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Align Your Investing with the Government & Overcoming Inflation

Jason Hartman

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To start the show, Gary Pinkerton shares putting money outside of the retirement plans into places where you have direct ownership and control and where you have free access to whatever you want to do. He also talks about paying attention to what the government is doing and adjusting your plans accordingly. Afterward, Jason Hartman identifies six business plans the government can use to ease its inflationary pressures. He also explains the difference between real versus nominal and price versus value. He ends by illustrating the three ways the government manipulates inflation statistics.

Announcer 0:04
Welcome to the heroic investing show. As first responders, we risked our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 129 129 of Roque investing show. This is a podcast for first responders for members of the military veterans, and really anyone looking to improve their financial future and gain some freedom with their time. We teach America’s heroes how to build passive income, build their startup business, and safely grow wealth through real estate and other alternative investments. I talk with clients every day about full spectrum from life settlements to merchant cash advances to investing in oil wells to leasing the land underneath oil wells, syndicated apartment buildings personal direct ownership of properties, I have to say, I’m still a big fan of one to four family real estate. I was a fan of that before I met Jason Hartman and all of his education and my personal experience has led me to believe that everyone ought to first and foremost, if you have any kind of indication that or inclination that you could handle could stomach the bumps in the road that come with the direct ownership, the tenants and toilets some complaint about, I would highly recommend that you get as many of those conventional loans while you have a strong w two income. And then afterwards, after you’ve got that strong base of direct ownership, then you maybe you branch out and you start looking into being more of a passive investor. Or perhaps you turn and start becoming a money lender or a note buyer. They don’t have quite the tax advantages, the full package of multi dimensional benefits that direct ownership does. But again, at the same time, it’s a bit difficult to scale, you know, one to four family properties. And I certainly understand that I’m starting to look towards larger multifamily stuff. Looking into vacation rentals, or short term rentals, I guess, is a better phrase. So lots of different options.

What I work to do is present for my listeners some education, as well, awesome connections, networking and resources that can help you get into those other alternative investments. When I say alternative, I just mean not Wall Street, right, we’ve all got our 401k thrift savings plans, or IRAs. And we have plenty of exposure to the market plenty of our money locked away in 59 and a half jail, this is very difficult to get to. So I think we should balance we should, you know, look to putting more money outside of these retirement plans out in a place where you have direct ownership and control and free access to use it for whatever you want to do, you know, start a business, like I said, start investing in a direct ownership of property. So that’s what I aim to do for my clients here on episode 129. We’re going to listen to a clip that from an event that I attended last summer with Jason, and he’s going over, you know, really the impact of inflation, the impact of the Federal Reserve’s decisions. This comes right after President Trump, you know, takes office. And you know, there’s a lot of questions out there about what’s going to happen, you know, with taxes, what’s going to happen with interest rates, inflation, you know, so so far,  you know, here we’re talking in 2018 hasn’t been a huge run up in either inflation or interest rates, interest rates have bumped up, they’re certainly higher, and they’ve been for most of the last decade. But well, you know, we’ve changed hands to a new Federal Reserve Chair. And it looks like things are slowing down a bit and just trending upward back to what I would call normal.

But there was a really interesting discussion that Jason has here and one of the big takeaways is never bet against the Fed. And I absolutely agree with that. I always think back to, you know, the old Bugs Bunny episodes they were on when I was a kid, one of the great ones is bugs, as you know, he’s trying to win out against his his enemies, his arch enemies, and eventually in the last scene, he’s having dinner with them at this big table. And he says, If you can’t beat him, join him, you know, sometimes, you know, that’s really what Robert Kiyosaki says is I studied the Fed so that I can see what they’re doing and get on the same side of the table do what they’re doing, as opposed to trying to oppose such a large force that has printing presses and their own bank. checkbook, they can squash you like a bug if you’re on the wrong side of the table. So I don’t make all my actions or take all of my actions simply to be on the side of the Fed. But I look at what they do. And when they do something that I can recreate my own world, legally, not printing money, but the legal things they do, like use leverage and have other people pay it back at deflated dollars, than those things I pay attention to when Congress changes the tax code as they did in 2018. And signals that they really appreciate people running small businesses and having passive income to the tune of giving you 20% of it tax free, I pay attention to that.

