George Gammon Warns of the Coming US Digital Dollar and Ban on Cash
In this extensive interview, host Jason Hartman and macro‑economist George Gammon discuss a wide range of macro‑economic issues. They begin with a debate on deflation, arguing that market‑driven deflation can be healthy while debt‑driven deflation is dangerous. They compare the United States’ fiscal situation—trillions of dollars in deficits and debt—to Japan’s 230% debt‑to‑GDP ratio, noting Japan’s high savings rate and mild deflation. Gammon explains the Fisher equation, how the Fed’s zero‑rate policy combined with deflation raises real rates, and why the Fed may be forced to adopt negative rates or a digital dollar/UBI to inject liquidity. They critique the Fed’s ownership structure, its emergency purchases of corporate debt, and the potential for a cash‑ban tied to a “Freedom Dividend” app that could function as a universal basic income with strict spending controls. The conversation also covers manipulation of the CPI and personal savings rate data, tax over‑payment issues, and the importance of hard assets—gold, commodities, and real‑estate—especially in light of urban unrest and political risk. Finally, Gammon promotes his Rebel Capitalist Pro community as a “sane space” for investors seeking to survive and thrive amid out‑of‑control central banks.
Chapters
You always hear that deflation is bad and it's the boogeyman. And I think it's actually good if you look at deflation in and of itself, especially if it's produced by free market forces, which if we had a free market capitalist society, we would see deflation, and it would be very healthy deflation, because entrepreneurs are out there producing goods and services and they're trying to compete with one another and they're doing it more efficiently and they're producing things at lower prices, and that's just. That increases demand. That's really kind of the line in the sand. You got to ask yourself, is this type of deflation increasing demand or is it decreasing demand?
It's a great pleasure to have George Gammon back on the show. He is a real estate investor, a investor in all kinds of things, and a fantastic macroeconomics educator. So it's always great to have him on the show. George, welcome back. How are you?
Hey, Jason, thanks for having me.
It's good to have you. And you are coming to us from Billionaires Row in St. Barts, right?
That's right. That's right. That's right. I tell people that I'm the poorest person here by a mile. When I first got to the island, I looked around, I said, my goodness, I need like a St. Bart stimulus check. Somehow.
I don't think you're going to get one there.
No, no. Gonna get one here, that's for sure. But no, it's a beautiful place. And I came here just because I didn't want to deal with any lockdowns. And the restaurants are open, the gyms are open. I'm gonna go to the gym after we talk. And it's, it's nice to just have some sense of normalcy right now in a. In a very crazy world.
Yeah. Is any. Are there any cases there or is it just totally clear? Like, you know, there's. There's no. Is there any precaution there at all or is it just normal living?
There are some precautions. When you go to the grocery store, they make you wear a mask. Some restaurants require that you wear a mask when you're, like, walking to the bathroom. You know, that crazy stuff. It's kind of weird because the French government has a little bit of say, but the people here, for the most part, really don't like the French government, and they just try to kind of ignore them. But technically, like, they're supposed to give a restaurant a ticket if the people aren't wearing a mask to the table. But very few restaurants even acknowledge those rules. So it's. The main thing is you got to wear a mask when you're going to the grocery store. Other than that, it's pretty much. You're pretty much good to go.
Pretty good. How did St. Barts, and I don't know if you studied it much. I know you're there, you've been there maybe what, a month and a half now or something. But how did Saint Barts become this sort of really high end Caribbean destination? I mean it's not, I never hear about it as a tax haven or an asset protection haven. I hear more about Cayman or Nevis in that regard and certainly other places around the world too, like Jersey, et cetera. But why St. Bart's you know what's.
Well, I think for the Europeans and the French it is a tax haven. It's very similar to Monaco.
Okay.
It's just Monaco in the Caribbean, basically.
Okay.
I think catalyst was Rockefeller. Rockefeller built a huge house here that's over by this beach where I go snorkeling. I think it's been abandoned for several decades, but it's still there. And he was the first person to kind of make it popular, I guess with kind of that crowd. And since it's just, it's a very little island, there's maybe 9,000 people here. The people are quite literally the most pleasant group of people I've ever met in my life. They're not just nice, they're very courteous and very welcoming as well. And I think that combined with. It's very nice. I mean a lot of the Caribbean islands, you go downtown and it's very down and it's not a terrible. Yeah. I mean the beaches are great and the oceans are great, but you go to the. In town you're like, man, this is.
This is not, it's a slum in a lot of those places. I mean it really is a total slum and high crime and all kinds of problems.
