Jason Hartman starts this FlashBack Friday episode encouraging listeners to dedicate portions of our wealth to our living and emotional capital not just our material capital. In the interview segment of the show, he hosts author Chris Martenson. They have a wide discussion starting with the global economy and legislation coming out of Congress. Then they go into issues with the stock market and why it makes no sense to invest there anymore. Chris looks at what would happen with the world in a deflationary environment. He presents some areas he believes people should be focusing on.
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present and propel you into the future. Enjoy. This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:16
Hey, welcome to the creating wealth show. This is your host Jason Hartman episode number 641 641. Thank you so much for joining me today. Our guest will be a returning guest. We’ve had him on a couple of times before, and it will be Mr. Chris Martin say he is the author of a new book entitled How to prosper. We’re going to look at some mouth Susie and stuff here today. You know, some some think the world is falling apart. Some people yours truly think what what do I think? Well, let me ask you a question. So you can answer that you can answer what I think by answering the question, What time is it it’s an amazing time to be alive. Remember, every time you ask yourself that in your own head, or somebody asks you what time it is. That’s the way to answer. It’s an amazing time to be alive. And it really is. There are some crazy things going on. Of course, Europe is falling apart, China is falling apart, many think the US is falling apart. It’s just a crazy world in which we live. But at the same time, there are all these amazing things that are just transforming our lives in so many ways for the better. But regardless of whether you think the cup is half full or half empty, there are opportunities out there incredible opportunities, especially when it comes to being a real estate investor, investing in the most historically proven asset class in the world income property. And I’m not going to make this one of my usual rather lengthy intros and monologues because we got a lot of stuff to talk about with Chris martenson today, but I’ll just leave you with a couple of quick things here. Before we jump over to that interview. Number one is are you meeting me in Salt Lake City? We had a whole bunch of you I flew, I couldn’t believe it. You know, one of our sponsors, decided to sponsor some, some free tickets for people. And they said we could raffle them off. And they said, hey, look, we’ll pay for three couples to attend. doesn’t need to be an official couple, you know, it could be a couple of friends, whatever, three sets of tickets for two people each. So that’s six tickets. And he said, you know, give those away, just raffle them off. You know, we’ll pay for him get some, you know, a few extra people there, in addition to our little sponsorship that we’re doing, so I said, hey, that’s great. We did that contest. And by the way, what is that URL so you can enter it’s Jason hartman.com slash contest Jason hartman.com slash contest for jQ Jason Hartman University Memorial University, mind you, because we don’t charge $200,000 to come right. jG law On March 12, in Salt Lake City, Utah, you got to enter quick because the deadline is fast approaching for your entry, go to Jason hartman.com slash contest to enter to win a free ticket. But hedge your bet and buy yourself a ticket also, at Jason Hartman comm slash events, Jason hartman.com slash events. If you win the raffle, we just refund your money. We’ve done it many times before, over the years when we’ve done contests like this. So either way, come and join me on March 12. in Salt Lake City, Utah, we’re going to have a great one day event Jq live interactive, where we’ll really drill down on how to build a portfolio how to analyze a deal, you’re actually going to do the math. So you know when you when you do the math, when you do the equation yourself, you own it, you really have a much deeper understanding of it. You’re going to learn how to analyze properties and analyze the most efficient metrics and ratios. in analyzing those properties. You’re going to learn about property acquisition, we’re going to talk about our checklist for making the decision on which property to buy. We’re going to talk about managing your manager versus self management, and then property portfolio planning. So it’s going to be a great event, Jason hartman.com, slash events, and Jason hartman.com slash contest. So head your bets and either way you can win. Also, our next venture Alliance mastermind trip is coming up. Yes, it’s coming up. And we want you to be there. If you are a higher level investor, you got a few bucks and you want to do some bigger things. Join the venture Alliance or come as a guest go to venture Alliance mastermind.com. We just got back from Dubai. And we are we got another awesome trip brewing. I really want to say where it’s going to be because it’s going to be in a really special Place, but I’m not gonna tell you.
Jason Hartman 6:04
I’m not gonna tell you yet. So you’re gonna have to wait for that one, but it will be in the United States. This is not an international trip, but it’s in a really cool special place. Okay, so that’s coming up. It’s a venture Alliance weekend, we do this four times a year, we are starting a little investment fund for just venture Alliance members only. You know, that’s the whole idea. commandment number three, thou shalt maintain control, you know, the, the the downfall of that commandment. And it’s really the only one is that when you’re a direct investor, by nature, you’re going to be limited in terms of the opportunities, right, because you’re doing it all yourself. But the good side, of course, you know, this is you’re not going to be investing with a crook. Unless you consider yourself a crook. And you’re investing with yourself. So I get it, you know, I guess you can cheat yourself, right? I mean, we all do that when it comes to food and exercise. We go to the gym workout by herself. That’s why people hire personal trainers. Because you know, you don’t quite push yourself as hard when you’re doing it yourself. Hopefully you won’t be investing with a crook, you won’t be investing with an idiot, hopefully, right? Because you’re investing with yourself. And you won’t be taking a huge management fee off the top. So those are the three major problems we want to do with a venture Alliance, where we have a group of people we know like and trust, we’re, we’re close to the investment. But we can do bigger and better things than we can do on her own. Okay, we can buy a portfolio of houses, we can buy a portfolio of notes, we can just do some more unique stuff. So that’s one of the concepts of the venture Alliance mastermind group, in addition to networking and sharing of knowledge, and it’s just such a special group of people. So we’re going to do some great stuff. Venture Alliance mastermind.com. So again, I know I gave you three URLs. Join us in Salt Lake City, March 12, Jason hartman.com slash events and slash contest and venture Alliance mastermind calm. Let’s jump over to our guests, Mr. Chris martenson. And let’s talk about prosper. Hey, it’s my pleasure to welcome Chris martenson. Back to the show. I discovered him many years ago when I found the crash course. And that really, really fascinated me. And he’s out with a new book we had his partner on before but now we have Chris as well and the book is entitled prosper, how to prepare for the future and create a world worth inheriting. Chris, welcome. How are you?