So that’s what I try to do is simply educate myself, help educate others, and get us moving in the direction that clearly there are incentives to move. So with that in mind, and being sensitive to the fact that this is a little bit longer clip, I’m going to shift over and let you listen in on a clip from Jason and he’s he mentioned at the beginning of this, that the acoustics are not the best, but it’s adequate. It’s, it’s just fine to be able to get the context of the great message coming from this. And so let’s turn it over to Jason. He’s talking about inflation and the Federal Reserve.

Jason Hartman 6:15
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Jason Hartman 6:51
But I want to take you to a clip of me talking live about some of this stuff, and how you’ve heard me say this before, but talking about the impacts of what the government will probably do. And really, governments I shouldn’t say that plural, not just the US government, but governments around the world will do in reaction to various inflationary and deflationary pressures, we’ve got them both playing out at the same time, in a much different dynamic than we’ve ever had before at any time, really, in human history, at least, in any major shift toward these things. And we’ve got all of this stuff going on with the cryptocurrencies, Bitcoin, the other cryptocurrencies. And I’m telling you folks do not bet against the Fed, do not bet on anything that would be against the Fed, especially these cryptocurrencies, I think you are playing a dangerous game. And as I’ve said many more many times before, I would love nothing more than to be wrong about my advice on cryptocurrencies like Bitcoin, but I don’t think I’m wrong. So just heed my warning, I met someone in Jamaica, she has an app, a startup, kind of a social app, and very, very smart person, who has basically her entire net worth in Bitcoin and I said, Boy, you better sell some of that Bitcoin off, and get out of that. And you know, it’s very appealing, especially if you’re a techie and a tech minded person to think that this is the answer. And we’re going to decentralize the monetary system. But you look at the reaction of China to that, just recently, never bet against the most powerful forces in human history. And that’s why this live clip is important, because I’ve identified most people have identified, you know, one, two, maybe three ways governments will deal with this massive debt load and the inflationary pressures that will cause but I’ve identified not one, not two, not three, most people stop at three. But I’ve identified six, yes, six ways that governments around the world but especially the US government, because the US government is in a very unique and very special and very enviable position to deal with inflationary pressures as they come about. So yeah, the times they are changing it not every way, though. That’s the dangerous thing. It’s easy to think that this is happening every way that the rules are just changing in every way and they’re not. Some things will stay the same. Maybe it’s like, you know, there are some sort of basic things, the fundamentals that will always be the underpinnings of the economy of the real estate market, but then some other things that are really changing so it’s Yeah, it’s kind of an amazing time to be alive. But it’s a complicated time for sure. It’s a time when there’s more options, and more information than ever before in human history. And so that’s all the stuff we continue to talk about on upcoming episodes of the show. And so we’ll dive into that more deeply. But I don’t want to take too much time in the intro portion here, I want to get to this live clip. Again, whenever there’s a live clip, you got to bear with us a little bit on sound quality, the sound quality isn’t too bad. And maybe in the future, I’ll tell you how basic that this recording, but this recording was done in such a sort of a basic format with basic basic equipment that you probably use every day. Okay, let’s get to this live clip. And here we go.

