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in my introduction you pointed out that i was warning about the 2008 financial crisis before it happened which was the case in fact i was warning about it very vocally at many of the money shows that i attended leading up to that crisis well i can assure everybody today that the crisis that's coming is going to be far worse than anything that was experienced in 2008 but it's going to be of a different nature and there's going to be a different outcome of course the cause is the same it's the federal reserve and monetary policy and to a lesser but also important extent government fiscal policy which is helping to drive the reckless monetary policy but i think the way it's going to play out in the financial markets it's going to be a lot different than it did in 2008 and you know this is the money show i think that is uh an appropriate title relative to what's going to be happening to our money i think the important consideration this time around is going to be inflation and i think inflation is the primary factor that everybody should take into consideration when trying to formulate an investment strategy especially one that is going to you know do well in the coming decade and you have to think of inflation not just as a monetary phenomenon and not just as the effect that inflation is going to have on prices and not just consumer prices and asset prices but you also have to think about inflation in its most basic form which is taxation inflation is really a tax i mean that's basically what it boils down to and you have to understand this because governments really have two ways of paying for their expenditures the most honest way is through current taxation now obviously that could be unpopular for the people who are paying the taxes right nobody likes to send money to the us government and so when politicians are constantly running for reelection they don't want to have to tell the voters how much all these government programs cost now there are certainly voters who benefit from the programs and couldn't care less about how much they cost because they're not the ones paying the taxes but then you have the group of voters who are paying the taxes and who are not you know directly benefiting from a lot of those programs and so they're more cognizant of what they cost so politicians looking to get as many votes as possible try to find other ways to finance their spending that won't aggravate the taxpayers now another way that government can do it which is really the first way just delayed is by borrowing money and i'm talking about borrowing it legitimately from a private lender who is willing to take money and loan it to the us government by buying a us treasury bond from the government now when governments do this they're just delaying the taxation into the future because whatever money the government borrows today must be repaid tomorrow and where is the government going to get the money to repay the bond holders well from the taxpayers of the future but in the meantime the taxpayers of today have to pay the interest on the money that's been borrowed so in other words when government pays for its spending programs by borrowing the taxpayers are actually on the hook for an even greater cost because not only do they pay back the principal but they have to pay all the interest it's just like if you go out if you want to buy a new uh let's say television set if you just buy it it's cheaper than using a credit card and then paying your monthly your minimum payments every month because by the time you pay off the television set maybe you've paid two or three times the actual cost because of all the interest that you've paid over the years well that's the same thing when you pay for government programs with debt by the time you repay the debt the government programs were a lot more expensive than if you just paid for them with current taxation but the benefit to politicians is that the taxpayers don't understand this or they don't care because they think it's some taxpayer in the future that's going to be stuck repaying the debt not the taxpayers who are voting today and by and large that's how a lot of our government spending has been paid for until recently see now the government has to resort to a new method of finance because it is now impossible for the government to borrow money from private sources because it can't afford to pay a high enough interest rate to private lenders to make this a viable transaction and that is because of the enormity of the debt that we currently have right the u.s government has borrowed so much money to try to delay the day of reckoning for so long and kick the can down the road as we've gone deeper and deeper into debt now that we have a national debt that's approaching 30 trillion dollars there is no way that the u.s government can finance that i mean repaying the debt is completely impossible i mean not with money that has any real purchasing power but at this point the principle of the debt is just so enormous that even if the government was forced to pay a normal rate of interest it could not actually make those payments so what's happening now is that the government is financing its expenditures through inflation and the way that process works is the government issues debt and then it's the federal reserve that buys that debt but when the federal reserve buys the debt it has to expand the money supply to do it see when the u.s government borrows from a private lender it's taking money from one person and loaning it to another it doesn't increase the money supply and the person who is loaning the money to the government can't also spend that money because they've loaned it to the government and now the government gives it to somebody else to spend but when the federal reserve monetizes that debt and prints new money then it's all new spending in the economy because the government hasn't taken money away from anybody but it's giving new money to other people and another way to think about it is when the government taxes you to pay for its spending it literally takes your money right your money just take this comes right out of your paycheck if it's an income tax right you just government takes your money and then they give that money to somebody else and now somebody else spends the money that you earn you can't spend it because the government took it and gave it to somebody else so your standard of living your purchasing power is diminished because you have less money to spend but when the government doesn't raise your taxes if it just prints money and then gives it to that same individual to spend your purchasing power at least in dollar terms hasn't been diminished but now you have another guy or gal who is given all this cash that can now go out and spend it and so what happens is that person competes with you to buy stuff and prices are bid higher and so the result of that type of taxation is that prices go up right everything becomes more expensive so instead of the government taking your money the government takes the purchasing power of your money and that's a tax and you know if you look at what's happening now especially since the beginning of the pandemic government debt and money printing is off the charts i mean we've never experienced anything like this in fact i think about half of the money that the government is now spending is being printed by the federal reserve so it's not really borrow and spend anymore it's print and spend and right now nobody seems to think that this is a problem people seem to think that we've stumbled on the equivalent of a monetary fountain of youth people like to call it modern monetary theory which is we can have whatever we want as long as government prints the money to pay for it that there's no limit that government is free as long as they print money now of course why didn't we realize this in the past i mean why have we been paying taxes all these years if all we had to do is print money after all the printing press has been around for hundreds of years and so if we could have whatever we want by the magic of government printing money what's the point of all of us having to pay taxes the reality is is this is a fantasy that is going to end in disaster see there's a big difference between earning money and just having the government printed see when people are productive when they have a job and they go to work and their labor is used to increase the supply of goods or services available to the public right you have a job you do work and your work either aids in the production of a good that people want or need or you're helping to provide a service that people need and in exchange for that help you get money you earn money and now you can use that money to help buy the goods and services that you yourself help to produce and the more productive you are well the more you earn and therefore the greater share of what society produces you are able to uh enjoy yourself but when the government just prints money and gives it to you right when you have all these unemployed people who are sitting at home just getting a check from the government they produced nothing they added no goods or services to the economy yet they can consume goods and services in the same proportions as if somebody had actually done work and actually been productive member of society so what does this do all this does is drive up prices because if your work adds to the goods and services you're consuming the goods and services you help create that's fine but if now you start consuming goods and services yet you didn't help create any of those goods and services you just have more money chasing a diminished supply of goods and services and prices are going to go up and they're going to go up like never before and the irony of all of this is that the federal reserve has been promising americans more inflation well that's one promise that they're going to deliver on in fact they're going to deliver on it beyond their wildest expectations and contrary to what everybody is saying inflation is not a good thing inflation is not desirable higher inflation is not making progress what people want is a lower cost of living when prices go down that's progress and that's capitalism that's how capitalism works when you have real capitalism businesses become more productive they become more efficient they develop economies of scale and as they do that the cost of production comes down and as the cost of production goes down demand goes up because as prices go down more people can afford to buy more stuff and it's falling prices that have just historically driven a rising standard of living well the government has interrupted that benevolent process through inflation and a lot of the times inflation doesn't simply make prices go up inflation also prevents prices from going down and a decline in a price would have been a windfall for the consumer when the consumer is denied that windfall by government it's still a tax the government is still taking your purchasing power because the goods and services that you want to consume are more expensive as a result of the government inflation you
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