0:01I think I Yeah. When it said I said I could I couldn't be black, but it said I could be It said I could be a woman. I couldn't be.
0:08>> But does that mean it was looking at you? Did you have to like >> No, no, I wasn't. I was just saying, you know, Yeah. I'm I'm a Caucasian male, but I identify black. What's my race?
0:17You're white. Yeah, it would. But it it took me I I got it to agree that I was a lesbian. That it pushed back for a [laughter] while after it said I was a woman. Says, "Well, you can't you can't be a lesbian." Well, why not? I mean, I like girls and I'm a woman. You agreed that I'm a woman.
0:33>> So, how many like prompt back? You can play around with it. I mean, it's it's very politically correct, but when you But you can you can get it like he's getting into arguments with it.
0:42>> Um because it does think logically, you know, so you can push it. You can get it to to ultimately concede certain things.
0:51>> Sure.
0:51>> But uh Yeah.
0:53>> Does it consider you a Puerto Rican as well?
0:55>> Oh, you know, I haven't I didn't ask it about that. that I just got into trouble with that because I was on somebody's podcast and I and I I said I I'm Puerto Rican and a lot of people in Puerto Rico got really upset about that.
1:06>> They got upset at that >> because they said you're not Puerto Rican. I What do you mean I live here?
1:10>> Yeah. How long have you lived there?
1:11>> Almost 10 years.
1:12>> Yeah. See, Dave and I were saying before like if you're in New York for 10 years, they consider you New Yorker. So if you're >> But but that's but yeah, they have some whole thing about you know like more it's ethnicity or something. But I don't know. I mean, I've raised my kids my kids. I have a daughter who's 10. She's spent her whole life in Puerto Rico.
1:31>> Oh, wow.
1:31>> You know, so it's like, is she Puerto Rican? She's, you know, >> you know, she's got white. She's white, but so almost all the Puerto Ricans are white. They're just a little, you know, the little tanner, >> right? This could be a real semantics argument for sure. [laughter] >> They're not, you know, >> but it's nice living down there. I mean, obviously, it looks beautiful, but like how is it from like a dayto-day being like a huge business guy living down there pretty much full time? No, I don't work that hard anymore. You don't work that hard.
1:56>> But we have our whole company there. The whole asset management company's there.
1:59So I got like a dozen employees in Puerto Rico.
2:01>> That's cool. Are they all natives of Puerto Rico or they >> A couple of them are most of them. Most of them moved.
2:06>> So you got a mix. That's good.
2:07>> Yeah. [clears throat] >> But most of them moved from California because that's where the company was located.
2:12>> Well, I've been seeing you on TV for years. Even like when I was in high school, I'd watch CNBC and you were on there all the time. And you are one of the guys and there's a there's a list of them but >> we should get started with the interview.
2:24>> Yeah, we are. We're already rolling.
2:26>> Oh, no. I didn't know. I was I didn't know you you were recording that stuff.
2:29>> Yeah. Good. That was great.
2:31>> No, that was >> You're doing awesome. All right.
2:34>> Yeah. But anyway, so you obviously were a guy who was among a very small list of people who in the years building up to the financial crisis, which is something I've studied a lot, but you know a lot more about it than I do, >> was able to determine that we had a real problem here, particularly with the housing market and what was going to go on. And then you also went to things beyond that as well that we could talk about where we are today with the economy. But like how did you see that so early on? I think you were first talking about that maybe like 05 06.
3:03Well, actually earlier than that.
3:05>> Wow.
3:05>> Um, yeah. And, you know, we we we had a big problem back then. We have an even bigger problem now.
3:11>> We do.
3:12>> Um, and it's, you know, the same uh factors are are behind it. But the mistakes that were made leading up to the the 2008 financial crisis, the mistakes that inflated the housing bubble were pretty obvious to me as they were being made. And they really started after the bursting of the dot bubble and you know also we had these terrorist attacks in 2001 and we had a a shallow recession >> and and so the Fed under Alan Greenspan who just passed away a couple weeks ago at 100 100 years old. Yeah.
3:53>> Hey guys, three quick things. Number one, if you haven't subscribed, please subscribe. It's a huge huge help. Number two, if you'd like to join my Patreon for early uncensored releases of the full episodes, you can join via the link in my description or in the pin comment below. And number three, if you'd like to join my clipping community for a chance to make content from the show and make money, you can join via the Discord link in my description below.
4:15>> Yeah. So, uh, he he cut interest rates down to 1%.
4:20Which at the time was really, you know, the lowest they've been in our lifetimes. We hadn't seen rates that low. And that cheap money is what fueled the the housing bubble because it enabled mortgage rates to come down. But also they developed these uh you know teaser rates where because rates were so low and the Fed had pretty much committed to keeping them low for a while and then raising them very slowly in quarter point increments. So lenders were confident that they could loan out money for two or three years very cheap. And so they were giving out these teaser rates where people could buy a home, but for the
5:08first few years the mortgage payment was really, really low. And so that enabled people to stretch to buy more expensive homes or pay more for homes than they could ordinarily pay.
5:20>> And because interest rates were so low, everybody was, you know, looking for yield. Everybody on Wall Street wanted yield. And what they were doing was packaging up these mortgages, securitizing them and selling them. And there was demand for them. And because there was all this demand on Wall Street for mortgages, uh, you know, mortgages were readily available and people were able to buy mortgages and people now you could have nothing down, zero dock, liars loans. There was all kinds of fraud in it. The government was guaranteeing a lot of the mortgages directly through FHA and indirectly through Fanny and Freddy. And Fanny and
5:57Freddy became the biggest buyers of the subprime market. And I knew this whole thing was a gigantic bubble and that eventually it would pop.
6:07>> Do you remember the moment where you were like?
