closing. For example, one of the best things the UN could probably do is create a global WI fi network. If you ask me, we've all probably heard about this hundred dollar laptop program and computers are getting out around the world so that people can access things. But Internet connections around the world are expanding so dramatically. And think of what happens when another, when the next billion people come online. All of the, the ideas they have, the money they will soon have to spend, even if they're impoverished people, largely just small amounts of money and micro finance, access to things like Kiva, by the way, you know, I don't think I've ever talked about Kiva on the program, but I'm a Kiva lender. K I V A look that up. Kiva is a phenomenal thing. Micro finance, micro lending, where you can go on and loan someone 25 bucks or 75 bucks and they can expand their business in a foreign country. And you know, so that's a phenomenal thing, really. This rising billion is going to change a lot. It's a whole new huge market. Granted, they're not making $100,000 a year, but there are so many of them by their sheer numbers of people, that will be a huge stimulation to the global economy. There are some really phenomenal things coming up. Now, all this said, the one thing that I don't think changes much in terms of my investment strategy is simple basic materials like housing. Housing again is a low, low tech item. It's made of sticks and bricks, packaged commodities. And as these rising billion become more prosperous and they will Undoubtedly. And as others around the world become more and more prosperous, they will actually use more and more of these materials, driving the prices of them up. There's not any big disruptive technologies in material science that I can see on the horizon. There are in ideas, education, in bits, computer bits. Which, by the way, leads us to our next subject. You wanted to talk about the book Free by Chris Anderson. Yeah, he talks about atoms and bits in that book, so maybe we'll jump to that one now. Okay.

Okay.

Yeah, that's great.

So in the book Free, which, by the way, I've read about four times because I loved it that much.

Isn't it good?

Chris Anderson mentions that some things are just simply too cheap to meter. So what sort of goods is he actually talking about and what actually causes it to be too cheap to meter?

Well, he talks about in that book, and I just. I loved that book Free. I want to get Chris Anderson on the show. He was really. It's just a brilliant book. And one of the things he talks about is he talks about a quote, and I think it was back in maybe the 1950s from, you know, one of the big execs in the electric industry, you know, in the electric utilities industry. And they were quoted as saying, electricity will be so plentiful that it will be too cheap to meter. In other words, it wouldn't even be worth keeping track of how much electricity someone uses because it's just too cheap to meter. And that didn't exactly happen. However, there are other things that are too cheap to meter, and I think we just really talked about some of them in terms of education and ideas that spread around the Internet globally. You know, the Khan Academy is free. What we're doing right now with this podcast, Brandon, is free. And we're sharing ideas with other people all around the world. Last time I checked, which, frankly, was a long time ago, I should check this again, we had Listeners in 26 countries from Ukraine to Andorra to China to Kuala Lumpur, all over the world, we have listeners. And this education, it's too cheap to meter. It's just free. We're glad to do it because there's a business model behind it. I want to attract clients to invest in real estate. But even if they don't invest with us, I want to spread the ideas around because I think it's a real. A real service to people. And I think people will remember that 10, 20 years from now, even if they don't invest with my company, they'll notice how it changed their life years in the future. And so Chris Anderson talks about a lot about how companies should just give things away and have a business model behind it. So the things that are too cheap to meter are bits and bits, bits and bytes on a computer. You know, data that's too cheap to meter in so many cases. And so you can give that away. Now atoms are different because atoms are matter. Those are, those are hard things. Right. A book is made of atoms. It's got paper and it's got ink and it has shipping costs associated with it. But now with the Internet, you can distribute ebooks via Kindle or other E reader devices or just PDF files and you can do that basically for free. A lot has changed, hasn't it, with the whole open source software revolution and so forth. And I think that leads to your next question about Microsoft.

Sure has, yeah. So with the free model that Chris Anderson talks about and actually at the end of the book he gives I think the 50 business models you can create on free, which is pretty interesting. So check that out. But how do companies like Microsoft compete with the free model? Like.

