Silicon Valley Bank MELTDOWN Explained | How to PREPARE for the RECESSION | Jaspreet Singh | Transcription

Transcription for the video titled "Silicon Valley Bank MELTDOWN Explained | How to PREPARE for the RECESSION | Jaspreet Singh".

1970-01-15T20:21:27.000Z

Note: This transcription is split and grouped by topics and subtopics. You can navigate through the Table of Contents on the left. It's interactive. All paragraphs are timed to the original video. Click on the time (e.g., 01:53) to jump to the specific portion of the video.


Introduction

Intro (00:00)

I wish that we were talking about better news. I saw a video that you created about how the average person doesn't understand what we're about to go through. And as we sat down to record this, SVB just got frozen Silicon Valley bank. Looks like there's going to be a tremendous amount of capital lost. And thinking about what I'm calling the triangle of doom with interest rates, a slowing economy, and inflation, how does this all play together with what just happened and how does the average person, if they don't understand what we're about to go through, how do they protect themselves? Yeah, SVB financial is really interesting because it's kind of a byproduct of what you just talked about, the triangle of doom.


Economic Challenges And Impacts Of Inflation

Doom is high inflation (00:42)

So we still have very high inflation and that high inflation is slowing down the economy. Now to fight the high inflation, the Federal Reserve Bank is working to raise interest rates. Now higher interest rates help to cool down inflation, but that also slows down the economy. Now the case of SVB financial in the bank is really interesting because they have been lending money to a lot of startups like Silicon Valley startups. And when you have low interest rates, it creates ease of access to money because if you can borrow money for 2%, you only need a 4% or 5% return on your money to justify making an investment. But if you have to borrow money at 10%, now you need a much higher return on your money to justify that investment. And what we've been seeing, this is not just SVB, there's a lot of examples of this, but what we've been seeing happen is investment institutions, venture capital firms, angel firms and startups had such easy access to money. I mean of course we printed trillions and trillions of dollars over the last number of years, but now if you wanted to raise money, venture capital firms are sitting on boatloads of cash and they're competing against each other to get the best investments. And so we saw the valuations of everything rise. Obviously we saw home prices skyrocket over the last couple of years. The stock market skyrocketed even though we were going through the worst recession during the pandemic since the Great Depression, the stock market grew, real estate prices grew. Startup valuations went through the roof. The reason why these valuations went through the roof is because now every bank, every investment institution is competing against each other with boatloads of cash trying to get into these firms. Now SVB financially, I'm going to be completely honest, this is happening right now. I only know based off of the information that has come out over the last number of days. I'm giving you just space enough of this, things can change by the time this goes live.


Crazy valuations (02:43)

They were lending money to a lot of startups. I think it was like four or five out of ten of the startups out of Silicon Valley had money from SVB. Now when you're competing against a startup, you might say, "Okay, if you make $100,000 a year, I'll value you at $1 million. I'll give you $100,000 for 10% of your company, something along that they'll value it at that." Then if you go to bank number two and say, "What will you do?" If bank number two says, "I'll value you at $800,000," you're going to say, "Well, I'm already valued at a million. Can you do any better?" Now, bank number two might say, "Okay, I value you at $1.5 million based off your $100,000 of income." Then you go to bank number three and say, "Hey, can you do better?" They might say, "All value you, based off your $100,000 of income, at $4 million." Now you're like, "Okay, we're talking." Now you start to shop like this and valuations just started to skyrocket. When you have easy access to money, it fuels, I don't want to say it in a bad way, but dumb investments because I can pay if you can get such easy access to money, you can run a business where you're spending a dollar to make 50 cents. This is a tough concept to understand, but a lot of companies actually do this, especially in the early stages where they spend a dollar to make 50 cents because they're just trying to grow their market share, they're trying to grow the number of users they had. Uber used to lose money on every single ride. Why? Because they wanted to eliminate the competition and get the market share. They could get the cheap capital. They could get the cheap capital.


Rising interest rates (04:16)

How much of what's happening right now do you think is a result of increasing interest rates? Is that a big part of this? Obviously it's so early, but do you think that there's scandal here? Is it just interest rate? No, interest rates are a huge part because what's been happening now is the veterans are trying to bring down inflation because inflation is still even today extremely high. We're closer to a peak of inflation than our lows, which means people's incomes are essentially shrinking. Even though what we've been seeing happened is people's incomes are rising, but they're not rising fast enough to keep up with inflation. So people are effectively becoming poorer across the country because the cost of living is going down. But now interest rates are going up very quickly. And so when interest rates go up, that means now the investment institutions, the banks, they need a bigger rate of return because most debt, besides their mortgage, is not a fixed rate debt. It's variable interest rate debt. Most of our national debt, most of our corporate debt and most of our non-household debt is variable interest rate debt. So when interest rates go up, the cost of servicing that debt goes up. So now you have something like SBB Financial. And I'm not going to go too deep into what they do, but I'll talk about just general because I don't know too much about their particular financial situation yet. But what most companies do is now they have this boatload of debt and the debt rate readjusts. And so now when you're investing in companies, your companies have to produce a return in order to continue making the payments on your debt. Well, what we've been seeing across the board, the reason why we've been seeing so many layoffs in the tech sector is now interest rates have gone up, meaning the cost of these corporations' debts have gone up, and now you need to make more money to service the cost of those debts. And if you have a high debt payment, now you have to figure out how am I going to have more money to pay down this debt. Well, you can either make more money or cut my expenses. Making more money is hard in a time where inflation is high, people don't have the ability to spend. So what's the alternative? I cut my expenses. I started laying off employees. I cut my expenses. And so now I have money to pay down my debt. Now that works if you're meta, Facebook, or Google. But what about the smaller companies that are still in the early stages? Now your valuation, I mean, you've seen so many companies go from like a billion dollar valuation to 200 million overnight, like you're talking about 80% drop. And so now you have banks that show on their balance sheet. Your balance sheet essentially is your net worth statement. So if a bank says I'm invested in 10 companies, each one of these companies are worth a billion dollars. That means I have 10 billion dollars worth of assets. And so now if you take this 10 billion dollars worth of assets and go to get money, you might be able to get let's just say 80% loan to value, right? Eight billion dollars worth of loans that you can then go lend out. But now when you see interest rates go up, the valuations of these things go down. That's why we've been seeing tech stocks crash. Well now if 10, if you're 10 portfolio companies are worth a billion dollars each and they fall by 50%. Now you go from a 10 billion dollar valuation on your balance sheet to 5 billion. Your point about meta I think is really important here. So the strategy that they deployed now, it's too early for us to know if there was anything sinister going on. So setting that aside for now, assuming that there wasn't, the strategy could potentially work in an environment where it's far more stable. Whether interest rates are dropping or they're stable, but when you get into a highly volatile, either the companies at a volatile stage and can't absorb the losses like a meta, which just has an insane amount of revenue coming in the door, then it falls apart. But if they had longer runway, they might not have gotten caught out. But this is Warren Buffett's old phrase. When the tide goes out, you see the swimming day. Exactly. And that's exactly what's going on. Wearing interest rates is going to make money more expensive. And that's where you start to differentiate the dumb money and the smart money. And as you raise interest rates to cool down inflation, it is going to cause economic pain. And that is going to be the tide going out.


Takeaway (08:50)

So what can the average person take away from this? How does the average person who probably isn't directly caught up in anything related to SVB, how do they learn the lesson of the triangle of doom, the rising interest rates, a cooling economy, inflation? What's this moment about for them? I think the most important thing here is you need to get financially educated and you're going to hear me say that a lot. But the reason why is because anytime we go through this type of shake-up or change in the economy, until it slaps you in the face, everybody will keep saying, "Oh, it's contained, you don't got to worry about it, everything is fine." And I can give you countless examples. In 2020, we saw it happen in 2008. I mean, in 2008, first of all, there's no housing bubble. Oh, there's a housing bubble, but it's contained to housing. And then, oh crap, the whole financial system's on the verge of collapsing. And look, this is not a political thing. It doesn't matter which side of the political coin that you're on. We're all on the same side of we're trying to become financially wealthy. But the reality is we have our president saying there's no chance of any economic slowdown, not just this year, but in the coming years. Our treasury secretary's been saying the same thing. The federal reserve bank is saying we're going to see a soft landing. Now, let's just look at the numbers to really understand what's going on because the first issue is really what I call this idea of debt monetization, which is probably one of the most concerning issues. Now what debt monetization is, how is our government funding its operations and how is they going to impact the regular person? Debt monetization as a term, if I understand it correctly, makes me very angry because it sounds cool.


Debt Monetization (10:35)

I can monetize my debt. This sounds amazing. Am I correct that debt monetization is printing money? Yes. That's one of the same, right? That's a basic way to explain it. So essentially, think of it this way. The size of our economy last year was about $25 billion. Over the last couple of years, especially during the pandemic era, we printed with the federal reserve bank around $5 trillion. She's nice. To put that in perspective, about 20% of our entire, I mean, every single person had to go to work for a year. Every corporation had to work for a year in order to produce $25 trillion worth of money or wealth. The federal reserve bank was able to print $5 trillion with a push of a few buttons, essentially. So now when you think about that, the question is, why do you and I have to pay taxes if the government and the Fed can just print this money? Well, it's because there's a cost to this money printing. What is that cost? Well, that cost is inflation. And so we're in a situation right now where the amount of money that has been printed is insane. And we don't even know the exact amount of money. We know the stimulus was something around $5 trillion. But the Federal Reserve Bank also did a lot of unlimited quantitative easing. The definition of money changed during 2020, M1. I'm not going to get into the technicals. Well, so just really fast. What's the difference between printing money and quantitative easing? So quantitative easing is when the government does some sort of stimulus, when the government spends money in a way to stimulate the economy. Got it. They give you money. So that is stimulus. Quantitative easing would be kind of where the Federal Reserve Bank now is working to stimulate by printing. So they're essentially go hand in hand. So wait, I'm not understanding the difference between quantitative easing and debt monetization. Are they both printing money?


Quantitative Easing vs Debt Monetization (12:37)

Are they the same thing? They're both printing money. The government has one source of income. Taxes. Taxes. And so when they spend more money than what they bring in, this money has to come from somewhere. So in 2022, the government brought in about $5 trillion in taxes. They spent about $6.5 trillion. So where does that one and a half trillion come from? Well, they can borrow money from you and I. These are treasury loans, treasury bonds. When you loan your money to the government, that is a treasury bond. The government has to pay back plus interest, but that's generally not enough money. So then they might go to foreign countries, China, Japan and ask them for money. But then they're doing the same thing selling them bonds? Essentially, yeah. They will loan, other countries will loan money to the United States because they want to return and they like to store their wealth in dollars because the dollars are the world's reserve currency. The government has to pay the back plus interest, but that has not been enough, which brings us to number three, which is the Federal Reserve Bank, who if option one and option two are not enough, the Federal Reserve Bank will essentially print the money and give it to the government. When you say essentially, isn't it literally? And obviously it's not actual printing like money machine go burr, but it's adding zeros and ones to a database somewhere. And if I remember this correctly, what they do is they actually go and buy things from people to get the, they'll go buy, typically they're going to buy corporate bonds, but they will, they started buying private company equity if I'm understanding correctly. But that's how they get the money into the system. So sort of. So the Federal Reserve Bank will get the money to the government by buying treasury bonds, meaning by loaning money to the government. They made up just to be clear. They made up, yeah. They have no actual money, but it in this new amount that they're going to go and perch or loan this money, they make it up, comes out of thin air, and it goes into the system. Just make sure that people track this because the more I learn about this, the more it's it's dizzying that it works at all. And the more I learn about it, there's that classic saying that as the island of my knowledge grows, so grows the shore of my ignorance. And so it's like the more I learn about this, the less sort of fiery I get about it, the more humble in the face of like, whoa, this is an incredibly complicated system. I won't even take a stance there being sinister, but that is what they're doing. They are inventing that money because the government says it's okay for you, Federal Reserve, to do that. Anybody else, we'd put them in jail, but when you do it, it's okay. And I don't even mean that in a cheeky way, but like just so people understand, it is counterfeiting by another name, which is probably fine, but just so everybody understands what's happening. So there's a lot more money out there, which then causes inflation because now money enters the economic system, people have the ability to spend, well, not much is being produced. Now that's the first issue and this is going on for a little while. It's been going on since before the pandemic, but it really just amplified during the pandemic. Now the next issue is the amount of debt out there. So the government national debt is breaking records, 32 trillion dollars. We have the highest amount of household debt ever and the highest amount of corporate debt ever. So we have more debt than ever before. And now we have high inflation, high amounts of debt. Now what's the next thing that's happening? The Federal Reserve Bank is working to raise interest rates. Well what does raising interest rates do? They are trying to reduce demand. This is what they're saying. They want to reduce people's buying ability because when you have the ability to buy whatever home you want, whatever car you want, whatever vacation you want, people will spend. That then causes the price of things to rise because there's a limited supply of these things. So they want to reduce demand. How do they reduce demand? They reduce affordability. All right, really fast.