6:11>> No. I knew it was a bubble, you know, for years and and even like, you know, I rented some space. I had a um I had my broker dealer at the time and I had just moved down to Orange County from the LA area and I had I I rented a lot more space than I needed and so I was subleasasing space and my tenants were always mortgage brokers >> and I could overhear their conversations and it was just pure fraud. I mean, they were just having people falsify their their income and they were cutting and pasting and you because they were cold calling people and telling them, "Hey, we can get money out of your house. You
6:50know, we could get you could do a refinance." And they would inflate their the value and they would, you know, there was so much fraud going on in in in the mortgage market. And I and I saw that, you know, people were being qualified for mortgages based on their ability to pay the teaser rate.
7:09and you know forgetting about you know what would happen if the rates um you know hit their normal level and and and so I saw this going on and I saw people you know buying multiple homes uh you know leveraging up their homes and knew okay eventually rates are going to go up the teaser rates are going to mature you know people and nobody was even using fixed rates people were using adjustable rate you know arms uh so I knew that this was going to end badly I knew that the entities that were securitizing or guaranteeing the loans, Fanny and Freddy, I knew they would go bankrupt. I knew Subprime was going to blow up. you
7:46know, that's how, you know, it got involved uh with that hedge fund to short the subprime market, which, you know, you can see if you go, if you're on YouTube and you look at Peter Schiff mortgage bankers, you'll see a um a talk that I gave in 2006 and in in Vegas at there was it was the Western Western Regional Mortgage Bankers Association >> in ' 06 >> and there were like 3,000 people there maybe and I had spoke the year before in 2005 which really was the peak of the housing market and I was the only one there who was bearish on housing and all the other industry bigwigs were of course very optimistic and so they had
8:25me come back a year later because some of those bearish forecasts were starting to come true by 2006. So, I came on and the main reason I went is I said, "Look, you know, I'm trying to raise money for this hedge fund, the short subprime.
8:40I'll come down there, but I want you to give me like a room so I can do a workshop and let me promote uh this workshop because I'm looking for clients who might want to, you know, get in on this trade." And they said, "Okay." And so, that's why I went down there. But I, you watch the talk and I completely lay out exactly what's going to happen. And it all happened in 2007 about a year after my uh my conference or or that talk is when everything blew up. Uh but I pretty much laid out how, you know, everything was going to collapse, how subprime was going to blow up, how the housing market was going to tank. I I
9:15said, you know, all these mortgage bankers, you guys are going to be out of work. Uh and I was hoping too that more of these mortgage bankers would want to hedge their careers by getting into this fund. And you know, of the 3,000 people that were there, only one person invested.
9:32>> One guy. One guy sent me about a half a million bucks. And about a year later, I think he got 5 million back. [laughter] But but that was it. But that but it shows you like that very few people, you know, they're trapped in the bubble. And even though they were part of it, they still couldn't couldn't see it. One of, if not the most common DMs I get on Instagram are many of you asking me what my favorite books are. Well, today's your lucky day because if you use the link in my description below to join my newsletter, I'm going to give you my top 10 book recommendations right now. Also, if you'd like to join my clipping
10:07community for a chance to make money producing content from the show, you can do so via the Discord link in my description below. And finally, you can join my Patreon for early uncensored releases of the full episodes via the Patreon link in my description below. As always, please take one second to hit that subscribe button if you haven't already. I really appreciate that. Also, the like button is a big help and you can join my newsletter via the link in the description. Well, like the bubble that we have now is much much bigger and and it's a lot broader because it's not just housing because home prices are
10:38actually more overpriced today than they were back in ' 07. They're they're even less affordable than than they were then. Um but it's a bigger bubble in that we have a bigger stock market bubble than the stock market bubble that popped in 2000.
10:54>> We do.
10:54>> Um yeah. Oh yeah.
10:55>> Is that do you derive that from a lot of like the hype with AI in particular? Is there more widespread? Well, the the the the AI related names, the the hyperscalers, the companies that are fueling the demand for AI, right?
11:10>> They're a big part of it, >> but the overall market uh is is more expensive uh than it's ever been in history.
11:19>> Yeah.
11:20>> Um so, you have a stock market bubble bigger than the the dot bubble. And I would, you know, you could throw crypto in there that didn't even exist. that that entire industry is a bubble. So, throw that in there. But crypto uh stocks uh and and bonds, the bond bubble has already popped. But >> can you explain that to people out there who don't understand that at all? Like don't understand the bond market and how it works.
11:48>> Yeah. And and what when I talk calling something a bubble, it's it's it's when the prices don't really reflect the fundamentals reality, right? the prices are become completely divorced from the economic fundamentals. Uh so with stocks it's when the prices you know if you look at the earnings of the companies the dividend yields of the companies and other metrics the price that you have to pay is very excessive.
12:15>> That's right.
12:16>> And it it reflects um optimism. The crowd is very excited and they and they they all believe uh that earnings are going to really grow. Um and and generally they're wrong when you have that kind of mentality. And the same thing, you know, with real estate. I mean, one of the reasons I also knew that real estate was such a bubble was because I would compare the price of real estate to the cost of renting and renting was so much cheaper back then >> in like 065.
12:45>> Yeah. I mean, I remember I was I was still living in Connecticut. I had recently gotten divorced and I was renting an apartment in Stamford and my rent was about $3,000 a month. I had a really nice um place. I was on the top floor so I had like a duplex. I had my boat right you know below me. I could see the the dock. I kept the sailboat there and you know it was a brand new building. It had you know cashiier. It had you know gym. It had a lot of stuff.
13:12And right next door there was, you know, some old town homes and nowhere near as nice as the ones I was renting, but they, you know, and I went there um because they had like open house. So just for fun, I just it was right next door. So I I I went in there and I think they were selling these things for5 or $600,000 the units and they were smaller than the one I was renting. Not nearly as nice, not as nice a view, kind of dark, none of the amenities. And when I looked at what it would actually cost to buy it, assuming like an average person put 20% down and I got a mortgage, it was going to be more expensive. Can we
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15:17That's d o s e d a i l y.co/julian for 35% off your first month subscription. And so, I asked the the realtor that was there. I said, you know, why would anybody buy this place?