Well, I can't really remember because I read Free several months ago and I can't really remember what he said about Microsoft in the book. However, my sense of it is that Microsoft, it's an interesting company. Microsoft is vastly overreaching first of all into way too many things. I think Microsoft, obviously, they're not going to take over the world anymore. You know, at one time we all thought they would, but they're up to some stiff, stiff competition. If you look at Google and compare Google to Microsoft, Google is the largest company on the planet based on the concept of free. Think about all of the Google products any listeners probably using now. You are paying for Google in another way. You're paying with your data. That's a whole other issue. By the way, I want to recommend I did a show on my holistic survival show with the author of a book called Search and Destroy and that investigated a lot of the evils of Google. Interesting that their mission statement is do no evil. Google does a lot of bad things, at least according to this author. And that's definitely worth checking out. But if you think about all of the free products that we use that are Google, you know, most likely you don't pay for any of them. I pay for a few Google products, but not much. And I think Microsoft has some real stiff competition. I think that company needs to do some soul searching and I know they have, you know, this is not new. And really figure out who they are and what they're going to be because the free model is offering them some big competition. The Microsoft Office products I have on my Mac, Microsoft Word, PowerPoint, etc. I use them, but less and less. More and more I'm using Google Docs, which is the Google suite, where they have a spreadsheet instead of Excel, where they have a word processor instead of Microsoft Word, and they have all kinds of other great products and they're free. I think Microsoft has some tough things to think about.

What's funny about Microsoft is I find myself using Microsoft Office as well. But it's only because the compatibility with sending files with other people and because I work in the corporate atmosphere, that's, that's just the norm. I would love to move to Google Docs. And on the personal side, I do use Google Docs. But it's just funny how corporate is not going away from the Microsoft products as of right now.

Yeah, well, you know, old habits die hard, but ultimately it's going in that direction. So I think you'll see more and more move away from Microsoft every time your Excel crashes. And Google Docs, they never crash. You know, it works great, so a lot less frustrating. But you know, you ask another interesting question about who wins with this model. Elaborate on that if you would.

Yeah, so with the free model, I wonder how many profits are you're able to get the profits out as a business? So who actually wins in this scenario? Do the businesses win in the free model or do consumers win? It seems like with the consumers, you have access to cheap data, cheap information. But businesses, where are the profits at?

Because businesses, if they set it up right and read the book free, they have a back end service or deeper product that they're selling. And that's where they monetize free. But you know what I found, for example, with podcasting, okay, all free. It's been a great source of business for my different companies. And one of the other things it actually does is it makes our job a lot easier because there was in the old days, Brandon, there was a day where you had like the slick, cheesy salesperson kind of, I think everybody thinks of a car salesperson or in real estate, there's a famous movie about it called Glengarry Glen Ross where they're selling, I think timeshares, I can't remember, but these like cheesy old salespeople and the old philosophy there was pull the wool over the customer's eyes, deceive the customer, don't tell the customer Everything. And of course, legally, that's a big problem. But let's not even talk about the law. Let's just talk about business and the way business works. My favorite customer, Brandon, is a highly educated, highly informed customer. And I'll tell you why. Because they're much easier to work with. They get it. You know, we don't have to educate them. They've listened to all of our free content. They've listened to 278 episodes of the Creating wealth show or, you know, my other shows, and they're just a really easy customer to work with. The first time I started noticing this is when people would call up and they'd say, you know, I'm interested in investing. What about this area in Texas, for example? They would say, And I'd start to explain it to them why this city is good and what the employment. And they go, jason, stop. I've already heard all that on the podcast. You don't need to explain it to me again. And I thought, wow, isn't that great? You know, I love it. It's a time saver for both of us because the consumer can benefit, listen at their leisure at the time that's best for them, review things multiple times if they wish. And it's a time saver for me, too, because I can just help them engage and get the property they want right away. So I think it's a true win win. You know, a long time ago, I read a book by Dennis Whateley called the Double Win. And the win win mentality is really where it's at, folks. If everybody doesn't win, you just can't do a deal. Because ultimately, you know, I remember going to a seminar a long time ago, and it was a real estate seminar, and the speaker said, the best deals never close. And I thought, hmm, that's an interesting statement. What does he mean, the best deals never close? And what he meant is that if you. If you're a buyer and you get too good a deal, the seller will usually figure that out and find a way to weasel out of it. And if you're a. If you're a seller and you pull the wool over the buyer's eyes and make them pay too much, they will usually figure that out and try and unwind that deal. So it's got to be win win. Stephen Covey says win win or no deal. The late Stephen Covey. The late, great Stephen Covey. But, you know, I'd agree with that. So I think both win. They really do.

So, Jason, will we ever get To a point in our lives where almost everything's free. With technology advances, I could see where the trend's going that way. But will we ever get to the point where almost everything in our lives.