Why inflation is bad for the economy. (16:37)

I think we have to make it clear for people why that's problematic because it doesn't seem like it should be. So here's how economists are looking at it, the feds being a part of that system. Hey everybody, you're acting like it's the 1920s, rip roaring, spending money, everything's great. And because of that the economy is hot as they say. People are spending a lot of money. They're going out, they're buying things. Companies are investing. They're hiring new employees. And it's like a growth mode. Now the problem is when the economy is on fire like that and people are buying a lot of stuff, there's a lot of demand for those products which causes the price to go up. That is inflation as the prices rise for the same thing. And so what they know is that can run away with you and if wages aren't going up, so people aren't making more money, but the cost of things is going up, the way that people fund that is through debt, but debt has a breaking point. Debt is fine until it's not because you have to service the debt. 100%. And when most of us think of debt, we think of something like a 30-year fixed rate mortgage. But most debts are not a fixed rate debt. Corporate debt is not generally fixed rate. It generally has some sort of variable rate to it. Either after six months, 12 months, or a few years, it is going to be a just. Our national debt is not a 30-year mortgage. Some of it is 10 years. Some of it is five years. Some of it is one year. Some of it is six months. Our household debt, we have things like credit card debt, which are variable interest rates. So now interest rates are shooting up and they're going to continue to go higher. The Federal Reserve Bank is saying the interest rates are going to have to go higher than what they originally expected. No big surprise here. We've been talking about this. Because we need to cool off the economy. You guys are buying too much companies. You're hiring too many people. I heard that the Fed, in raising rates, one of the things that they're looking at is they want to make sure that there's an optimal jobless rate that you want. Is that true? Essentially, we have way, everybody has a job according to the Federal Reserve Bank. Because there are so many people who have a job, we have a very low unemployment rate. Unemployment is around 3.5%, which is historically extremely low.


The consequences of bringing the inflation down. (19:00)

This is where now the Federal Reserve Bank is saying one of the consequences of cooling the economy and bringing inflation down is increasing unemployment. Is their goal to necessarily increase unemployment? No, it's a byproduct of bringing inflation down according to the Federal Reserve Bank. Their goal is to bring unemployment from 3.5%, it's 3.6% as of today, to 4.6% by the end of 2023. This is what they've stated in their annual report. That would mean that we would have about 2 million Americans lose their jobs according to those numbers. Now this is where also understanding what is the impact of that and is that going to be enough? Because what we've seen happen is- Is that going to be enough to slow inflation? So the Federal Reserve Bank has to raise interest rates to bring inflation down. And the consequence of raising interest rates is a slowing economy, aka less people have jobs. So is their current projection of raising interest rates, which is bringing interest rates to about 5%? Is that going to be enough with about 2 million lost jobs? Is that going to be enough to fix the inflation problem? No, it's not going to be. The Federal Reserve Bank has been wrong many, many, many times. And if we just look at the last few years, first they said that this stimulus quantitative easing is not going to cause inflation. Then they said, "Oh, this inflation will be gone by the end of the year. This is like 2021, 2022." They said it'll be gone by the end of 2022. Then they said the inflation is transitory. Then they said the inflation is not transitory. Then they said the inflation will be gone completely in the next couple of years. Now they're saying that the inflation fight is going to be much more painful and much more difficult than originally expected. So now they're saying that if we can bring interest rates to around 5%, then the inflation problem will be gone. 5% is their terminal rate. That's what they're calling it, meaning how we expect interest rates to go. When I say interest rates, I don't mean your mortgage rate. I mean the interest rate set by the Federal Reserve Bank, this is the wholesale rate that banks get tomorrow money at. So banks borrow money at the wholesale rate, this is the federal funds rate, and then they jack it up and then give you the retail price like your mortgage rate or something like that. So the Federal Reserve Bank, as of today, are saying that 5% is their terminal rate. As of today, it's at around 4.5%. Last year, they said the terminal rate was going to be around 4.6%. Before that, they said it would be even lower than that. So they keep raising how high they expect interest rates to go. They're saying that a 5% interest rate would result in an unemployment rate of an extra 2 million people losing their jobs. The truth is hitting your career goals is not easy. You have to be willing to go the extra mile to stand out and do hard things better than anybody else. But there are 10 steps I want to take you through that will 100x your efficiency so you can crush your goals and get back more time into your day. You'll not only get control of your time, you'll learn how to use that momentum to take on your next big goal. To help you do this, I've created a list of the 10 most impactful things that any high achiever needs to dominate. And you can download it for free by clicking the link in today's description. Alright, my friend, back to today's episode. What is that going to be enough? Well, based off of the past trends and based off of where inflation has gone, it doesn't look like it's enough because what the Federal Reserve Bank is realizing that bringing inflation down to their 2% goal is going to be more difficult than they thought. And if it's more difficult than they thought, that means it's going to cause more pain to the economy than they thought. So now, what does that mean? We're living in this world thinking everything is just fine. Everyone keeps saying that there's going to be a soft landing. Everyone keeps saying that we might not even see a recession. Everyone keeps saying that there's nothing to worry about. Yet, if you look at the numbers, we have still extremely high inflation, the highest debt levels ever.


5) Does your balance increase quality of life? (23:19)

We have interest rates that are rising, which means your corporate debt costs are rising. Even if you don't increase your debt levels, the cost payment is rising because interest rates are rising. We have our national debt cost, which is rising. Even if the government didn't spend more money, their payments would still be rising. Household debt costs are rising. Why? Because our credit card debt is at the highest level ever. Now, it looks like interest rates are going to have to go up even higher than 4. Then if you dig a little bit deeper, you start to see where the real issues start to arise. Because now, if you look at, for example, if we just look at the government, in 2022, our interest payments on the debt outpaced our total veteran's spending, veteran's affair spending and transportation spending combined. That's 2022. In 2021, we spent more than $100 billion less in interest payments than in 2022. The prediction is that by around 2025, our interest payment spending, just on the interest on the debt, is going to exceed our entire military budget here in the United States. And now you have to ask, "Okay, is that a problem?" Well, if the government can continue generating enough tax dollars, then maybe it's not a problem. How does the government generate tax dollars? You have to go to work to get paid. Your company has to make a profit. People have to make money in their investments. Let's start tying this together now. If the economy is slowing, people are losing their jobs, corporations are making smaller profits, less income, less taxable income, less taxable income means less tax dollars. So if the government is generating less tax dollars because the economy is slowing, people are losing their jobs, how are they going to afford a ballooning interest payment? Their interest payments are growing so quickly, not because the government is spending like they were in 2020 and 2021, but because the cost of servicing the debt is growing really faster than ever. And on top of that, the Federal Reserve Bank is saying that they're going to have to increase interest rates more aggressively and potentially even longer than what they originally expected. So now you look at that from the government side, you're saying, "Oh, there's some issues on the government side, but they should be able to figure it out. We're the world's reserve currency." Okay, let's go to the corporate side. Corporations are going to face one of their biggest tests because of this ballooning debt bubble. And the reason why it's because in 2020, 2021, and even in 2022, corporations were making their biggest profits ever. The economy was booming, partially because of all the money that was now just entered our economy. There's a lot of fresh money in the economy. Corporations are making money handover fist, meaning they're making big profits, meaning they would have big piles of cash. Yet, you're seeing layoffs accelerate. Why are corporations having to do layoffs when they're making the biggest profits ever just a year or two ago? Well, it's what does a corporation do with that cash? There's three things that a company can do with their cash. They can save it for an emergency. They can reinvest it back into the company, hire more employees, open more plans, open more stores, or they can give this money away to their owners. And what's interesting is our economic system makes it so that saving money as a corporation is the least attractive thing to do. Now, you might say, "What do you mean?" If you made, let's just say $100 million of profit and you kept it because you said, "I want to keep this $100 million for a rainy day as a corporation." But the first thing you have to do is pay taxes on that money. And that means that you're going to have to send a check of maybe $20 million, a little more than $20 million to the government just in taxes. Now you, if you're running a company, that's a lot of money. You mean $20 million, you can hire more employees, you can open your plant, you can invest in more whatever. There's a lot of things you can do with $20 million. So you're going to say, "Do I really want to do that with my money because as a CEO of a company, you want to use your money in the most productive way possible and to you, giving that money to the IRS is not very productive for the company." So you might say, "Well, you know what, we're not going to give this money to taxes. We're going to invest it back into the company." So now if you take all $100 million and you hire more employees, you invest in advertising, you open and use doors, all the money is gone, you have $0 of taxable income, $0 of profit, but you're making the company more valuable. The third option- And presumably creating something that the world wants. Exactly. That would have to be a product for the business to continue. But then the third option is you can give that money away to shareholders. And what has been happening is shareholders- And when you say, "Give it away, are you talking dividends or stock buybacks or both?" Yes, both of them. And so I think this is where it's important to understand corporate governance because most people assume that if you're the CEO of a company, you're the head hotshot, like you run the company. At least you have a boss. Your boss is now the owners of the company, the shareholders. And so if you're a publicly traded company, your shareholders are anybody who owns the stock. If you own one share of Amazon, you're one of the owners of Amazon. And what happened was in between 2020 and 2022, the end of 2022, the shareholders said, "Wow, we had a big profit. We've been invested in this company for a long time. It's time for us to see our returns. Give us some of that money. You can give us that money in the form of a stock buyback, which means the corporation is literally buying back their own stock to make the stock price rise or give us that money in the form of a dividend, which is literally a cash payment, a distribution." And so for the shareholders, they put a lot of pressure on the CEO saying, "We want some of this. We want this money given to us." And so what did we see happen? Well, we saw dividends grow very quickly. And we also saw a record amount of stock buybacks. Stock buybacks broke a new record in 2021. They broke a new record again in 2022. And currently they're on pace to break a new record in 2023. So now let's go back to the same example because I really want to highlight this one point because if you made $100 million in profit and then you announced a $100 million stock buyback, now you're using all your money to buy back stock. You have to pick taxes on this money first, but then you can use all whatever is left to buy back the stock, which enriches the shareholders. And there's a time and place for this. But if you think that if a corporation is just going to spend $100 million on stock buybacks, you're thinking very small because what can a corporation do? They can go to the bank and say, "Hey, bank, look at our balance sheet. Look at how many assets we own. Look at how much our stock is worth and look at how much money we made. We deserve a loan. Give us a half a billion dollar loan." So now this corporation has $100 million of cash of profit. They got $500 million from the bank at some of the lowest interest rates we've ever seen in history in 2021 and even in the early part of 2022, the lowest interest rates ever. And now you have a $600 million cash pile that you can now use for something like a stock buyback. What does that do? Stock prices soar. Investors see their portfolios grow. The corporation sees their debt balance balloon. Now, if a corporation has an increase in debt because they're investing their money into more research, into more employees, into something else, it's an income-producing asset, right? Because they're investing their money into something that will hopefully produce a much higher return than whatever the debt cost is. If a debt is costing you 4% a year but you can invest it in your company, get 20%, it's profitable. But if a corporation is going into debt to fund a stock buyback, that means they're now borrowing money to essentially fund a liability because they're not getting a return on that stock buyback, right? If I go out and I borrow money to buy something for myself and make myself richer, that stock buyback doesn't produce a return for the company. It'd be like you going to Gucci and financing a new Gucci belt. You don't get a return on it as opposed to you going out and buying maybe a rental property, which is something that produces a return. So what we've been seeing happen is corporate debt balances have been ballooning to the highest levels ever. The corporate debt today is at the highest level really ever partially due to levered corporate buybacks, meaning corporations doing stock buybacks with the help of debt. Why were they doing that? Because debt levels were at the lowest rates we have ever seen. Interest rates. Interest rates. Now today, it's changing. Interest rates are growing at some of the fastest rates we've ever seen. And this corporate debt that they have is not a 30 year fixed rate mortgage. It's a variable, meaning six months, 12 months, five years, it is going to readjust. And now when it starts to readjust, they're going to have higher costs. When they have higher costs, they're going to have to pay this money back. Again, no big deal. Assuming you're making enough money, how do corporations make enough money? You need a growing economy. You need people to have the ability to spend. But people's ability to spend has been going down. Why? Because of inflation. People can't spend as much because I got to spend more money on my gas and my eggs than I, so I don't have money to go out and buy as much other stuff. So people spending ability goes down. And in addition to that, what we've been seeing happen, well, okay, I'm going to actually let me clarify this for a second because one thing that I really, really, really want people to understand is that there's a difference between data and analysis. And today, most people's analysis is everything is fine. Why? Because of the way they interpret the data. So let me explain what that means because the data today says that the economy is growing and people are spending. Our economy runs on spending. The more you spend it, Chipotle, the more money Chipotle makes. If you go to Chipotle and you buy the extra guac, they make more money, right? And so what we're seeing right now is that consumers are spending. They think things are still good. Things are still good. Flying high all as well. So I get 21 and I get 22 in terms of the consumer thinking things are well in terms of the corporations thinking buybacks are the right play. But I'm super confused why in 23, we're on pace to set another record for buybacks. Do you think that's just going to absolutely die in the second half of the year or? It's hard to time it.