Chris Martenson 8:40
I’m doing very well. Jason, how are you doing? Good, good.
Jason Hartman 8:42
It’s good to have you and you’re coming to us from Massachusetts. Right?
Chris Martenson 8:46
Absolutely. Right. Fantastic. Well, Chris,
Jason Hartman 8:47
a lot of stuff is going on in the world. Nowadays. There’s no shortage of stuff to talk about. before we started taping for the show today. You were mentioning Mexico and Brazil and Greece. And let’s talk about the global economic situation. I, you know, maybe you’ve seen this video out by Carl Icahn, that’s a warning of some scary things in the junk bond market or high yield bond. Now they call they keep, keep giving things another name to make them sound better. But you know, a lot going on out there. What are you? What are you looking at nowadays?
Chris Martenson 9:22
Well, I track all of this nearly obsessively. And I’m always on the lookout for any sort of signs that might be indicating that we’re about to enter a new era of some kind, right? So we’ve been through a very long expansion phase, most everybody listening will know that a large measure of the expansion was due to Central Bank, money printing, and the more that money printing goes on, the riskier things tend to get so we’re always on the lookout for signs of that risk coming to the fore. And so as I look across the globe, we have a global economy. Now you can’t just understand what’s happening to General Motors and understand what’s happening to America. You have to know what’s happening. In China, in the emerging markets in Europe, excuse me. So as I look across that landscape, most people might not know this unless you follow it closely. But Brazil is in deep, deep trouble right now they’ve got a huge fiscal crisis, their 10 year bond is spiked up to 17 and a half percent yesterday, they have their the real, the Brazilian currency has lost 50% of its value in the last three years. And over that same period of time, their external debt has grown by almost 70%, almost all of it denominated in dollars. So if you have if you owe debts in dollars and your currency tanks, that’s a double whammy because you of course, it costs a lot more to pay that off. Let me
Jason Hartman 10:40
stop you there for just a moment. So I want to expand on that thought and and please try and remember what you were saying there. But But you know, listeners, I’m always talking to you about what I call inflation and do step destruction and how, as a real estate investor with debt with long term fixed rate debt on your properties, this benefits you in a huge way. What Chris was talking about is the exact opposite. Because if we have a deflationary spiral, now, you know that that the value of that debt increases, the burden increases. Of course, the great thing about it though, is you have this implicit nuclear option of walking away, the one that over 10 million people actually took in the last financial crisis. When you’re a country, this is more complicated. And so, Brazil’s debt being denominated in a currency that has not tanked while there is has that debt becomes very onerous to Brazil and Chris answer this when you can because I know you’ve got some other stuff to say but you know, a few several years ago I kind of was looking at Brazil and and you know, they’ve got all these natural resources a lot of oil of course the price has plummeted for oil you know, I kind of thought they were doing a lot of stuff right for a while there but it’s looking pretty ugly. It sounds like
Chris Martenson 11:50
well, it really is unfortunately it wonderful people I love visiting there and I think they’re just saddled with with really poor government. Who isn’t these days it seems but But they’ve really been hammered by it by a confluence of things which have just all conspired to really put them behind the eight ball. And so Brazil is is a very high candidate for a default. So it’s one of the things that I’m looking out for is the sovereign default, because that could be a black swan event that really upsets the global order of Finance. And, you know, because here’s my basic view, Jason, when when the central bank’s put all this money into the markets, and we even had a Federal Reserve official, Federal Reserve official come out yesterday and and say, hey, yeah, we kind of inflated all these assets. We were kind of hoping it would work, but we’re out of ammo, right? That was Richard Fisher out of the Dallas fed, right. And so they admit they inflated all of these things with their fingers crossed behind their back that we just need this global growth of economic growth to return. It hasn’t returned. And so now we’re seeing that we’re very late stage and we’re looking for this big bubble they’ve blown to find a pin. So is that pin Brazil? I don’t know. But could it be Venezuela? wails another very high candidate for a sovereign default and other things South Africa, their currency is absolutely plummeted. And they’re also in equivalent Dire Straits at this point in time, Greece not fixed. So as I look across the landscape, the reason I’m pulling all these countries out, you know, it doesn’t really matter what’s happened in South Africa? Well, the answer is yes. Because it’s a global integrated economy. And it’s also Yes, because when we were trying to understand if the core of the center of the financial system I mean that, you know, the financial markets in, in Bern in London, New York, Shanghai, those are the that’s sort of the center of the nuclear reactor, could the weakness extend all the way to the center? And the answer is, well, maybe but first thing we want to do is want to watch for the warning signs, and I see warning signs everywhere and the big elephant in the room is China. Their economy is clearly tipped over at this point in time. I’ve been on record for about four months saying I think they’re already in recession, but hiding it with bad statistics and I’d say that because I track their imports their exports and their electricity production. I’m unaware of any country that can grow 7% wink wink, while their electricity production is going backwards, and their imports and exports have fallen by double digits year over year, and let’s not mention the pollution problem and the exodus of capital and people to the US the Brinks truck, and it’s so odd that the US could still hold that title as poorly managed as it is. But it’s just a game of relativity. It’s just a it’s just a game of comparison. I mean, the US is a mess. But compared to what right? I mean, well, yeah. And that’s really compounding this the problem right now is that we do have these giant pools of global capital, they’re all looking for a safe place to go. But this isn’t like 1918 and why Mar Germany where, you know, yeah, they sort of torched their currency but you could just duck over the border and being a perfectly sound, Swiss currency if you wanted to. There’s nowhere to go anymore. Right. So that’s, that’s really been, you know, I was speaking at a wealth conference just about a month ago and there was probably huh Somewhere between 200 and $300 billion under management in the room. And when I was talking to all the individuals there who were operating very big funds they had, they just don’t know what to do. They there was a lot of concern, they didn’t quite know where to put anything. They had the sense that, that, you know, this whole experiment by the Fed was long in the tooth. But if you’re running a really big fund, you don’t have that many options. So there was a little little bit of feeling trapped in some concern that exists in the big money. And I experienced it when I talked to ordinary people, too. There’s just a lot of concern right now. Yeah, fair
Jason Hartman 15:33
enough. Fair enough. Let’s talk about countries more first. And of course, I want to make sure we get to what should people do? Okay. What about Japan? I mean, Japan has got a huge debt problem. Are they going to default?