But Saint. Saint Bart's is the complete opposite. Not only is the downtown area just gorgeous, there is, there's nothing here that you would consider a slum. And the crime is for the most part just non existent to the extent that, I mean nobody here locks their doors. Nobody. And I mean your car. When you go up to a restaurant, most people just leave the keys in the car. They just leave them in ignition. When I went, I was ocean swimming yesterday out to these cliffs where I go cliff diving. And I just left, on the beach, I just left my briefcase just Right. On a rock with my laptop, with my phone, which has all my credit cards in it, with my keys. I didn't even think twice. Twice. Interesting. Yeah. It's just. It doesn't really. It doesn't really exist here. So that combined with everything else, and then you've got a lot of celebrities that come here because they don't get hassled. I know a lot of, you know, singers and artists and whatnot have gotten married here, so. And I know during the. I heard a statistic the other day from a guy at a cocktail party that during New Year's, like, some crazy number, like 90% of the super yachts in the entire world are here in St. Barts.
Wow.
New Year's, it's a very popular place. I won't name any names, but a mutual friend of ours has a property here that he rents out during the holiday season, which is the high season here.
Right. I know who you're talking about. Yeah, yeah.
Well, don't name any names because I don't want to throw out his numbers or anything, but he rents it out for. For six figures per week.
Wow. Amazing.
Yeah. So it's that type of place.
You sent me an image from your phone, a screenshot of a map with properties for lease or rent there, and I couldn't believe the prices. They were super expensive. But I bet you. What's that?
Just on Airbnb, I think that was.
Yeah, yeah, the prices were astronomical. But I'll bet you the rent to value ratios aren't very good, because I bet you the value of those properties is just astronomical, even more so than the rents.
It's still it. No, it's still it. No, the RV ratios, you can get a. Yeah, you can get a good RV ratio here. The problem.
You can. That's amazing.
Yeah, yeah, yeah. I mean. I mean, who's got 20 million to drop on a property?
Right?
But believe it or not, I mean, if.
Well, you mean a good RV ratio in favor of the tenant, right? Yeah. Not as a landlord. Oh, as a landlord.
Oh, yeah.
Oh, that's amazing. On expensive properties, I wouldn't have thought.
Yeah. As an example, if you've got. I mean, if you know what you're doing, if you've got, let's say, 7 million in a property, you can get. You can make 700 grand a year on that.
Well, you got to get 70,000amonth for 1% of 7 million. Right.
You're getting six figures a week during the high season.
Yeah. Right, right, right. Well, that's Vacation rentals too. So you know, more, more volatility potentially, but. Right. Fact that you don't have lockdowns there. It's an attractive place for wealthy people. So that, you know, that skews the thing too. But very interesting. Well, hey, the other very courteous place that I've been, and I think you've been there too, is Japan. And you know, you did a fantastic YouTube video recently and another one where you're talking to Peter Schiff and then you were talking about the Federal Reserve and what they don't want us to know and so forth. And I thought I'd like to ask you because I talk about Japan quite a bit on my show. It's a really interesting economic story. They've been saddled with what used to be called the lost decade. Then it became the last two decades and now it's into the last three decades. And then they had Abenomics, which many people have heard of. And they've got a real demographic disaster in that they're just not having kids. And the population is aging obviously. And in 70 to 100 years, if they don't have kids or immigration, Japan literally won't exist. You can't have a country if you don't have people. But it's fascinating because people have really downplayed Japan saying that look, their debt to GDP ratio is the highest in the modern world. It's 230% debt to GDP. And just to give people a reference point, and I haven't checked it lately, but I think even into all this craziness now, it's gotten worse. But the US is around 100% or approaching 100% debt to GDP. Oh, it's more than that now.
Okay, yeah. These four plus trillion dollar deficits, the US deficit just this year will be the same as the total amount of debt accumulated from 1776 to 2000.
Yeah, I have to laugh at that. It's so absurd. It's so totally absurd. It's beyond, I mean it's just beyond comprehension frankly. So we'll talk about that. But we were talking off air about Japan and I'd just like you to touch on that for a moment in that the debt to GDP ratio does not necessarily bode so badly for Japan as one might think.
Right, well, it hasn't caused hyperinflation.
Yeah, well the opposite actually.