No, I don't think so. I don't think we'd be even close because there are still hard cost. Remember, it's all about the difference between bits and bytes and atoms. And atoms are physical products. And physical products have to be made with somebody's hands and with machines that somebody builds and maintains. And so that's the difference. As real estate investors, as income property investors, we want to control resources that are made of atoms and we want to utilize resources that are cheap or free, made of bits and bytes. That's information or data. And that's what you're doing right now, listening to this show. So control the atoms because atoms are things that have universal needs. They're the sticks and bricks, the copper wire, the lumber, the labor, the petroleum products, all that stuff in what we call packaged commodities investing, where you're buying houses and those materials have universal need. The atoms. You know, I think that's what comes out of this. Brandon, Control the atoms, use the bits. Okay, I would agree with that. Yeah. So good, Good stuff. We'll be back in just a minute.

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Why don't we talk about this recent video from Peter Schiff? You want to talk about that?

Yeah, let's do it. So basically, Peter Schiff's talking about QE3 and what it means. I think he's definitely selling gold on the back end. But I think we're going to play the video and we'll talk a little bit about that.

Let's do that. Now, this is a pretty long video. We're going to stop it a few times, but I tell you, I just couldn't have said it better myself. So I want you to hear what Peter says. And as all of you regular listeners know, I'm sort of a critic and a fan of Peter Schiff at the same time. You know, I think Peter Schiff has some. He has a great premise. He's the master of the sound bite. I think his conclusion is largely wrong. I was one of his clients. I've had him on the show. I think he was on show number 69, if I'm not mistaken. And you know, I would love to see Peter Schiff as a senator. Okay. I'm not that much of a fan of his investment stuff, but you know, I think as an economist he's great. Okay, so, you know, that's kind of where I come down on him. But let's listen to this video and we'll pause it a few times for some comments.

Peter Schiff it is Thursday, September 13, 2012 and as far as I'm concerned for the Federal Reserve, this is a date that will indeed live in infamy. Because this is the day that the Federal Reserve went all in on qe. Now, rather than reviving the economy, the Fed has just sealed its fate. In fact, I think it has driven the final nail in the coffin of the US dollar and with it the entire US economy. What Ben Bernanke has committed to do is supply an indefinite quantity of QE of money printing. Ben Bernanke said that he will buy $40 billion worth of mortgage backed securities monthly for an indefinite time period. He also promised to extend Operation Twist to the end of the year. In fact, as far as I'm concerned, this new policy may as well be called Operation Screw. Because if you own dollars, you're screwed. If you own bonds, you're screwed. If you have a savings account, you're screwed. If you're an American, you're working for wages or salaries, you're collecting a paycheck in dollars, you're screwed. If you're hoping to retire on dollars, you're screwed. In fact, Ben Bernanke was asked a question during his press conference and I think the press conference, which I'll talk about a little bit later, was maybe more interesting than the statement itself. But in answering a question, did he think it's fair to the savers that you're getting no interest? Because the Fed also promised to extend the 0% interest rates now into 2015. And he said, well, hey, it's too bad for savers, but look, it's good for the stock market. So in other words, if you've got your money in a bank, pull it out and buy stocks. Otherwise you're going to be twisting in the wind as a result of Operation Screw.

In addition to that one comment here, I think that what is happening here, and it's kind of a big conspiracy in a way, is that this is very intentional. And Peter Schiff alludes to this here when he talks about how it's Operations screw. Because what they're doing is they've made it impossible to save money. In other words, if you want to save money, you're gonna just get creamed by inflation and taxes. So saving money doesn't work. They've completely disincentivized good behavior. So what we need to do essentially as income property investors is we save money in a sense, but we save it in the form of goods. See, what Peter Schiff is saying here is buy gold. That's the way you should preserve your wealth. I'm saying buy things that have universal need. Buy housing and buy all of those packaged commodities that come with housing. That is really the point, because they've totally disincentivized savings. You can't earn anything on it. And this is particularly bad for elderly people who have saved money all their lives and are just getting destroyed. The Fed is trying to encourage, and so is the government, speculative bad behavior. They want you to put it into stocks. They've reinflated the stock bubble, which is an illusion for sure. And now, frankly, I think they're trying to do the housing bubble again. We can really profit from that on the way up. Whether there is or isn't a housing bubble, if they force housing to appreciate, that'll create more employment and solve a lot of the problems there. And heck, let's ride that bubble up with these bad policymakers. Brandon, any comment, or can I go on?

Yeah, actually, what they're trying to do is increase the asset prices, but isn't that simply an illusion for people, as if they have wealth that they didn't have before? So what, are they gonna go out and spend a bunch of money? They're gonna use their mortgage as a piggy bank, or, sorry, their equity as their piggy bank and go out and spend more money? It just seems crazy to me.