Chris Martenson 15:47
Well there, Jason, they’re gonna have to at some point, look, let’s be clear, Japan, is the world’s largest floating retirement colony on the planet, right.
Jason Hartman 15:56
I love that metaphor. That’s awesome. Their populations terrible. Sad but it’s it’s a it’s a perfect metaphor. Other population
Chris Martenson 16:02
actually peaked in 2008. They’ve been losing population every year since 2008. They’re projected to lose population every year for the next 50 to 70 years depending on some things. And of the population that remains. It’s rapidly aging by composition. So that is not a recipe for high aggressive growth. In fact, if the economy was serving the people of Japan rather than the other way round, you would find that you could make a strong case to shrink the economy because older people consume less and you have a shrinking population Great. Let’s just dial back our economy. The problem is that the money system, the banking system, can’t do reverse. It’s great forwards but it’s like watching somebody try and swim the breaststroke backwards. It’s just it’s just all chaotic, it doesn’t work right. So the banking system needs the growth so of course the Bank of Japan under Kuroda and then with Prime Minister Ave have been doing everything possible just throwing more and more and more money and debt into the into the system. hoping they’re gonna get aggressive rates of economic growth, but they can’t, because their population is all wrong demographics aren’t supporting them. And they’re, and they have no natural resources. So they’re a manufacturing center. They import Raw Materials, Energy and other things. And they convert it into high value products, they sell them and they pocket the difference. That was their economic miracle. Well, guess what, China’s just eating their lunch on that stuff, because China’s lower cost came up the curve very quickly industrialized with all new facilities. And and so Japan is really in a pickle, you know, sorry for a super long answer. The answer is yes. They’re going to have to default at some point because they have absolutely unsustainable amounts of debt.
Jason Hartman 17:38
Okay, so the debt is so big, though, in terms of a world scale. That would be like saying, is the US going to default? Right, which, you know, defaults can take a lot of forms, is it? Can they, well, they can’t inflate their way out. I mean, they can’t create inflation even if they as much as they might want to, but how how does that before Look isn’t an outright default. Is it just saying hey, look, you know, we’re not paying? That’s that’s what most people consider a default? Or is it a default in a more subtle or devious way?
Chris Martenson 18:11
Well, of course, the authorities would love the devious method, which is inflation, right? So if you create inflation, it makes the future value of your debts appear less, and it works wonderfully. So if you have, you know, high inflation, maybe your nominal GDP is growing by I don’t know, six or 7%. Your real GDP is only growing three or 4% because you have to subtract 4% inflation. But of course, all that nominal GDP means there’s a lot of nominal dollars flying around, you get to tax them all at nominal rates. And so it does help so but let’s look at where we are in the story right since 2007. To the end of 2014. I can’t wait to see the 2015 numbers from 2007 to 2014. The world added $57 trillion of new debt on top of about 150 trillion ish us about $200 trillion of debt outstanding in the world. Right now, the only way that makes sense, Jason is if you have high rates of economic growth to support that, well, let’s look at economic growth. It hasn’t come back. It’s been very stubbornly low. Even in the United States, which has one of the stronger economies and we’ve been deficit spending like crazy and just pumping, you know, brand new wads of debt into the system. We’re still struggling along at about the 2%. Mark could easily tip below that at any point in time. Europe is pretty close to recession, depending on where are we looking? It’s actually in recession. Japan certainly is technically and fully in a recession at this point, South America, mostly in recession at this stage. So that’s, that’s where we are and and unfortunately, the central banks have put everything on black number 12, which is you know, they’d like we’re just going to do everything possible. We’re going to inflate all the assets. We’re going to create a lot of debt and we’re going to trust the growth is going to come back but it didn’t This time, and I think I know why. But you know, if I was gonna give a diagnosis of the situation, it was the same diagnosis I gave in 2008, which is you can’t fix a problem rooted in too much debt with more debt. It seems simple to me, but I don’t know. You mean you can’t put a fire out by throwing gasoline on it?
Jason Hartman 20:19
Is that what you’re trying to? It seems to be we live in such an upside down illogical world in virtually every way. It seems to be that that plan kind of works. As much as it should not. But nothing is logical anymore.
Chris Martenson 20:37
Well, no, it’s not. And it works for a while, but it’s really just kicking the can down the road. So listen, if we wanted to just normalize interest rates, which means bring them back to I don’t know 5% on the short end 7% on the long end, what would that do? Well, it’s easy to calculate, you know, with $19 trillion, a debt outstanding, the US government would see roughly 50% of all of its tax receipts to Go to interest service payments. So we can’t even we can’t even normalize all this talk of the Fed raising rates, they can’t do it. If they did it, they would absolutely crush the the economy of the United States in the same way that Brazil is getting crushed by high interest rates right now, once you know whether you’re an individual or country once your interest cost, just consumed too much of your disposable income, your your your squirrel in the bowl at that point in time, so we all know we’re stuck. We’re stuck. And we’re stuck here because the Fed didn’t do the hard work in 2008 of saying, Oh, hey, maybe, maybe we shouldn’t have allowed all that wild craziness to go on. We’re going to take the Punchbowl away, but they didn’t. They doubled down and they said oh we lost all our money on black 17 we’ll double down. So here we are. And it’s just I think 2016 is going to be very interesting.