Right, yeah. It's caused mild deflation, which I think is when a country gets that over indebted. I think just a very slow grind. Deflation like that is probably a Best case scenario, if you look at history, when you get a debt problem, it's just there's no easy way out of it. Dr. Lacy Hunt talks about this all the time. You either have to have austerity, you've got to inflate away the debt, or unfortunately, sometimes the way to get out of it is a war. But there just is no easy way out. If you over consume, if you consume more than you produce for a long period of time, at some point you've got to under consume. That's just the way it works. There's no financial engineering that gets you around, just a basic thought experiment. If you were stranded on an island and you had. I always use the thought experiment that if you're stranded on an island with a suitcase full of a billion dollars, are you rich? I don't think so. Because there's no goods or services anyway going back to Japan. What most people see is they say, well, how come they haven't had inflation or hyperinflation? And therefore, if they've done quantitative easing, if they've done all these things for the past three decades or plus, why can't the United States do the same thing? The United States could do the same thing, but there are no certainties. There are always probabilities. So you have to look at the facts and how the economies are set up and then weigh the probabilities for yourself. So there are dramatic differences. First and foremost is the savings rate in Japan is staggering. It's almost 30%. If you have your population saving that much money and not spending it into circulation, your velocity gets so low that I'm not going to say that it's hard to have inflation, but you're not going to get it as easily, then most people would see inflation as the value of the currency going down in relationship to goods and services or to other currencies. There's always a bid for the yen because they're a net exporter. So what happens is when you've got two countries that are trading between one another, the one that is producing more stuff, more goods and exporting those goods, they're going to have a trade surplus. And therefore there's going to be more demand for those currencies from the countries who are buying their goods where the opposite is true. If you've got a trade surplus, then what you're doing is you're exporting more of your currency units. And therefore at some time, if all else being equal, the value of those currency units relative to other countries is going to go Down. The reason that hasn't happened with the United States is because obviously we're the world reserve currency and the world runs on dollars, and therefore there's a bid for these dollars to do business outside of the United States. Regardless of what's happening with our domestic economy or how much goods and services or how little goods we're actually producing and exporting.
Yeah, the US Is in a pretty enviable position, at least for the time being. And you can really break a lot of rules when you're in the position the US Is in. You can defy gravity. The only question is what? For how long? I want to show you a chart real quick.
George distorts the economy. Most people don't really think that through, so I would argue that it massively distorts the economy as well. So going back to an interview with Lacy Hunt on, I want to give them props. Grant Williams, who's just a fantastic guy, just interviewed him for my channel and Bill Fleckenstein did an interview called the End Game, or their podcast is called the End Game. This episode was Dr. Lacy Hunt and they talk about a debt jubilee. And I think as a thought experiment, that's a great way for us to get our heads around what happens to an economy when you over consume. It's not just the debt. Like the Keynesians and the MMT people would say, well, if the Fed could just buy all of the Treasuries as an example, then on the asset side of the Fed's balance sheet, you'd have, let's say, whatever, 27 trillion in treasuries. And then on the liability side of the government's balance sheet, you'd have the same 27 trillion in treasuries. Well, okay, just click a button and erase it. Everything like an NBA scoreboard, right? From 100 all the way down to zero and you just start all over again. And the Fed keeps spending money and the economy grows as a result of this government spending. But what's absent in that line of thinking is what has happened to the economy as a result of the government spending all that money in the first place. So as an example with the United States, government spending now is over 50% of GDP or 50%.
Absolutely insane.
Half your economy is government spending. And we know government doesn't produce anything, right?
Yeah, they just.
Especially on net balance. Yeah. So they're not producing anything. So 50% of this is just. So that doesn't go away. Right. Even if they are able to start from zero again, the only thing that happens is that gets worse. It goes from 50% to 60%. So if the quote unquote, how rich an economy is is based on the amount of goods and services that are actually being produced, not currency units that are just being printed, at some point, it just. It comes home to roost regardless of whether you have a debt jubilee or not. Another great example would be all the zombie corporations in Japan. If Japan had a debt jubilee, those zombie corporations would still be there.
Right, right, right. Yeah. No, that's all fascinating. Before you go on too much, I just shared my screen a moment ago, and I just want you to see this because it's sort of interesting and it sort of goes to this, like, whole dysfunctional system we have. If you look at the personal savings rate in the U.S. it's always been, you know, fairly low. Americans.
Keep in mind, this is like the CPI as well. I've done the video on how they.
Of course, I. I don't deny that it's manipulated.
You'll notice that they changed it. I think they changed it back in 2015 right around there, Jason. But prior, it was like 4, like 3, 4%, and then it just hopped right up to 7. That was because of the finagling of.
The numbers, but they didn't change it this year. Right. So the benchmark, relatively speaking, is all we're looking at. And it's just interesting to notice how much money people are saving when they're in lockdown because they're not out spending money. Right. So you see here, we're looking at February, March area right here, and it's hovering around 7.78%, something like that. And then the savings rate just skyrockets.
Buzz Lightyear to infinity and beyond.
And they're getting an extra $600, like paying them not to work. Right. And then you see as the lockdowns are lifted, the savings rate starts to plummet a little bit as people go out and they buy an rv, they buy a boat, they go out to some restaurants. They're not going on airplanes, but they're doing vacationing with RVs. Like, RV sales are through the roof.
You know, sporting goods, because everyone's buying camping gear.
Yeah, right, right. So people are doing domestic vacations. Right. And so this is just kind of interesting. I just thought I'd. I'd share that.
