CW 433: Reducing Taxes & Debt with Daniel Amerman Author of “Mortgage Securities’ & ‘Unlock the Secrets of Mortgage Derivatives’

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 multimillionaire 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. This is your host, Jason Hartman, and.

We are at episode number 433.

433. You know, there's a small debate raging in the podcaster community of whether or not you should number your episodes. And when I first started podcasting, when I converted my terrestrial radio show on KRLA in Los Angeles to a podcast, I kind of thought it was weird too, this custom of numbering your episodes. And I was just looking at a thread in one of the podcasting forums of which I'm a member, and, you know, my comment was, I like it. I think it makes it a lot easier to find and reference things and stuff like that. So the episode numbers, as far as I'm concerned, can stay highlight them. I think they're, they're kind of cool and easy. Anyway, just a little side note, there it is. Gosh, 10pm in Arizona on All Hallows Eve. Halloween, or actually it's the eve of Halloween. Is that All Hallows Eve? No, I think that might be tomorrow anyway, I don't know. But happy Halloween to you. And you know what is really scary to me? It is this documentary I'm watching right now. I took a break in it to record this introduction for our guest today, Dan Ammerman. For you listeners, this documentary I'm watching here, it is late, so pardon me, but this documentary I'm watching is entitled Generation Rx, as in prescription, Generation Rx. And on my holistic survival show, I've done a few episodes with Dr. Peter Bregan and some other really renowned experts in this field that talk about how our children. Now, when I say our, I'm speaking of society collectively, because I don't have children, but if I did, I would not be drugging them up with Ritalin and Prozac and Lexapro and all these things. You know, this stuff if someone is telling you that you should give this stuff to your kid or you're giving it to your kid now, you know, really, please question yourself. I am certainly not an expert in this. It may be necessary, but I think there's a pretty strong chance that it's not necessary. And this is nothing more. The way pharmaceutical companies basically scam people. When I interviewed Dr. Peter Bregan one of the times on the holistic survival show, he talked about what happened in the 1970s when the drug companies were just kind of running out of customers and material and wanted to open new markets, as any business would look at. This is one of the flaws of capitalism is that businesses will, you know, companies will just look for things to do. And it doesn't mean it's good for us. It doesn't mean it's good for society, right? And so this is probably just another example of it. And it's. It's really, it's really sad and terrible. All of these school shootings, you know, the cost. Common thread through all of them is these prescription drugs. I would highly recommend you check out this documentary, check out my holistic survival show episodes about the concept of over drugging people, whether it be children, adults, whatever. Maybe you know of someone or you yourself have had some experience with this stuff. Certainly there is a lot of thought that it increases suicides. I personally have been affected by that in my life with a friend of mine who I believe these types of prescription drugs, these psychiatric drugs played a big part, if not the part in that suicide. So it's really a tragic, terrible thing and it is scary. In keeping with our Halloween theme here as to what happens, you know, today I interviewed Tim Carney, who will be on the show soon, and he's a senior editor with the Washington Examiner. He's got a book out about the way big corporations and big government are just ripping us off. And it amazes me. You know, I did another interview today where I was talking with a guest a lot about the Federal Reserve and the kind of government cartel that they have together. And it just. Between the pharmaceutical companies, between the people who run the economy at the Federal Reserve, between Congress and the presidency. It is just unconscionable to me how immoral these people are. I mean, I don't know how they sleep at night. Well, they probably take drugs for that.