Jason Hartman 10:57
Okay, so, as we have talked about, it is an amazing time to be alive. And during the break. You know what we just did? Stefan Adam and I just recorded the podcast intro for tomorrow’s episode. uploaded, it’s Dropbox or editor can grab it and publish it tomorrow. isn’t that easy? You know how difficult that used to be. It used to be much more difficult. In the old days, I had to walk to school, and it was uphill both ways. In the southern California snow. Yeah. That’s what they always say, right? Older people always say younger people are always so spoiled. We’re saying that now about the millennial generation. This time, I actually think it’s true. They are some spoiled. So inflation. There’s a lot of inflation fear with Mr. Trump in office inflation, fear or inflation opportunity. I don’t know which it might be opportunity, certainly for real estate investors. And basically, we as a country are in a mess. Okay, we are in a mess. We have spent way too much money. Ronald Reagan used to say, to say that the government spends money like a drunken sailor is an insult to drunken sailors. And that’s a great quote. I love that one. Reagan had a lot of great quotes. So the question is, what do we do now? Right? What can we do as a country as a nation to get out of the mess we’re in? What do we do? Well, there are six ways out of the mess that I’ve identified, you’re welcome to add a seventh or disagree with one of my six, I don’t know. But these are the six that I’ve identified. They basically go like this. Number one, we have all this debt, we could just default, and say to that, to Japan, and China, and all of the countries that we owe money to, and all of the people and companies that we have obligations to in terms of repayment of debt, and then also entitlement obligations, which are much, much bigger than the debt. Okay, that’s the what Laurence Kotlikoff, the economist, was on my show a couple times, he talked about the $220 trillion time bomb, okay, of entitlement obligations, that simply cannot be paid. Now, to put this in perspective, just know that the country’s gross domestic product annually, is somewhere around about $18 trillion. And if we have to pay $220 trillion over the next 1520 years, obviously, this map doesn’t work, right? The tax revenue is dramatically lower than all of this. So the idea of taxing our way out of it is very, very unlikely. Okay. Even if you taxed everybody at 150%,

Jason Hartman 13:54
there wouldn’t be enough money. This is just math, okay. It’s just math. That’s all it is. There simply isn’t enough money. So the first two options default on our obligations, that would be very politically unpopular. It would probably create multiple wars. Okay. And it would not be good. The other option is tax our way out of it. That’s impossible. The third option, have a yard sale. We could sell stuff off, right, we could sell off assets that the country has. Many of our roads now are owned by businesses or governments in foreign countries, literally. Okay. Remember, a few years ago, they wanted to sell the ports to Dubai. Right? That was a big thing in the news didn’t happen. But you know, it was it was talked about, remember several years ago when he was alive. It’s just funny how we go back and forth with these little tin pot dictators around the world. It’s really stupid and ridiculous. You know, it’s Ron Paul. He’s the man, you know, too bad. He’s not gonna be present. And maybe his son will be he’s not quite as good. But, you know, his his dad really got it like George Washington said when he was leaving office. You know, do you remember when Washington said this? I don’t remember. But I heard that he said it. He said, avoid foreign entanglements, you know, try to stay out of everybody’s business as much as possible in a, in a connected world, it is impossible to do that. But as a philosophy as much as possible, let’s just stay out of all these dumb wars and all that, you know, it’s just not worth it. Right? The old saying, you got to pick your battles. So have a yard sale, sell something off, we were selling military equipment to our arch enemy for so many years, when he was alive. We just had started this selling military hardware to Kadafi, our arch enemy, and he’s blamed for the Lockerbie, Scotland, bombing of that 747 where everybody died, you know. So this is crazy how the world works, right? So we could have a yard sale, we could sell assets. The other thing we could do is we could steal, we could just pillage right, we could rob other countries of their assets. And so you heard a lot about this during the second, while the first and the second Gulf War, you know, we’re in Iraq to just steal their oil, right? Well, if everybody’s gonna blame us for it, I wish we would have actually done it, we might as well. Right, if they’re gonna blame us for it. That’s what we can do. I mean, if you look at the history of the world, and all these different military conflicts, what you realize at some level is all of these great military leaders like Napoleon, he’s a great example. Okay. Napoleon was really just a burglar with an army. Right? You know, he’s to invade countries to steal their wealth. That’s what he did, right? And so, you know, militaries are used to steal. That’s one thing they do, right. But there’s a softer version of it.