I think they're doing domestic vacations and they're also getting out of Dodge. I mean, I don't know if you saw what happened, like Rand Paul last night. And I mean, it's just bananas. In urban areas in the United States right now, especially in. I got a lot of buddies that are even in red states that have bought RVs. And they lived in kind of even suburban urban areas. And they're like, listen, I'm out. I can work from my computer. I'm gonna go up to like, show Low Arizona as an example. And I'm just gonna sit here in a campsite with WI fi.
And when we have 5G, as long as you have a tower close to you, those towers need to be plentiful and close to you. And now there's a whole bunch of theories about 5G and the health side effects I won't go into. But that will make Internet just plentiful, mobile, super fast. Tell us, though, about this savings chart. What was the manipulation and when was it? 2015, because this goes back that far. And by the way, this is from the St. Louis Fed. But just tell us about the manipulation. We talk about unemployment number manipulation a lot. You and I both do that. Obviously, the cpi, consumer price index, inflation metrics, manipulated massively. But what about the savings rate?
I'd have to go back and look at my notes. I don't know the year right off the top of my head. This is a video I probably did four or five months ago. I remember with the manipulation of the rate, though, it had to do with the fact of how the IRS estimates what you're not paying them. It's just a completely obscure, like, objective or subjective number. And when I read it, I'm like, I think it was. The reason it didn't make any sense to me whatsoever is because it only calculated what people are not paying them and it didn't calculate how much people are overpaying them.
Okay.
I would argue people overpay far more and they underpay. You know, the IRS always says, oh, you know, if Americans paid the tax that they should, or people underpay by 500 billion a year or something like that. But all they're doing is they're looking at the people that underpay. They're not looking at it on net balance. They don't look at all the people who overpay. Cause they don't want you to know about that. In fact, I talked to Robert Barnes, who's a good buddy of mine. He was the lawyer for Alex Jones against Twitter. He's a free speech, you know, constitutional lawyer, represented Wesley Snipes against the IRS and whatnot. So he's got a lot of knowledge with these, with these IRS cases. And, you know, we talked about how many people actually overpay. And he's saying he went through some of these deductions that I've never even heard of. And I, and I've been audited five times. I've never, you know, as a business owner, as an entrepreneur, you know, you have a little bit more. A better understanding as to what, especially the real estate guy, as to what's deductible and not. And he was going down this list of things that I have never even heard of. So I can almost promise you that 90% of the people, especially if they're just going out there to H and R block or using some sort of software program, that they're not taking the. All the deductions that they qualify for. Not even close to it.
So anyway, yeah, no, it's, you know, 70 some odd thousand pages tax code, I guess at last, last time I knew. And it's. It's just super complicated. And you know, there's so much, man. I mean, in 2006, I think it was, they stopped publishing M3 and you know, so it's just a moving target to try and figure out the economy because the powers that be want to just hide everything from the hoi polloi, us little people. But George, you did a fantastic video recently about the things the Fed or really the powers that be in general don't want us to know. Do you want to talk about that a little bit? That was really good.
Well, three things. First was that you always hear that deflation is bad and it's the boogeyman. And I think it's actually good if you look at deflation in and of itself, especially if it's produced by free market forces, which if we had a free market capitalist society, we would see deflation and it would be very healthy deflation. Because entrepreneurs are out there producing goods and services and they're trying to compete with one another and they're doing it more efficiently and they're producing things at lower prices that increases demand. That's really the line in the sand. You got to ask yourself, is this type of deflation increasing demand or is it decreasing demand? And that's where most of the deflation that we have now, it's a scary thing because of the amount of debt that we have in the system. But I would argue that that's like saying that heroin isn't the problem. The problem is that XYZ person is addicted to the heroin. Heroin in and of itself isn't the issue. The next one was that inflation is Good. We always hear that from the government or the Fed especially, or central banks, that they have these inflation targets.
Right, 2%. We've all heard that.
Well, now that's of course a moving bogey as well. I don't know if you heard Powell's latest.
Oh, that, that is earth shattering. You know, I made a big deal about that on my podcast either yesterday or the day before. But you know, this is a sea change potentially, folks. The Fed has just lifted all the constraints and they've come out and said we're not going to forecast and act in a forecasting or react to forecast. We're going to wait until we see it and then we're going to change. And you know, that's like a giant oil tanker, you know, it takes a long time to turn that big baby around. Right. And if the Fed, you know, if this is their new philosophy, then I mean, that is fairly pretty risky, I'd say. Right?
They're always moving the target. It's nonsense. First it's like let's get up to 2%. And then once they get up to 2%, they say, well, actually it's got an average 2% and we are under 2% for 10 years. So now we can run at 10% and it doesn't matter because it'll just be an average. As though how that makes sense, I don't know.
Then they'll change the time frame they do the average over or they'll take out a couple years that are anomalies that they don't like and make it weighted. A weighted average versus an average average. So.