7) 7 Explosive Confidence (34:03)

I mean, buybacks are still happening. But what do they understand that either I'm missing, you're missing, we're both missing. I get seems self-evident that right now is the time to save and be cautious. And you've got Warren Buffett and Charlie Munger saying, "I see red flags in the economy, bro." And so they're sitting on $90 billion in cash. So how on earth are we on pace? Why are consumers still spending like crazy? And why are we on pace to again set another record for buybacks? So on the consumer side, consumers are spending. And this is what the data shows, which is why everybody's saying everything is it's great. Why are they spending?


8) 9 Sips of Cop Stoppa Cawfee (34:44)

What's the psychology? The first issue is you have no choice. Inflation has made everything so much more expensive. So people are spending more. Interesting. So they're looking at spending and it's not that they're buying more cars and Gucci belts. Is that they're paying more for eggs?


Inflation isnt even (34:57)

So that's the first part. I mean, there's a holistic view. The first part is they're spending more money for their eggs. And that is made like if you look at the recent spending reports, it shows that consumers are spending, but they're spending partially because of inflation, which means people aren't just getting more things. They're just spending more money. So they're not out there spending like drunken sailors. They to some extent, okay, this is very interesting. So as you tease out the data, raw numbers and the analysis, the story you tell about the data that you see. People are confusing, oh, everybody's spending more money. Good times. Yay. With, no, no, no, just to get my basics. And that's your analysis. Are there, who else is saying that? So let me just hone in on that for one point because now if you look at the spending, people are spending, right? Yep. But how are they affording it, which is the interesting part because, so I ran these numbers on a YouTube video that I did recently. And what the data shows us that inflation between the pandemic 2020 to now, there's reported inflation number over those last number of years is about 15%. Whoa, God, I've known that, but that just, I don't like hearing that. Well, now let's compare that to wages because according to the Bureau of Labor Statistics, and I calculated this out, in 2020, inflation was around two and a half percent. I think it was 2.6%.


Recession Planning And Economic Resilience

Savings rates are at an all-time undeniable (36:20)

2021, it was about 5.1%, 2022 was about 5%, which means if you made $100 in 2020, you made about $13.20 today. Inflation is 15. Wage growth is about 13, on average, according to the numbers. Now most of us know that the reported inflation isn't the real inflation. Wait, but sorry, what timeframe do we go from making 100 to making 13? 100 to 113. There we go. If I said 13, I apologize. I heard 13, so I was like, wait, what? No, no, 100 to 113. So wages have gone up around 13.2%, inflation about 15 and some change, which means inflation has been growing faster than wages. And so now people are spending. How are they spending? Well, what we've been seeing is credit card debt is not only at its record levels, but growing at record speeds. So people are going into credit card debt. Incrate did a study that they put out earlier in 2023, which said that about 4 out of 10 Americans have been digging into their emergency funds to cover lifestyle expenses. And in addition to that, savings rates in America, this is according to the Federal Reserve banks, are near record lows right now. All time? All time. We're very close to the all time. The all time is like somewhere in the last six months. So our savings rates right now is very low and so people are spending way more. So what we're seeing is yes, people are spending. How are they spending? They're going into debt and they're digging into their savings. At a time, we're variable interest is about to slap them about the head, neck and chest. And servicing the debt is going to get far more brutal, but they have to do it because it isn't lifestyle at the club. It's lifestyle eggs. And it's a mix of both. But the thing is there's a breaking point. So do you think they're still euphoria? Like are people? I get the eggs problem. I know you're just going to ballpark this or maybe you have the data, but I'm guessing you're just going to take a stab. But how much of the increase in spending is eggs and how much is I don't want the party to stop? Well, okay. They're over 50, I think it's about six out of 10 millennials who are making over six figures a year are living paycheck to paycheck. Yeah. And if we assume that if you're making six, three, four, five, five, five, five, five, you can six figures that you should be able to invest some money and save some money and six out of 10 millennials who are making over $100,000 a year are living paycheck to paycheck. Well, that gives us an idea that, well, you should be able to at least save some and invest some money and live. So some of this is still I don't want the party to stop, which is at least as long as I've been alive, that's been the case. Everybody lives paycheck to paycheck almost no matter how much money you make, which is very terrifying. Okay. So this is not just like one thing to do. This is not the year to finance a brand new truck.


We cant actually afford to spend money (39:16)

Let's just make that clear because now we're seeing all these red flags. We have people spending and then you also have people, if you're not aware of what's happening, if you're, let's just say a regular person, I go to work, I get paid and I like to spend money, which is, you know, a lot of people, because we don't have a lot of financial education and you keep hearing everybody saying there's nothing to worry about. Everything is fine. You're still getting your paycheck. What's the concern for you? What we're talking about are things that, I mean, how many people understand what our national debt is? How many people understand what debt monetization is? How many people really understand what inflation really is? I did an interview. I did a video a number of years ago. This is before the pandemic. I walked the streets of different cities around the country. I went to San Francisco, I went to Chicago, I went to Washington, D.C., I went to Manhattan, New York, and I walked, I went to LA also, and I walked around and I asked people the question. I went to 18, I think. What is inflation? And I can't give an exact number. Let's say eight out of ten people, if not nine out of ten people, had no idea what inflation was. The number one comment that I would get on these videos is, "How long did it take you to find these people?" Like, you don't get it. This is like half a day. I went there and shot the videos and I left. Like I didn't go out and try to find people. It was just like, this is regular people that I was asking these questions to. Now obviously inflation is becoming a little bit more of like, front of mind because we see it everywhere, but most people still don't understand the consequences. When was the last time we saw inflation this high? The late 1970s. What had to happen in order to bring inflation down? Interest rates had to get jacked up. Mortgage rates in the early 1980s were over 18%. It took a lot of work to bring inflation down. Are we going to have to see that same thing happen now? Well, we've taken our mortgage rates from under 3% to now over 7% and inflation is still closer to its peak than it is to our goal. So what does that mean? How much more are we going to have to do and how much more are we willing to endure?


Dont plan on being able to sail through another crash (41:21)

We're seeing the issues with corporations. They have the debt problems. Our national debt is having some issues. House holds are starting to have issues and yet we're sitting here like, nothing is wrong and this is where Michael has to say, "Look, let's run two scenarios. Nothing bad happens and something bad happens." What's the best thing for you to do? If you start preparing right now, you start building a little bit of a savings cushion, you put some money aside to invest, you make some investments and you start preparing and you start getting educated versus you don't. If you prepare and nothing bad happens, you do nothing wrong. Everything is fine. You have a big bank account. It's a big deal to build a world if you want. If you prepare and something bad happens, you have a once in a lifetime opportunity to build a immense amount of wealth just because you're prepared. How? Because when bad things happen, good assets go on sale and that creates opportunity because now you can come in and buy some of these distressed assets which are like, when I say asset, I mean an investment. It could be a stock, it could be real estate, it could be a business. When people are running out of money, people become desperate and then they will need to sell or they'll be forced to sell because the bank is forcing you to sell and this can create an opportunity now for somebody who's prepared to go and buy some of these investments at a discounted price. When the 2020 pandemic hit, people were able to buy stocks for 50% off for a small period of time. Now, most people running away getting scared, they had no idea what was going on, but some people were buying and it created an opportunity. I don't think even myself, I didn't expect the stock market to turn around that quickly. I talked about on my channel how I was buying in phases on the way down because I didn't know what was going to happen but I knew that this was creating great opportunities. I never expected the market to turn around as quickly as it did. I never expected the Federal Reserve Bank to do the amount of quantitative easing that they did. I never expected the amount of stimulus that we saw happen. That was a surprise to me but that completely turned around the market and that made the people who invested, they saw huge returns very quickly. Which I did. Everybody thinks is going to happen again. In preparing for this episode, I started looking at what are most people saying. Most people are like, "Oh, has the crash finally been canceled? I think you actually even have a video along that vein." There's a lot of people talking about, "Oh, the crash that we thought was coming, it's not going to come. We are going to get our soft landing. We have the increasing rates which has already started to really bring down inflation. The government will do more quantitative easing, AKA printing money. We're going to be fine." So here's the thing. Yeah, that has happened in 2020, happened in 2008, happened in 2001. The difference between now and then is we have an inflation problem now which we didn't have before. Which means let's just go with that. Let's say unemployment shoots up, we start to see a recession and now the federal-- Start to see a recession so you don't think we're in a recession now. Well, I think the average person is in a recession. I'm saying what the world is saying. We haven't been declared in a recession so let's just go with that now. Because they changed the definition though. They changed the definition of a recession and that's a whole different topic. We weren't derailed by it. Because at the end of the day, if the declaring a recession or they don't declare a recession, if you're struggling financially, it doesn't matter. The average American is feeling the effects of a recession right now. Plain and simple. Now whether they declare it or not, it's a matter of semantics and you got to take care of yourself financially. So if our economy gets worse and now the federal reserve bank pivots, well then what? The missing are going to cut interest rates. If your mortgage rate dropped to two and a half percent tomorrow, what's going to happen? People are going to start buying homes again. If people start buying homes again who've been waiting for the mortgage rate drop, what's going to happen? Home prices will shoot back up and spending will shoot back up. Car seals will shoot back up. People would spend more money. What's that going to result in? Higher prices for things. So this is the problem where we don't have that same ability to cut interest rates without consequence like we did before.


What is a Soft Landing? (45:49)

You talk about this idea of a soft landing, which I want to highlight that this isn't the first time we've ever heard of this concept of a soft landing. It's been talked about many times. The whole idea of a soft landing technically is you raise interest rates without inducing a bad recession without it seeing a huge increase in unemployment rates. Before the 2008 crash, let's start with 2005, the then chairman who was Ben Bernanke said not only is there no housing market bubble that's going to burst, there is no housing market bubble. So there's like his famous few years from catastrophe. Where's some catastrophe? 2007, now we start to see a little bit more issues. We start to see the housing market go down a little bit and that's where Ben Bernanke brought up the idea of a soft landing. He says we're going to raise interest rates to ease the issues in the housing market, but we believe that we can do a soft landing without causing pain to the broader economy. One year later, the entire meltdown happened. And so now what is a soft landing? You raise interest rates without inducing a major pain to the economy. Have we ever seen a soft landing before? Yes, we have. If we go back to 1994, this is what all the economists are like talking about. They're saying, oh, we can just do a repeat of 1994 because in 1994, the Federal Reserve Bank raised interest rates and we didn't see a major increase in unemployment. And that was the only real time between 1940s and now. So like modern economy where we were able to increase interest rates without causing a big increase in unemployment. Are we the same economy that we had in the early 1900s? No, we have so much more national debt. We have so much more corporate debt. We have so much more household debt. We were raising interest rates very aggressively and on top of all of that, we have extremely high inflation. And now on top of that, we're also jacking up interest rates very aggressively and they keep saying that they're going to have to raise. Like every time we hear, oh, I think we're getting close to the interest rate and we're going to have to raise interest rates even more aggressively. And so now it's look, understand that just because somebody says something doesn't mean it's necessarily true, right? It's the data versus analysis. The data shows, if you take a snapshot of today's economy, if you take a still picture, it's shows you consumers are spending and companies are making money. Now if you turn this into like a live photo where you can kind of see moving image, now you see, yeah, consumers are spending. How are they spending? Well, they're going into credit card debt. They're going into their savings. They're spending more of their income. So now you start to see, oh, there's some red flags there and debt levels are rising, corporate debt levels are rising, and national debt levels are rising, and household debt levels are rising. There's got to be a cost for this and bringing inflation down like, okay, inflation by itself is slowing down the economy. The fight on inflation is bringing down the economy, but inflation has gone away and the fight on inflation has a lot to go. So it's like a double whammy, which are both hurting the economy. And now everyone's saying, don't worry, we're going to have a soft landing. Well, how is that possible? If the inflation is hurting the economy, the fight on inflation is hurting the economy, and neither of these are close to being solved. Okay, so I think there is a debate to be had and it goes something like this.