And I interviewed him on the show, john Perkins, he wrote a great book called confessions of an Economic Hitman. And he talked about how he worked for this consulting firm that was hired by the US government to go in and negotiate with foreign leaders, about, you know, making deals with them, Saudi Arabia, when it was just a desert wasteland, we basically made that country incredibly rich by the Economic Hitman deal we made, okay. And this is very complicated and nuanced. And there’s lots of opinions back and forth. My mom listened to his audio book and said, Oh, he’s such a hypocrite, you know, he’s just a guy who went in and profited from all this. And then years later is saying, It’s so bad, but he kept the money, you know, whatever you think, you know, I’m not sure. But it’s interesting to say the least. Right? Okay. So a positive way, those are four negative things that we just talked about. But a positive way that we could get ourselves out of the mess is through technological innovation, energy, biotech, nanotechnology, you know, all these great technologies like 3d printing, etc. Maybe there will be some America centric, big innovation, or many big America centric innovations that will create tons of wealth for the country, and in so doing create a lot of tax revenue for the government. And if that happens, possibly, I guess we could essentially grow our way out of our mess. But it’s super unlikely because the numbers are so big and ominous, with when you’re looking at 220 trillion plus, plus plus, right? It’s pretty hard to imagine that but I don’t know could happen. And it would be great. If it does. Who knows. I believe the most likely way we will work ourselves out of the mess is we will inflate our way out of the mess. Using inflation as a tool to avoid repaying debts, and avoid paying obligations is really a fantastic business plan for governments and central banks around the world. And certainly many, many governments throughout history have done this, and many are doing it today. One huge difference, though, is that the United States has the reserve currency of the world. And it also has the largest economy in the world. And it also has and don’t underestimate this no one really talks about this that I know but me, it also has the biggest brand in the world. Okay, a brand that stands for freedom and opportunity. And we can certainly argue that that brand has been tarnished and diminished. And I would agree, right, you know, especially with the government spying on us and so forth, right?

But still in comparison, America is pretty good place. And a lot of people around the world still want to come here. They may talk on one side of their mouth and say they hate America and America throwing its weight around around around the world. And on the other side, they’ll say, but I’d love to come there. Right? The same time. So America has a big asset in its brand name. And that’s very powerful. I don’t think that should be underestimated, okay. But it certainly has the largest military, the reserve currency and the largest economy. And one way or another, America can get away with a lot of stuff with all those assets, okay. And it also has obviously, very good geography, the American geography has really allowed it to be very safe. It’s got a very secure geography with oceans between it right, you know, poor poor King Kim Jong Hoon, in North Korea, you know, he’s really struggling to get a missile to come all the way here, right. To those evil American oppressors. But you’ll probably one day, you know, pull it off, right? Hopefully you won’t. And, and so the geography is a big American asset to you know, if you, if you’re in Europe, you know, you’re just susceptible to all kinds of problems because of your geography. And we’ve seen that throughout history. So with all these assets America has, it can get away with a lot of stuff. And it can spend like crazy, and it can go into debt like crazy. And it can just create more fake money to repay the debt in dollars that become cheaper and cheaper and cheaper over time. And that is basically the definition of inflation. Okay, so inflation is our friend, as a real estate investor, it is the home run for real estate investors. And there’s really only one opposing force to this inflation. This is going to happen, except for one wild card, which is a significant wild card. And that’s technology, like we were talking about when we started this morning. Okay. So technology is deflationary. Everything else is inflationary. Okay, so these two will be opposing forces, and we’ll see which one wins out. None of us really know. Okay. So getting excited about the government’s mismanagement of our money is, is a pretty big thing to be excited about. Okay. It’s It’s pretty good. And we got a question here for Satan city. around in New Orleans, that a new

Jason Hartman 22:25
God, Okay, go ahead.

Jason Hartman 22:30
Do you have

Jason Hartman 22:36
to give it a paper money?

Jason Hartman 22:38
Oh, that would be bad. Paper money is a real asset. It’s actually a big part of our freedom as people. And we’ve seen attacks on higher value currencies like what happened in India fairly recently, where they de monetize the largest bill they have. And in Sweden is almost a cashless country. Now, it’s pretty much everybody just uses credit cards or wireless payment systems like Apple Pay. So believe me, you do not want cash to go away. Because cash is a very private thing. You can spend it without people knowing how you spend it. If it’s all electronic, the government can track every move. And that is very bad. You know, I mean, part of our privacy is how we spend our money. Right? Okay, so yeah, I think technology of electronic currency unless they’re not controlled by the big powers that be like Bitcoin or these other cryptocurrencies, those would be great. But I wouldn’t bet on them. You know, I wouldn’t hold out a lot hope for Bitcoin, because the likelihood is that, you know, the the fight between huge governments and central banks all around the world, not just the US and the standing armies they control and an idea like Bitcoin, I think Bitcoin is likely to lose, okay. He just did a really good podcast, but the guy that went to jail, they’ll find every possible way to crack down and squash it, you know? Yeah. And we got to not do a lot of questions because of time. Okay. But what’s your question? I just can make a point to point to that. You look at the last couple years.