It's just really disgusting. I mean, these people have to know how much harm they are causing to people, yet they just want to line their pockets. It's really, really sad and disgusting. But On a brighter side, we do have a lot of great things happening in the world nowadays, and most of those are centered around innovation and progress and technology. And in so many ways, we're doing that. And in so many ways, before they hit the kill switch on the Internet, and they don't allow people like me with alternative views and people like you with alternative views, or at least enough curiosity to check them out, to listen and get away from the mainstream media and the mainstream establishment. I mean, how is it that basically almost the entire media landscape in the United States is owned by just a few large corporations? You would think I would be okay with that because I am most definitely a capitalist. Okay, I love capitalism. I think it's great. But when you get to the big corporate level, it isn't even anything close to capitalism. It's cronyism. It's total crony capitalism. It's disgusting. And, you know, between the unholy alliance of, you know, these big companies buying off government, they basically, you know, Wall street owns the Senate, they own the White House most of the time. You know, it's just unbelievable the way government panders to these companies or companies pander to government. It's, you know, it's an incestuous, disgusting loop that it goes both ways. There's my theme, Generation rx. I got it on Netflix. They sent me the dvd. I'm about halfway through it, but I thought I'd take a break and talk to you tonight. I gotta get to this darn article. I keep telling you, I want to share this with you. It's about America's missing wealth and the way government regulation impacts that. But we've got to get to our interview with Dan Ammerman. Now, Dan has been on a couple of times, a few times, as you know, and he does some really good work when it comes to understanding the financial system, the motivations behind our financial system, how it affects us as real estate investors, and how we can win the game through this bad monetary policy that we have to endure. And really, you know, for most people, they do have to endure it. They suffer from it. With my real estate investing strategy, sharing the ways that you can win and you can win big. And remember, economics is a relative game, so your prosperity only has to be slightly ahead of everybody else's for you to be relatively considered wealthy or well off with that. In the last episode, I talked a little bit about the compounding effect in the intro portion. And, you know, how much this matters. And it really does, you know, when I was talking about Taxation, how income, property, real estate, the most tax favored asset class in America and how much that can mean to us. I mean just think of the compounding effect of that. I just want to remind you relating back to the last episode that I recorded when I was just in Boulder, Colorado. I just returned yesterday afternoon and that was a fantastic trip by the way. Really, really enjoyed it. Really enjoyed Denver and Boulder. I've always been a big fan of Colorado. It's just beautiful. I think it harkens back to my, my love for John Denver's music. I mean what a, what an incredible musician and what an incredible gift he was. Unfortunately died too young, age 56 I believe. But, but anyway, Colorado always beautiful. I always love to go skiing in Colorado and just enjoy the mountains. When I was there, just, you know, day before yesterday I recorded this, this portion when I was talking about taxes and how with income, property. I mean just think of the significance of this folks. If you're going to be a stock market investor or you're going to be a business owner or a person who invests in businesses, say privately on a small scale, I don't mean through the stock market, of course, those are businesses too in the vast Wall street conspiracy, the modern version of organized crime. But if you're just going to invest individually in businesses, when you sell your stocks, when you sell a business, you are going to lose a major portion of those profits. If you have a profit. Hopefully you do. If you have a profit, you're going to lose a major portion of those to the government. It's just going to evaporate into Uncle Sam's completely wasteful menagerie. Right? You don't want to do that. When you sell your real estate, you can take those pre tax dollars through a 1031 tax deferred exchange and reinvest them and let in additional. Depending on what state you live in and at what rate the gains are taxed at, you can take an additional maybe as much as 35, 40%.

Okay.

And you can reinvest those. Have that money working for you without Uncle Sam taking that huge toll off the top. What if you were investing in gold and silver and precious metals? Well, if you had a profit and you sell it and you trade it, you're going to pay Uncle Sam first, you're going to pay the government first and then you're going to be able to reinvest with what little is left over. Maybe you've only got 75%, maybe you've only got 70% left. Maybe you've only got 65% left in order to reinvest and let that money grow. So you see those giant tolls, just do the math on that. It's compounding interest in reverse and it just extracts so much of your wealth. That's one of the many, many reasons that income property is the most historically proven asset class in America, Certainly the most tax favored asset class in America, certainly the most debt favored asset class in America. It's just a wonderful thing. And by the way, I had a very nice call. A gentleman, Kevin called me. An Australian called me today and we talked for a while and I really enjoyed the conversation with him. He talked about how he has looked for property in Australia and just saying that after listening to my podcast for several years now that my message is correct. It's accurate. I believe when he called he was in oh gosh, I always get these two mixed up. But Thailand or Taiwan now of course.

I don't get them mixed up because I don't understand that they're separate places.