Competing Narratives for the Recession Plan (49:30)

So I was just talking to Ralph Paul. Ralph isn't super concerned. When you talk to him, it feels like soft landing territory. He said he thinks to use his words that the recession will be sharp but short. And so maybe different than a soft landing, but he feels like the government is 100% going to print its way out of this. It's going to stimulate its way out of this either or both. So it's either going to hand-stimmy checks to people or get money into the economy. Either way, it's going to do it through printing certainly here in the US because we are the world's reserve currency. We can basically do whatever the fuck we want until we can't. And we can get into bricks in a second. Right, so the two competing narratives as I see it, you've got Ralph's idea of short and sharp, then you have it. I'm going to have to look up her name, unfortunately it's a slightly complicated name. But the new co-CIO of Bridgewater, so Bridgewater, Ray Dalio's company, largest hedge fund in the world. Karen Knoyle Tambor, I'm sure I just brutalized that, but you get the idea. So she is saying that she thinks that we could be in for deeper and longer recessions than what we're accustomed to. So if we've got sharp and short, government is going to, and I think it was the Fed that said this, it's okay if we end up breaking the bone being that we raise interest rates too high, that breaks the economy because we know how to repair a broken bone. What we don't know how to deal with is runaway inflation. So we're going to go in, we're going to hammer that down. We're going to keep cranking up the interest rate until inflation comes down. Now the bad news is it sounds like we don't think we're going to be back to 2% until 2025, which is very little comfort in 2023, early 2023, and we're recording this. But they feel like, okay, we've got that in hand. And so that speaks to what Rowla is saying, which is, okay, we're going to break your leg, it isn't going to be fun. But we know how to fix it, we're going to stimulate, we're going to print some more money, and we're going to make sure that you don't end up in the ICU. Whereas the other narrative sounds like you and Karen at Bridgewater are in a more similar vein of like, we're out of tricks. And if you continue to raise interest rates, you are going to break the leg and you can't keep stimulating because at some point, not only, so let me finish that thought, you're going to break the leg, but you're going to have a hard time getting it to heal. The reason that you're going to have a hard time getting it to heal is complicated. It's a triangle of doom, which we've already talked a lot about here. The next part, which is a signal to me, and again, I'm playing the role of the layperson here is a signal to me that you'll only be the reserve currency until you're not. And so you've got the, it's bricks, right? The bricks nations, yeah. Brazil, something China, South Africa, Russia, Brazil, Russia, India, China, there we go. Okay, thank you. So they're going, yeah, US, you can't just keep printing your way out of this. And devaluing the dollar, we're not going to stand around for that. And so they're now making moves to create a new reserve currency that's backed by gold. And we see central banks, the world over now scrambling to buy gold. In fact, I have a snapshot. I may have gotten from you. Oh God, am I going to be able to find this? Yes. In the third quarter of 2022, central banks bought more than 400 tons of gold. The last time they bought this much gold was back in the 70s when Nixon took us off of the gold standard. Yes. And this is now what you're saying, look, we're all Paul's a very smart guy. And, you know, the government, no, okay, just because this is a lot to unpack here.


Raising interest rates vs generating economic pain (53:58)

And the raising interest rate is going to cost pain even though most people say it's not going to cost pain. Because you're raising the interest rate on the debt that I have, you gave a really good example in one of your videos. You said, let's say your cousin buys a house and based on the cost of the house, it costs him $1,500 a month to service that debt and own the house to make his payments on the house. You then buy the same house, which has gone up a little bit in price. And your interest rate though is higher. And so now for the same house, he's paying 1500, you're paying 2500 by way of example. Right. And this is a very common thing happening because home prices haven't come down enough to kind of make up for the higher interest rates. But that's a separate topic from this, which is now the government, no government wants to see economic pain while they are in power because it looks bad on you. So why would I want to have to deal with the pain and actually fix the problem when I can stimulate and try to push it off, kick the can down the road essentially. That's what people say. It seems exactly like what's going to happen. And that is what has been done and it is what everyone will want to do. The problem is right now, if we keep doing that, it's going to cause even more problems because right now you're right, our dollar is being tested. We haven't, most of us, myself included, haven't lived through a period of sustainably rising interest rates. And we haven't seen what that does to our economy because from like the 1970s until now, it's been a drop in interest rates. Yeah, we have ups and downs, but from like 80s, 70s till now it's just been steadily downwards. And so we haven't seen a period of growing interest rates. Growing interest rates makes borrowing more expensive, it slows down the economy and we haven't experienced that. And for the last 15 or so years, we've only seen low interest rates next to zero interest rates. And so for the first time, we're actually experiencing higher interest rates. That is something new for most of us, myself included. So now higher interest rates are going to have an impact. And now if the government just starts stimulating, they try to like kind of bring us out of this, that is going to hurt the dollar even more. And then that poses the second concern like you brought up is we have major countries around the world, Russia and the China that are coming together and saying, we don't like being controlled by the United States. We don't like being controlled and subservient to the dollar. We don't like that the dollar isn't backed by anything. So in 1971, the United States was, I'm going to say this in a kind of like, let's say the politically correct way. In 1971 or before 1971, our government was on the verge of default. We had a lot of debts. Our dollar was then backed by physical gold. So we don't have the same ability to print money. We needed more gold to print more money. We had a limited amount of wealth. And so now our government had a lot of debts that it owned, especially to other countries around the world. And we were struggling to make these payments. And we were on the verge of default. And that was when President Richard Nixon in 1971 severed the tie with the dollar and gold temporarily. He said, no, he said, I've put the speech many times on my YouTube channel where he said, I am temporarily going to sever the link between the dollar and physical gold. What does that mean? That means that now the government and the Federal Reserve Bank have the ability to print money on command. Now we have all these debts to pay. We have to pay hundreds of billions of dollars in debts. Fine. Just print that money. Here's your money. And now you're a little confused. You want in gold, but you have the money. So it's like, I got the money. Okay. And everything was just fine.


Global Financial Standing And Education

Inflation (58:01)

Obviously inflation really kicked up after that. But now what we're seeing happen is, okay, inflation is becoming a bigger concern. These are on the world that own dollars are saying, oh, this inflation is a problem. This money is just pieces of paper. What is the real value of this money? It's backed by the economy. It's backed by the military. And we don't like, but we don't like being bullied by the United States. What if we work together to create our own currency and we back it by a metal, like gold? Now this is still in the early stages, but you know, the BRICS nations that we talked about have been working to build their own reserve currency, potentially backed by physical gold. And we have seen more central banks, like you said, working to purchase and hoard gold than the last five decades. The last time we saw them go after this much gold was when the gold was severed from the dollar temporarily. And we think that they're doing that because if the BRICS nations pull this off, then to increase their own wealth, they will have to acquire more gold. Exactly. And then it's kind of like an economic warfare type of situation where it's like, if the United States is getting weaker economically and they're getting weaker internally because people inside the country are fighting each other, that creates weakness. And people around the world will want to capitalize that weakness. Now, of course, we're in a situation where most of us have grown up never having to worry about inflation. Most of us never have to worry about the long term concern of our economy or anything like that. But what other countries are saying is we don't want to continue being bullied. We want to have our own independence. We want something a little bit different.


What happens if other countries don't rely on the USD? (59:54)

And so that's concerning because, well, if more and more countries don't rely on the dollar, they're going to be less willing to loan money to the United States. And if they're less willing to loan us money, okay, well, that could create more of an inflationary issue here. What is up, my friend, Tom Bill, you here. And I have a big question to ask you. How would you rate your level of personal discipline on a scale of one to 10, if your answer is anything less than a 10? I've got something cool for you. And let me tell you right now, discipline, bias, very nature means compelling yourself to do difficult things that are stressful. Boring, which is what kills most people, are possibly scary or even painful. Now, here is the thing, achieving huge goals and stretching to reach your potential requires you to do those challenging, stressful things and to stick with them even when it gets boring and it will get boring. Building your levels of personal discipline is not easy, but let me tell you, it pays off. In fact, I will tell you, you're never going to achieve anything meaningful unless you develop discipline. All right, I've just released a class from Impact Theory University called How to Build Ironclad Discipline that teaches you the process of building yourself up in this area so that you can push yourself to do the hard things that greatness is going to require of you. Right, click the link on the screen, register for this class right now and let's get to work. I will see you inside this workshop from Impact Theory University. Until then, my friends, be legendary. But then secondary is many of these countries own our dollars. And so if they decided to play the game and dump our dollars, you increase the supply of our dollars which would increase essentially inflation, it would increase the amount of the supply of dollars in our economic system. And so those are the concerns, how, where will that play out? I have no idea. I'm just telling you what's happening right now. Right? I mean, there's a lot of conspiracy theories we're kind of saying, this is going to happen. And look, you can kind of play out where this could go, but this is where it becomes so important for us to become economically strong and really understand. And when you say us, do you mean us as a nation? Us as a nation. Well, our nation is made up of individuals. And so, you know, the government doesn't have its own stream of income. Well, so that's interesting. I would say there's a pretty big difference between appealing to the individual and appealing to the government because the individual can be disciplined and the government can still spend like drunken sailors and now you're still in trouble. But the individual has their ability to vote and to pick who's in government, right? And so if the individual is educated financially, then you can make a more educated decision of who's running the country as well, because the country is run up by, do you have faith in what you just said? Look, man, you have to.


The Longest Empire in World History (01:02:30)

I feel especially, look, my family is from a state in India called Punjab. And we have obviously issues here. But economically, there's nowhere else in the world you'd want to be. I agree with that. But I also am very sensitive to the reality of your, the leading empire until you cease to be the leading empire because you deteriorate from the inside, which feels like what's happening right now. So there's that famous John Lennon quote about in the 80s, you know, if I were living in Roman times, I would live in Rome where else. And now I live in New York because America is the new Roman Empire and New York is Rome itself. I feel like there's a similar quote to be had, which is that there, there's just a psychology that ends up happening when empires end up declining and some of those same things are happening right now. So the fact that we're so over leveraging from, again, I'm, I am the lay person. I'm educated enough to know that I'm on the right track that directionally what I'm about to say I think is very accurate that we are over leveraging our position as a world's reserve currency that the fact that we have created so many new dollars, I forget what the percentage, but it's absolutely ridiculous. In the last like whatever five or six years, we've created something like 40% of all the dollars that have ever existed in the history of this country. So it's like that's so crazy. And so when I think about appealing to the average person, hey, please be thoughtful about who you vote for. We want to be careful as a society. The problem is when everybody is grown up being the reserve currency for as long as we have and Ray Dalio has a map of the changing world order. It goes in six stages. Every empire ends up collapsing. There's only six stages. Stage six is absolute total collapse. He puts us somewhere around stage five and a half. So it's like we're just headed down this path. And when he looks at what are the indicators of that, it's the fighting inside of a country he talks endlessly about how we treat each other. I saw him backstage literally like weeks ago. And I was like, hey, because we were in Dubai. And I'm just like, whoa, Dubai is like popping off. I'm like, you're a guy. You travel around a lot. Like, how do you think about where to go? Where is going to be the economic opportunity? And he said, Tom, it's all about how people in the country treat each other. And I was like, that's so interesting that you mentioned earlier that we're colliding internally and that's part of the weakness. I think it's a multi-prong thing. Part of the weakness, you and Ray are saying the right thing. We're not treating each other well and we have to be very thoughtful. But the other part is what you're bringing up now that you have faith in that maybe I have a little bit less faith in, which is I don't think I'll get there and we bring this all together. I don't think that we're going to make the wise decisions that we need to make unless there's enough suffering. Because what ends up happening is when you look at the way that we're going, it is more and more richer evil companies making money like they're evil. Companies need to pay their fair share. All this stuff not understanding that the miracle is not the redistribution of wealth. The miracle is companies creating something that people want badly enough that they pay money. This is how we've pulled people out of poverty, production by creating something that's amazing. And so what I'm worried about is there has become an attitude because things have been so well for so long. You said for 50 years we've been in a declining interest rate environment. Money is easy to get. You can finance things on debt and that's fine because the rate is going to go down. Like what could be the problem? Now in the moment where the rate is going to start going up, the mentality of people has been formed over 50 years of it's all good. It's raining money. Everything is well. And so now people go into, oh, the miracle isn't like all this wealth we've been able to create and isn't this amazing and look at how productive we've been. It's like, oh, people that are succeeding like this is evil and what are they doing. And so now when they vote, they're voting from that perspective. And so they will change their tune, but it will require so much pain and suffering for people to realize, oh shit, like we've been barking up the wrong tree. And so I to say it in a single sentence, I don't think people are going to vote in the austere way that you want them to vote, which would be fiscally responsible until they are in agony. Well, I think you're 100% right on that.