Yeah, exactly. So this is just the next step in the long line of just, I don't want to call them lies, but just kind of the smoke and mirrors game they're playing when they just won't admit that they, meaning the government, has to have inflation. It's their. It's the path of least resistance for a government that's 27 trillion in debt. And this debt is just going to be ever crushing them as it increases with these deficits that we're seeing in Covid. So you hear that this inflation, this low type of inflation is actually good. And then the third thing that I went over is who actually owns the Fed? I focused on the New York Fed and the usual suspects are there. The top three, I think it was Citi, JP Morgan, Goldman Sachs. But the next two I think would really shock a lot of people in the sense that it was HSBC and Deutsche Bank. A lot of people when I bring Up. Let's look at the Fed's P and L. Not just their balance sheet. They say, oh that's nonsense because they only get a 6% dividend and everything that they, that they make as far as profit from their, I don't want to call them investments, but we'll say their balance sheet goes right to the Treasury. And I'm like, maybe, maybe not. I mean the Fed has a surplus account that they even admit to, that they have money in that's in excess of what they repatriate to the government. And after the dividend that's one. But then what most people aren't thinking about is listen, just because they might not get billions and billions and billions and billions in distributions as owners think about all the money that they're making or the profit they're making as a result of maybe being closer having the ear of a Fed governor or being, you know, I mean, you got you, I mean 2008, it's a great example. You know, they get the bailouts from the government or the Fed. And now most more recently we had the repo spike in September and it goes up to 10%. If the Fed wouldn't have stepped in right there, I don't think people understand. I mean we're done. The banking system is done. There's no way that you can have the dollar funding market operate with 10% interest rates. And so they come in, they basically bailed out the banks right there, in my opinion. And then you have what we saw in March and it's not just now the Fed now it's the government coming in with their stimulus and bailouts that are like a government put is what I call it now and that's bailing out the banks to a certain degree. But then you look at all the investment banks and they have record profits and is it any surprise because they think there's a Fed put. And I think you could argue that there could be, whether it's psychological or it's direct or implicit. So their downside is cap, but their upside is almost limitless. So you look at the risk reward and that's all benefiting the banks.
It's socialism for the rich and giant corporations, especially the big banks.
Yeah, so that's kind of the three things that I outlined. But as far as the deflation example that I gave, it was the late 1800s and we saw that everything I think went in the right direction. As an example, the average hours worked for the few positions that I saw went down pretty much across the United States the wages went up, in some case, wages went up dramatically, like 50% just in the span of 10 years from 1890 to 1903. And so then you say, okay, that's a good thing. But keep in mind that from 1865 to the year 1900, we had almost 50% deflation. 55, 0 post Civil War era. Yeah, well, and gold standard, really. So what you have is 52 cents in 1900 could buy what a dollar could buy in 1865. So you have the prices of goods and services going down, down, down, down, down, while people's wages in nominal terms, not just real terms, but in nominal terms, are going up, up, up and up. And then you have GDP increasing dramatically. GDP from, excuse me, from 1865 to 1900 went up by almost 100%. And that's in nominal terms. And people say yeah, yeah, but the population increased. Right. Look at the per capita gdp, that went up as well in nominal terms. So I mean, how can you. Well, that's a rhetorical question. You can't produce an environment that's better for the poor and middle class where their lives improve more dramatically than something where their wages are going up and the cost of what they buy daily is going down consistently, let's say to 3% clip per annum. I mean, that is the best. Go ahead.
I was just going to say, could you attribute any of that deflation for that long period to the Industrial revolution though? Yeah, that was, I think most of.
It you could attribute to that. So that's the free market. That's why I was saying when you have a normal free, well, not a normal, but a free market where it's very few regulations where people can actually compete and you have Jupiter's creative destruction that's actually allowed to take place. And you have all these things. You don't have manipulated interest rates. You have hard money, you have sound money. That is absolutely key. Then what happens is guys and gals like you and I go out there and we produce whatever we can produce to pursue our own self interest. And we compete with one another. We're very competitive. I know you're competitive. I'm extremely competitive. And we're always going to try to gain market share. We're going to try to make more money. The way we do that is by producing a good or service that people value more than the money in their pocket. And so we're always trying to find better ways to do things. We're always trying to find ways to create new technologies to deliver our goods and services. To the general public at a cheaper cost. And that benefits everybody. And then as those prices go down, their wages stay the same, not go up. That increases demand, that doesn't decrease demand. So it's just. It's the fact that we have an economy now that's based on debt, asset prices and confidence. That's the reason why we could get a deflationary spiral. That would be a bad thing because people can't get. They can't get debt and they need the debt to further increase their consumption. So that's an example of demand going down because there's just no more debt. There's not an expansion of debt. But that's not deflation's fault, that's the fault of the underlying economy.