15:30because you for I live right next door and for a lot less money you could just rent like one of these condos and they're so much nicer than than than the ones that you're selling. And they said, "Well, you know, but when you when you move out of your condo, you're not going to have any equity." I What do you mean?
15:46Said, "Well, if you buy this, >> when you move, you could sell it and you can make all this money on the appreciation." I said, "Well, why the hell should the price go up? Didn't I just told you you can rent right next door a much better place for a lot less money? And they said, 'Well, you know, well, that's how real estate works. You know, the price goes up. I mean, so you're telling me that if I'm dumb enough to buy this place instead of renting next door, somebody even dumber than me is going to come along and pay even more money, right?
16:12>> You know, but that was the mentality.
16:14You that, you know, prices just go up.
16:16They don't go up. Real estate, the value is the rental income. That's what that's what real estate is worth, right? What you could rent it for. Um, so, you know, so right now we have a bubble uh in all these assets. Now, the reason I say bonds are a bubble is because the the coupon on a bond, and even as we're talking today, the yield on a 30-year US Treasury traded to 5.18%.
16:43That's the highest yield since 2006.
16:46>> So, you're talking about 20 years ago.
16:50Uh, but 20 years ago, the national debt was like, I don't know, 8 trillion.
16:55>> Yeah, let's now it's almost 40 trillion, right? So, it's almost five times the size that that it was back then, >> but the the yield is only 5.18.
17:08>> That's not nearly enough yield to reflect 30 years of inflation that you're going to be subjected to. Because if you loan somebody money for 30 years, when they pay you back, the money is not going to be worth what it was when you loaned it, >> right? Especially when you look at the fact that we got a $40 trillion national debt, which will probably be 50 trillion in another three years.
17:32>> How does it even Peter, how does it even get there? Like people at home, when we look at this, we're like, this is monopoly money. How do we have debt at 40 trillion and see that in any way sustainable to where, to use your term, like it's not a bubble that's going to pop tomorrow?
17:46>> It's well, it's not sustainable. uh and and you know even the people in Washington at the Federal Reserve will will say that it's not sustainable that you know we have to address it but they overlook the fact that nobody addresses it.
18:01>> Yeah.
18:01>> You know they'll talk about how we're on an unsustainable path. Yes. But the destination is you know we could get there any day. They you know they don't know when we're going to become it's going to become a crisis.
18:13>> Yeah. Look at that. Look at the where you started and even a little after you started looking at the first bubble. It was five trillion. Now look where >> well that's well five trillion. It was a lot lower than that if you go back to you know 2000 the peak of the the uh the NASDAQ bubble. But the reason that we have 40 trillion in debt and again that's just the tip of the the iceberg when it comes to what the US government owes because the US government is obligated to make a lot of payments in addition to the the the Treasury debt that that's outstanding. The government guarantees mortgages. The government
18:49guarantees student loans. The government guarantees bank accounts. The government guarantees pensions. the government has obligations to uh um its own workers pensions, social security, Medicare, all that. You know, you're talking well over a hundred trillion in unfunded liabilities. So the unfunded liabilities, which are still real, which is still money that the US government is on the hook for, right? That dwarfs the 40 trillion that we're talking about here, but it's all part of what the government has to pay. But why don't we see that on a chart? I don't like >> because yeah, that's not part of the
19:25national debt because the national debt is just the money the government has borrowed and has committed to repay.
19:31>> It doesn't guar it doesn't count anything else. But if you go to the national debt clock somewhere on that clock, I think they have like the unfunded liabilities.
19:39>> Um but that's not what people talk about, but they're real.
19:44>> There it is. That's what you're talking about.
19:46>> Where?
19:47>> The US debt clock right here.
19:49>> Yeah. Yeah. Somewhere on there. There's so much data on there.
19:52>> They should just put they should put your face as like the background. You know what I mean?
19:55>> And some and somewhere along the way they added that little gold thing that US reserve that that's a bogus number. I don't even know where that number comes from. That doesn't really exist.
20:04>> I think they did that for you.
20:05>> No, they did that for Trump maybe to make him look so he wouldn't look as bad. I don't know. But but the to answer your question where that debt came from, all that debt is government spending that wasn't paid for with taxes, right?
20:19And it's the money the government spent, but they didn't take the money from us.
20:22They borrowed it. Um, and >> wait, I'm sorry. They b they didn't take they didn't take our tax money.
20:28>> No, they just borrowed the money.
20:31They They're running these def deficits right now. The the government is running about a $2 trillion$3 trillion debt deficit every year.
20:39>> That's money the government spends on the military, on social security, >> above what they take out, >> what they collect in taxes. Okay. Got it. Right. But the the problem is we're on the hook for every dime the government spends.
20:53>> Right?
20:53>> Even if they don't take it from us in taxes, we still owe it. Right? That's why the big beautiful bill was such a a lie because the Republicans, Donald Trump try to claim that that was a tax cut. But it wasn't. It was a tax increase because government spent more as a result of that bill, not less. In they increased government spending. Yes, they cut income taxes for some people, but they increase spending. And so the difference is borrowed and then printed.
21:22And the reason that prices have been rising, the reason we have inflation is because of those deficits. Because the Federal Reserve monetizes those deficits, it creates money and buys government bonds. And that new money is what's bidding up the prices. So >> the way we pay for government spending when they don't take the money in taxes, we pay for it with higher prices. We pay for it with inflation or interest rates.
21:48So when you go to the store and you know you buy groceries and the food is a lot more expensive.
