In this interview, Jason Hartman and George Gammon explore how the COVID‑19 crisis has accelerated the shift of the home into the center of economic life. Hartman references the 1990s "cocooning" trend and argues that today’s mortgage payment holidays represent a new form of government bailouts for homeowners. Gammon explains the technical side: the Federal Reserve can increase banks’ reserve balances without creating immediate deposits, but the real‑economy impact depends on whether banks lend or buy assets, which in turn influences inflation or deflation. They discuss the moral hazard created by such interventions, likening it to a "return policy" for real estate. The conversation then moves to the broader policy implications—whether temporary bailouts could evolve into permanent programs like Universal Basic Income, a national Section 8‑style housing assistance, or even rent control. Hartman reflects on how these changes would affect landlords, noting that guaranteed government payments could reduce tenant defaults but also raise questions about digital, earmarked currencies. Throughout, they stress that crises compress future policy shifts into the present, making previously distant ideas (MMT, digital fiat, expanded social security) imminent.
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And I predict, as I've alluded to earlier and talked with you about George, is that the home is becoming the center of the universe. And we can thank the US government for the Internet in the 90s. I remember being a big follower of Faith Popcorn. She wrote a. She's a futurist who wrote I think a couple of books. But one that I read talked a lot about cocooning and how people were making the home the center of their life. And back then, okay, because this is before the Internet really caught on, if you will. The main point or the main reason for cocooning was this. People weren't going to movie theaters because they had big home theater systems and could watch high fidelity movies at home. Okay, that was cocooning back then. Now it's been taken many steps further than that. And you know, just that concept is, it's really kind of interesting because office properties, people are being pushed out of them. Gatherings of every sort. You know, I just wouldn't want to be in the business of owning real estate, that is for a commercial purpose. But I love housing. I think it's all about housing, housing, housing. And homeowners just got another bailout. I just got this one that now you can take a year long break from your mortgage payments. I guess I don't know how the banks are going to survive with this idea, but you know, they'll just get a bailout. I guess it's like trickle, trickle, trickle, just pump the money in the system, right? To prop it up. What do you think?
Crazy really. So this gets really technical. I don't know how far you want to dive into this, but basically this could potentially not create inflation, consumer price inflation, because so the banks have a bank account with the Federal Reserve, it's a reserve account. So the Fed, that's why they mostly do business with the primary dealers because it doesn't create a deposit in the real economy all they do is, let's say you're a primary dealer, you've got a billion dollars in your reserve account. All they do is just type in digits to a computer and now you have 2 billion in your reserve account. But in the real economy it hasn't created any more deposits, right? So let's just say, excuse me, that the Fed comes in and bails out the bank or pays for this year long mortgage. So they would just add reserves to the bank's reserve account that they have held with the Fed. And the only way that that would get out into the real economy is if those banks were to take those additional funds and buy financial assets or create more loans. So if there's no demand for loans because we're in a depression.
Well, there's tons. At the moment, there's tons of demand for loans because the rates went down and the mortgage brokers, they're literally turning business away. It's, it's crazy. But we're only at the beginning of this, so go ahead.
Yeah, so. Well, if that does play out, I'm nothing, I'm saying or certainties, I'm not even making predictions, I'm just saying this could play out this, this way. And then if that goes down as far as the new loan creation and you have more people paying off loans, decreasing the money supply and you could see the opposite, it could be very counterintuitive. And then the only thing else they could do to create those deposits would be to buy financial assets, which they may or may not do depending on what's happening. Maybe they don't want to catch a falling knife. But then behind that you've got all these four letter programs that they've come up with that allows those banks to buy those assets and the Fed to basically pay them for that service and then it goes onto the Fed's balance sheet. So that could increase the money supply in those deposits. There's just so many cross currents.
I know. Yeah, yeah. But I'll tell you the moral hazard here. And I just did a couple of shows on the return policy for real estate, which is an option for people. And, and that's why I think it's a very safe investment because you always have these backdoor options, the return policy for real estate. But it's a lot of moral hazard. That's the problem when the government starts and the government and the Fed, I'm sort of speaking of those two as if they're one. They're not. But when they start intervening and everything, all the concept of whose obligation is anything, it just gets all funky and it's hard to know, you know, the morality of everything disappears, doesn't it?
I think you just hit the nail on the head and that this, what we're seeing is going to be this massive bailout of corporations and most likely the consumer. And I'm not saying whether that's right or wrong, I am saying it's just most likely going to happen. So then how do you pull that back? Right, so let's just say that everyone gets a year long holiday from paying their mortgage. Well, now we're at month 11 and a half. Do you think everyone's gonna be like, yeah, let me go back to paying my mortgage.
I can't wait. Yeah, right.
They're gonna go to the, they're gonna go to their politician and they're gonna say that we need this extended. And by the way, if we extended another year, why can't we extend it five years? Why can't we do mmt? We're not seeing inflation, so why can't we just print the money? It would be just like Section 8 housing in the Section 8 vouchers. Just think if we just said, okay, enough is enough, we're not going to do that anymore. And now because people are so never.
There'd be riots in the streets. Nobody would tolerate it.
Change the way or Social Security, I think that's probably even better.
Right?
What happens if you just, you just mentioned increasing the Social Security age and people freak out? Why? Because they've built their entire lives around this set of rules. Well, if we build our lives now around the bailouts and MMT or Universal Basic Income, try reeling that one back. If people get $1,000 a month for the next year.
You, me and Milton Friedman agree there's no such thing as a temporary government program, right? Yeah, absolutely. You know, and I've said that this is a prelude or call it an excus for Universal Basic Income, which was probably coming anyway, and, or a national housing assistance program like Section 8. You just mentioned Section 8, so I thought I'd bring that up.
What do you think about national rent control? Do you think this is going to potentially bring that.
But I don't know that there'd be a lot of need for it because I don't know that there's going to be that much rent inflation in the near term. You know, there's just, you know, if you have high unemployment, granted, people be getting their checks. You know, I was kind of thinking about this yesterday morning. From a landlord's perspective, if we have universal basic income, temporary or permanent, or a national housing program like a Section 8, as a landlord, it doesn't give your tenant the opportunity to lie to you anymore. That's kind of nice because they can't say, well, I was laid off, or you know, I have these excuses to not pay the rent. I'm like, hey, I know what government program you're on. Pay me. Or the government's just going to pay you directly like Section eight.
Yeah. And you can take it, you can take it a lot of steps further if you start thinking about government backed digital currency because that tenant wouldn't have the ability to not pay you because the, the money that was going to them would be specifically earmarked digitally for you.
So it might make landlording more convenient in some ways. But look at folks, everything's up for grabs right now. It's just there's a lot of unknowns. But one thing for certain, a crisis brings the future closer to us. All the stuff that was probably coming in five years, 10 years is going to happen sooner.