Of course I was just in Thailand a few months ago and I've been to Taiwan before but I just can't remember which one he was calling from at the time. And he's looked around and just cannot find international deals that make as much sense as as for example, some of the fantastic properties we have in Birmingham, Alabama. And our tour is coming up. It's just about three weeks away. A little more than three weeks away I guess. But I hope you'll join us for that. Register@JasonHartman.com and by the way, if you're a member in the member section, there is a giant discount. I think it's like 2/3 off if you are a member of the take advantage of that if you are. But if not, it's still really inexpensive. And we're staying at that beautiful Weston Hotel in Birmingham, which I really, really like. We'll get that room. We've got a special room block rate. I believe it's a 1:19 per night if I recall correctly. It's going to be a great time. You'll get to share some meals with us. See the Creating wealth in Today's Economy seminar on Saturday, the weekend before Thanksgiving, and then the tour on the following Sunday the next day. You can be in on Friday night, flying in Friday evening and then you can fly out Sunday anytime after about 4pm we'll wrap up the tour. So join us for that Jason hartman.com click on events. We will look forward to seeing you there. Okay, let's get to our guest today, and it is the very distinguished Daniel Ammerman who's going to have some great information for you about financial repression and how you can win the game and protect yourself from this financial repression. Here is Dan.

It's my pleasure to welcome Daniel Ammerman back to the show. He is a charter financial analyst and he is, I think, the leading thinker in terms of what does monetary policy, particularly inflation, mean for our financial future and how can we use this to our advantage. Daniel has taught me a lot over the years. I attended his event in Newport beach several years ago and got three days of this content. We're going to share some of his most recent thinking with you and talk about financial repression. Dan, welcome. How are you?

I'm doing really good, Jason. It's good to talk with you again.

Yeah, yeah, it's good to have you back on. I think this is your fourth time on the show over the years. I mean, of course, we've been doing the show for many years, but you've been back several times, and it's always enlightening to hear from you. And I always like to expose your latest and greatest thinking to our listeners. So what is financial repression?

Well, financial repression is a solution for governments to both an economic problem and a political problem. If you look back over the centuries, governments tend to go through cycles with their debt where sometimes the debt is very high. For instance, they just paid for a really big war or something. And sometimes the debt is relatively low. And right now the debt is throughout the Western world at very high levels. It's not uncommon. The United States, for instance, has debt that's approximately equal to the size of the total economy. That's the recognized federal debt. Of course, they have other measures that go well beyond that that aren't being included in the debt. And that's true of a number of other nations as well. So the problem is, as a nation, you owe a fantastic sum of money. And particularly if interest rates were to go up at some point, that could become unmanageable in terms of how you make those interest payments. So the question is, how do you get rid of that debt? And there's really four ways of doing it. One of them is that you could default on the debt.

That won't make anybody very happy.

No, there is a tremendous economic cost to it, and there is a tremendous political cost. If you are in the if you are one of the political powers that be and you want to stay in power, the voters aren't going to like that at all. And you're likely to lose the position that you're in now. A second way of doing it is that you can do austerity, which they've been talking about in Europe. And what austerity comes down to is that you raise taxes on everyone for decades and you cut government spending for decades. And again, this is something that voters understand very well, and generally speaking, they don't like it. You've got a third alternative. Not everyone understands this one, but people who have some economics background usually do, and that is you can try to rapidly inflate your way out of trouble. So if you slash the value of money by 20, 30, 40% a year or something like that, you can relatively rapidly wipe out the value of the national debt. The problem with that, though, is it's very dysfunctional for the economy. And people understand that really well. If you look back in the United States, 1970s, early 1980s, people understood a high rate of inflation really well. And there's negative political consequences associated with that. Now, there is a fourth method of doing it, and this is a very well accepted method among professional economists. And it is in fact what the nations of the west used during the period from 1945 through the 1970s to wipe out the value of the debt during that time, because the average Western nation was in debt to the tune of about 90% of their GDP by 1945, after they had paid for World War II. And by 1971 that had dropped to under 30% of the GDP. And they used a very deliberate process which you can read about in places like the International Monetary Fund. This is no conspiracy theory or anything like this. This is fundamental advanced economics. They used a process of what's called financial repression to do that. And there's two key features to financial repression from a governmental perspective. One of them is it's proven to work in practice. And the second one is it's proven proven to have almost no political effect because voters simply don't understand it. So from a governmental perspective, then that's kind of an ideal combination. It's a way to either reduce or keep under control the ill effects of having a very large government debt outstanding, but you don't pay a price for it when it comes to elections. And the classic components of financial repression come down to five components. And I think of them really two different categories. One way of thinking about this is an illustration. It's a way of thinking about it. Think about it as shearing sheep and keeping within a fence. And of course, who's the sheep? Well, it's all of us. But to do that you've got to do two things. One of them is that you need a shears. To make the shears, you have to find a way of essentially taking money from the average person without their catching on to what you're doing. And there's two components to that. One of them is that you want to have very low interest rates. If you look around into the interest rate environment we have right now, what do we have? We have very low interest rates, close to zero percent if we're talking about short term high quality debt. And the other thing that you need, the other half of the shares, is that you need a rate of inflation that is higher than the interest rate.