21:53>> The it's the food isn't more expensive, the government is more expensive. You're just paying a tax every time you buy that food. So you're paying for the military. you're paying for social security when you go and you buy groceries or when you buy gas or when you buy everything. There's an embedded tax in there that is the result of all of of these deficits. But the reason I said that bonds are a bubble is because I don't think the rates are high enough to reflect the real risk of owning bonds. And the there's there's two risks, right? One is default and the other is inflation. Now, some people
22:33might think, well, the government, the US government's not going to default, right? Well, maybe, maybe not. I mean, they might. They def you know, they defaulted in the past on their obligations to pay gold. You know, at one point, >> when was that?
22:44>> Well, in the 1930s and but but actually the price >> actually in 1971 when Nixon took us off the gold standard. Even as late as then, our foreign creditors who had US dollars, we were obligated to pay them gold dollars, you know, Federal Reserve notes for IUS for gold, right?
23:02>> And we defaulted. We told our creditors, we promised to give you 35 uh um an ounce of gold for every $35 you had.
23:11Now, we're going to give you nothing. We basically defaulted on these liabilities. So, you know, we have a history of not honoring our debts when it becomes a problem because, you know, redeeming our notes in gold became a big problem back then because we had printed too much money. So, it's it's it's not the government may default and default can happen um in different ways. So, the government could say, let's say, you know, you own a US Treasury bill that matures in a year, right? The government can say, you know what, we're not going to pay you in a year. we're going to pay you in 30 years. So now you have a 30-year bond.
23:47So now, you know, that's kind of a default because you're not going to get paid when you thought. And if the government does that, your bill, which was worth a dollar, will probably be worth 40 cents, right, immediately because now, you know, someone would have to wait and they could freeze the coupon or they could lower the coupon.
24:03Well, they could say, "Okay, you bought, you know, you bought a bill uh with a uh three and a half percent, 4%. Uh you know, you now you have a 30 year a 30-year bond at 4%." Or they might actually say, "You know what? We were going to pay you 4%, now we're paying you 1%."
24:20>> You know, what do you do?
24:21[clears throat] You can't sue them.
24:23[laughter] >> So So they they can pretty much do what they want. So they they may default. I mean, there's ways of defaulting like, yes, we're going to give you your money back, but we're going to give it back to you in 30 years instead of, you know, 30 days, and we're not going to give you 4% or 5%, we're going to give you 1%. So, it really wipes out the value. But if they don't want to do that, they just print a lot of money, which is what I think is more likely to happen, which means inflation is going to go from a a a bad problem uh to uh something much much worse.
24:58>> Yeah. So, you know, people think that we had a lot of inflation um you know, in the in the past, you know, four or five years. That's nothing compared to what's coming based on all the money they're going to have to print. Because what I think is going to happen is that the world is going to stop, you know, loaning us money, stop buying treasuries because the yields are not high enough to reflect the risk.
25:25because they [clears throat] start to worry about the enormity of the debt, the trajectory, the fact that nobody is going to do anything about it. I mean, even the Republicans, right, they they've campaigned on fiscal responsibility. We need to shrink the government cut the deficit, but they don't they don't govern that way. No.
25:42>> Uh and so and the Democrats, of course, you know, they want more government.
25:45They want, you know, government spending to go up. So, they're not fiscally responsible. So, if nobody's going to be responsible, why would anybody want to loan us money? And I think that the the Federal Reserve is going to have to buy a lot more bonds in order to prevent rates from really skyrocketing, which is what they would do.
26:06>> You know, can we take a step back for one second just so people can follow this? I think before we get to what the prediction will be here where you're laying out where the inflation is going to get way worse, I think what would be really helpful is if you could explain what the Fed did particularly with quantitative easing right after the right after the crash in08 to basically like buttress up the economy because that kind of continued to get us on this road.
26:30>> Yeah. Well, you know, first of all, quantitative easing is just a euphemism that the Fed came up with.
26:36>> Yeah. Nice term. um so that they wouldn't have to say inflation because quantitative easing is inflation.
26:43>> Yeah, it's quantitative though, >> right? First of all, inflation because a lot of people a lot of people don't even know what inflation is. People think inflation is rising prices and and that's by design, but that's not what it is. If you get an older dictionary, even even in the 1970s, a Webster dictionary, and you look up inflation, it will say an expansion of the supply of money.
27:04That's what it is. Uh, and it's also credit, the expansion of money and credit because you can buy stuff with credit even if you don't have money. So money and credit as you expand that you're inflating. Uh, and that's what inflation is. That's the root of the word to inflate. Um, prices don't inflate. They can go up, they can go down, but you can expand a price the way you expand money supply. Now what happens when you expand the money supply? You have more money, >> prices will go up. So rising prices are the result of inflation. They're not inflation itself. They result from inflation. Now the reason that over time
27:43the government has worked so hard to change the definition of inflation is so the public doesn't know where the hell it's coming from. Because if you think that inflation is rising prices, then you blame whoever raises the prices.
27:58That's right. So you can blame the greedy gas companies or you could you could blame whoever you want the businesses. But the only reason that businesses are raising their prices is because the government is creating the inflation that is causing uh their costs to go up and because their costs are going up which are their prices. They they raise uh prices to consumers. So it it enables the government to create inflation but then blame somebody else for it. So when they did quantitative easing, it was inflation. They said, "You know what? We're going to try to inflate our way out of this problem. We're going to
28:33print a lot of money to stop real estate prices from falling, to stop stock prices from falling and they succeeded in doing that. Uh but they also caused consumer prices to rise. Now you know they they would have actually fallen because people think that inflation let's say prices go up 2% 3% one year but had the government not created inflation maybe they would have gone down two or 3%.
29:02>> Sure.
29:03>> So the in the the effect of inflation is not just that prices went up 3%. But that they didn't go down 3%. That's 6%.
29:12That's 6% more that you're paying than you would have paid absent the inflation. And you know, the government tries to claim that we need prices to go up. That's part of the justification for why they create inflation because they say we need prices to go up 2% a year.
29:28Why? Why? Why do we need that? Why Why can't they go down 2%. Why do they have to go up 2%?
