Podcast

Leverage: Bringing Wealth To Your Personal Life, Investments And Business

TWS 55 | Leverage And Wealth

 

What is leverage and why is it the secret to becoming wealthy? We hear that word very often in business, especially when talking about credit, but what we may not realize is that leverage refers to far more than just that. Patrick Donohoe takes a closer look at what leverage means to your personal life, investments and business. Learn why leverage is important for you to succeed in all three areas, how it is differently applied in each and how it is essentially the same core principle as a whole. Whether you’re looking to increase your investment portfolio, scale your business or simply live a fulfilling life, there is so much you can take away from this episode.

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Leverage: Bringing Wealth To Your Personal Life, Investments And Business

Thank you for tuning in. I am going to be covering a topic that’s been on my mind quite a bit. It is the topic of leverage and how leverage is the secret to becoming wealthy. I’m going to cover three areas of leverage. Personal leverage, investment leverage, and business leverage. I hope you enjoy it. Thank you for your support. I hope you are doing well, finding opportunities, finding areas of your life that you’re happy about, and given the circumstances, are doing awesome. I wish that upon you. I have this new shirt Be Infinite. It is by my friend, Ken McElroy. If you like the shirt and design, it’s a great conversation starter. You can go to his website at KenMcElroy.com. You can also get a link that is in the resources section of the website, TheWealthStandard.com, and pick up your shirt. First, I’m going to riff quite a bit here. I have a couple of bullet points, but that’s it.

As I’ve had a lot of time, I take a walk every day. Typically, around midday around the city because there’s nobody here. I walk with my wife at night. It’s allowed me to think differently and think about some things. I don’t know if I would have otherwise had them cross my mind. A lot of it is because of podcasts and books. There’s lots of stuff that I’m trying to consume that inspire me and help me make progress in my life. The thing is, I look at the life that most people live and then I compare it to the billionaires of the world, whether it’s Jeff Bezos or Warren Buffett. Ninety-percent of the life they live in is the same life we live in. Let me explain that. They don’t get special movies, music, or average entertainment. They watch the same movies. They listen to the same music. They have the same web browser and relatively inexpensive software at their disposal.

Oftentimes, we put ourselves outside of the realm of that caliber of person and especially as it’s measured in dollars, wealth, financial and economic wealth. We think our lives are different and they’re not. I look at an example. I heard where a wealthy person could drive a Ferrari or a Bugatti, at the same time, it’s impractical transportation. All that it is, it’s a signal of a person’s or it’s a representation of a person’s wealth that they want to wear on their sleeve. I look at the average car, a Ford F-150, Toyota, or a Honda Pilot, and the actual technology, comfort, and the economy of it are superior if you think about it from a practical standpoint to someone who’s wealthy.

In the end, I often think about, “What do I want? What lifestyle do I want to live in? What would make me happy?” I connected from a financial standpoint, those that do not have wealth, those that do not have money, it’s difficult to find happiness, even though it’s not impossible. I believe financial wealth is a big piece of it. From there on, it’s how much and why? That’s where it comes down to a definition of what type of lifestyle you want to live. For me, I’ve recognized in my life and I’m no different than anybody else that what I want is I want to have a feeling of financial wealth to the point where I don’t worry about money. I also pursue having energy, being fit, and being able to not have to worry about my body or feel something that detracts from physical experience.

Also, relationships and family, my children, wife, brothers, parents, and friends. Those relationships bring me tremendous happiness and fulfillment. When I focus on it and have the distractions of money and the distractions of pain or the lack of energy, they’re gone. I got to that point. As I look at the audience and I’ve thought through, what would be most valuable to you? That’s where I broke down, how to obtain leverage in your life to achieve financial wealth and in hopes that you too start to have the distractions associated, what gives life meaning removed? Let me get into it.

Personal Leverage

Personal leverage, I brought up on the show before and he’s been a guest, Craig Ballantyne. He has one of the simplest things to follow when it comes to organization. One thing I see with working with clients and talking with people is there is a significant amount of disorganization, whether it’s financial things, budget, income, and expenses, but also how a person structures their day, week, month, year, and overall, their life. There’s a day by day mentality. I believe that there are some things in your life that you can systematize. What that does is it allows you to retain the energy and time to be spent in the areas that make the biggest difference.