On the debt. So each year that relationship is outstanding, part of the debt is inflated away because the money that you're going to pay the debt back with is worth less than it originally was.

And I assume, Dan, when you say that, that that'll be real inflation, but officially they will say the inflation rate is much lower. Right.

That's very good, Jason. There's two different ways of looking at that. We now are incidentally, in effect, we're in a classic state of financial repres, even if we use the officially stated rate of inflation.

Okay, so tell us about that, if you would.

Well, the government in the United States is reporting a rate of inflation that's generally in about the 2% range right now, a little bit higher, and they're paying out a close to 0% rate. If we look at what treasury bills are paying now, the difference between those two are financial repression. That roughly 2% differential, even if you use the official government rate of inflation, is going straight to the benefit of the United States government because the real value of that $17.5 trillion in federal debt is then dropping by about $350 billion a year. And in a free market, they should probably have to be paying at least a 3% rate on that, but they're not. So that is going straight to their benefit. And I did an article a couple years ago where I added up all the numbers and this worked out to be even if you used the official government rate of inflation, that's the equivalent of a 5,500 billion dollar a year tax, which would be political dynamite.

It's a hidden tax. Yeah, right.

But it's not an overt tax. The effects are the same and it's a very uneven tax as well because not everyone's taxed. People who are savers are the people who are taxed. And Disproportionately, it's the older savers who have the most savings, who are paying the penalty here. That's a huge wealth transfer from, let's say, retirement investors or people who are retired and they're trying to live off their interest income. Well, how do you live off your interest income if interest rates are close to zero percent? That's a very difficult thing to do. So I would say it's a very unfair tax.

Oh, it's terribly unfair. I mean, all the people, Dan, who've done the right thing, you know, they've saved money, they've delayed gratification, they've. They've done the right thing, they're getting punished. It's completely unfair. There's nothing fair about this. But if you, the nice thing is, and one of the things you teach your readers is that if you game the system, if you will, you really can game it by kind of following the same business plan that governments and central banks follow, right?

Yes, yes. Financial repression is one of the many forms of redistribution of wealth that are going on all around us. And the way it's set up is that if you follow the usual advice and you do what an investor is supposed to do during a time of financial repression, you essentially get sheared every year, year after year. And the only way you avoid that is to change your behavior. Now, another aspect of financial repression, those first two aspects are the shears. That's how the money is extracted. That's the differential between the stated interest rate, the interest rate that's being paid out, and the rate of inflation. Now, incidentally, if we take a more reality based rate of inflation of say 4 to 5%, even somewhere in that range, then we're looking at effectively, this is a trillion dollar annual tax on favors.

Unbelievable. That's just unbelievable. The government is just basically pickpocketing everybody to the tune of a trillion dollars a year.

This is the equivalent of individual income tax. This is larger than payroll taxes. And you know, the strangest part of all is if you want to find out about it, go to the International Monetary Fund website, read the Harvard professors. You know, this is very much government policy, but it's not understood by the general public.

This is how people are just losing, losing, losing. If they don't learn how to play the game right, they're just going to continue to lose and basically be impoverished by this financial repression. Dan, you outlined four ways to, you know, solve the problem. And in, in my presentations, I wanted to get your comment on this because I talk about Six ways to get out of the mess. And some of them, you know, you talked about, you know, number one is default. That's obviously very politically unpopular and, you know, causes riots in the streets there. Not going to do that. Number two, raise taxes. And one of the things I say about that is that there just simply isn't enough tax to get if they taxed all. Bill Whittle, who's been on my show, he did a great analysis and he said, you know, let's tax the rich. And his analysis was awesome. You may have seen it. Basically, if you tax the rich at like 100% tax rate, you could run the federal government until, you know, forgive me, I'm wrong on this, but I'm just gonna throw out a number for like, 15, the first 15 days of January every year. And then. And then we'd be broke again. So, you know, and obviously raising taxes, you know, Reagan and Arthur Laffer proved this. It suppresses economic activity. So raising taxes is a bad business plan. It disincentivizes the right behavior.