Jason Hartman 24:38
Yeah. Yeah, the US government can basically force other countries to buy our treasuries. And, you know, we knew that to some extent, if you read the Economic Hitman book, you’ll, you’ll see how this works. It’s a really interesting you know, peek behind the scenes of this world that most of us don’t even know exist. I didn’t know it existed until I found upon that book. Okay. Okay, so understand that in to understand inflation, we need to distinguish between real and nominal and price and value. Okay, real and nominal price and value. So I have in my wallet, exactly $1. That’s all I have, okay, in cash because I mostly don’t use cash, right? So I’ve got this dollar. And this dollar has been around for a long time, not this particular one. But the thing called $1, has been around for a long time. So, for example, the Federal Reserve was created just over 100 years ago, and one of our venture Alliance trips was to the place of its creation in Jekyll Island, Georgia, where they created the Federal Reserve just over 100 years ago. And when the Federal Reserve came out, it’s the United States, I believe it’s the US is third central bank, they had two other failed attempts and Federal Reserve have stuck around for a while. But when the Federal Reserve was created, does anyone have any idea what this was called? reserve? No. Reserve Note? Yeah. I agree. It was you could exchange it for silver. Right? But I’m not getting that technical. I’m just getting really simple. Yeah. greenback. Yeah. Okay. I Oh, you know, it wasn’t an i? Well, it wasn’t I owe you for silver, I guess. Right. I don’t know if it was called that. But I’m just being really simple here. It was called $1. Okay, it was still called $1.

That’s the point I’m making, right? It’s called $1. It was called $1, over 100 years ago, and it’s called $1. Today, yet, the value of this dollar is only about four pennies versus what it was back then. So you’d have to just rip a little tiny piece off. To illustrate the real value of it, the value has changed significantly, even though the name is the same. Nominal means in name only. Okay, that’s what that word means in name only. So the dollar is called $1. in name only. Alright. So we need to distinguish the difference between the name of something and the actual value of the value is a fluctuating thing, even if the name stays the same. Inflation is the insidious hidden tax, that is a pickpocket. It literally takes money out of our wallet out of our savings account out of our stock brokerage account out of our bond account, okay? You know, it is a pickpocket, it’s a thief, it’s a liar and a thief. And why is it that way? because it keeps calling the thing, the same name, yet diminishing the value of it. Okay, so it’s, it’s something very few people really understand. It’s really hard to truly like wrap your head around it. And I would say that I still haven’t wrapped my head around it. And I’ve been studying this stuff for I got really into it in about maybe 2003. Okay. I mean, it’s interesting that I took an econ class in college, and I didn’t get that into it then but when I self study even became interested in for personal reasons, I did get interested, Keith quickly. because money is printed in a central place that money actually goes to somebody first. If that’s the tax, right, because in my basement, I get the most benefit from that. But let’s say I go buy a car. The guy that gets the money for the car gets the next and he gets the money to install the entire money supply recognizes that it’s out there. So the poorest people get punished most Yes. Very good point. Like the prices move up in lockstep. circulates