Jason Hartman 21:45
Yeah, well, what’s going to happen? I mean, what Yes, it’s going to be very interesting. What are you looking at what’s gonna happen?
Chris Martenson 21:50
Well, so the model I’m working with says that deflation first and then the central banks are going to freak out and really print money. I think it goes to Main Street instead of Wall Street, this time. whole different model but deflation first. That’s what I think people should have their eyes on. So, by deflation, you know your open the newspaper, they talk inflation, deflation is if it’s rising prices are falling prices. That’s the symptom. The cause of inflation or deflation is simple. Inflation is more money and credit is being created, then there are things to spend it on. deflation is the opposite. We’re destroying money and credit at a faster rate than then we have things than the things we are spending it on. So in deflation, when money and credit go away prices for things fall, that’s what we see. But it’s really destruction of credit. So why would I think we’re seeing a deflationary impulse right now simple. The engine of growth for any economy are the basics. They’re the building blocks think of them as the bottom of Maslow’s hierarchy of needs. But for companies, it’s copper, oil, coal, cement, the building blocks that you know you use to build other things. From those who have been in an absolute crushing bear market since 2011, we saw the most recent iron ore prices, copper prices, oil prices all tell me that we’re in a deflationary impulse. Clearly the mining sector is going to be a source of defaults. But will that be the initiating wave that takes more down? I don’t know. But it tells me that the economy itself are not growing. In fact, they’re probably shrinking. And so with that level of default risk, you have to be aware that we could go into that default pattern in that deflationary pattern and that means that’s 2008 all over again. That’s what that’s really the same thing we were experiencing then, where you see cascading defaults, right? So in example, Europe is deathly afraid of say Greece’s banking system going under because ultimately that means Spain’s banking system goes under which means Portugal’s and Italy’s go under, which means all of your apps go under. It’s the domino theory. So we have a lot of debt. I already mentioned this. $200 trillion, a lot of it’s bad debt needs to go away. It’s and as it goes away, it’s going to create this deflationary impulse that might give us another Lehman moment. That’s the risk. That’s the concern.
Jason Hartman 24:12
Now, so so what you’re what you’re saying, and a lot of people aren’t predicting this. Now they’re saying a short span of deflation than a big spout of inflation. And the reason it sounds like you’re saying that correct me if I’m wrong, is that you’re saying, look, the market will create some deflationary pressures. And then the response by the powers that be the central banks will be to inflate like crazy to pull the market out of that. That’s correct.
Chris Martenson 24:40
Jason Hartman 24:40
And so when people I mean, why wouldn’t they just inflate in advance of it? Are they always just late to the party? Do they not see it coming? What Why wouldn’t they just do that now? I mean, or, you know, it could be argued, aren’t they doing that now? I mean, the fact that we it took this long to raise rates, they must think there’s some inflation built into the system. Right,
Chris Martenson 25:00
well know that I think they got locked into raising rates for political slash optical reasons they said they were gonna they were gonna do it sometime this year in December was the last possible moment at the December FOMC. Meeting. So they did. And they only did it of course, once you peel back the covers to discover they found a way they could do it without draining a whole lot of liquidity, which is normally how you raise rates, the Fed doesn’t just tell the world the rates are higher, they have to go into the banking system, remove enough cash that causes the rates to go up. So they found a way to do that by removing not a lot of cash. And we shouldn’t go into it now. But at any rate, they I think it was more window dressing than anything at this point. The Fed did not raise rates because they were comfortable or thought this was an awesome time. They know they have to do it sooner or later. But I don’t think this was really the data wasn’t saying awesome timing, you know, this was a good moment to raise rates, so they but they did it. And that is of course contributing to some of that emerging market distress that we were talking about before. But you know, where do we go Go from here with that. I think that you know, we’re going to have this, I don’t think the Fed could get out in front of the ball right now and just really begin to stoke that inflation because I don’t think they have the political cover for it. They’re going to need something that where everybody’s afraid again, it’s like when hank paulson marched into, you know, Congress and said, I need 780 billion for tarp, or we’re going to see fires in the streets or whatever he said, We need something like that, because the feds, the feds under a bit of political heat for having done the obvious thing, which is really stoked a gigantic wealth gap in and they did create a lot of inflation a huge amount, but they gave all the money to their wealth, you know, the Wall Street. So we’ve seen inflation. If you priced Manhattan apartments lately, have you seen what it takes the waiting list for a Gulfstream 650 of you know, fine art, large gems, all the things that super rich people buy have just absolutely been, you know, high double digit inflation rates for a period of time. The idea though, is that that’s that doesn’t help they need inflation on that. Main Street, and I’m expecting the Fed to do that whether I get a check directly from the Fed or the Fed, winks at the government says we’ll monetize any deficits that result. But But why don’t you give people a tax holiday this year or rebate for the last three years of taxes they did or whatever. when something like that happens, Jason, I’ve got it on. You know, I’ve talked to the people who listen to me and say, when that moment happens, you got to run, don’t walk, run to buy anything that isn’t nailed down, because that’s that’s the beginning of phase two of the story
Jason Hartman 27:30
of the inflationary phase. Correct? Yeah. So what do you think about the banks? Are they solvent, if we have a banking problem, the FDIC can’t pay. There’s just simply not nearly enough money to cover the deposits. Now, of course, the FDIC could just get bailed out by more money printing or tax dollars. Whichever one you know, it’s usually a blend of both. What do you think about the banks, US banks, of course, and you can talk about World Bank’s too, but you asked me
Chris Martenson 27:59
Yeah, I think that Banks are very much exposed at this point in time. So listen, banks use derivative products, very heavily, things like credit default obligations, interest rate swaps, things like that very complex things and they use those specifically to manage the risk is how they put it. But I would say they use it to hide the risk or delude themselves about the risk that they have. So, so it’s like you and I, you know, are both you know, have enormous bets on on, you know, the direction of Greece interest rates, and we guess wrong and suddenly we lose lots and lots of money. But don’t worry, we have this insurance policy called a derivative that’s going to cover us that’s good as long as your counterparties good. And so I’m I’m of a mind that the banks have done a lot of assuming about how good the their risk exposure coverages and I don’t think it’s as good as they expect. And I think that in a real crisis, we’re going to find out that derivatives aren’t really worth the paper they’re written on and all of a sudden, people we’ll discover what kind of portfolios they truly have. So the reason I know that banks are super concerned about it is because it was in an omnibus spending bill. At the end of the year before this one, where Citi group actually put an amendment in on this Omnibus spending bill, you know, those multi thousand page congressional acts to sort of, you know, get the sausage out the door. And this enshrined the fact that derivatives were now going to be senior senior obligations of the bank to deposits, meaning that if a bank on into trouble, and it had to pay out huge amounts of money in derivatives claims, it would pay those before it would begin to pay back any depositors. That is, it was you know, you are an unsecured Junior creditor of the banks. Oh, my God,
Jason Hartman 29:49
that’s insane. But what you’re, what you’re saying is insane. That like, wow, that’s like what Obama did with the GM bondholders, but I think thousand times worse.