Financial Divergence (01:07:25)

And I think many people are emotional and one, we don't understand money. Now what I'm saying is for the first time people have access to real financial education with ease, YouTube, podcasts, newsletters, we have access to information. And you're right. People are generally emotional. And this third issue is we are becoming a two class nation, which is probably the biggest issue causing the divide. And what I mean by that is you have the rich and the poor, but in order to have a healthy society, you need to rich the poor and the middle class. And the middle class is completely being decimated by the system. And you know, going back, there's a saying is like tough times, create tough men, which create good times, which creates soft men, which create bad times, something like that. I probably butchered it, but yeah, pretty close. And this is kind of what we're seeing. Yeah, you know, we became this country because of tough times. We fought for it. And then things became great. And then we grew up in the times where money is easy. Everybody's rich. You can finance whatever you want by as much Gucci as you want. We're a consumer nation. We become fat as a society. We want it all. We don't want to have to work for it. We become lazy and things are seems great. Like I can have anything I want. That's going to have a breaking point. Eventually that party will stop. And when that party stops, you know, it's what will we do? Guess what? We still have a ability to learn here. We're still the most creative place and hopefully we stay this way where we are the hub of entrepreneurship in the world. We are the hub of business innovation in the world. We are the hub of production in the world. We have to stay that way if we want to continue to compete in the world. And I'm hoping that will happen. I'm not an optimist. I have a lot of faith because, you know, people here are, we are still, I mean, you think of all the major companies in the world. This is we are the producer of them. And we provide a lot of benefits to encourage entrepreneurship. And I hope that we will continue to do that. There's a lot of people now, thankfully on the internet. I mean, people around the world look at what we put out on the internet to learn from us. You know, like I was invited recently to a couple of shows in London. I was asking about their demographics and all that stuff. And they're like, yeah, you know, most of the people here in the UK watch US produce, US content creators. And that was a really interesting thing to me. I was like, what do you mean? Because I don't consume like that much content. I really try to just learn my own ways and I don't really follow what's going on in the world like that. And they were like, yeah, you know, we have some creators here, but most of the people here are just watching people in the US. And I realized it's not just the UK. It's many people around the world. And so we have a lot of educators here. We have to be now the consumers of our own understanding. Okay, we have to be creators. We have to be innovators. And then that also goes to education system where we can't just produce factory workers anymore. We have to innovate our education system. And we, I was going to say we suck there, but we have to really fix that up. I mean, we have to really encourage innovation. We have to encourage the ability to think freely because the advantage that America has is we became who we are by thinking differently than everybody else. It's kind of like that minority mindset message because we didn't follow what everybody else did. We have a completely different like economic system, tax system than the rest of the world. We cannot be a follower. We have to be a leader. And in order for us to do that, we have to continue innovating and thinking differently from the people level to the national level. And you're right, you know, we have a long way to go, but we are going to have to if we want to stay competitive.


Ominous Warning Signs (01:11:22)

All right. So I want to get into the specifics on that. So if you were a benevolent dictator and you were going to say, okay, here's what we have to do here are the principles, whether it's, you know, fixing education or what have you. What do we need? What are a small handful of things that we need to do to continue to lead, to innovate, to learn the lessons that we need to learn? Well, I think part of that is the straight financial education and it has become much more accessible, but we have to know how to learn, right? Well, so let's not move off the first one. So what the, in fact, I'll let's get them out. So financial education, that's the first one. We're going to circle back to that to a couple of key points that you think people need to learn about financial education. What else? So we talked about now as a society, what do we need to learn to be? Yeah. Like, so we started this episode by saying, look, before we turn the cameras on, you were like, thank you so much for having me back on. I'm getting really paranoid that people are going to get really hurt by what's happening. They don't understand at the triangle of doom.


Financial Education (01:12:27)

They just don't understand how money works, all of that. So we're going to like help people get themselves out of this mess. It's going to be partly financial education. So I think the financial, I mean, if we talk about the financial side, it's the financial. No, just financial. We're going to come back to that. I want to know if you were the benevolent dictator and we know America needs to continue to lead. You were saying that, you know, all across the world, people are listening to American educators, which I have a hypothesis about why that is that all round two were like the only country that until recently was not into the Tall Poppy syndrome. So in the UK, in Australia, like if you stick your head up and say, I can do something amazing, people just swat you down. And it's like, whoa, I don't want to try to be cool. I don't want to try to do anything amazing because people are going to make fun of me. When I was a kid, 100%, I was just like, I'm going to be rich. Like I was so like, I'm going to go do amazing things. But I think all of that like innovation, right? The idea of the next one? Yeah. Financial education. But even that one. That is a part of financial education, understanding the ability to lead management. All these things are all a part of financial education. Because now if we talk about how to succeed as a country, it's financial education. And that can be a period. If I mean, look, I think we need health education. I think we need to understand how to be spiritually fit. I think we need to know how to be mentally fit. And then we need to know how to be financially fit. These are the four aspects. And now if we talk about now, if we're on the economic side, how do we produce entrepreneurs? How do we produce smart investors? How do we produce people who know how to save them around, how to invest their money? That's the financial education part. But what stops so many people from being able to do that? Well, I feel depressed or I'm anxious. I don't think that I can do it. I don't have the confidence to go out and do something. I don't believe in myself. I'm surrounded in a toxic environment. If you grow up, look, I used to guess teach in Detroit public schools. And these kids are smart, hardworking kids. I was actually just talking to a guy last week. Three teaching finance? I was teaching life skills and part of that was finance. But it started with the core of just building some confidence of thinking bigger because I was talking to a guy, he came into my office last week. He grew up in a rough neighborhood in Detroit and we began talking and he was like, look, I want to get to somewhere else in my life. He's like, I got to where I am today because I was an athlete. I didn't want to be like everybody else in the neighborhood. I started working out and I became a good athlete. That got me through education. Now, I work an okay job. I own a lot of shoes, but I don't have much else. I don't have any savings. I don't have any investments. I don't even know what this stuff means. I want to do something different. So, now I start talking to him. He tells me, I grew up with this mindset of, I don't care about being rich, I just want to get by. That's all he wanted. And now he's like, he was telling me he read this book called the Millionaire Mindset. I think that's what it was. And what he was like, he was like, the book talked about how people who say I don't want to get rich are lying to themselves and you have to say that you want to become successful that way you can actually achieve more. Because we create these taboos around money. But what stopped him? He had this limiting mindset that because of where I came from, because of all I saw, somebody like me can't do it. Then he got a little bit of a taste of, wait, you're telling me that I can achieve more? Because he never had been exposed to that before. And now because he just read or listened to an audiobook that said that, now all of a sudden he's trying to put himself out there. We happened to just talk in the gym and now he's like, dude, can you please give me some sort of guidance? And now he started talking about different things that he can do. And he was like, dude, I cannot thank you enough because it's just like, it's not even that I did anything. It's just, he got a little taste of what's possible. Trust me, this is the entire reason the impact theory exists. So you're in Detroit teaching. I was in Compton building a company and I'm encountering all these people, very bright. Some of them, look, there were morons just like there are anywhere else. But there were a lot of incredible people and I began to realize intelligence is evenly distributed, but mindset is not.


Creating Financial Opportunities

Mindset (01:16:40)

And because they have the wrong mindset, because they're asking the wrong questions, because there was one kid who, I was like, bro, you're so smart. Like why aren't you out there pushing yourself? And he said, oh, my mom told me that the world doesn't want people who look like me to succeed. And I was like, that is the worst fucking advice you've ever heard in your life. And I'm like, I've become obsessed with the Kobe Bryant quote that booze don't block donks. And you can get so good at finance that no one can stop you. Like you can just out invest people. And this is where I get obsessed about, okay, there are a cluster of things that mindset is certainly one of them. Financial education is certainly one of them. The education system in and of itself is certainly one of them. The self loathing thing that's become so prevalent in America is one of them. It's like, what I want for people is for them to feel like I felt in the 80s. Now I didn't grow up with money. We weren't poor. I used to think we were poor, but now I've seen real poverty. We were poor, but we were lower middle class. And so I couldn't have the things that I wanted to have. I had to start working when I was 12 years old to buy. I had to buy myself a Nintendo. My parents couldn't or wouldn't buy me one. And so I took a job in a door factory at the age of 12 so that I could buy a Nintendo. Now when you come up like that, you learn a couple things depending on how you're wired. For me, what I learned was I really hate work, but it's really cool that I can go do something, someone will pay me for it, and then I can get the things that I want. So it gave me a sense of self agency. Then as I got older, I read my own equivalent of the millionaire mindset. It wasn't that. But things that ended up teaching me, oh, whatever you dream for. You're going to fall short of. So you better dream really fucking big and then go just relentlessly acquire a skill set in order to get good enough. So in the 80s, I just believed I could become anything I wanted, but I was going to pay an extraordinarily high price to get there. I was going to have to figure it out. I was going to have to outwork everybody. I was going to have to go hard. Nothing was going to be given to me. Nobody owed me anything. I was going to have to head down and just learn to fight. But that sense of like, hey, you can have anything you want. This world is amazing. It's your oyster. Let's go. But let's go means let's go get strong. Let's go get smart. Let's go get educated. Let's like figure out what you have to do, but booze don't block dunks. You can get so good that even if people want to stop you, they can't stop you. Now if I could get people that mindset, an overwhelming number of them are still going to fail. I get that. But you create an environment like the US where man really amazing people from all over the world want to come here so that they're not struck and down by other people who don't want to see a tall poppy. They don't want to see somebody stand up above other people. They're cheering for it. They want to do it themselves. It's become a meme that really pisses me off. It's become a meme, the whole idea of people voting against their own interest because they're just a temporarily embarrassed millionaire. Yeah that was my entire youth until I was in my late thirties.


How to NOT be broke. (01:19:57)

I acted like the temporarily embarrassed millionaire and it led me to becoming an actual millionaire. If you see yourself as like this is all you're ever going to be and you're stuck, then you won't do the things you need to do to at least have a shot. A lot of people are still going to fail. I get that. But man, if you think, oh if I, it's what I call the only belief that matters. If you believe, if I put time and energy into getting better at this thing, the world will still punish me. Rich white people are going to take it away. I will never get anywhere that I want to go. You won't do the things. But I think that goes to, this is really a mindset thing of like, I don't know if it's self-confidence or a little bit of arrogance or a little bit of ignorance where like for me, I, you know, you said that a person you talk to, their mom told them to someone like you can never make it. Because the world doesn't want someone who looks like you to be successful. And you know what? You said that was the worst advice. I think that's the best advice that you could get. Why? Because that makes you, well at least because I heard something's very, very similar. And for me, that put a fire on my butt where I was like, I'm going to prove you wrong. I'm going to prove you wrong. I'm going to give you a middle finger and I'm going to go do what I want. Because I heard, did your mom tell you that? My mom told me that somebody who looks like me will never be the CEO of a company. So I need to shut up and go study to become a doctor. Wow. And the world were more like you. I mean, the thing is I always had just a little bit of a hard head. And my mom said it out of love. Like I love my mom. Yeah, they always do. It was for, because I was such a, like I was very rebellious, but not in a bad way. Like I wasn't doing drugs and drinking and doing things like that. I was like trying to start businesses. And in a traditional Indian household, like my house, like my parents were like, you have to become a doctor. That's like from the, the, since I turned like one or two years old. They told everybody from America to India, just breathe is going to become a doctor for my entire life. That's all I heard. Me playing football was a distraction for me becoming a doctor. Me doing a newspaper route was a distraction for me becoming a doctor. Me wanting to go to the gym was a distraction. All these things were discouraged. I told my dad, I wanted to start investing in real estate. I told me you're stupid, focus on your studies. And then when you're a doctor, you can do whatever you want. I want to be clear though. That was all terrible advice. It happened that you pushed back against it and prove them wrong, but the advice, because most people listen, the advice was got awful. But I think it's like, you know, we have to be able to channel pain. We have to know how to do that because pain creates purpose. And can create purpose. It can. And we, but you have to like, I mean, I don't know if it's confidence or a little bit of again, like I was saying, arrogance or ignorance, where you have to, we have to want more from ourselves as people. We have to know that we can produce more. We have to believe in ourselves. I mean, I don't even know if it's belief because I never like, I, if I look back to like my 17, 18 year old self and I remember telling myself, like, dude, if one day I ever made a hundred thousand dollars in a year, like, man, I'm going to be flying in private jets. I'm going to have all, like, I'm going to have all the money in the world. And then you do it. And I was like, wait, like this was a dream. Like one day, then they did it and it's like, well, I'm not flying in a private jet. I don't have all the nice stuff, but I'm pretty surprised that I did it. And then you surpass that. And then you take it from a hundred thousand dollars a year to a hundred thousand dollars a month. And like, I can't imagine like when I was like 17 to think that somebody could make that in a month and you're like, wait, that is possible, but in order for that to be possible, you just have to like, you have to have some sort of taste and belief and that belief, I don't know where that comes from. And I don't know if it's just like, you have to just be like, you have to have this like, I don't know what the best way to explain it where it's like dumb belief. You got to want something really bad that you just nothing like science doesn't add up like two plus two is four, but you're telling me that two plus five is forty four. Here's what people have to understand.