Jason Hartman 29:02
Yeah, absolutely. That it gets spread around. It’s slow and insidious. And it hurts the poorest people the most. That’s the thing. And this is why By the way, I can’t be a liberal because they say they want to help the poor, yet their policies hurt poor people the most. And remember, I grew up poor, so I know what it’s like to be poor. Now, I wasn’t destitute poor. I still ate okay. Although not much. Okay. I had a little bit. It being poor is no fun, right? But the inflation hits the poor the hardest, because when gas prices go up, for example, a fairly large part of their income goes to gas, especially because a lot of the poor people have to commute the longest to have a job. I just give you a great example in Southern California, Riverside. They if you don’t have as much money you live in Riverside, but you likely work in LA or Orange County. So you’ve got this long commute when gas prices bump up a buck. That’s like hugely significant to them. Okay, richer people. Well, first of all, the dollar increase in gas prices doesn’t matter that much. But second, they don’t have a long commute, because they can afford to buy a more expensive home near near their work. Right. So anyway, yeah, it’s it’s really a bad deal. Okay, so it’s this insidious, hidden tax, inflation destroys the value of saving stocks, bonds, and actually equity and real estate. equity in real estate is denominated in dollars. Anything denominated in dollars loses value, proportionally, so even equity in real estate, but thankfully, it also destroys the value of debt. That’s why it’s a home run for us, because we love debt. Debt is our favorite four letter word. Okay, raise your right hand and say, I love that. Yeah, I know, it’s counterintuitive, right? It’s totally counterintuitive. But it really does make sense. As long as the debt follows rules. It’s not consumer debt. It’s debt against assets that produce income or produce wealth in some way at least. Okay. And it’s long term, low interest rate, fixed rate, debt, investment grade debt. That’s the kind of debt we love. Okay. Inflation is the most powerful method of wealth redistribution. Most people will think taxes redistribute wealth. I had joe the plumber on my podcast before Remember him? Yeah, he was on the creating wealth show a few years back. And he became famous for walking up to candidate Obama and really surprising him and saying, hey, you’re gonna redistribute my wealth. And you know, Obama was accused of being a socialist, and communist and all this stuff, right. So most people think that the powerful method of wealth redistribution is through taxation. That’s a amateur method. The powerful method is inflation. Because inflation redistributes wealth, from lenders to borrowers, from lenders to borrowers. And by the way, this is you can fill this in in your workbook, okay? If you want to, and from old to young. So why does it distribute wealth from lenders to borrowers? Well, if you loan money, and when you loan the money, you loan it in today’s dollar that has a certain value, we know what a million dollars today means. We know what that means, right? But in the future, we don’t know what a million dollars means. That’s up for grabs. So as you go through time, and you’re, say 10 years in the future, okay. And now it’s 2027. I mean, what do you want to bet that that million dollars is going to be worth less than it is today. And you are really not even you, but your tenants pay it back in cheaper dollars. on your behalf? your tenant is like your representative that pays your loan back for you. Okay. So that’s a pretty great deal for a borrower, why would it distribute wealth from old to young, more specifically, you kind of got it. But old people have assets usually, hopefully, and young people have debts.