It is a total illusion. There's no question about it. However it works, it'll just allow them to kick the can down the road a bit. And one of the things we've got to talk about here is who would ever buy these bonds from the Fed? So we'll get to that, but let's just go on with the video. Okay?

The Fed promised to keep interest rates low even after the economic recovery gained traction. In other words, it's tantamount to the Fed admitting that he realizes that the only reason the economy is going to accelerate or recover is because of the cheap money, and that the Fed knows that it can't take the cheap money away because it will simultaneously take the Recovery away. So it is an open ended commitment to keep interest rates at zero. However, it's not going to be able to keep that commitment. The Fed is saying that it's going to keep rates low until we get the job growth that we need. The fact of the matter is, the reason that we're not getting job growth now is because rates are too low. It's because of all the money that the Fed has already printed that the economy is so screwed up that it can't create jobs. And printing even more money is not going to solve the problem. Now, of course, the catalyst for this announcement was the horrific job numbers that we got last week where not only did we create fewer than 100,000 jobs, but almost four times as many people left the labor force, meaning they threw in the towel. They were so discouraged that they quit looking for work and they're no longer even in the labor force as people who found jobs. In fact, the labor force participation rate is the lowest it's been since 1981. And if you just focus on males, it's the lowest it's been since 1948. So the Fed feels its back is in a corner and it has to act. In fact, in that press conference that Ben Bernanke gave in response to a question, he basically said that the Fed has one tool and that's purchasing financial assets to drive up asset prices. And the Fed is going to use that tool. Even if it doesn't work, the Fed's going to use it. In other words, the Fed has a hammer and it's going to bang everything it sees. You know, even if it's not appropriate. I mean, maybe a hammer makes sense when you're, when you're trying to put a nail into a board. It doesn't make sense if you're walking through a china shop. But in other words, he's got this hammer and he's going to swing it at everything in sight and he thinks it's going to create jobs. The only thing that's going to create is inflation. And of course, the Fed denied that he was going to create inflation, of course, even as the price of gold was surging over $30 an ounce in reaction to what the Fed said. Silver up about a buck forty. Oil.

Well.

Peter's talking about how the Fed has this one tool to buy bonds. But does the Fed actually have any other tools they could actually use to try to stimulate the economy? Jason?

Yeah, they have other tools, but what they're basically doing, I mean, this is the big tool, okay? The big Tool is create fake money out of thin air. And he talks about gold going up $30. Oh, whippedy doo. Okay, this is the guy that said gold would be $5,000 by the end of Obama's first term. You know, I gotta find a video clip of that somewhere. I really should search for it. I remember seeing it with my own eyes. I think he was on cnbc. And it's always this speculative. Oh, gold is on a run. It's gonna be on a tear. You know, this reason, that reason. They've got all their reasons, and they're not wrong about the reasons. I mean, you know, I've said that so many times, but. But the thing they never tell you is that there is so much more in control of the gold market than logic. There are so many forces, like central banks that are so much bigger than individual investors wanting to gobble up gold. It's just a worldwide cartel. Just look at the GATA website, the Gold Antitrust Action Committee. Who says the price of gold is manipulated? Well, of course it's manipulated like crazy. And that means don't invest in it. I think it's a lame investment. It's a way to save money. That's all it is. Okay, it's better than dollars, but it's not a real solution. It's not offensive. It's only defensive. Let's see. Hey, Peter, you better hurry if we're going to see gold at $5,000 an ounce. You only got a few months here of Obama left. And the question is, even if that happens, even if gold, say over the next three months, gold goes to $5,000 an ounce. The question is, Brandon, did the gold go up or did the dollar go down? You talk to any gold bug, I guarantee you they will say the dollar went down. So you've only treaded water. You didn't gain anything. You preserved your wealth in a commodity. Great. I think that's okay. But why not preserve it in commodities that have true universal need, like housing, where you can get the bank to pay for 80 to 90% of the asset for you and loan the money to you until 2042 at artificially low interest rates, and then that loan is repaid by the tenant, and then you get a bunch of tax write off to boot? I mean, gold is a mediocre solution at best. Your thoughts?

I absolutely agree with you. But I wonder, are they speaking to the people who just are sitting on a bunch of cash in their bank account? Because buying gold probably is better than just sitting on a bunch of cash I agree.