How to create opportunities for yourself and make money work for you. (01:24:12)

The human animal is designed to grow and get better. It's cultural transmission of ideas. That's how we've become the dominant apex predator. We're not smarter. Sorry, we're not faster. We're not stronger. We're smarter. And so it's the ability to learn. This is why I call it the only belief that matters. Everyone needs to believe the following statement. If I put time and energy into a specific thing, I will get better at it. Once you believe that, everything else is going to take care of itself. You're failing. You're not making as much money as you want. You don't know finance, whatever. Go learn it. And once somebody is like, okay, I'm going to go get good at this thing. I didn't need to be born good at this. I don't need to have a natural inclination to it. I have a goal and my goal makes demands. If you're Kobe Bryant, you have to practice basketball. Why? Because your goal is to become the best basketball player of all time. If you're Kobe Bryant and your goal is to become the best basketball player of all time and you spend your time swimming or studying math, you're never going to get there. So your goal makes a demand. So your parents weren't wrong. If you wanted to become a doctor, then going on a paper route didn't make sense. What they weren't realizing is you wanted to be an entrepreneur. And so that was just a misunderstanding of what your goals were. But you both were right in the sense that, hey, figure out what that thing is that you really want to get great at and then go do that thing. I think that the society also molds it because it wasn't that- What's it? So for example, you said my parents, they didn't know that I wanted to be an entrepreneur. And I think it's more that they didn't understand that other opportunities were possible. Because when I said I wanted to be an entrepreneur, they just thought you were stupid. There was a horrible thing. But I think that whether it be your parents, your cousin, your family, your friends or society, we encompass ourselves into this little box that this is what's possible for me. Somebody that grew up like me, somebody who's good at what I'm good at, somebody who looks like me, somebody who comes to my background, this is my possibility. But what the opportunity we have here is the whole table, the whole world is your opportunity. But you have to believe that first. And that means that you're going to have to go against what, you know, maybe what a lot of people are pressuring you. Maybe you have support. Maybe you don't. And it doesn't really matter because what you need is up here, that belief in yourself to now do whatever it takes. Because for me, it started with listening to motivational tapes. Now I listen to Eric Tomics blueprint to success so many times that I knew the words to like every single word of that CD. And I was like, wow, like I can wake up earlier. I might not be the most smartest or whatever, but I can work harder than everybody else. Because that I can control. How did I learn that? Because I started this motivational CDs and I tell everybody to listen to it and I'm like, yo, did you listen to it? They're like, yeah, it's basic stuff. I'm like, oh, okay. Like you already knew this. Then I read a book called Rich Dad Poor Dad by Robert Kiyosaki, the first time I ever got exposed to financial education. And I was like, holy moly, like this guy's- What was the most important thing he taught you in that book? Well, they like covered a cover. Like I, you got to understand, I didn't grow up with anything. Like I don't know what investing was. I never heard a passive income. I didn't know you could invest in real estate. Like I was so naive. I didn't know anything in that book. That's my beef. People don't know how the world works. And this, I was as guilty of this as anybody. But going back to the triangle of doom, this is the, so as a refresher, triangle of doom, interest rates, economy, and sorry, which one am I forgetting? Interest rates, economy, and inflation. And so you've got, if people don't understand how that works, they don't understand how to move in order to either survive or take advantage of the opportunities that are going to present themselves. But it starts with understanding how the system works. Understanding the system and then not blindly trusting everybody. Like you said, you know, you have distrust. Like I'm on board with you. I don't really trust many people. I don't trust what the government says. I don't trust what the Federal Reserve banks says. I trust myself. But you got to have, take everything with a grain of salt. Now why do I say that? Because, okay, we'll talk about interest rates just for a second. The Mortgage Bankers Association put out a statement in 2023 and they said that by the end of 2023, that they expect mortgage rates to fall to like a low 5%. The National Association of Realtors said something very similar. They said that by the end of 2023, they expect mortgage rates to fall under 6%. I forgot the exact percentage, but it was under 6%. Why? What is their attention? You have a lot of mortgage bankers and Realtors out there saying what the heck is going on? Why aren't people buying homes? Why aren't people getting mortgages? And so now you have these, I mean these are big agencies saying, come down, it'll be just fine. What is their justification? Mortgage rates are too high right now. People can't afford homes so they have to go down. Again, analysis, that's their analysis versus the data. Now if you dig a little bit deeper, this is the financial education aspect that I'm going to keep talking about. Now you can answer this question yourself instead of just trusting somebody else. I mean I'm not saying trust me. I'm saying learn it so you can figure out how to do it yourself because I can be wrong. You can be wrong. Anybody can be wrong, but at least you know how to come up with your own analysis. What affects mortgage rates? Two things. The interest rate that the Federal Reserve Bank sets and inflation. When the Federal Reserve Bank raises interest rates, that makes borrowing for banks more expensive which means they're going to have upward pressure on what they have to sell it to you. If you sell it a hat for $10 and then the cost of the hat goes up to $11, now the store is going to have upward pressure to sell the hat for 20 as opposed to 15 because their cost is going up. So when the Federal Reserve Bank raises interest rates, that's upward pressure mortgage rates. The second aspect is inflation, why inflation? Because well when inflation happens, it's a little complex, but when inflation happens, people are more worried about the dollar. And when people are worried about the dollar, they're less likely to loan money to the government.


Treasury Bonds (01:30:22)

This is called a treasury bond. So in the financial world, there's something called the risk free rate. The risk free rate is if I loan money to the government through a treasury note or a treasury bond, the return that the government gives me, the interest, the interest, the interest is risk free because we expect the government to always pay back their debts. So when inflation happens, people are less likely to loan money to the government because they're worried about the health of the dollar, they're worried about the government, which means that for the government to incentivize more people to loan money to the government, they have to offer a higher rate. So when inflation happens, people are worried about the dollar, people are worried about the government, the risk free rate goes up, interest rates on government debts go up. If the interest rate on government debts go up, that's going to push up the rates on mortgage bonds as well because now your mortgage return would naturally have to be higher than the risk free rate because if you're loaning money, if I'm loaning money to get a home in traditional finance, that's a riskier investment for me than me investing my money to the government because that's risk free. So you have to give me a higher rate of return than what I'm getting from the government. So higher inflation, higher treasury yields pushing higher mortgage rates. So now what is the analysis? Inflation is higher than expected, looks like it's going to be around higher than expected. Okay, that's higher treasury yields, higher pressure on mortgage rates. The second factor is Federal Reserve Bank interest rates. Well, the Fed keeps saying that they're going to keep raising interest rates. Now, of course, all this can pivot, they can pivot tomorrow. And based off of this information, this tells me that there's a lot of upward pressure on mortgage rates. Mortgage rates are around 7% right now. But you have the National Association of Realtors, the Mortgage Bankers Association, two very credible sources who are like the source of information for realtors and bankers saying, don't worry, mortgage rates are going to fall by the end of the year. This is why that education is important.


Mortgage Rates (01:32:24)

Yeah, we're already so $2.3 trillion, according to Fortune Magazine, have already been scooped out of the US housing market alone. So I'm very shocked that in the face of $2.3 trillion of losses that people are pretty chill. I've got some more stats than that that I found super disturbing. We've got month over month housing prices have declined for the first time since 2012. We've got home builder sales have collapsed by 46% home buyers canceling 20.8% of their construction contracts. Like it seems like we're in the middle of a housing reset of pretty aggressive proportions. So do you think people are willfully lying? Are they blinded by their own narrative? Are they just trying to be optimistic to keep people from panicking? This feels a little bit like masks don't help. You're fine because we had a shortage in hospitals. And then once that shortage was over, it's like, nope, actually you do need masks. You know, that question I think it's like, are they sinister or are they stupid? That's the question. Sinister stupid or doe wide and naive. Right. And so I mean, I think that I'll leave that up for anyone watching this or listening. You come up with a new interpretation, right? Do you have you don't have to tell me, but do you have an interpretation? I don't know if I do because I go back and forth because it just doesn't. But I think my wife talks to me about this. I think I have a very trusting personality by nature. I have gotten scammed and screwed over so many times. But I refuse to give up this idea of wanting to trust people. Now, yes, that's on me. I get that. But and my wife is like, dude, you can't keep doing that. And I'm like, look, if you scam me, you screw me over. I'm not going to do this with this with you again. Sure you hurt me, but do I want to give up my trusting nature and do I want the jagged personality or whatever? And, you know, I go back and forth. I don't have a, you know, a good answer on this because I'm still trying to figure that out about myself. I don't think many people are sinister. My gut instinct is that's going to be the most rare. I think people, this is exactly how it plays out in business. The reality intoxicates people. To be a good leader, you have to give people certainty. That's one of the most important things you do as a leader. To give them certainty, you have to develop certainty in yourself. To do that, you need a narrative. The narrative allows you to connect dots. So as we talk about the triangle of doom, it's like we're telling a narrative about how those things flow. But the reality is if we could predict it precisely, we'd be gazillionaires. So nobody can really predict it, but you have to move. You have to do something. And so you look at the triangle doom or whatever, you look at the signs in the housing market and you come up with a narrative. And there are incentives, if you're in a certain governmental body or whatever, there are certain incentives for you to, since you don't know, to create a narrative that leans one way or the other. And so if you're a YouTuber, there's an incentive to do doom porn because that's going to get a lot of clicks. And so even if you're like, I'm not being sinister because there really is something over here, but it's like, I'm also nudged because I have an incentive. So I have a feeling to give themselves certainty, to give other people certainty. They begin telling themselves the narrative that they happen to be ever so slightly incentivized to tell. I don't think they're doing it on purpose, but you have to have a narrative that's going to allow you to move. So we end up there. It's a combination of doe-eyed optimism and willful, not willful. They have to tell themselves a narrative in order to be effective in life. And that narrative gets a little rose-colored. And then the catastrophic mistake that entrepreneurs make that I've been guilty of a gazillion times, you forget to question your narrative. You get so busy telling other people what it is, telling yourself that you forget to seek disconfirming evidence, which brings in the last piece of the puzzle, which disconfirming evidence feels super bad. It does not feel good when people are like, you're wrong. And especially now in the days of the internet, you're wrong. Usually is said, you're a moron. You're an idiot. Or worse. Yeah. And so then you really want to defend yourself, which means defending your narrative, which then you entrench yourself and it becomes dogma. But one more point in this, even Einstein, who gave us the theory of relativity, could not in the later part of his life become one of the people pushing the envelope of his own theories because he got trapped in his own dogma. I think you're 100% right on that.


YouTube title theory. (01:37:22)

And that's what I've been experiencing, too. So on YouTube, let's just talk about that and we can expand other places. If you don't have a very attractive title, no one clicks on it. It goes into the YouTube cemetery, no one's going to watch it, which was a huge, like, pull on my heartstrings because I'm like, why do we have to title videos like this or come up with these thumbnails? And the reality was like, look, if you want people to watch your stuff, like, you know, my team was like, you know, you have good content. If you want people to actually watch what you're putting out, you've got to be able to play in this game. And that was one of the reasons why I created my briefs media newsletter because now I can avoid the sensationalism. I can avoid those titles and avoid all that clickbait because in the newsletter, you get all the news that you want, like our market briefs email. You get all the news, you just click on the email. Doesn't matter. Like our subject lines are like black cups are cool. You know, it's like you click it and then all the information is there and now we can give you because my goal is unbiased. I want to give you the data so you can create your own analysis and understand what's happening because nobody else can do that. Most media companies don't have the ability to do that because they have to get you to click and that's all they tell you. And I want to change that. And so for me, it's like, okay, well, if I want to get you to hear about me on YouTube, I got to, I got to come up with the title. But my goal is to make the content educational so you learn and then say, look, if you want more, go to market briefs briefs.co and you can see our emails and join for free and get the news in your inbox. You don't have to worry about it. And I think when it comes to incentives though, like what you were saying, where we kind of forget or we get put into a box and then we ignore all the other things or we have no reason to understand.