Yeah. So a lot of it plays in whether there's inflation, deflation, whatever. And you can divide it up between consumer prices and asset prices, for sure. And I know you have a lot to say about that and some great stuff there. These interest rates, George, are insane. I mean, it's just got to be a completely artificial market. In the interest rates. Where do you think we're going? And interest rates are just notoriously hard to predict because especially when you have policymakers intervening all the time. Where do you think we're going with this interest rate stuff? And I'm sure you believe it's dysfunctional and has causes a lot of mal investment and such and people to do improper things that they wouldn't normally do. And obviously it hurts savers and usually older people. But what are your thoughts about that? I just thought I'd throw a few things out there, give you something to chew on.
Well, let's think through the Fisher equation. And I'm not sure if you're familiar with the Fisher equation. Very, very simple, but it has a dramatic impact. So the Fisher equation is the real interest rates plus the rate of inflation would give us nominal rates. So you've got. Let me write this down here. So we've got the real rates, real interest rates, because there has to be.
A cost to the use of money. Because when a lender loans the money, they have an opportunity cost because they can't use the money for something else. Thus the basis of interest rate, time value of money, et cetera. Right, that's fair. And then you take the real rate of inflation and you add it to that opportunity cost and that should be the interest rate in my eyes.
Yes, that's correct. That's basically the Fisher equation. An easier way to look at the equation, I think, is with the Same equation is if you take nominal rates minus inflation, that gives us the real rates, everyone. That's pretty much common sense right there. So if the Fed pegs the rate at zero and let's say that we actually have deflation, that the economy, we have all this debt and the economy is trying to get it out, it's trying to flush it out of the system. So as an economy we're having deflation. Okay, well if they're pegging it at zero, they won't let it go negative. If we have a, let's say a negative 2 rate of deflation, well, what that's doing to the real rates is it's increasing them. Right. And if we have increasingly high real interest rates, that makes it harder for people to borrow, that makes the money more expensive.
Right?
You see, so the only way, the only release valve for the government, if the Fisher equation is true, which it obviously is, is to allow the rates to go negative. So it's allowed the Fed funds rate to go negative and therefore that would allow real rates to go back to zero or to negative where people could actually afford to take on more debt. You see, so my point is the Fed's backed up into a corner where if, and I'm just saying if the system stayed the same way as it is today, meaning that they had to abide by the Federal Reserve Act. And so that's a whole other topic. What I'm talking about is them not being able to take bank reserves and inject it directly into the economy through just let's say a Fed coin and bring it to your apps. That's a whole other topic conversation. And I think they'll go around the Federal Reserve Act. But if they abide by the way the system is set up now, let's say the Fed would have no choice at some point than to take rates negative. They have to just because of Fisher equation. Because if deflation is going down because of this over indebtedness, and I'm not just talking about consumer prices, I'm talking about assets as well, then the real rate of interest, like we said, goes up and up and up and up. But if you have the real rate of interest going up while you have deflation, that just, that feeds on itself and that creates a positive feedback loop that gets really, really ugly really fast. So they'd have to take and they'd have to get rates further negative to release to opening up the affordability to, to increasing debt with consumers and businesses in the real economy.
Yeah, and home buyers.
Home buyers Everyone, Yeah. So that's kind of. I'd have people look at the Fisher equation if they're trying to figure out what's going to happen with interest rates moving forward now, then you'd have to handicap. On top of that, what are the chances that the Fed circumnavigates the current system, especially based on what we've seen them do since Repo and since March, where they pretty much abandoned every single thing that is written in the Federal Reserve Act. They're buying junk debt. And I've read the Federal Reserve act and I can promise you, nowhere in the Federal Reserve act does it say that the Fed can buy corporate debt, or corporate junk debt for that matter. And obviously they're doing it. So if they get around that, then they can create inflation without having to rely on the commercial banking system. Because right now, the main way that they can get M2 to increase, meaning more currency units chasing the same amount of goods and services is by the banks lending new money into existence by creating loans. So the deflationist argument is, well, the banks aren't lending and there's no consumer appetite for debt because we have these positive real rates that's crushing the economy and therefore there's no money that's being created, money's being destroyed, and that's deflationary. That's basically the crux of their argument. But what they're not considering. They might be considering it, but they're giving it a low probability. Where I would give it a high probability is at some point the Fed will look at Japan, they'll look at the ecb, the Eurozone, they'll look at these negative rates and they'll say, listen, we cannot take rates negative here in the United States because we have the reserve currency and we have this infrastructure, meaning the bond market, that is completely reliant on rates being positive. At least once it goes negative, it's not like the German boom going negative or JGBs. It's a whole different.
It's a whole different animal. I agree with you on that.
They're going to try to get around it.
You probably have more to that thought, but I just didn't want to forget to ask you this because I think my viewers and listeners want to know. So George's opinion on this. We were talking a few minutes ago about the target rate of inflation, 2%. The Fed has publicly stated that's their goal. That relates to the Phillips Curve and the relationship between inflation and unemployment rates.