Right.

And then number three, and this one you didn't mention is have a yard sale. You know, heck, sell the ports to Dubai, you know, sell off our assets. Maybe we can sell Alaska back to a nation who is better managed financially than we are.

Maybe Hawaii, you know, or Alaska can go, and we'll just have, you know, 48 or 49 states again. The Bureau of Land Management sells off land. There was the talk about selling the ports to Dubai years ago. It seems like everybody forgot this. But a few years ago, we were starting to sell military equipment to Muammar Gaddafi in Libya.

Okay?

I mean, look what happened there, right? Toll roads in the US that are owned by other governments or companies of other governments. That's another way to potentially get out of the mess. A little bit of heavy yard sale, okay? And the next way is to steal, okay, use the American military machine or the economic hitmen to basically go in and somehow steal assets from other companies or other countries, I should say other countries, and, you know, do that. And then the only positive note, and then my next one's a positive one, and that is technological innovation. So maybe if America would be fortunate enough to be at the center of some great new revolution like we were in the industrial revolution, maybe, you know, we would lead the world in some sort of energy innovation or biotech or nanotechnology or something that would fill the coffers and increase our exports. And then the most likely way, the last one of the six, is to just inflate our way out of the problem. The business plan that governments have used for a long, long time. And frankly, from their perspective, it's pretty good business plan. What are your thoughts on my six? You had the four. I threw in a couple bonus rounds there.

Yeah, those are all options, but it's a little more dangerous in terms of seizing things from the rest of the world than it used to be.

They're certainly accusing us of doing that.

Yeah, yeah. But they have ways of striking back for sure. And I think we saw some of that recently with the hacking of JPMorgan Chase and the other banks by the Russian hackers at the same time we were putting economic sanctions on Russia.

There's definitely blowback, no question about that. And Ron Paul talks about that a lot. So good. Well, okay. So good stuff.

So what do we do?

What is the actionable advice for somebody listening in terms of what to do about this? You know, how do we, you know, I kind of like to call it gaming the system. You know, we're just using their own tactics, kind of against them to enrich ourselves and protect ourselves. What are your thoughts about that?

Well, the best way of doing it now, there's a lot of details involved in terms of how you do it, but the is to flip around and stop following the conventional advice. The conventional advice is that we get entirely out of debt and we purchase bonds. And if we have artificially manipulated interest rates that are lower than they should be, that means that we're in a lose lose situation. We're not getting the return on our money. But we also don't get the benefit of below market interest rates. Now the banks, the major corporations, the government, they are all borrowing fantastic sums of money at these very low interest rates because they are benefiting powerfully from that. And so you could say, and I suspect you're going to have to like the way this direction is going and that is that if you could only somehow find a way of borrowing and buying something that produced a cash flow that would pay back that borrowing for you, that would be a pretty good way of doing it, you know.

You know my favorite thing, and I definitely learned some of this from you and that, you know, I want to control commodities that are generally inflation hedged. And in, in my world, those commodities are copper wire, glass, steel, lumber, concrete, petroleum products. And coincidentally, those are all the ingredients of little houses and apartment buildings. And so I love that. And then there's a labor component of course too. And, and there are other ingredients and those. The nice thing about those Commodities, Dan, is they're not tied to any one currency. These are commodities that have universal need. As long as the global and the US population is increasing, which it most definitely is, you're going to see more and more demand for these things. And then you take and you finance these, what I call packaged commodities or assembled commodities. I just mean, you know, it's a house or an apartment building and you finance them with three decade long fixed rate debt, financial repression type debt that is lower than real inflation rates. You take advantage of what I like to call inflation induced debt destruction. You know, where inflation comes along and.

Kind of pays it off for you.

Right, but you have a lot of more technical, I mean, you're definitely a.

Much more technical guy than I am.

You know, that's the concept. But you have a lot of little techniques, technical tweaks to this, and I just love those, like attending your event and reading your work over the years. There's a lot of little nuances to this.

Oh, there are.