Yes, I definitely agree. I think cash is the most dangerous asset class in inflationary times. Cash is just being devalued constantly. You know, it's amazing that someone can pickpocket you and pull money out of your wallet without physically doing it. See actually that ties in with our discussion about Chris Anderson. The dollar is just bits and bytes, really. It's not atoms. In other words, it has no intrinsic value. Okay, Gold does. Copper wire in your houses, lumber in your houses, all the petroleum products a house is made of, the concrete, the, all those materials, the glass, the steel, those are atoms, okay? Those can't be manipulated so easily like gold can't as easily as the dollar. So yeah, with fiat currencies, you can be pickpocketed through bits and bytes without anyone having to physically take that money from you. Amazing, huh? Let's go on.

Okay, Brandon, pull up a dollar a barrel. The dollar index hitting new lows for the move. You got a new 52 week high in currencies. I think like the Canadian dollar, the New Zealand dollar, even the euro is now above 129 and I think headed much higher against the dollar. That's how weak the dollar is. It's even weaker than the euro. In fact, Ben Bernanke started off his press conference by saying that the Fed's printing money and buying bonds was not the same thing as the government spending money. Now what is the difference according to Ben Bernanke, between spending money and buying bonds? Well, Ben Bernanke said that since the Fed is not buying goods that it doesn't count as spending. What do you mean? If you say spend money on bonds, you're still spending just because you're not buying an actual product, you're buying a financial asset, you're still spending money, you're spending money to buy a financial asset. Now the Fed also went on to say that, well, it's not really spending because whatever financial assets the Fed buys, it's going to turn around and sell back into the market when it unwinds the policy. Yeah, right. How is the Fed going to sell all these bonds? The Fed is the only buyer. Without the Fed, no one in their right mind is going to buy. Who's going to buy when the Fed wants to sell? Who's going to step in front of that freight train? Who's going to want to bid for mortgages when the Fed is trying to unload the mortgages that it owns? Nobody. In other words, the Fed has basically checked into the roach motel of monetary policy. Right. It can check in, but it can't check out. It can expand its balance sheet, but it can never shrink it. So the Fed is spending money, it is spending it on financial assets. And in fact, the goal of the Fed is to make those assets rise in price. And this, you know, if this is the craziest part about it, and it's almost like it's a fantasy or I'm in a dream because it's impossible for me to actually believe that this is actually happening, that I'm actually hearing what I'm hearing or seeing what I'm seeing. But this is the plan that Ben Bernanke has. Ben Bernanke's plan to revive the US economy and create jobs is to inflate another housing bubble. That's it. That's what the Fed's got. That's what it came up with. As if the last housing bubble worked out so well for the economy that the Fed wants an encore. Now, I'm not making this up. You know, you can go check the Internet, you know, YouTube it yourself, Google it. But basically, this is what Ben Bernanke said he is buying. The Fed is going to buy $40 billion worth of mortgage backed securities every month. The goal of the Fed is to bring down interest rates. Ben Bernanke specifically said the reason he wants to bring down mortgage interest rates is because he wants home prices to go up. Now why does Ben Bernanke want home prices to go up? He specifically mentioned two reasons. One, the wealth effect. Ben Bernanke said if we can get home prices to go up, homeowners will feel wealthier and they'll go out and spend more money.

That, Brandon, is exactly the bubble I want to ride up again. I've done it a few times in my life. And as philosophically disagreeable as I am with that, you know what, that's the thing. Like I say all the time, I used to be an optimist, now I'm just an opportunist. And we're not going to change any of this.

We've got to respond to it in a way that enriches us and in a way that helps create value. So if they create another housing bubble, which they may be doing, you know, you showed me an article about how a 5% increase in housing prices would basically lift, give a whole bunch of people equity. And guess what happens when people have equity? That ATM machine called your house becomes a way to stimulate consumer spending, doesn't it?

I feel like we've seen all this before, Jason. It's like Unfolding right before our eyes all over again.

You know, Brandon, as Yogi Berra, who has those great quotes, as he once said, he said it's like deja vu all over again. I mean, it's just, it's a repeat. This is a rerun. You know, it's just, I mean, it's amazing. They just keep. They've got nothing better to do than just kick the can down the road. Let's make another bubble. And all that does is move money around. It creates mal investment and boom, boom, boom, here we go. But folks, if you're listening and you're not into riding that bubble up that they're going to create, you are going to miss out and you are going to be dramatically hurt because any other asset you have besides debt and commodities will be destroyed in value. Debt and commodities are the only safe places commodities keep pace with the inflation. So, you know, when you invest in the real estate, you own a bunch of commodities, a set of packaged commodities. If you invest in gold, yes, you have a commodity there, too. And by the way, Schiff is in the gold business, we should say that. But, but that debt, see, you don't get the debt against the gold, you get it against the real estate. That debt goes down in value again. It's the only safe place in inflation. Commodities and debt. That's it. Denominate all your, your assets in things, or as Chris Anderson would say in the free book Adams, and denominate all your liabilities in debt. That's the strategy. You ready to go back to the video?