Lessons From Financial Crises, Spending And Inflation

The people that were successful in the 2008 crash. (01:39:02)

And what I mean by that is if you go to like the 2008 crash, right, what died up to it? Well, you know, we like to point fingers. Well, mortgage bankers were making just bad loans. They were loaning money to people who shouldn't have gotten it. Now, if you're a mortgage banker, what's your incentive? My incentive is to make loans. I'm on commission. I want to make as many loans as possible. If you got a 600 credit score, you can't call a fed, this I'm going to give you this. I'm having to get a commission. Okay. So am I a bad person because I'm trying to make money and take care of my family? Well, then it's the bankers, the CEOs of the company that are ruining it. Well, what is their incentive? Their incentive is to increase the earnings of the company. Their incentive is to make sure that they can issue more loans than their competitors. So are they evil for trying to increase the value of their company, increase the share price? Well, no, it's the people because they should have known better. They shouldn't have gotten these loans. They should have known that if you're making $75,000 a year, you can't afford a million dollar home. Well, how many of them are financially educated? How many of them know the basics of how much mortgage they should buy, how to save their money, how to invest their money? None of us have grown up learning about that. So is it their fault? Well, it's the government's fault. They should have regulated it. Do we want more regulations? So now it's like, everybody's going to have their own incentive. Everyone's going to have their own reason for wanting to do something. And this is why I go back to the financial education aspect. Like we can point fingers all day long that is your fault, their fault, their fault. At the end of the day, if you cannot protect yourself, it doesn't matter. You have to know how to protect yourself. And that shield is that financial education. Because now, look, your banker is in the business of making loans. They want to make as much money as possible. It's reality. The realtor wants to sell you a bigger home. They get a bigger commission check. The car salesperson, they want to sell you a bigger car. The corporation, they want to sell you more stuff. Your company wants to keep you employed there. This is the incentive. You can hate it, love it, or understand it. And the financial education is understand it. That way now you can at least make an educated decision of what type of home you want to buy. That's what is lacking. And this is where it keeps coming back to the same thing. Because everyone is going to have their own incentives. Politicians are going to have incentives to get votes. They're going to want to say things to get votes. Corporations are going to want to say things to get you to buy their stuff. Salespeople are going to want to push their thing. And everyone is going to have an agenda. And now your agenda needs to be protect yourself. How do you protect yourself? We focus on the financial education side, but you can apply this to every aspect of life. You've got to know how to protect your wallet. And that only, I mean, you cannot tell me that your banker is going to have a better protection of your wallet than you are. You cannot tell me that a corporation is going to protect your wallet better than you can. You cannot tell me that-- Most people don't know how to protect it though. That's the thing that scares me. And we're relying on the government to tell us what to do. And so this is where like, what do we do? And I keep going back to financial education. That's why I'm an advocate for that. Because what I've seen is, dude, look, you can rely on the government all you want. Maybe they'll help you, but I do not want to rely on them. I want to rely on myself, my own financial education. Don't rely on-- Like I'm not saying you rely on me. I'm not saying don't rely on a random guy on YouTube. Learn. And what you said, I'm 100% in agreement with. Listen to people who disagree with you. Listen to both sides of the aisle. Because if you agree with one thing and social media amplifies this, you go down to rabbit hole. As soon as you start learning about one thing, whether it's money, health, or it doesn't matter, you're going to get bombarded with only that one thing because that's how the algorithms work. You go deeper and deeper and deeper down the rabbit hole and anybody who disagrees with you is stupid. But if you really want to build intelligence, you've got to break out of the algorithm, come out of the rabbit hole and now study this side too. And maybe they're wrong and maybe you realize, wow, they're even more wrong than I thought. Or maybe you have a more balanced opinion. And this is where real learning comes into play because we have to learn how to learn. And we're not taught how to do that. How do we learn how to do that? Do you think that game of money is too complex for the average person to ever win? This is what I think is happening to the middle class. It's just too complicated. And unless I'll expand on that. The reason that we've created rich and poor is because of the fact that the way that we're getting money into the economy is by buying assets. To buy assets, you really have to understand an obscenely complicated game. And most people don't understand that game. And so they just say, I'm just going to go work and I'm going to earn a paycheck and I know how to live paycheck to paycheck. It's not ideal, but like I get buy and I have fun and I'm able to raise my kids and all as well, most people aren't. But fewer and fewer people are having kids now. And so we're simplifying the game. We're collecting a paycheck. We're entertaining ourselves for reasonable amounts of money. Amazon's helping make your average stuff cheap. So people don't really have a big incentive, especially in an era where the rates were just declining and some debt basically was pretty easy to get a hold of. Goods are getting cheaper and cheaper. So I don't have to Tony Robbins' money master the game. I just play the game of going and getting a paycheck and now all as well.


The simplified game of money. (01:44:45)

But the way money finds its way into the system in an era where we have to like inflate, inflate, inflate is only going to people to hold assets. I don't think that it's too complex, but I think the first issue is comfort is one of the biggest drugs in the society. And we, many people are con- I'm going to back you up before we get to comfort. I think it's so complex you sound crazy. So that means I think you're carving out a small piece of the money world and saying, just focus on this piece. What's this piece then? Look, money at its core is very simple, just like how fitness at its core is relatively simple. In the fitness world, it's eat less, work out more to live a healthy lifestyle. In the financial world, spend less than what you make, invest the difference. In what? And this is where it can be as simple as you put your money into the S&P 500. Now, I'll explain what that means because it's going to sound very complicated if you've never been exposed to the money. S&P 500, literally all that means is the 500 biggest companies in the stock market. Historically, the S&P 500 has grown by 7 to 10% a year on average over almost the last century. Which means if you took $100 a month and that's all you did. You didn't look for the next Google, the next Amazon, you didn't try to find real estate investments, you didn't try to do anything complex, all you did, you had a system and you just put your money into that fund, a fund that gives you exposure to the S&P 500 and you did nothing else and you even automated it so you don't have to do it manually because there's brokerages out there that do that for you. If it was just completely automated and you never looked at it in individual stock, you never touched your investment portfolio and all you did was spend less than what you make and you just invested $100 a month, you would have retired a millionaire with $100 a month investment. So now, what do we do? We like to complicate it. We like to say, "Man, this stock looks hot. Get into this stock before it pops off. Should we short this stock? Should I do options? Should I go and do this? Should I do that? Should I?" And we start trying to play this game thing because now we start to get into the whole idea of, "This is fun. This is attractive. How can I make more money?" For a lot of people, it becomes gambling and this is we're now understanding investing versus everything else. Investing, look, spend less than what you make. If you're making $25,000 a year, $250,000 a year or $2.5 million a year, it doesn't matter. Spend less than what you make.


Spend Less Than What You Make (01:47:23)

It doesn't matter how much money you make, it starts with a mindset thing. There's a reason why you've seen so many athletes make millions and end up bankrupt. I think it's like almost 8 out of 10 NFL players end up broke up bankrupt within 5 years of them leaving the NFL. It's not just a money thing. We talked about 6 out of 10 millennials making over 100 grand a year or broke. There's a crazy high number. I'm going to say around 50%. I don't remember the exact number, but of people making over 250 grand a year, they're also paycheck to paycheck. It starts here. Spend less than what you make. Give a smaller, smaller partner, smaller car for a little while. Have some extra cash. Now what do you do with that? You can save some and you invest some. Where can this money be invested? I gave the example of the S&P 500. How do you put your money into it? Well, in the stock market, you can look at something like SPY. SPY is a ticker symbol that gives the exposure to the S&P 500. Another one is VOO. I personally am invested in VOO. That gives the exposure to the S&P 500. So if you just put your money in there, historically, you would have seen 7 to 10% growth a year. If you say, "You know what? I don't even know what the S&P 500 is. Can't I just put my money into the stock market?" VTI is an ETF, meaning it's a fund, that gives the exposure to the entire stock market. It's a total US stock market fund. So now if you just put your money there, now you don't have to, you're not investing in Amazon or Google. You're investing in all the stocks. Amazon, Google, Google, and others. You are technically investing in Amazon and Google. You are, but I'm saying not the individual company. Every, every, everything. And so now it's, we can dumb it down to as simple as, you know, just put a little bit of money into these things and now you're just going to meet the market. You don't got to worry about all the fancy stuff. All the fancy stuff is what generates all the clicks and the excitement and the fun and the noise and the, you know, that's what gets all the headlines. It's also where people lose their money. So yeah, getting to, getting to someone like Ray Dalio and a huge hedge fund, those guys are going to time the market. Those guys are going to use AI and hundreds of millions of dollars in research and all of that to stay ahead of the curve. Ray was the one that said to me, he's like, man, the problem is that they don't understand how sophisticated we are. And you've got your average person on the street that thinks that they're going to beat us to the punch. And he was like, we measure our trades in milliseconds. We've got AI. We've got like, we've got 1,800 employees or whatever. And he's like, yeah, the odds of you beating us are effectively zero. So that puts people back into the passive investing mode, which is what you're talking about. Okay, I will say that even that, like you're so immersed in it that you forget how complex even that is. Like the ticker symbols, people are like, what's a ticker? Yeah. So. And so like, you know, I'm going to go back to the conversation ahead with the guy from Detroit recently where he was, we had the same talk because I do, I don't know, I have no idea how to invest in the stock. Where do I start? And so now you're right. That can be daunting because now you open up one of these apps and they're going to ask you for your bank information. They're going to ask you for your social security information, which can be like overwhelming. You can be distrustful. Like, who are these people? Can I just say something really fast? Yeah. In high school, I was talk calculus, but not about the stock market. That's crazy. You and me both. I had, look, I didn't know what the word dividend meant. I didn't know what passive income was. I don't know what wealth meant. I had no idea what these things were until I started reading books. And we all live in a bubble, each one of us. Every single person lives in a bubble. And until you get yourself out of that bubble, you don't realize how big the world is and how many different things there are. Like, when I broke this bubble and started learning about money, I mean, I've become obsessed with things. Like, I started just like, I couldn't stop learning and it blew my mind how much I didn't know. And then, you know, I started learning about fitness and nutrition. I'm like, Oh my God, so much stuff I didn't know. And I started learning about spirituality. What? This is all the stuff that I had never learned about before. There's a world of things out there. And when you think you know something, I can pretty sure like guarantee you that you don't know it. Like, the more you learn, the more you realize you don't know. And so like, when we talk about, okay, how do you now make your first stock market investment? There are apps out there that will even do that for you. Like they will just like, they will just ask you how aggressive do you want to be with your investments. A little bit medium, a lot, and then it connects to the bank account and then it just invests for you. The biggest, the psychology, like the education part can be learned, relative with a few YouTube videos. Like if you devote yourself for, let's say three hours, you can figure that out. Just search it on YouTube, Google. There's a bunch of content there. The difficult part, which is not so easy to learn is the psychology part because now, if you're getting started in the money game and you start investing your money and then you see markets go down and now you see a portfolio on the red. That's where now most people will panic, freak out, and sell because you're like, I was supposed to get rich because of this. I put in $3,000, now it's down to $1,800. What the heck happened? And this is where that psychology is so important and that you cannot learn as easily. What should the psychology be? So here, the great irony of investing is the best advice anyone is ever going to get is buy low and sell high. The thing that people are at least able to do is buy low and sell high. The reason is when the price is low, everybody else thinks it's terrible, it's trash. So now you have to believe in yourself and your analysis of the data enough to go, okay, it's the right play to do it now. The price being low means everyone thinks it's trash. You've got to buy it when everyone else thinks it's trash. And then as the price goes up, then you have to think it's not going to go up forever and so I'm actually going to take some wins. I watched this happen with crypto. It was surreal. I had never paid attention to the markets before. So I didn't understand what euphoria looked like. And so everyone was just like, it's going to go up forever. Nothing bad could ever happen and they were buying in at the high. And then as soon as the price started dropping and look, Michael Sailor may end up looking the fool, but what he tried to tell everybody was any increment of time, less than four years in Bitcoin is just noise. Don't do it. And people still sold like fucking crazy. And so yeah, getting people to buy low and sell high is already the most difficult thing. So if that's the wrong psychological approach, what's the right approach?


How to build resilience (01:54:06)

How do you build the resilience? So on the first kind of basic level, it's when things are going around, if you're investing in the funds like I talked about, if you look at history, we have seen recessions and market crashes happen almost every decade, which means you see boom, boom, boom, ups and downs and ups and downs and ups and downs. And the people that make the money are not the people that sell at the bottom. Is there a long arc? So if we're going up and down, is the market just, you know, realize as it's going up, don't buy, because you know, it's going to crash seven years later, buy when it crashes, write it up, sell it'll crash again. Or is it like up and down, but with this trajectory for those watching, I'm raising my hand up into the right. Yeah. Listening, I should have said. So is there like, you know, over the last hundred years, has it returned seven to 10% because it's actually gone up in value or including the recessions and crashes, the markets have gone up a seven to 10% a year on average. And is that due to an increase in productivity of companies? Like people are actually spending more, is it birth rate? Like how is it possible that it could keep going up? Like does at some point, doesn't even the long arc have to go, this isn't sustainable. So there, that's a good question. And it's actually probably a more complex question that, that you might be thinking because it's yes and more. So what I mean by that is, okay, if you bought before the before at the peak of the 2008 crash, if you bought before everything tanked and you held on, you would still, assuming you invested into funds, not individual companies that would bankrupt. If you invested into the market, like the S&P 500, you would be richer today than then. Why if you held on? So the psychology is now, you hold on and buy more with things, go down, assuming you're investing into funds. If you're investing in individual assets, then the research and analysis is completely different because you want to make sure you're not buying your way into bankruptcy. So now the question is, why does the market go up? Well, the first part is value creation, right? Amazon is working every day to increase how much value that they're putting out. They're working to create new products. They're working to make buying online better. They're working to increase efficiency. And I'm going to talk about efficiency in a second because that gets into artificial intelligence and reducing costs and things like that. In addition to that, so you have company, every single company is trying to do this. If your companies are trying to do this, they're dying. Every single company is trying to produce more value, make more money, create a better product. But in addition to that, it goes back to everything that we just talked about. Why does inflation happen? You know, the Fed says our goal is 2% inflation. Why? Why not 0%? Why not negative inflation? Because that would make things cheaper, right? And so now understanding, well, why does inflation happen? If you look at our economic system, and this is where, again, financial education is so important, 2% inflation is just enough inflation. The most regular people don't notice it. It doesn't mean that it doesn't happen. It's just enough. Why do we want it? And so I'm going to get to that. So it's just enough that most people don't notice it. But why does it continue to happen? Because what is inflation? It increases the monetary supply, right? It increases the monetary supply. More dollars mean more money to spend. More money to spend means you got more money to go to Chipotle. That's why over the last 50 years, we have seen the prices of things steadily increase. A hundred dollars in 1970 could buy you way more than a hundred dollars today. I'm not sure that's quite true.