29:33>> Yeah. What's their argument for that?
29:34>> They Well, they have [ __ ] arguments.
29:36I mean, they the arguments are that if prices don't go up, people won't buy anything. M. So, it's only because we're worried that prices will go up that we buy, which is complete nonsense because we buy things that we need and that we want. Um, and if prices go down, that's a good thing. We buy more because we we can afford to buy more. I mean, everybody wants the cost of living to go down. Nobody nobody wants prices to go up except the government. And they claim that we need that. Um, and you know, the only time that you don't buy something because you is because you can't afford it. And the way you will be able to
30:15afford it is if the price goes down. So if if something gets cheaper, then you'll be able to buy it. If it if you can't afford it and it just goes up every year, then you may never be able to afford it. Um, you know, they also claim that businesses can't make money if prices are falling, which is nonsense because businesses are concerned about margins, not the price. So, if their costs are going down and their prices are going down, >> they can actually make more money. Yeah.
30:40>> Even if the margin is the same, because they can do more volume, >> you can you can always sell more at a lower price.
30:47>> That's why everybody is trying to lower their prices so they can sell more stuff. So, it's just nonsense to say that we need to have rising prices. We don't. I mean, the economy had falling prices. If you look at the CPI in 1800 and you look at it in 1900, it fell by 50%.
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32:10They're the real deal. clean sourcing, no synthetics, no sketchy additives, and they actually educate people instead of just pushing product. Their products are beginner friendly, legal, and actually work. So, if you'd like to check them out today, head on over to www.amantara.com/go/juliana, link in my description below, and use discount code JDP22 at checkout for 22% off your entire order. Once again, that's www.mitara.com/go/julian, link by description below, jdp22 at checkout. Boom. So stuff was I you probably you're not going to see a chart that's going to go back that far probably. But but prices were half as
32:46much in 1900 as they were in in 1800.
32:50>> You remember that?
32:51>> Well, I wasn't around but you know but funny you know like cuz you know I talk to my kids and I say hey you know I remember when I was your age this only cost me a dollar right >> and my father used to say when I was your age that only cost me a nickel right? People always tell you how cheap things were. Well, in 1900 when grandparents talk to their kids, they say, you know, I remember when that cost 10 cents. Now you can get it for a nickel, right? Because things things actually got cheaper. But we had a stronger economy. We had a booming economy in the 1870s, 1880s, 1890s.
33:24>> All at a time when prices were coming down.
33:27>> That was the peak of the industrial revolution.
33:29>> Yeah. That was, you know, that that that and and even Trump talks about that as the heyday of American uh dominance. And you know that's when we we we had the fastest growing economy relative to the rest of the world. And that's when we had no government. We had a tiny government. We didn't have the income tax. We didn't have the social security tax. You know, we didn't have any of these government agencies and departments. It was, you know, government was small.
33:50>> They had no income tax back then.
33:52>> No.
33:53>> Wow.
33:53>> No. The income tax came in in 1913.
33:56>> But how did they pay the government bills? What was their >> Well, the government was tiny. There wasn't There wasn't much to pay. They had they had some tariffs. They had um uh you know some taxes on liquor, taxes on firearms, tobacco taxes. The government ran on excise taxes. There was no you know there there was no nobody filled out tax returns.
34:14>> So people had to buy to support the government's revenue effectively rather than the government using a deductive tax.
34:21>> Right. And there was no deficits. The government just spent what it collected.
34:24>> That's nice.
34:24>> Uh and the government was small. I mean it was no big deal. It was an afterthought and we you know we were a free country. That's why people were coming here from all over the world to they wanted freedom. They didn't want government programs or or handouts. They they just wanted to be left alone >> and and that's when we had a really booming economy. But getting back to your question on on quantitative easing.
34:44So quantitative easing was inflation.
34:46And you know the the current uh chairman of the Federal Reserve Kevin Walsh, you know, he's correct when he says that inflation is a choice. And it's the choice that the central banks always make because it's the lesser of the evils from their perspective. I think it's actually the greater evil, but from a politically expedient perspective, it's it's better for the politicians to create inflation. So the that the the policy following the 2008 financial crisis was to create inflation.
35:15>> Uh which is what they did.
35:16>> Yes. Um, and you know when gold, if you look at the price of gold in 1999 2000, gold was under $300 per ounce.
35:28>> Yeah. Now it's over 4,000. [snorts] And and the reason for that is we've debased the currency. We've created so much inflation. You need more dollars to buy an ounce of gold. Now the stock market, the Dow is about 50,000 and in 2000 it was 10,000. So that the Dow is up 5x >> but gold is up more than 10x during the same period of time. So what that shows you is yes we created a lot of inflation to get asset prices to go up in nominal terms in terms of dollars but in real terms priced in real money priced in gold. The market is a lot lower than it was 25 years ago.
36:07>> Lower.
36:07>> Yes. Not even >> way lower. It's half of what it was.
36:11>> Wow. Um and and and that's why you know afford everybody talks about affordability. We have an affordability crisis because the government has destroyed so much of the purchasing power of our money and they did that you know to bail out the the banks and bail out the the stock market in 2008. They did it again during COVID, right? They printed a crazy amount of money [snorts] in 2000. The Fed's balance sheet doubled in 2020. We flooded the economy with inflation. That's why prices really soared in 2000 in in 2021 uh 2022. You know, Trump and the Republicans want to say, "Oh, that's it was because of
36:54Biden." I mean, it wasn't because of Biden. The policies that created those price increases happened under Trump. It was, you know, Trump's final year, 2020, when we had COVID, and that's when the deficits exploded with all these ridiculous government programs, uh, you know, the, you know, the the purchasing, uh, power or protection PPP program, whatever it was, or the stimulus programs, but, you know, the Fed slashed interest rates back to zero uh, in 2020.