Feel free to talk about any of those.

Well, sure. Again, it's difficult to do in a short format, but the way that all too often people look at strategies like that is it tends to be like there's only two musical notes. One of them is that either you get out of debt because that's the objective, or another one that's traditionally been very popular with a speculative real estate investment is absolutely maximizing leverage long as much as you possibly can. The way that I view it is that really this is what's called asset liability management and it's a musical instrument. You can play it multiple different ways from multiple different objectives. If you look at the latest work that I've just brought out in the last couple weeks is on five wealth strategies. Basically I look at how to take some of these same variables and show how to create wealth just from the normal background, inflation, this part of financial repression, how to create wealth during times of prosperity, how to create wealth from financial crisis, how to create wealth from economic stagnation, and how to construct a robust strategy that can handle any one of those futures and still produce strongly positive results.

Right? Yeah. Yeah.

Okay.

It's a matter of how you want to play the musical.

Right, Right.

Okay. So yeah, leverage is a, you know, people like to say it's a two edged sword. And you definitely, you know, we've seen lots of people, millions and millions of them get into trouble with leverage, obviously. But you know, ultimately it's funny how people argue that it's a two edged sword, you know, because I don't even know if it really is, Dan. I, you know, for many years I thought that you look at the implicit option and the nice thing with these real estate loans is they're, they're only almost always, you know, there's a few exceptions here and there, but almost always they're generally just secured by the real estate people can just implicitly their, their backdoor, or we'll call it the nuclear option, if you will. They can just walk, which they did. Millions of them did that. And as they walked, it's, it's so unfair. Again, those people got the advantages. You know, they got the loan modifications, they got the short sales, they got the workouts, and a lot of them just kept collecting the rent as they were not paying the mortgage. So, you know, I mean, I literally know people who. That's the way they got through the financial crisis, you know, six, seven years ago. I mean, that's what they did. They, they lived off collecting rents and not paying the mortgages. And then it gets even weirder. Okay. And then the lender would come to them and say, well, listen, we want to do what's called a cooperative short sale. And we'll pay you, we'll pay you. The lender says to the defaulting borrower, we'll pay you to help us with this. You don't have to submit any paperwork or any financial info, and we'll pay you anywhere between 6,530 some odd thousand dollars to just cooperate in a short sale. Talk about, talk about, you know, you couldn't make this stuff up, you know, in, in, in a fiction novel. You know, it's just crazy. But, but that's the way it is. What are your thoughts? You know, just like all the wrong things keep getting rewarded. It's.

Yeah, yeah, I mean, that's just, it's crazy, the redistributions of wealth that go on, particularly in the heart of a crisis.

Yeah, it really is. It really is crazy.

Okay, so, you know, what are some of these great nuanced things that, that people can do to, to just, you know, work. Work the system better, you know, and, and benefit from a financial repression rather than getting hurt by the it like most people do?

Well, I think it comes down to deciding what your objectives are. How much of it is. Do you want security? How much of it is. Are you willing to take on some risk to have mostly security, have a nice upside? Are you willing to take on quite a bit of risk, let's say a portion of what you build up in an attempt to really aggressively build wealth. Those are the kind of questions that we need to begin with. And then there also needs to be the question of what do you think the future is likely to bring? Hopefully one of technological innovation and prosperity.

That'll be the best one.

Yeah, that could happen. I certainly hope so too. Do we have a great big whopping financial crisis coming at us again? Well, I sure hope not, but there's certainly the danger. Could it be, as many of the world's leading economists now believe, that we are entering a. Or we've been in going to stay in what they're calling a state of secular stagnation? And what secular stagnation means from an economist's perspective is you have low or no growth in most of the advanced nations of the world for a period of 10 years or more. The head of the IMF just recently did an announcement or speech where she talked about this and she referred to it as the new mediocre. Unless some radical actions are taken, which we probably don't want to know too much about by the nations of the world to prevent that from happening. And investing for a low growth, low interest rate world is a very different process from investing for prosperity or investing for financial crisis. It's when you take this combination, I mean, what do you think the future is most likely to be? Or you just say, I have no idea. I want something that's going to perform regardless. You look at how much risk you want to take on and you look at how that compares to security. Someone who's 30 or 40 may have a different profile. Someone who's 60 in terms of how they want to do that. When you put all those components together, that's where you have the musical instrument. And I realize I'm the ultimate financial geek for calling asset liability management a musical instrument, but.