The Bitcoin pizza problem. (01:57:51)

So here's how I've always thought of inflation. And the reason that we want a little bit of inflation is that if I'll call it the Bitcoin pizza problem. So Bitcoin is a finite supply, which means that it will, you'll never be able to inflate it. It can still lose value. Obviously, we've seen that. It can go up in value. We've seen that. But if the cost, if the value of Bitcoin goes up over time because it can't be inflated, then you could buy a pizza today. This happened to a guy. He buys a pizza for what? 17 Bitcoin, whatever. And then that 17 Bitcoin goes on to be worth $200 million. And it's like, oh God, like that was a mistake. I should have held on to it. So if money has a deflationary effect, meaning that if I have $1,000 today, that $1,000 tomorrow might have the buying power of $2,000 today. So it's like, I'm incentivized to hold it. Now if I'm incentivized to hold my money, there's no velocity of money. There's nothing moving. Goods aren't being bought and sold. People are just trying to hoard their money. And so even though people have this money and it's able to buy more in the future of the same $1,000, then I'm incentivized to hold it. Whereas if it goes down a little bit, it loosens that sense of, well, this isn't going to be more valuable tomorrow. So I'm never going to look like a fool. So I might as well go get the thing that I really want. But why not 0% inflation then? Why doesn't the Fed do that? It's an excellent question. I don't have an answer. That doesn't increase the economic system. It doesn't increase the size of the economic system. If you want to. Is it really though? So is the only way to get inflation to print? Because what I'm trying to reconcile in my head is yes, there's more money, but the price of things then just goes up. And so you're still only buying the same amount. So okay, there's a couple aspects to this. When inflation, inflation by its definition means you're inflating the monetary supply. What that results in is the value of the dollar dropping, which means for the government example, why does the government want inflation? Because that means they can pay back their debt. I get why they want it. Because they're printing money. And so the first aspect is they can continue to pay back their debt with cheaper dollars. But then it's basically an extra 2% tax or whatever person they get a little bit of extra, right? That benefit. The second thing is they have more spending ability. It goes to increasing the size of the economy because look, a financially smart person is going to make $50,000 a year, invest some of that, save some of that, and spend some of that. So the government doesn't work that way. If the government made $50,000, they're going to spend all $50,000 and then an extra $10,000. And so how do they do that? Well, why do they do that? It's stimulative. It grows the economy. When the government spends money, what does that mean? Well, if the government spends money, let's just say infrastructure, they're paying contractors. They're paying a company. More money is entering the economic system. So as inflation happens, when the government spends more money, more money is coming into the economy. And so what does that do? That grows the economic system at a cost. The value of the dollar goes down. And so our system, we have companies, right? The economy. You have investors who own a piece of the economy and you have consumers. Every single person is a consumer. Rich, poor, middle class businesses, every single person is a consumer. But most people stop there. Most people are just consumers. Investors own a piece of the economy. Now the Federal Reserve Bank, you have kind of over here, they're working to increase our economic system. They want to grow the system. They want to grow the economy. How do you do that? You increase how much money comes into the economy. You increase consumer spending ability. How do you do that? Increase how much money is out there. And so if consumers are spending money, well, how can you increase how much to spend? You can give them more money to spend. And if more money keeps flowing into the economy, there's more dollars in there that can be flowing through the economic system, which then will benefit the economy because I mean businesses can get more money because there's more dollars out there. And businesses are getting more dollars. The investors also benefit because now businesses show more revenue, more profits. Sure, the value of the dollar has gone down slightly. But on a nominal level, there's more dollars, more wealth, more money accumulated here. This is why inflation is so important to understand because consumers don't benefit from inflation.


Spending money does not cause inflation. (02:02:24)

Sure, maybe you can buy more stuff if more money comes and if you get more dollars, but consumers now have to pay for things with a deflated dollar. But am I crazy? You get 2% more dollars, but things cost 2% more. Sort of. That would be in a perfect world, in a vacuum. But it's roughly that, right? I mean, this really is a tax. It is 100% a tax. This is with government getting the ability to spend 2% more money. It is 100% a tax. But inflation has been around 2% a year historically or 3% historically. But does that mean that the monetary supply has increased by 3% a year? No. The amount of dollars out there has increased way faster. And this is the big argument that people say that spending money does not cause inflation. This is the big argument here because if you look at the 2000s. Spending money or printing money? Well, spending more money than they have. So printing and spending. When the 2008 crash happened and we started unleashing the quantitative easing. We started opening up the money printer and money is flooding our economy. You had some people saying this is going to cause inflation. But we never really saw a tidal wave of inflation after the 2008 crash. Inflation never really saw a big spike at all. Like it was pretty contained around like that 3% mark. And so now we had everybody saying hey look money printing doesn't cause inflation. We can print as much money as we want. We saw inflation at around 3% but our monetary supply didn't increase by 3%. It was way more than that. I have a hypothesis I'll be curious to see if I'm going in the right direction here. The money printing that they did though was just to keep people from losing their homes. So they printed the let's say roughly exact amount of money they needed to print in order to keep things status quo. Well the government cannot predict how much money will be needed in order to do that. They sent out stimulus checks in order to stimulate the economy during the 2008 crash. What is a stimulus check intended to do? It is intended to stimulate the economy. But we assume that it's intended to stimulate the individual. The individual is a consumer. So if you get a $2,000 check what does that do? Maybe you can make one month of mortgage payment but what were people doing? They're going out and spending. It stimulates the economy. It gets the economy moving again. Businesses start making money again. And so more money. That's really dark. So I'm hold on. I might be misinterpreting this but that could be really dark. So let me say what it sounds like happened in 2008. I just lost my home. Brutal. Gut punch. I'm living in a tent. This is so gnarly. Oh my god. I get my $2,000 steamy check and I just go buy the normal things that I would buy. But maybe this goes back to your initial statement. I'm buying food that the vast majority of the things that I buy are going to be my main stays. So it's not like I go out and buy a new truck. I'm going to go out and buy my eggs and go see a movie or two. Maybe go out to dinner or something like that. But that's really what it sounds like. If they can pour that much money into the system and inflation doesn't go up, then people spending habits roughly would stay the same unless somehow that money went into the system and it created additional productivity so that there wasn't people fighting for the same number of items. The number of items actually went up and so the price of everything stayed the same. What you said makes that prediction. So okay. The government, if the government sent out $2,000 stimulus checks and everybody put that money in their savings account and didn't spend it, it wouldn't grow the economy. That's not what the government wants. They want you to spend that money. It's a way to encourage spending because we are a consumer. People should have saved that money. Let's be very clear. Unless they need it to eat. So I'm talking about what the government attends. People should invest a piece of their money, save a piece of their money. But I'm trying to speak to human behavior. Does the government understand just the ugly truth? Is what I just said true? 100%. Look, the government knows we're a consumer nation. It's not just the US. The whole world knows the United States is a consumer nation. People here spend more than what we make. Because you talked about the inflation issue in 2008.


How is it that we're seeing it now (02:07:19)

I wanted to expand on that a little bit because money isn't just money. We have two types of money in our economic system. We have actual money and then we have credit. People don't spend based on how much money I have in my bank account. They spend based on how much debt I can qualify for. So if I have $100 in my bank, I can still spend $500. What happened in 2008 is first, credit levels fell. I couldn't even get credit. I couldn't get credit because if my income goes down, I lose my job. I'm no longer credit worthy to a bank. Banks are not going to want to loan me money. So before I had $100 in my bank, but $600 with the spending ability. Because I could have, let's just say, got a $500 loan or credit line or whatever. Now... Can I ask you a question? Keep where you were going. But I need to understand something. So fractional reserve banking, I understand how that works. So when you go for a home mortgage, they don't have to have that whole price. It's like only whatever, 10%. But how do credit cards work? Are they able to create debt out of thin air in the same way that a bank does? Or do they have actual one-to-one reserves? So let's highlight this and then we can get to credit card companies about that too. So I have the spending ability of $600. $500 is a loan. $100 is actual cash in a bank money. Here, I lose my job like everybody else. Now I lost $500 with the spending ability. I only have $100. My spending ability crashes. Then come the stimulus checks as a way to stimulate. Now I have $100 of money and then $2,000 in the government. Now I have $2,100. Now I can go out and start spending again. I start spending again. Businesses start making more money. There's more dollars in the economy and then I get another job and now I go from a spending ability of $100 because I already spent the $2,000 back to $600. So now there's more money out there and the credit starts to go up. But the inflation never really happened.


The delayed effect is now + here to stay (02:09:25)

We never saw it really pass through and now we're seeing the effects of the inflation. We got the original question. You think it was just delayed? Oh, 100%. It's... What we were trying to figure out to reorient was in 2008 housing crash, stimulate the hell out of the economy, pump a bunch of money in but inflation doesn't go up. I then had a hypothesis about why which is very gloomy.


Inflation is like taking heroin... (02:09:43)

Yeah. So now you said was it delayed? I think we talked about this previously where if I took a dose of heroin to wood today, I'm not going to die. I might like it and I might say, okay, let's do another one. But to keep chasing the high, I might keep increasing my dose. Now, if I keep increasing my dose, but nothing bad happens to me, does that mean that it's bad for me or good for me? Well, nothing bad happened yet. But eventually, right, you're going to hit a point. We know scientifically that if you keep increasing it, your odds of something bad happening keep increasing. Well, what are we seeing now in the money world? In 2008, we printed a lot of money. We didn't see the full side effects of the heroin. We didn't see the full effect, the pain of the inflation. We did again in 2001. Now what we're starting to see happen is over the previous decades of money printing, over spending, we're starting to see the side effects of it. And now the question is, what are we going to do? Are we going to just shoot up again and try to delay the real effects of it? And just like, okay, calm the withdrawal symptoms? Or are we going to actually solve the issue and fighting an addiction is painful? You want to get off of a drug addiction, you're going to have to go through pain. And to get back out of analogy and into what we're talking about, that's spend less money. Spend less money from the government. And that means people have less stuff. That means less government spending. That means more saving, less spending. And that is painful, especially when you're accustomed to having the nice stuff and being able to buy whatever you want, that causes financial pain. People lose jobs. That causes economic pain. Businesses go under. And that is like, we don't, nobody wants to see that pain. But the unfortunate reality is now because of the inflation problem, if you want to solve inflation, you're going to have to go through that pain. And what the Federal Reserve Bank is saying is we want to solve the problem without enduring the pain. We want to get off of the heroin without having to withdraw symptoms. Well, unless you have some fairy dust where you can do that, sure. But withdrawal symptoms are often a byproduct of trying to leave a drug that you're addicted to. In the money world, trying to get off of the inflation high is, has the side effect of economic pain. And now this is what everyone's saying that we can avoid. But what I'm saying is be prepared that way, if we do see more economic pain, that you can protect yourself and not just protect, but also capitalize on opportunities that might come your way. And so, you know, we've had a lot of kind of buildup. And this is where now understanding, look, we are starting to see some effects of this.


Long-Term Effects Of Past Financial Crises

The impact of 2001 and 2008 financial crisis' now (02:12:37)

And over the next decade, we're going to see a lot of things change. We have a lot of corporate debt, a lot of national debt, a lot of household debt. As interest rates, if interest rates continue to rise, it's going to cause pain. Now we could shoot up again, the Fed could cut interest rates and start stimulating, and they kind of get the economy going again. But then that makes the inflation problem worse. Where can people stay in touch with you to be up to the minute on this stuff? Absolutely. So I covered this on my YouTube channel Minority Mindset. If you go to briefs.co, you can join my free newsletters. We have newsletters for investors, newsletters for business owners called business briefs that keep you up to date on the latest business trends for financial education. You can go to marketinsiders.com. And yeah, all of that. Guys, if you haven't already, be sure to subscribe. And until next time, my friends, be legendary. Take care. Peace. Oxygen. Pretty important for human life. There's no price on it. Why? It's not scarce. Something like diamonds. Not that important to human existence yet has a huge price because the demand way out strips of supply.


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