Let's do it.

So he wants the wealth effect. He wants to create the illusion of wealth so that people will go out and buy stuff that they really can't afford, not because they earn the money, but because their house is appraising at a higher value. And of course, they can refinance, they can pull out equity, they can cash out money and go spend it. That's one reason. Number two, Ben Bernanke said if we can get home prices to go up, people will realize that they can make money buying houses.

Houses.

And if home prices rise, more people will want to buy houses because they can make money. They can get rich buying houses. And so that will encourage more home buying. And as a result, we'll have more home building. If more people want to buy houses because they're going up in price, then we'll build more houses and we can create an entire economy of the housing market by the housing market, for the housing market. In fact, what the Federal Reserve wants to create is a super housing bubble. I mean, I kid you not, this is their plan. This is all they can come up with. And think about it. In the last housing bubble, it was the government that was guaranteeing the mortgages, but you still had the private sector owning a lot of the mortgages, although with government guarantees. See, now they're going one up. Not only is the government guaranteeing the mortgages, but the government is owning the mortgages. Basically, our new monetary policy, our new policy for economic revival is for the Federal Reserve to print money and loan it to Americans at ultra low rates so they can go out and buy houses and in the process push up housing prices so we can all go on a consumption binge and spend all sorts of borrowed money on imported products and somehow all of this is going to create a employment and it's not going to end in complete disaster. Just like the last time the Fed tried to create a housing bubble to stimulate the economy.

You know what I mean? You just got to say he nailed it. I mean, he nailed it. But here's the thing, Brandon. You know who's going to get hurt in the next housing bubble? It's the same people that got hurt in the last one. It's the speculators, the people that aren't following my ten commandments. And what is one of the commandments? The most important one relating to this exact concept is this one. I think it's number five, if I'm not mistaken. Thou shalt not gamble. No speculation. In other words, the property must make sense the day you buy it or you don't buy it. You know who's going to get hurt in the next housing bubble? People buying properties expecting something great to happen. And that great thing is called appreciation. Appreciation to us, to, to us prudent investors who listen to the show appreciation to us. You know what that comes from? It is the icing on the cake. It's not the cake. The cake is cash flow. The substance of the investment, the thing that makes it make sense the day you buy it is cash flow. It's income. The name of it is income Property. It's not called speculative appreciation property. It's called income property. And as the name would imply, it better produce income or you shouldn't buy it. So any thoughts about that one, Brandon?

You said it perfectly. The deal has to make sense the day you buy it. But your number one goal should be the cash flow. It shouldn't be the speculation of the property. Everybody could ride this wave up on speculation, but if you don't buy the deal based on cash flow, then I think you're setting yourself up for failure.

Of course you are. And the reason the speculation concept doesn't work is because it's just like gambling in Las Vegas. You never know when the streak is going to end. Appreciation is very unpredictable. Cash flow, however, is pretty darn reliable. It really is. And, and remember, not only do property prices inflate, but rental prices inflate. Okay? So you can ride the inflation wave that way and you can also have your debt destroyed by that same inflation. So, okay, let's go back to the video now.