Jason Hartman 33:14
And so that’s how it’s just distributed through the generation. You know, it’s redistributed from old to young. And it’s totally unfair, old people that did the right thing, delayed gratification, save money invested, but he did all the right stuff, they got totally screwed by the system. And here’s the thing that’s hard for a lot of people to come to grips with. Look, we all have parents and grandparents that we heard, say things to us about money throughout life. And a lot of our beliefs were formed by this. And one of those beliefs at least I heard all the time was don’t have debt. Debt is bad, right? And my mother, and my grandmother who told me that and my grandfather that told me that kind of stuff. Basically, they played that game, that was the right game. That all changed the rules of that game changed in 1971. When we went off the gold standard. Why did it change in 1971? Because when the when Nixon closed the gold window, and the government was allowed to spend without being tied to any intrinsically valuable thing like gold, and I’m not a gold bug at all, but you know, it is a measuring stick, when the government was allowed to just spend like drunken sailors insulted drunken sailors. Okay. Then inflation we saw in the 70s. That went crazy, right? And inflation really has been going crazy, even since then, most of the time, the government just figured out ways to manipulate the numbers really well to hide it from us. And technology, which is a positive thing also hid it from us. Okay. All right. The example is that million dollar mortgage, if over whatever amount of time you want to pick one year, six months, 10 years down, Doesn’t matter if you have 10% inflation in that given period, that real value of that mortgage is $900,000. That’s what you’re really paying back in real dollars, not nominal dollars. In nominal dollars. You’re still paying a million, but in real dollars 900,000 Okay, so that’s the very Swank deal. Okay. You’re Oh, now here’s a good video from CNBC. Now this video is several years old, but it is very, very telling. It’s got Peter Schiff, arguing with a guy named Harvey Hirshhorn from Bank of America, Peter Schiff, although I would never invest with him, actually, I did, and I lost a bunch of money, so I would not recommend investing with him. And you know, it’s like, they couldn’t care less how much money I lost there. They were so arrogant and terrible. They didn’t return a phone call half the time. awful experience. But I invested with Peter Schiff many years ago because he sounded so good. You know, he Peter Schiff is a very intelligent person. He He’s like, quick witted. He’s a master of the soundbite. He’s just got the zingers. And he’s in here and he’s right. Okay. You’ll love this video. It’s great. Because Peter Schiff is right. He just nailed it. Harvey Hirshhorn this guy from Bank of America total idiot, okay. And the host, it’s interesting how the host it CNBC. Just, you know, rails on Peter Schiff. Like he’s, you know, they try to totally marginalize him and make him sound like an idiot, because they’re part of the big wall street central bank government scam. Okay, that’s really like the and, you know, you hear this stuff about like, the people in the media? Well, they’ll say things like, this is how, like, we had a meeting to decide which candidate to support, like the media will defend themselves. They know they’ve constantly accused of being left wing, right, the media, we’ve all heard this, this is not a surprise. Right. And, you know, journalists usually are left leaning people, right. So, you know, they’ll defend themselves sometimes. And they’ll say, Well, you know, we never had any meetings and we’re gonna support Obama or Hillary or anything. I believe them. I don’t believe they had a meeting. It’s just the general Zeit guys the thought, you know, it’s just their their world that they’re talking about that they believe that right? So this is their world. CNBC is like a mouthpiece for the vast Wall Street conspiracy. And you just hear it all the time. It’s just a constant theme. It’s not like, it’s not like they got together and had a collusion to you know, probably, I mean, maybe they did. It’s just like part of the way they think, okay, it’s just the way they think. And so this video really illustrates it. Now, the three basic ways that the government manipulates the inflation statistics, when they publish them in the consumer price index is through three basic things, weighting, substitution and hidden x, okay, weighting just means, you know, in this basket of goods that makes up the consumer price index, the government will say, Well, you know, we’re gonna give more weight to this item, this widget, and less weight to that widget. And if that widget widget a goes way up in price, they’ll just wait it less is though people buy less of widget a okay? And more of widget B which didn’t go up. And so it makes the index look better, like inflation is lower than it really is. Okay. And then substitution is kind of similar. With substitution. They’ll say, Well, hey, the price of beef went up. So everybody will just buy chicken. And we’ll just put chicken in the index and take beef out. Okay. And you know, maybe you don’t like chicken, maybe you think chickens a dirty bird. And you don’t want to eat chicken, right? You want to eat right? And anyway, so you know, that’s substitution, right? The third way is hedonic. And hedonic basically says, It’s from the word hedonism, right? And hedonism is pleasure seeking the amount of pleasure you get out of something, right. So if I take this laptop computer here, basically, every time Apple comes out with a new laptop that’s got enough of an upgrade, I buy it, okay. And I always buy the most powerful, best thing they sell. And every time I buy it, it pretty much cost the same amount of money. It’s 20 $800. For the best laptop they make at any given time, that’s about the price, always the same price for years, it’s been the same price. Now 20 $800, the value of that’s obviously a moving target, right? But the technology keeps getting so much better, and that’s why what incentivizes me to buy a new one. So hidden x will say that even though Jason bought his new computer and paid 20 $800 in actual dollars, the computer is twice as good as the last model. So we’re going to assume he only really paid 14 $100 that’s hedonic indexing.

Jason Hartman 39:57
And that is addressed in this video quite dramatically. So you’re gonna like that. When Harvey hirschorn talks about, he’s gonna say, well, the power of a processor has gotten faster. Well, yeah. So yeah, I mean, Peter Schiff just kills them. But understand that the concept of hedonic indexing is logical. It’s true. Like what they’re saying is true. That happens, technology gets better products get better, right. But you know what they’re saying when they had honestly index, they’re saying that we are not entitled to progress. That doesn’t belong to us. It belongs to the misstated index of inflation.

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