But.
There does seem like. I have a feeling you're going to disagree with this, but there seems like a valid argument you can make to have some inflation in the system. As long as the highly manipulated GDP is increasing and the population is increasing, it seems like there's a logical argument to have some inflation that's relative to population and GDP increases. Does George Gammon think so? I have a feeling he's going to say no. But what do you think?
No, I don't see the upside for that.
Okay.
I guess the argument is the economy needs more money if it's growing.
Yeah, right. There's more people. There's a bigger economy.
Yeah, but I just say that you just. You just divide the currency units you have into a lower amount. So let's say we had dollars right now. We had. Let's say we had $100 in the entire economy. And we're like, shoot, this is getting cumbersome. We don't have enough currency units to transact because I have to wait for that guy to sell his cow in order for me to have currency units to trade to this person. It's being restrictive. Right. Well, I just say, okay, well, let's not increase the amount of dollars, let's just create quarters, let's create dimes, let's create pennies. And that's how I get around that.
Yeah, right, right, right, right. And it's interesting also that there's this giant coin shortage going on, which makes me suspicious that there's something behind that. Either a digital currency on the way, which I think that's going to happen, obviously, at some point, at least. China is certainly moving in that direction. Smart for them. Bad for the people, though. Or just the fact that it's just too expensive or there's going to be a lot of inflation in the system and those coins are going to be meaningless. I mean, why? I think it costs 1.6 cents to produce a penny. How did we get here? This is just obvious that there's massive inflation in the system.
Yeah, and I think that's a great point. I think it goes back to what we were talking about with the Fisher equation and how the Fed has painted themselves into a corner where they have to take rates negative, but they can't take rates negative because it blows up the whole system. So how do you get around that? Well, you ban cash, and then what you do is you have. Let's call it UBI or whatever. That's funded by Universal Basic Income. Yeah, but it's funded by the Fed's balance sheet. So that's a direct way to get around the banks, to inject more currency units into the real economy without the banks having to create more loans. And so I think that's kind of going to be their rationale. Obviously, they're going to sell it as, this is for your security, this is for your safety benefits.
It's to avoid terrorism, drug dealers, human trafficking.
Freedom Dividend, right? It's the freedom dividend that you deserve as an American. So it's Freedom dividend is $2,000 a month. But in order to get it, you just got to download the Freedom Dividend app on your phone, and then you're gonna have a bank account with the Fed, just like JP Morgan, just like the tga, the Treasury General account, just like the primary dealer banks. Jason Hartman. Well, you might not, because you probably opt out like I would, but Average Joe, let's say, is going to download the app and they're going to have an account with the Fed, and the Fed is going to create new bank reserves, just like they do with JP Morgan when they do quantitative easing and they buy Treasuries. And instead of the Fed buying assets from you, they're just going to simply increase the amount that's in your account by $1,000 with bank reserves.
And that'll be your UBI, your universal basic Income, right there.
Yeah.
And then, and then you go on the phone and you got to spend that money on the phone. And guess what? If they don't like you or you commit a crime or, you know, thought to have committed a crime, they'll just shut you off and you'll have. You won't have any spending privacy at all. They'll know every, every unit you spend.
Somewhere and where you spend it, how you spend it, how fast you spend it. And then if they don't see velocity increasing, what they'll do is they'll just reduce the amount of time that you have to spend your freedom dollars or your.
They'll put an expiration date on it to discourage saving.
That's right.
Unbelievable.
Yeah. They could say, okay, Jason, if you don't spend this $2,000 in 30 days, it expires, it's gone.
Just like your frequent flyer miles in your airline program or that gift card that you didn't use, you know? Yeah. Yeah. Really scary stuff, George. You think we're going there?
Yep.
Yeah.
Yeah. I don't think they're going to have a way out. I mean, if you are under the assumption that the Fed has any level of intelligence in the 900 PhDs of the Fed, and that's debatable. But you can't. I mean, if you and I were at the Fed and they said, hey, Jason, George, we need to create inflation because we have to bail out the government, how are we going to do that? Well, what you and I would most likely do is go, we'd study Japan, we'd study the Eurozone, we'd figure out, okay, why didn't this work? Why hasn't Japan been able to get it? And then we'd sit there and we'd go over the. Obviously have more access to more data than you and I do. So if you and I can figure this out, they've got to be able to figure it out.
Oh, sure, yeah.
And then so they're reporting to the powers that be and they're saying, okay, this is why Japan didn't create inflation. Okay, how can we get around this? And the only answer is to get around the commercial banking system and get velocity up. And even that might not work, but that's kind of the Hail Mary. So the only other option really is belt tightening and austerity. So if you think that with politicians, especially in the United States, they're always going to take the path of least resistance. And so think about how politically palatable that would be for a politician to go out there to their constituents or to go on, you know, Fox News or CNN or whatever and say, hey guys, you know what we need to do for the next 10 years is we just need to produce more than we consume.