Chris Martenson 30:00
Jason Hartman 30:02
That’s, that’s my mind boggling, you know, whoa, you we would make derivatives, a superior lien to deposits
Chris Martenson 30:13
that would just wipe out.
Jason Hartman 30:15
So many good, especially elderly people who have a nest egg in the bank are unbelievable. Basically, it tells people to go play the derivatives market instead of saving money on bulk. That’s insane.
Chris Martenson 30:28
It is, isn’t it? I mean, this is the world we live in. So before you say is
Jason Hartman 30:32
this true now? True. I mean, are you? Yeah. Wow. That’s unbelievable. It’s just insane. Oh, my God, listeners. Did you catch that? Now look, you know, what’s the derivative, right? I have defined it with my own definition. And it is a highly sophisticated definition. A derivative is the thing about the thing. That’s that’s my definition of a derivative. It’s the thing about the thing. So, in some of these things are things are about a thing about a thing about a thing about a thing. They’re like 12 levels deep, you know, it’s it. I mean, you think multilevel marketing is a scam This is but nothing compares to this. So the banks who invest in derivatives would pay them first before paying their own depositors.
Chris Martenson 31:19
Yep, that’s how that’s how it got structured. And I wish I could tell you you could you could scoot somewhere else in the world and and find a safer place but the G 20 meeting in Brisbane, Australia last year, in trying that this was going to be the operating mechanism of all g 20. Countries that everybody had to go back to their own countries and, and pass these basic provision the bail and provision rules. And there was some agreement around structure around that. And so everybody has done that, which which, you know, when people say, Chris, I don’t understand the German two year bond it bond is you know, the bond is paying minus point 4% what insane person would pay the government minus, you know, point 4.4% to give them money, and The answer is sophisticated, smart, large company. Like if I’m Treasurer of a large company, and I say, Listen, I know for sure I’m gonna lose point 4% keeping my money for two years with the German government, or I can keep these 10s of millions of dollars of working capital stashed at Deutsche Bank, but Deutsche Bank might just one day wake up and tell me it’s insolvent because I had a bad derivative bet and I lose. Tell you what I’ll take the minus point 4%. It helps understand it helps us understand why Europe is just absolutely coated with negative interest rates, sovereign yields that don’t make a lick of sense to the average observer. But if you understand the bail and provisions that got encoded and enshrined last year makes all the sense in the world. You know what’s unbelievable. I mean, we are going to see listeners live your full natural life plus some extra by listening to my longevity and biohacking show. There’s some amazing things going on there. We are going to see during our natural lives, I bet we will, we will see countries fail I bet there will be no more Spain in a decade or two. There are many may not be, there probably won’t be a Greece, maybe there won’t be a Portugal, you know, like literally countries will fail. In my opinion. I think there will be a serious secession movement of states seceding from the US. We could start with Texas or Rhode Island, very libertarian mindset. Well, I don’t know. I mean, there’s gonna be some crazy stuff going on. Chris, any comments on that? Well, sure. This is my whole my whole work in life. I totally agree. It’s the warning signs are there. It’s and and listen, you know, sometimes you’re fated to live in very calm, peaceful time. So other times, it’s more interesting. So
Jason Hartman 33:36
what is that the Chinese saying, may you live in interesting times, right?
Chris Martenson 33:40
Yes. Well, that’s coming true for all of us. Somebody curse came true. So this is getting very interesting, Jason. So as I look across the landscape, whether it’s on the political side, or the rising geopolitical tensions or looking what’s happening with raw natural resources, or the monetary system, everything’s sort of pointing to the same direction which is look word of Word a very uncertain time. There’s a number of trends that are completely unsustainable. We mentioned one in Japan, Japan’s on this unsustainable practice of ramming up debt while its population shrinks, when do they stop? When there’s a billion dollars of debt per person, you know what it tells me? Right? So when something is unsustainable, it’ll stop. Here’s the thing we don’t know. We don’t know when, and we don’t know what the precipitating agents gonna be. It’s kind of like, you know, why did World War One start? Everyone’s like, oh, because the Archduke got shot, you know, but now there was, well, there’s a whole lot of dry Tinder laid around that particular match when it got struck. Right. So that’s the world we live in. So given those risks, I think the only prudent thing is for people first to become aware of them so you know, listening to shows like yours or reading some my work or lots of other outlets for it, but understand the context. Don’t read the newspapers, watch TV, think you know what’s going on. You got to find some alternative sources and then to you got to come up with an action plan, figure out how you are proving I’m going to both potentially insulate yourself from future things, but also make your life better today because this isn’t about living in fear of some future that may or may not come. This is about what are the things I can do today to be happier, healthier, more well connected. And, and more fulfilled, that I could do those things. And and if this weird future comes, I’ll be much better prepared for it than somebody who hasn’t taken the steps.