Talk about insanity, right? Talking about doing the same thing over again and expecting a different result. How can Ben Bernanke, with the memories of the last housing bubble and debacle and financial crisis fresh in his mind, how can he think that the solution to the problem is to try to recreate the very conditions that created the problem? How is another housing bubble going to solve anything? Now, one thing maybe Ben Bernanke hasn't figured out yet, it ain't going to work. No matter how much he tries, no matter how much air he blows into that housing market, he is not going to reflate that bubble. There are simply too many holes in it and there is no precedent for reflating a busted bubble. More likely, all that cheap money is going to go someplace else. Where is it going to go? Well, if you look at what happened today, 30 year bond prices went down and interest rates went up. In other words, the bond market stuffed it right back in the Fed's face. Because I think the bond traders are waking up. The bond vigilantes maybe are coming out of their coma and they're realizing that the worst thing for the bond market is for the Fed to print money and buy bonds. Because when they print money, they drive down the value of the currency that the bonds are denominated in. What went up? Gold, up over $30. Silver. As I said, the dollar tanked. So where is all this money going to go? Commodities. It's going to go to gold. It's going to go to silver. It's going to go into oil. It's going to go into agriculture. It is not going to make the economy better, it's going to make the economy worse. It's not going to create jobs, but what it is going to create is a higher cost of living for everybody, whether you have a job or whether you're unemployed. And believe me, if people are spending more money on food and more money on energy, they're not going to have any extra money left over for discretionary spending? None of this is going to work. But the amazing thing is people are looking at Ben Bernanke and analyzing what the guy has to say, taking him seriously. Can't anybody think. Doesn't anybody remember what happened just a few years ago? I mean, how can he not be laughed out of town? I mean, during that press conference? I mean, how come people aren't just shocked? How come they're not just saying? Say what? Are you kidding me? How can this be your plan? How can re inflating a housing bubble be all that you got? I mean, how long did it take you to come up with this idea? How many brains at the Federal Reserve? Apparently there was only one guy that dissented. It was almost unanimous. I mean, can you imagine everybody at the Fed sitting around this big table? How do we revive the economy? What's the plan? And somebody comes up with, let's create a housing bubble so we can create a bunch of wealth and people will go out and spend it. And we can get people to speculate on real estate prices because they're going up. And all this is going to create jobs in the housing sector. It'll cause more home building or home modeling. We'll be able to consume more. Somebody came up with that. And then someone else said, great idea. I mean, didn't they see that movie? Don't they know how it ends? Apparently not. You know, I'm going to tell you how that movie is going to end. It's going to end in a currency crisis. It's going to end in a sovereign debt crisis. It's going to end in tears and misery. And the amazing thing is this has happened over and over again throughout history, yet we continue to repeat the same mistakes. We never learn from the past. And I think the problem is it's the politicians who are making these decisions. Despite the fact that the Fed claims to be independent, it is not. This is all about politics. It's not about economics. It's not about doing what's good for the economy. The only jobs they're concerned about is the jobs of the politicians who are afraid that if the Fed tells the truth and actually does the right thing for the economy, that they might not get reelected. Because the right thing for the economy is bad politics. And even though you can look back in history and see how many times governments have destroyed economies by destroying the currency, they're going to do it again because it's politically expedient. They don't care about history. They don't care about the country. They care about themselves. And so they're doomed to repeat these mistakes because it's the only thing they can do. The Fed can't admit what the problem is. The Fed can't take the punch ball away. It doesn't want anybody sobering up. It wants to keep force feeding us alcohol so we don't realize how screwed up the economy is. And maybe we'll reelect the incumbents one more time. All I can say is you got to look through all this smoke. You got to buy gold, buy silver, get out of dollars, get out while you can. Get into real things. Own stocks outside the United States in currencies with dividends and income that are not US Dollars.

Here's the total fallacy of that. What Peter says is one third true and two thirds false, if you ask me. Okay, is. He says get into real things. Okay, yes, I completely agree with that. Gold, mediocre version of a real thing, but better than dollars. I'll agree with him there. But then he talks about stocks outside of the U.S. hey, Peter, here's a question for you. What country isn't doing the same thing we're doing? This is basically a global phenomenon of people that are, you know, of countries that are, that are all subject to the same types of political expediency. Very few countries are actually well managed. And what he's saying is bet that their currency is more solid than our currency, and virtually every currency is now a fiat currency. And so I say it's just a race to the bottom to collapse all currencies. I mean, not every one of them, I'm talking metaphorically, but a lot of the currencies, the vast majority of currencies, are fiat. Okay. So it's a race to the bottom in terms of value of those currencies. So, you know, and again, having been a client of Peter Schiff and lost, losing a bunch of money with him giving his guy $200,000. And a month or two later, I had like 100,000, $130,000 with his strategy. It just, you know, it hasn't worked for me. I mean, I think Peter's great. I want to see him be president. Okay, Peter, I will give money to your campaign. I love your economics. But again, as an investment solution, you know, I just don't think it really, really works. I think it's a. It's a defensive strategy, which is okay. It's better than dollars. He's right about that, no question. Brandon, you have any thoughts about that?

I think A lot of his ideas are pretty spot on. And I actually couldn't help but to laugh at the one part where he said, somebody got this idea together and they, they brought it to a group of people and they said, great idea.

Yeah.

But to me, it's like these people actually believe this is going to work again.

No, I don't think they believe it. They're. They're too smart to believe that this is actually going to work. All they're doing is what is politically expedient. They're kicking the can down the road and they're just trying to make sure things are okay under their tenure. And Bernanke will probably be gone in 10 years. I mean, you know, he's the same policy as Alan Greenspan. They call him Helicopter Ben because of his famous quote where he said, I'll get up in a helicopter and throw money down on the people. In other words, create a bunch of fake money and stimulate the economy that way. So, you know, it's Keynesian stupidity. Peter's right about that. He's absolutely right. The question is, what do you do as an investor? You gotta buy hard things, assets, like he says, get into real things, completely agree that produce cash flow and use the bank's money to buy them. And that debt is destroyed by inflation. So that, that is the real strategy. You ready to go back? The video is almost done.