Okay, good, good.

Okay. So, you know, what else do you want to say on this? I distracted you with a couple of things, but I just wanted to make sure you got the message out, Dan. You know, just anything else you want.

People to low the other side of it. There are five components of classic financial repression. And the other components have been. Are starting to be reassembled as well. And I think of those as being the three fences. Okay. You need to have the shears to separating the value of the money from the people who have the money.

Oh yeah, the financial Berlin Wall.

Indeed.

And one of them is that you want to make sure that as many people as possible are participating, even though most people don't buy debt directly from the US Government. And the way you do that is you force the financial institutions to participate, and then they spread the losses onto their depositors in the form of near zero percent interest rates. And if you look at what the Federal Reserve has done, they have created $2.4 trillion and new money from the nothingness in the form of quantitative easing. And what many people don't realize is that whole $2.4 trillion is being financed effectively by financial institutions through their ownership of excess asset reserves.

So that money then means they're getting virtually no income on that money, and that's being passed through to all of us in the form of virtually no interest on our savings and checking accounts. So that's a really important component there. Another component that used to be much more explicit, and I think it's coming back now, is capital controls. During the period of classic financial repression, we had regulation Q meaning we had. People tend to forget this. This is a time of happy days. This is the time of Leave it to Beaver was also the classic time for financial repression. We had interest rates that were legally controlled as a matter of law. And it was also very difficult to get money out of the country. And this is true of most of the advanced Western nations. So you couldn't get your money out. So you're kind of stuck and losing a little bit of value each year. And I think that arguably FATCA is serving as capital control.

Okay, so tell us about that. That's basically the reporting where you have to report if you have money offshore, right?

Well, yeah, but you've always been forced to do that. What happened? This is one of the many things that were jammed into the Health Care Reform act of 2010 with no public notice and no scrutiny is even though it had nothing to do with health care, they changed the reporting requirements for financial institutions overseas who had money that they were investing or was on deposit from American citizens.

But, Dan, we have to read the bill to see what's in it, or we have to pass. Is it what Nancy Pelosi say?

It's not.

Read the bill. We have to pass the bill to.

See what's in it.

She said, yeah, it's like, how can someone say that with a straight face? That's hilarious. You know, it's just unbelievable. But such as our government, you know.

And it took effect in 2014.

Yeah.

It was delayed for four years. It's now fully effective. And what it essentially is, is that if a foreign financial institution has American investors or American depositors, they are required to follow IRS procedures in Fully reporting on the activities of those citizens to the Internal Revenue Service or else any investment assets that they have in the US are subject to a punitive level of taxation. So basically any foreign institution that has any assets in the US Is being told, you report, you follow these onerous regulatory requirements of the United States Internal Revenue Service or we're going to hold on to your profits. Okay, so what most financial institutions I believe at this point around the world, other than the really big ones who have the US operations anyway, they're just not allowing Americans to open up checking accounts.

This is really hitting a lot of expatriate Americans, including the families of servicemen and so forth, who are living overseas. If you're a small or medium sized financial institution in Germany or Japan or somewhere else like that, what kind of regulatory burden do you want to take on in terms of dealing with the United States Internal Revenue Service or risk the loss of punitive taxes on your investments in the U.S. well, the simplest thing to do is you simply tell US citizens, well no, we don't want your money. So the effect then of FATCA is that it is becoming a form of capital control.

Right.

It's gotten significantly harder since Fatima has come into effect for US citizens to just take their money and move it overseas.

And you know, you know what's really just seems like a very sad thing in our system is that we've got all of these multinational corporations with huge amounts of money overseas that, you know, if we could get them to repatriate that money, it would be seemingly very good for our economy. But our tax code disincentivizes it, so they're just not going to do it, you know.

Yeah. It's almost like there's two sets of rules. One for the big guys, one for the little guys.

Of course, that's the way it always is.

Yeah, it's unfortunate. Boy, it's, it's something else.

Well, the fifth aspect of financial repression we haven't seen yet, but we might. It could come back. A classic part of financial repression is that you heavily regulate or ban the ownership of precious metals for investment purposes.