Right.
And tighten our belts. And we need to go through the.
1930S, that's very old fashioned and nobody would do it nowadays.
And you guys need to live beneath your means, you need to, your standard of living decrease dramatically for the next 10 years. Or what we can do is we can just give you money to spend every month. Which do you choose?
Yeah, obviously we all know what they're going to choose. Yeah, it's crazy. It really is. Well, George, just wrap this up for us. Are there any. I'm sure there are questions that I didn't ask you, of course, that maybe you just want to say anything. Wrap it up with some closing thoughts for our listeners and viewers, if you would.
Well, I always say that in today's time you can be prepared or you're going to be a victim. And I think what we're talking about with not just inflation, deflation, everything that's going on, the Fed with money printing, you've got to look at hard assets. I mean, I don't care whether you're a gold bug Silver. If you're a real estate guy or gal, you might obviously you want some dry powder there in case we get the stock market going down. You can take advantage of that. But you've got to have hard assets because you just don't know what they're going to do. And we know that it's to their benefit. They're incentivized to create not just inflation, but a lot of inflation.
Right.
And therefore you don't want to be on the other end of that if they're able to achieve it. So again, obviously you're the real estate guy, so I'd defer people to you and I'd be very careful about the real estate as well. I mean these urban areas, I just, I just don't think you want anything to do with that especially. And we didn't talk about the wealth tax in California and all this nonsense.
Yeah.
So you got to be very, very, very careful. But start considering hard assets right now. I also like commodities and as you point out very well. And you have for over a decade that all a house is is just packaged commodities. So I'd encourage people to not only understand this stuff, but to start figuring out how they can apply what we're talking about to their current portfolio or maybe their everyday lives. When it comes to the urban areas and social unrest, that's pretty much what I'd end on.
Yeah. And George, I would agree with you. See, hard assets, I like real estate the best or the commodities that make up the real estate. The copper wire, the steel, the glass, the lumber, the petroleum products, the concrete, et cetera, all the ingredients of a house. Right. Those have intrinsic value regardless of what any currency on earth is doing. Everybody just needs those intrinsically. They have their own value regardless of being indexed to a currency like the dollar or the yen or the euro or whatever. So I agree with you there, definitely. And stay away from the urban areas and stay away from politically left leaning areas. I think we can say with certainty that the left leaning areas are literally becoming, to use a Trumpism, shitholes. And it's just, you know, my home state, the vast majority of my adult life, the Socialist Republic of California. It is so sad to see what is happening to that beautiful state. And they're just ruining it. I mean, the policymakers are just destroying that state and especially the urban areas within the state. So, you know, you look at San Francisco, you look at Los Angeles where I grew up, especially bad there, but just the state in general. And you know, you look At New York. You know, it's just unbelievable. I mean, I just cannot. There's just no excuse. And these mayors, these left leaning mayors of these cities, they should be indicted for not protecting the property and the people that live there. That's their solemn duty is to do that. And they've let this send them to state of anarchy. I mean these businesses are being ruined, lives are being ruined, people are being assaulted, killed, attacked. This is unbelievable that this is happening.
In the U.S. yeah, yeah, that's the best way to say it. And again, you can just ignore this, you can have cognitive dissonance, you can try to rationalize it, but it's not going away. It's not going away and you're going to be a victim.
Yeah, you really are, George. You have a fantastic group that I'm a member of and I just love it. That's kind of the pro version that you offer. Why don't you tell us about that and give people a link where they can find out more?
Sure. So that's a partnership deal I have with Lynn alden and Chris McIntosh. Lynn Alden is an extraordinary mind. She's a, a research analyst, I guess you could say. She's huge on Fintwit. And then Chris McIntosh has been a fund manager for many, many years and they see the world in a very similar way to you and I, to say the least. So we set up this online forum for people. It's called Rebel Capitalist Pro. It has research from Lynn and Chris. We do live streams for members where they can asked myself, Chris, Lynn questions and then the user generated content is fantastic and then it's just a great resource for people. But I always call it a sane space. Right. Because we have all these safe spaces at local university and I call this a sane space because for people like you and I, you know, we go online, you go to your Facebook feed or something like that and it's just filled with just insane. Yeah. Whenever you go online. So this is a way for people who kind of see things the way we do to congregate, to help each other and then to use that research to be prepared and to make more money and to not only survive but thrive in a world of out of control central banks and big governments. So that's George gammon.com.
And I'm chuckling because that's George's tagline, how to survive and thrive in a world of out of control central banks. Good stuff. So the link again is georgegammon.com pro forward slash pro. And that's your rebel capitalist pro group. Good stuff, George. Hey, thanks so much for joining us.
Thanks for having me.
Happy investing, Sam.