Jason Hartman 35:27
Tell us about some of those things. I like that you have this sort of soft side of the discussion here. And your partner when he was on the show talked about that a little bit too. But what can you do to make your life better today?
Chris Martenson 35:37
Well, so we, you know, our most recent book is called prosper and it really comes out of all the seminars we give on a yearly basis, we gather lots of people together, and we run seminars to ask, what are people doing, what works, what doesn’t work? We have lots of engaged conversation in our website. So this is really this book prosper is a synthesis of a number of years of observing and cataloging. And here’s the basic outline. We talked about resilience in this book and how to become resilient. And we were really taken by this framing of capital that a couple of young permaculturist we ran across, that they used in their work. We said, Oh, that’s it, that’s a great way to bucket the stuff we’ve been talking about. So for example, we talked about financial capital, of course, it’s a big chapter in the book. But financial capital isn’t the only form of capital that you can have. So another form is living capital. And so for me in my life, my living capital is of course my body. But it’s also when I look out my window, I can see the you know, 7000 square foot garden I put in, I’ve got an orchard, I’ve got chickens, I’ve got bees, I’m increasing the abundance of the world around me in my small corner of it. And so I’m increasing the living capital. So that’s an example of two forms and I take some financial capital and I use it to increase my living capital. And so we start people by saying do a good hard, rigorous, you know, review of your financial situation, you know, develop your own Balance Sheet income statement, understand your cash flows, do all of that hard work of figuring out where you are, and then dedicate a portion of your wealth to these other forms of capital. So, you know, here’s what’s happening to me today because I’ve invested my living capital, I’m healthier, I eat much better food, I’ve got a garden that has both macro and micronutrients balanced out I’m actually eating really well and I love the process of doing that. Do I grow all my food way 2% 3% you know, some some small number except in late August when the number shoots way up, right? But, but that’s giving me a lot of satisfaction today. And in a future if I ever had to grow more I could you know, it’s an easy step to take because of the investments I’ve made so far. We talked about material capital. So these are you know, if you own a property, plant or equipment as a business, but this is the car you own, this is your house. These are the material things. Again, we think there are fantastic investments people can make that would be Just a great investment. insulating your house putting in more energy efficient systems, maybe energy generating systems, solar and especially solar thermal can make a ton of sense. Purely spreadsheet financial calculation makes a ton of sense. But it makes sense on other dimensions as well. So my house now uses a third of the oil that it used to use before I started these, these things, and that saves me money today, but in a future if oil ever spikes back up again or becomes difficult to come by, it will affect me a lot less than it would have before or somebody who hasn’t taken these particular steps.
Jason Hartman 38:37
What’s the price of oil gonna do? I mean, you’re kind of a peak oil guy or at least you were your mind on that? Yeah,
Chris Martenson 38:43
no, no, no, no. So so
Jason Hartman 38:44
if you try to hold on to that one, huh?
Chris Martenson 38:46
Well, if you track so
Jason Hartman 38:47
here’s the thing. Even after borders, Dan’s Marian, you had the argument?
Chris Martenson 38:51
Yeah, no, especially I’m still there because I track this so closely and conventional oil peaked in 2006 and has been going down ever since. We’ve been reading Placing that with unconventional oil. So tar sands I don’t know if you’ve seen the environmental disaster and capital nightmare that that program is for Canada but it’s awful. But at any rate, we’re we’re we have lots of expensive oil and unfortunately oil has now collapsed below the price at which companies can successfully prosecute those programs. So we’re seeing an extraordinary erosion if not destruction of capital expenditures across the entire landscape, international oil companies, nationals, privates, you name it. And so, in two or three years, you know, we’re facing a world that’s depleting its existing conventional reservoirs by three to 4 million barrels per day per year. And without that being replaced, there will be a supply shortfall in the future. The only Asterix in the story I’ve got is if the world goes into some major capital D depression that destroys demand, but I’m not really counting on that. At first, so, yeah, absolutely. There’s, you know, a big big form of investment that I’m staring at is there’s gonna be some great investments to be had in the energy space coming up soon. Interesting.
Jason Hartman 40:05
Wow, a lot to talk about a lot to think about what do you think is gonna happen with the stock market? I mean, it seems like this it’s so overvalued. I mean, I don’t know, it’s just too hard to figure out. It’s just too complicated. I stopped crying, trying to predict it.
Chris Martenson 40:24
Well, I cut my teeth on really analyzing and I’ve been an investor for a long time, but I’ve been out of the market for a number of years. Because if I can’t analyze it, I just it just drives me nuts. Right. So things have to make sense. And I can’t make sense of this.
Jason Hartman 40:38
They don’t make sense because they’re there. They’re propped up and there’s too much intervention. Yep. You know, you can’t make sense of Oh,
Chris Martenson 40:43
no, that’s that’s my view. And I watched the intervention happen and I think I’m pretty clear on how it happens. But then there’s just investors too, that that are making silly, silly decisions again. So here we are, you know, I look at it like Amazon wonderful company. I ordered from it constantly. I think it’s great, but without PE of 950 Please, set a decade to prove that it can earn cash, but it doesn’t. Right. Right?