37:26So, we we we really primed the pump with a lot of inflation. There is a lag between the creation of the inflation which is the expansion of the money supply and credit and the impact it has on prices.
37:38>> So we created the inflation under Trump it manifests itself in rising prices mainly under Biden. But if you look back at a chart of the CPI and see when it really started to rise sharply, it was in the last three or four months of Trump and then that continued and it was accelerating even before Biden's first uh you know bill was passed. A and so even if Trump had served two consecutive terms had he been elected president would have had the same the same thing.
38:09inflation had been just as bad if Trump had been elect reelected back then as Biden. Um and and now I think it's going to be even worse, you know, in Trump's second term than it was, you know, under Biden's. Uh because I think we're going to see uh this big drop in the dollar as the Fed has to really crank up QE again.
38:32You know, Warf said, you know, inflation is a choice and he's going to make that same choice. He's going to make that choice for the same reason that uh uh Greenspan chose inflation, the same reason that Bernani and Yellen and and Pal they all chose it because the alternative was a crash in the stock market, a crash in the bond market, which we need a crash in the real estate market, a severe recession, high unemployment, >> we need it, >> a financial crisis. Well, unfortunately, we need a lot of that stuff because the whole economy is screwed up because of years of artificially low interest rates, inflated asset prices. The
39:14economy is messed up by what the government has done, right? Free market forces have not been allowed to operate.
39:24And so, we have all kinds of imbalances in the economy, uh, bubbles, you know, misallocations of resources. There's been so many mistakes that have been made as a result of this bad monetary policy that correcting them, you know, will involve a severe recession, uh, bankruptcies, um, you know, a a big increase in unemployment. It's going to be very difficult to to fix what the government broke. So I think where the younger generations looking at millennials and Gen Z and what's the generation below them that's not in the workforce yet called? I don't even remember. They're called what?
40:03>> Gen Alpha.
40:03>> Gen Alpha. So they're not in the workforce yet. But if we're talking about a future crash here sometime in the next 5 years or something, where people are going to take issue with that type of idea is that the ones this entire bubble has been inflated by the older generations being in power. And those people own the homes that they bought for [ __ ] 10 grand in 1972 and are now worth 3.5 million. They'll be okay when something like that happens.
40:29the people who will get hit the hardest overall by and it's this isn't a perfect way of putting it but the overall like weight of being hit when you look at unemployment opportunity stopping the economy taking away income things like that are going to be the younger generations and they're probably sitting here I mean I know I am looking at this going well wait a second the people that caused this are the older people and now they want us to carry the bag because it it's a healthy way to reset the economy it's kind of a tough argument >> no actually it's it's it's going to be the reverse >> you think it'll be the reverse
40:58>> yeah well right Now it's the my generation, right? I'm at the tail end of the baby boom. [ __ ] >> Hey guys, if you haven't already subscribed, please hit that subscribe button. It's a huge huge help. Thank you.
41:09>> But you know, um yes, you know, pe a lot of people bought homes, uh you know, for 50,000, 75,000 that are now, you know, a million, two mill, whatever. Um but they're not really worth that because they can't sell them. There's no there's no buyers who can afford to pay those prices. It's an illusion. And >> yeah, well, you people can't sell their homes. I mean, look, look at the supply of homes for sale that, you know, the price, you know, uh, time on the market is going up, sales are collapsing because people can't afford these prices.
41:42>> And the reason that prices are too high is because of the government. Government policy of subsidized mortgages, guaranteed mortgages, artificially low interest rates, uh, the deductibility of mortgage interest. All of these policies were designed to increase housing demand and all that did is push up prices.
42:01>> And in fact, even Donald Trump, you know, when he's asked about the housing problem, his solution is not lower prices. He wants prices to keep rising because he wants to protect the paper wealth of maybe his base, >> the boomers. So he just wants to make it so that people can borrow more money to overpay for these houses by lowering interest rates, which we we really can't do without just creating massive inflation. Uh but what's going to happen is home prices are ultimately going to collapse. Um and so that you know that will benefit the people who don't own homes who want to buy them. Uh you know
42:41that that same thing with stocks. I mean all these prices are going to come down unless you know we have hyperinflation.
42:47Then all the prices go way up but people are in the streets >> but it's but it's only in in in inflated dollars. They they the prices won't mean anything. That's right.
42:56>> Um if the dollar collapses and then you know you know the price of gold soarses and >> and and you know ultimately um the the younger people I think get out of jail when this whole when the whole thing collapses >> because they they don't have anything to lose. the people who are going to get wiped out have savings, have financial assets, have, you know, have these overpriced homes. Um, but right now, younger people are struggling because of the policies that are being pursued to keep the bubble from deflating. That is the problem. The artificially low interest rates, the overvalued assets, uh, that's what's harming it. In fact,
43:36you know, younger people now, they're, you know, they're paying these payroll taxes. If you get a job, you or you're self-employed, you're paying 15% payroll taxes, that money is going to uh retirees uh who are, you know, playing golf and, you know, >> I'm well aware >> and a lot of young people are struggling and those taxes are going to have to go up. I mean, if they're going to try to continue this social security Ponzi scheme, they're going to have to continue to raise taxes on the younger people who are still working so that the older people who stopped working can keep getting money. But the money's not
44:12there. I mean, the money was spent, you know, decades ago.
44:15>> Yeah.
44:16>> You know, just, you know, the government didn't set it aside and invest it. It was all spent. And and so either there has to be massive cuts in benefits uh for the pe the people who are receiving social security or they're going to raise taxes on the younger people who are still paying. But the problem is how do we wind that down?
44:33Social Security, like you said, it has a Ponzi we just had the fat electrician in here. He laid the whole thing out like it has a Ponzi scheme. It it's it's got Ponzi scheme written all over it. So, how do we just like cut the cord when all the people who would have to vote on that legislation or people who are incentivized not to cut the cord because they'll be voted out of office right away if they do?