1933. So do you think there's likelihood of that?

I don't know. And I've done a fair amount of work in that area right now to have what is essentially a punitive taxation on precious metals in the form of collectibles. Tax treatment.

Yeah, 28%. It's a terrible deal. You got to pay tax as a collectible. You don't get shorter long term capital gains. You get collectible tax. So it's, it's really, really bad.

And one of my most popular articles for some years now, it's on my website, is showing people how that works in a different way than. They understand that essentially through inflation taxes on precious metals, the government is essentially taking the wealth that many people think they're creating and slashing their net worth year by year. When people are investing in gold and silver, in fact, and trying to beat the government at the inflation game. But there's levels upon levels there and I think as long as that's working for the government, they will probably allow precious metals to be legal if it changes. We have the historical precedent that yeah, sometimes they do make ownership illegal.

Dan, I gotta ask you, I don't think we've ever talked about, what do you think about the cryptocurrencies? What do you think about bitcoin? Just what are your thoughts? Any hope for them or. No?

Oh yeah, I haven't really gotten into that area too much. I mean I have my certainly opinions in that area and that is that in this increasingly hackable world of ours, I'm not sure that I want my value of my savings to be in a bit of computer code.

Yeah, well, it just seems to be.

A bit of a fundamental mismatch.

Yeah, that's a good thought right there alone and you know, just to share my thoughts and you know, I'm sure you'll have something to add to this. I just, I would love to be wrong about this. I would love to be wrong about gold, I'd love to be wrong about bitcoin, but I'm just not bullish on them at all because I think that the, the power of the central banking cartel, it's just omnipresent and omnipotent, okay? And it's, it's everything. It runs the entire planet with the possible exception of Iran and North Korea. I guess that's why we have to hate them. Anything that isn't backed by them or anything that represents competition to them, which is what these are, is that their competitor? I just think they're going to find a way to squash it. I just, you know, they're going to manipulate it like they do with gold. They're not going to get rid of gold, okay? It's there. The alternative currencies, they can just with a stroke of a pen say it's gone and of course it'll be under the guise of public protection, you know, oh, these exchanges go under and people get ripped off and you know, blah Blah, blah, or, or it'll be under the guise of oh, you know, people are using this to support terrorism. Right.

That's one of the core things that I teach at my workshops is the principles of what I call alignment. Where what many people do when they're looking at wealth preservation strategies is they choose things that are essentially an in your face to the central banks. They're very confrontational and that's part of the idea with precious metals. I don't like what you, the central bank are doing. So I'm going to put my assets somewhere where your monetary gains can't touch the value of it. And there's certainly elements of that with bitcoins as well. Emotionally it's really easy to see the compelling reasons why people want to do that. But it gets us back to that issue that you were just talking about is that if you set yourself up in competition with what the government or the central bank wants to happen, then you are subject to being squashed every now and then. And they have complete control over the law to do things like that. Now an alternative strategy is to seek alignment with the interest. As much as we dislike them, just try to set up strategies that are aligned with the interests of the governments in the central banks so that in serving their own financial interests, they're helping us out as well. It's like a complete 180 degree turn.

That's exactly what we want to do. We want to be aligned with their interest and, and, and when we're aligned with their interest, we're going to win because we have the most powerful forces on the planet behind us. You know, all we're doing is just kind of mirroring what they're doing. You know, we're, we're investing for inflation, we're investing for bad financial management and, and all of this stuff that we, we love to grouse about and say is terrible and it is terrible but you know, if you can't beat them, join them I guess is the quote for the day, right Jan?

One way of looking at it.

Yeah, yeah, yeah, definitely is. Well, hey, give out your website and tell us you know about any of your, your latest resources.

The website is danielamerman.com and Amerman is a M E R M A N and I have a brand new educational resource that I've just put out that you can find on the menu bar at the website. It's called 5 Wealth Strategies and it is 5 Unexpected Ways of Creating wealth using Real Estate Based Asset Liability Management Strategies.

Fantastic. And where is that available from?

Our website.

Okay, fantastic. Well, Dan Ammerman, it's always a pleasure to talk to you. And thanks for joining us again and sharing with our listeners how they can win the game by having their interest aligned with the powers that be rather than trying to buck those trends like so many others do. Mostly to their dismay. So thanks for joining us.

Thanks so much for having me.

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