Jason Hartman 41:06
Well, but I mean, I don’t know, you know, if you take Jeff Bezos side of things, he’s gonna say, Look, I’m just in the building this great company and dominating the planet’s retail space. I’m just gonna reinvest. I’m not gonna I’m not gonna know if the investors have something to say about this. And there’s been a lot of dissension there. But that’s like in your own life. It’s just like delaying gratification. Right? Is that okay? conceptually, there’s an argument for
Chris Martenson 41:32
it, right? No, no, I understand Bezos his point. And I think it makes sense. But what didn’t make sense to me was, was Amazon being a full double last year going from 300 to 600 bucks a share, right? So investors suddenly said, Oh, this company is, you know, worth, you know, 100 billion is worth 200 billion, whatever the numbers penciled out to me it was just a big gigantic increase. When I didn’t see anything fundamentally that would say, oh, Amazon has clearly upped up the ante by a factor of two here. So these are the sorts of things It just don’t make sense. And you know, Listen, I’ve lived through two bubbles before, right? I’ve been through the 2000 2001 bubble. I’ve been through the 2007 eight bubble, I watched all of this unfold. And I see signs now that that are crazier than I saw it the peaks of both of those. So one of the things I love to do is I have the stock screeners that I run. And so if I run and I asked the question, show me companies with a market cap of more than a billion dollars who have a PE of over 200. This used to be just a small handful, I get page after page results now. It’s astonishing.
Jason Hartman 42:29
It’s pretty amazing. I got to ask you about something I’m really struggling with Chris. And that is the future of employment versus robotics. There are many say who say that 50% 48 50% of the jobs out there now will be replaced by robots within literally the next. I don’t know 10 ish years. That’s not very long. That’s pretty that’s happening quickly, right? I recently purchased a almost self driving Tesla, I’m amazed at how good that technology is, even though it’s not quite there yet. Are we going to have this future of like a massive unemployment and civil unrest because of it? Or are we going to have this future of utopian prosperity where we only have to work two days a week. Now, mind you that in the 70s, while they were talking about peak oil, just throw that one in there. They were also talking about how technology would make life so easy by the year 2000, that we would all only work two or three days a week, then the complete opposite happened in both cases, actually, I don’t know I’m struggling with the robot thing. I don’t know which way that’s gonna go. I really, I really don’t know we have what are your thoughts?
Chris Martenson 43:41
Well, you know, there’s a number of things sort of that all smushed together into this conversation. The truth is that people could work two days a week right now, there’s absolutely no no reason why we couldn’t do that. Of course, we have a system and a culture and a set of beliefs that say, Oh, no, we would never never do that. You know, that doesn’t mean Makes sense, because, you know, once you give people an incentive to work two days a week, that’s all you’ll get out of them. And, you know, we clearly need, we want a very high consumptive sort of an environment. But But robots are a true disrupter. And the chance here is that capital is going to be able to come in it like like, let’s imagine, like, let’s take it to a silly extreme. Tonight, you invent the the robot, it can do literally everything in the world, and it can undercut anybody else and their robots by 25%. Right? within a very short amount of time, you have everything right. So now we get back to the whole Henry Ford thing, which is like, I need somebody to buy my cars, though, right? Because your master robot is able to build anything and everything. But what are the people buying? What how, what is their what is their exchange, we use money to sort of, you know, as a marker for stuff, but really, you want you would want to be selling your products to other people who have things to exchange ultimately for that. So listen, if robots disrupt and put through 3040 50% of the people out of work, you we as a society are gonna have to decide what we’re going to do with those people, right? Because they can either sit and fester and maybe, you know, go into social uprising and revolt and all of that.
Jason Hartman 45:13
But maybe they’re not sitting and festering, they just sort of have everything they need. And this whole concept of capitalism and work, it really actually changes. Maybe it gets disrupted. I don’t know, I can’t imagine it, but because people, the human mind can just, it has, it’s never satiated, the unfortunately. I mean, that causes progress, right? In a lot of ways. I mean, you can argue, like the documentary surviving progress, there’s a, there’s an argument there. And you probably agree with that, by the way, we’ll just invent new wants and needs. I mean, who would have ever imagined the things we had nowadays? 100 years ago, you know, that we’d need this or wanted or, or whatever, right? But we’ll just we’ll just want more stuff and have to figure out a way to exchange and earn it right.
Chris Martenson 45:53
Yeah. And you know, but the other major trend that’s sort of sneaking along here is that right now in the world, there’s approximately a billion people Who are middle class? and middle class means you’re kind of at a, you know, you’ve really jumped up in consumption, right? You have the washing machine, you got a house with a lot things in it and all that. The statistics and trajectories that were on that I’ve read and looked at, say that by 2030, it’s going to be 3 billion people who are middle class. Well, I need you to wander with me over to the big world of resources for a minute and really look at what that implies, because listen is good as the shale oil is for the United States. The EIA says that that’s the Energy Information Agency out of Department of Energy says look, that those fields are going to peak somewhere around 2020 probably got delayed a year or two because the drill programs got really dialed back. But let’s even say it doesn’t the shale oil doesn’t peak till 2025. Well, by 2030, the United States is in decline for oil, which means we’re increasingly competing with other people across the world. We know that the North Sea fields have completely collapsed at that point in time in fact, out of 65 oil producing countries probably By 20 3050 of those are past peak. So they’re now on the increasing consuming side of wanting to oil. So, so we’re gonna have to sort of compete for that. And you know, you compete with price, maybe you compete with war, depending on how things go. But if we compete by price, you know, this is where I look at this. And I say, my country doesn’t have a long term plan for how we’re going to deal with that moment. Like, we should be making very, very different investments in our country right now. And maybe robotics could help with that. But we really need to reconfigure ourselves. Because I, you know, just it’s so easy to this is simple math to see where we are in the resource curves. And there’s going to be a lot of increased competition for that. And that’s really, people say, you know, want to know what my thoughts are in the Middle East and Syria and Russia and all that stuff is oil it this is always ever been about the gas pipelines and the oil that that’s in that region, and that’s heating up and China’s increasingly knocking on on the same door. We are and that’s obviously something we need to factor in. Yeah, I mean,
Jason Hartman 48:04
if the transportation industry is huge if that’s replaced by self driving autonomous vehicles, if the $15 an hour burger flippers are replaced by robots. You know, robots can compose music, write poetry, they can trade on Wall Street. They obviously do already. Yeah. And by the way, you must see The Big Short if you haven’t seen it already, it’s fantastic. Go see it tonight. I mean, I don’t know what’s left for people to do. Robots can run and repair the robots. It’s a It’s a brave new world.