44:51>> Yeah. Well, you know, you have a lot of people who are living off of social security who collect Social Security and they're not going to uh vote for a politician who's going to take it away.
45:01>> That's right.
45:02>> Um, you know, I mean, originally when Social Security was first proposed back in the 1930s, a lot of Republicans were against creating Social Security. you know, Roosevelt created it. Uh, but none of them want to get rid of it now. I mean, you know, once people get a benefit, it it's almost impossible to take it away. Even the people that might have opposed it before it was created, >> uh, don't want to don't want to take it away. So, that's why they call social security the third rail because if you touch it, you know, you're politically dead. Um and that is the problem that you know and it's one of the reasons I
45:38think that you have this big increase in the appeal of communism you know socialism among young people is because this maintaining this Ponzi scheme is very harmful to the younger generation who's who's holding the bag and you know they they kind of you know get led astray because they they blame their predicament on capitalism. None of this is capitalism. This is all the socialism that crept into capitalism. You know, the government introduces socialism into capitalism and that causes problems and then the problems get blamed on capitalism and the solution is always well we need more government to solve
46:17these problems when it was the government that created the problems.
46:20Could you see how people might look at something like say a wideopen policy, free policy like Reagan did with with trickle down economics and say that that didn't that ended up having capitalism lead to and I say this as someone who believes in capitalism by the way. I just want to be clear I'm devil's advocating. But like that led to people that it was supposed to trickle down to actually not receiving it and just the top half of society got or the top 10% of society got way more wealthy.
46:49>> Yeah. Well, you know, the Reagan tax cuts, uh, you know, they did reduce marginal marginal tax rates, but the problem was government spending continued to increase. They never got the spending cuts that they were supposed to get, and so the deficits got bigger and bigger under Reagan. So, it wasn't legitimate tax relief. Although, I think the reduction in the marginal rate of tax was a good thing, and it ultimately led to the government collecting more taxes, >> but the spending outstripped it. that that was the big problem was the increase in government spending. But the way capitalism works, you know, because
47:24forget about it's the taxes, the way anybody gets rich in a free enterprise capitalist system.
47:34I have to figure out what people want and and provide it to them at a price that they can afford a at a quality that that that that they that they like.
47:48>> And and so if I can do that, I can earn a profit.
47:54And and I I only earn a profit if I succeed. if I succeed in combining resources in a way that I can produce something uh for a dollar and you're willing to pay me $2 for it. And if you're willing to pay me $2 for it, that means I've improved your life or you wouldn't give me the money. You value whatever it is I've sold you more than what you paid to provide to get it. And so you're benefiting from capitalism because I've improved your life. And what happens is I'm not the only businessman. I'm competing with other businessmen and and and and they're they want your business and so they might undercut my price. They might sell you
48:31the same product for less or they might come up with a better one. So you have all these people trying to figure out how to make your life better and if they can make your life better, they get rewarded, right? So it it's not so much trickle down. I mean that that's how everybody benefits from the invisible hand of capitalism. And in the process, if I'm creating a business, I'm going to need help. I'm going to hire people.
48:53they're going to have jobs. Now, you know, having a job is a lot easier than starting a business. You know, when you when you run your own business, you know, it's a lot harder. Uh, anybody can collect a paycheck, right? You get a job, your boss tells you what to do and then you do what you're told and you get a check every week and you, you know, you know exactly what you're going to get. You don't take any risks. It's pretty secure. you know what your income is and you just do what you've been assigned, right? But when you start a business, you have no idea if you're going to make any money. You may lose
49:27money. You take a lot of risk. Um you you maybe you have to save for a while.
49:32You have to underconume. You need some capital. Um uh to start your business and you know, you pay your workers, you pay your landlord. You know, if you borrowed some money, you pay interest.
49:45You only get money if there's something left over. If there's nothing left over, you get nothing.
49:50>> Um, so, you know, it's it's a lot riskier. It's a lot harder to be the boss and create the jobs, which is why most people want to be an employee. They don't want the responsibility. They don't want to assume the risk of being an employer. Uh, but it's the businesses, this the entrepreneurs that create the jobs, that produce the products, that provide the services that that that grows the whole economy. It makes everything everything work. when you have a a socialist economy and there are various forms of socialism. You have communism, you have fascism, they're all types of socialism, but in in social
50:26>> across the political spectrum.
50:28>> No, they're on the same side. And that's like a lot of people think that they're opposites. Like fascism and communism are opposites. They're not. They're they're they're they're close together, >> right? But one is more left-wing ideology, one is right-wing ideology.
50:40>> No, they're both they're both on the same side. I don't I I I would put them based on how we describe it today, they're both on the left because if you look at a spectrum, if you want to look at a political spectrum, on one side would be anarchy, right? No government at all.
50:54>> So let's put anarchy >> on the extreme right, zero government, which really can't exist. On the extreme left is total government, right?
51:02Totalitarianism, complete government, no individual liberty, complete government control of the economy, right? And so as you move from right to left, you're going from less to more government. And so as you're going left, that's where you're going to run into socialism. And fascism and and communism are leftist ideologies that have a lot of government control. Like if you look at the Nazi party people, the Nazis were fascist.
51:29What are the Nazis? The Nationalist Socialist Party of Germany, right? They are socialists. the the the Mussolini was the first fascist complete. I mean, if you look at Mussolini's platforms, there's nothing in there that Bernie Sanders is going to disagree with or AOC. I mean, it's their it's their platform. I mean, it's it's government really controlling the economy through taxation and regulation. That that that's what happens uh in fascism. I it's it's not some radical uh rightwing.
52:03It's not like you go from believing in no go, you know, li limited government to a lot more government, which is what you have under fascism. But the problem with those types of economies is they are not efficient. They they they do not lead to the rising standard of living that you have under capitalism because you have no profit motive. You have no real pricing mechanism. Nothing can get done. I mean that's why >> then why did then why did Germany's economy when when Hitler come in when when Hitler came in become more business friendly?