This is the most important thing that you can probably do. You know, you got to save yourself first if we're going to save our country. You know, that's the title of my, of my book that's out now. The Real Crash, America's Coming Bankruptcy, how to save yourself and your country. You've got to save yourself if you're going to save your country. We're going to go over a real fiscal clip. We have a real crisis coming because of the Fed, but we've got to protect ourselves. Hopefully, hopefully when we have this sovereign debt and currency crisis, when we have this giant shock that just maybe, just maybe, the Fed will finally. And the government will finally have an epiphany, you know, have the moment where that light bulb goes off and they realize that, you know, we can't keep doing this. We can't keep repeating these mistakes. There's something more important than the next election, and that's the future of our economy. But until then, don't bet on any political integrity or anybody in Washington doing the right thing. We're going to be heading full steam over the edge of this cliff, blindfold on. So all you could do is buckle up, prepare for the impact and protect yourself. In fact, one of the craziest things that Ben Bernanke said, of course he said so many, it's hard to pick which one was the craziest. But he actually said that he believed by printing money and buying bonds he was actually going to help reduce the deficit. Well, how could he do that? Well, he said that by printing money and buying bonds we're going to have a stronger economy. And the stronger economy with more jobs is going to help bring down the deficit. Of course, the exact opposite is true. You don't bring down the deficit by monetizing it. You don't bring down the deficit by making it easier for the government to go into debt. You don't stop the government from borrowing by buying up their bonds and making it easy for them. If the Fed were really concerned about bringing down the deficit, it would let interest rates go up. If interest rates went up, the deficit would have to come down because the government can no longer afford to finance it. It's the Federal Reserve. It's the money printing. That's the reason the deficits are running out of control. And the fact that the Fed has just said we're going to have QE indefinitely, we're going to keep interest rates low forever. We're going to print money definitely to buy bonds. That just basically gives a green light to the politicians to do nothing about the deficit, to keep on borrowing, to keep on spending, to grow the deficit until it all blows up. Because that's the only thing that's going to stop this. It's going to be an all out crisis. Hopefully we get the crisis sooner rather than later because unfortunately the further into the future it hits, the bigger the explosion. That's it for today. Take care, everybody.

So there you go. Boy, that's long. But you know, Brandon, the crisis is the inflationary crisis. That's exactly what Peter's talking about. And we have the best way, I think, to exploit that crisis and to benefit from it and to enrich ourselves and the people we care about from that crisis. So very interesting, huh? Very.

Yes.

Yeah, definitely is. Well, hey, I know we wanted to talk about Dan Ammerman and we wanted to talk about the article about rising home prices lifting another 1.3 million people out of from underwater. So that's the bubble Peter was talking about, huh, Brandon?

It is, yeah. Peter really hit on a lot of good points. And what's funny is it all comes back to the these politicians, they just want to spend and that's the biggest problem is the spending. If they could get their arms around that, then I don't think we'd have a deficit issue. We wouldn't have to be purchasing bonds via the Fed. Comes down to spending.

Yeah, but the problem is it's just not popular to reduce spending. I mean, who's gonna vote for you if the 47% of the people who get free stuff from the government. Right. You want to lose 47% of your voting block? I mean, that's never gonna happen.

And you bring up a good point. That's why Ron Paul is not the Republican.

You got that right. Because he's not part of the big scam and conspiracy. Ron Paul's the maybe the last honest politician. Maybe his son Rand Paul is too. But very interesting. Hey, Brandon, I just want to thank you for coming on and kind of co hosting with me and helping me talk about these issues and talk them through. So it's been great. And upcoming episodes, folks, we've got some callers that have called in. We've got to get those on the air with some great questions. We've got a whole bunch of great guests coming up like we've had in the past. And of course, our Atlanta tour is sold out. I mentioned that to you. But we've got our Meet the Masters event coming up in January. It looks like we're gonna be back in Southern California for that one. We were thinking of doing it in Phoenix, but gosh, the hotel rates are just too high that time of year. So we're probably gonna be for Meet the Massers in I think the third weekend of January in Irvine, California. And stay tuned for that and enjoy all the free stuff because free is a philosophy we believe in@jason hartman.com and Brandon, again, thanks for joining us. Appreciate it.

It's been fun. Jason, thanks.

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