Chris Martenson 48:42
It is and that’s, that’s a direction that we’re clearly heading in. And in many ways, I think it’s, it’s probably a good thing. It’s going to be a highly disruptive though. And so you’re right, we’re going to have to start to figure out what do you do with with all the people who don’t fit into that particular world, and that’s just a reality. We’re gonna have to Think through because, you know, listen, if you if you ever went to school and opened your eyes, you realize that there were people there with a whole different set of ranges of talents, skills, drives, abilities, all kinds of things where, you know, everybody can’t sort of, you know, wear pinstripe suit and be a wall street capital mover, you know, it’s just so yeah, I think it’s gonna be highly disruptive it already is. No question. But I love I love Uber. I, you know, yeah, sorry, it disrupted the entire taxicab industry, but boy, it works great, so much better.
Jason Hartman 49:32
I mean, it’s just, you know, and I want to mention Lyft, too, because I think Uber is as great as they are as a bit of a bully. You know, I like I like to support Lyft when I can, because Ubers a bit of an abusive company, I just, you know, it’s it’s like meet the new boss, same as the old boss type thing, you know, it’s going that direction. So I just don’t want to see any one dominant player. I like free markets. Thank you very much. So good. Good stuff. Chris. give out here. tell people where they can find the book etc
Chris Martenson 50:02
sure that the site is peak prosperity, calm peak, spelled like a mountain peak PE AK. And the book is prosper with an exclamation point you can find on Amazon, you can order through our website and on Amazon, we have it in book form hard book form, it’s got an audio book, I narrate it. And we’ve got a Kindle version, of course, so so it’s available in bookstores as well. So and soon it’s going into airports, kiosks, so so we’re getting it out all over the place has gotten very good reviews so far. And I’m really happy with it and and we didn’t get to all the different forms of capital. But you know, this. One of the last ones that I want to talk about is just emotional capital, because you’re, you’re touching on something where all these people get displaced. I gotta tell you, emotional capital is going to be the most important one you could have for the coming times. So we talked about that in the book and
Jason Hartman 50:53
give us a little tease a little more than that about it. What do you what do you mean? Oh, sure. So
Chris Martenson 50:57
you know 1989 USSR collapses right? For the next eight years in Russia. 54% of all deaths recorded in Russia were due to alcohol, alcohol poisoning all that right, mostly middle aged men drinking themselves to death. And so what happened was the US
Jason Hartman 51:13
heroin problem in Norway too, by the way, yeah, yes,
Chris Martenson 51:16
same, same thing. It’s the same thing. So what happened was, these people mostly middle aged men lost their jobs, the USSR crumbled. They, Dmitri the pipe fitter no longer felt useful. So he drank and drank too much and killed himself. Right.
Jason Hartman 51:27
But but that’s a male problem. So nobody cares if it were females or minorities, you know, then everybody would be worried. But you know, it’s just white men. So who cares? But yeah, go ahead. I’m just being bitter as a white man.
Chris Martenson 51:43
But we all will be our crosses. So, but in this particular case, you know, if we look back on it now, whether you agree with how this happened or not, that was actually one of the most explosive and exciting periods of capital formation and redistribution in Russia’s entire history. Right? oligarchs are made billions were made, all new markets were opened up. There were people who were
Jason Hartman 52:05
mafia stars were made.
Chris Martenson 52:07
Yeah, of course, you know, in our own country, you know, look at our own cyan families, you know, the Kennedys, please. You know, we’re all that sorry. So, so what happens, right? I’m not saying that was right or wrong. But I would like to suggest that for somebody who is not emotionally resilient, meaning they don’t understand what’s happening, they don’t have the tools to manage it, they have the wrong story in their head about what’s happening to them and why they are more likely to be crushed by the economic incident than helped by it. But for other people who can, you know, roll with the punches and understand what’s happening and see it there’s going to be I think there’s just some very exciting changes coming. You’ve mentioned one in robotics, there are a number of other ones I’m a strong believer in, but for people who don’t see it coming who gets sidelined, you know, it’s it’s going to be emotionally difficult for them. And so here’s the thing, you could have all the money in the world. You could have all the other forms of capital beefed up, but if you Fall to Pieces the minute things get a little tough, none of the rest of it matters. So actually emotional capital is extremely important. And if I can summarize it like this, the next economic crisis is not going to hurt nearly as many people as those people’s reactions to that
Jason Hartman 53:16
is very, very good point. You know, Chris, a chain is only as strong as its weakest link. It’s like during the Great Recession, you know, that story about the billionaire committing suicide? I mean, why is that guy committing suicide? I mean, you know, he was worried that he lost 100 million or whatever it was, you know, I mean, give me a break. You got to keep you got to get control of your own your own emotional destiny. You may have everything else in order, but if you can’t control your mind the game over. Yeah, good. Great point. Great point. Good stuff. Yeah. Chris martenson. It’s always so interesting to talk to you. Keep up the good work, folks. Go check out his book. Very good reviews on Amazon and audible. We appreciate it. having you on again, Chris. Thank you Jason pleasures been mine.
I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be. Really now How is that possible at all?
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life. I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead stocks and other non direct traded assets or losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win. And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us. We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government. And this set of advanced strategies for wealth creation is being offered for only $197. To get you’re creating wealth encyclopedia book one complete with over 20 hours of audio go to Jason hartman.com forward slash Store. If you want to be able to sit back and collect checks every month, just like a banker Jason’s creating wealth encyclopedia series is for you. This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.