52:34>> It didn't [laughter] the government when when when you're talking about the government getting more involved in business that's not business friendly.
52:42In fact, I think that's business unfriendly because you're you're tilting the playing field. The government is getting involved in some companies to the detriment of others. the government needs to stay completely out of it and allow the free market to allocate resources, to allocate capital, uh to set prices. You don't want government getting involved. I mean, that's why when the communists, you know, the communist government still rules in in China, but they're not a communist economy. They're in many cases a a freer economy than the United States.
53:14>> Free Yeah. is is you know there there's a lot of capitalism in China politically you know they have less freedom but economically it's a market economy much more so even than the United States uh in your everyday life so if you were to go out and start a business as a young man in China just set up a business you're going to have less interference from the government than you would here not as many you know forms and and taxes and licenses and there there's more freedom to do things. That's why so many people were lifted out of poverty in China. That's how come China has a middle class today. It's because they
53:56abandon the the capitalist the the the communist economic model in favor of a capitalist model. They didn't they didn't become a democracy uh but they freed up their their economy.
54:09>> But the government does get to control kind of who wins and who loses. Yeah.
54:12The the government does >> that's why I'm making the comparison.
54:15>> The government the government does interfere in the economy and that's to the detriment of the Chinese economy.
54:20The Chinese would be in better shape if the government did less. But the same thing here. Our government interferes in our economy dramatically too.
54:28>> Can you give some examples of >> Well, just about everything. I mean, you know, your business I mean there, you know, there are all these rules and regulations. You start a business there's so many things the government says you have to do and there's so many things the government says you can't do, right? you have all these rules and you break the rules, you could be fined, right? You could sometimes, you know, you could be imprisoned. Uh and then of course the government takes a lot of taxes away from you, right? Uh from your business. So they they take a good chunk of your profits. They're like your
54:55silent partner. Uh they don't help you make any money, but they just take a good chunk of what you earn.
55:01>> Uh so the government is very active in in the economy. Um, and you know, we would be much better off if if they didn't do that. And you know, and most of what the government does with our money is they just redistribute it. They take it from people who who earned it and they give it to people who didn't.
55:22And a lot of the times they're giving it to people who, you know, have political uh favors. You know, they're, you know, uh they're rewarding people who vote for them or who give them campaign money.
55:34But you don't want to have that. You want to have the government just staying out of the economy. And to the extent that, you know, people think, oh, we need government to take care of the poor. Well, in most cases, the government is creating the poor. But to the extent that you have poverty, we don't need government to to uh to take care of it. In fact, if you look at before the 1960s when we had the war on poverty because that's when Lynon Johnson declared war on poverty, we had more poverty after the war than before because government programs perpetuate poverty by design. They trap people in
56:11poverty. Um, >> how do they do that? I agree with you, but how do they do that?
56:15>> Well, I mean, it's the incentives.
56:18They they they pay you. They if they're going to give you money not to work, well then all right, I won't work. give me money. And especially when it came to women with children, they told young women, if you have kids and you're not married, we'll give you money. And the more kids you have, the more money we're going to give you. So what was the incentive? I'm I'm going to go out and have some kids. I'm going to get some money from the government. And then the government says, if you get a job, we're going to take those benefits away from you. All right? So I'm not going to get a job. I don't want to lose these
56:45benefits. Uh and then, you know, they they have things like the minimum wage law, which makes it very difficult for people to get their first job. And if you can't get your first job, how are you going to get your second job? How are you going to get your third job? And >> isn't the minimum wage so low though?
56:59Like people can't even pay for anything on >> Well, fortunately, inflation has eroded away the minimum wage. And so it's not as big a barrier >> for some people as it once was. But a lot of states have raised their minimum wage, $12 an hour, $15 an hour, >> which still gets you dick with in this economy with with money gets you nothing.
57:21>> I know. But what it but what it what it also does is prevents you from getting a job. Because the most of the value that most people have to contribute to an employer, they learn on the job. They don't learn it in school. The skills that increase your value. And if you're not going to start your own company, if you're going to work for somebody and you're going to exchange your labor for a paycheck, your labor has to have value. I'm, you know, I'm not going to hire somebody unless I believe that hiring them is going to help me, right?
57:56You you if you're, you know, you've got to give me labor that has value to my business so that I can earn more money because I hired you and and so you know, what are you you know, what are your skills? What value can you add? Most people gain those skills that help create value on the job, right? They they learn, you know, as they're doing stuff. They don't. It's not what they learned in school. So, you got to get your first job, right? And then, and then you you increase your marketable skills to get a promotion or to get your second job or your third job. So, you got to get on the employment ladder. The
58:33problem with the minimum wage is it makes it so much harder to get your first job because let's say the minimum wage is $15 an hour.
58:41Um, all right. Well, I've got to deliver $15 worth of value to get hired. But not even $15 because if I hire you, let's say at $15, I got to pay payroll taxes.
58:53>> Uh, you know, I've got workman's comp. I got other things. So, let's say it cost me $20 an hour to hire you. Even though you only get 15, it cost me 20. Well, what if what if you don't have $20 worth of value to offer me? Why should I hire you? I'm not going to do it. But, you know, uh, but if I could pay you five bucks an hour, maybe that maybe maybe it might work.
59:18Maybe that, you know, maybe maybe that's enough. Maybe, you know, maybe I can make money. Um, but someone might say, "Well, $5 an hour is not enough money.
59:26How can you raise a family at $5 an hour?" You can't. That's why you don't have a family when you can only earn $5 an hour. But if you're still living at home, if you're 18 years old and you're living at home, who cares if the job pays $5 an hour, take it. If that's the best you could do, you really need that job because you have no skills. You know nothing. But getting that first job is what will enable you to earn more money eventually. So that by the then you earn $20 an hour, $50 an hour, then you can start a family. then you can move out and get your own place.
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