A big piece of personal leverage is to have your life organized. What I mean by that is to streamline systematize what you repetitively do. Craig Ballantyne, as I mentioned, The Perfect Day Formula. You can check out his program, read his book. It’s insanely inexpensive, especially relative to what it gives you. Having a structure for your day where you understand the priority and what’s to be accomplished when that is done, you don’t have to spend energy anticipating or energy, trying to figure things out it’s done for you.

There are some things in your life that you can systematize so that you can spend more energy and time in the areas that make the biggest difference. Click To Tweet

You set up days in a certain way where you’re organized and that organization becomes a structure in order for you to become more creative. That’s a big piece of what I see as personal leverage is being able to be in a creative space. Craig calls it magic time but being able to be in the most creative space because that is where all the money, all the wealth is usually created. It’s not created in the monotony. Monotony is something that human nature tries to systematize through technology innovation. That’s what we see all around us as far as the life we get to partake in and what I explained in the beginning as our lives, not being much different than the life of a billionaire because of the technologies, we are all able to enjoy regardless of status.

There are financial things, but the difference between someone that makes $100,000 a year and someone that makes $100 million a year, that’s what I’m referring to is what we partake of maybe at a lower level, is oddly similar to what the billionaire is able to enjoy. They may be able to have maybe a nicer home. Some don’t. They have an average home. Warren Buffett an average home and average car. They may travel a little bit differently, but for the most part, 90% of what we have access to is the exact same thing they have access to. It’s interesting to think about it from that standpoint, but what I’m referring to is, as you start to remove the monotony and the systems from your life, it puts you in this creative zone.

I believe all people are unique. All people have unique gifts. They have something to bring to the world but most people never discover it. I look at the level to get to when it comes to having your life and some of your financial matters organized. To get to the next level is leveraging those systems, the monotony, and the repetitiveness of your life. Systematizing that so that you can have more time, energy, and focus on the creative areas of life. Those creative areas I’ll get to those when I get into the business side of how to have leveraged both as someone who runs a business, but also someone that is a part of a business.

Hopefully, that makes sense for you. I’ll put a few more things here in regards to the personal side of things. Being strategic and being intentional about what you’re using social media for. I specifically do not use social media for social things. I use social media as a massive brainstorming mastermind group. I use it to be inspired, get ideas, see what people are reading, what they’re listening to, and for business purposes as well. You can strategically design it for that purpose. However, the lack of strategy is monotony. It’s the chaos and it takes a lot of time and energy away from you. Structuring social media is huge.

I would also say, taking advantage of the different software and different apps that are out there. People are using apps more for entertainment, not for productivity. When I look at productivity, there are many different ways in which you can use technology to ensure that your day is structured and you are anticipating or prepared the day before so that you optimize every single day, which will stack and allow you way more to be creative. From that creativity, you’re going to discover opportunities. Let me get into maybe a couple more things. Personal leverage relates to the direction our society is going when it comes to work.

My team, other than me, I come into this massive 20,000-square foot office and nobody is here but one person. My lease ends next year and we’re changing. There has been so much efficiency created in being able to operate remotely. We had a lot of the systems already. It was slightly different at the same time we’ve been able to cut expenses. We have a lot more productivity and we have a lot more happiness from the team. Where I’m going is going to be different than what I had anticipated. I believe a lot of the world is going in that direction.

The Wall Street Journal, there was a headline that said Google is essentially having their team and employees work remotely until the summer of 2021. I know it’s working for a lot of people. It may not be working for the company or business that you’re a part of. What this does is it presents an opportunity. From a leverage standpoint, when you look at a profession and how you’re earning income, what you’re doing, what you’re training is, your specialties, skillset, degrees, your experience, there are remote jobs. There are remote positions that allow you to live in an area. I love Utah. I grew up on the East Coasts. I liked the East Coast. I’m missing it because it’s the summer on Cape Cod where my parents live. I know it’s amazingly beautiful there, but it’s amazingly beautiful in the mountains the hiking. I sat there on my porch and like, “This is such a beautiful place.”

TWS 55 | Leverage And Wealth

Leverage And Wealth: As you start to remove the monotony from your life, it puts you in a creative zone.

 

If you don’t live in a place that you think is beautiful, that’s one thing. Your environment has an oddly interesting influence on your level of happiness and fulfillment, which is what I’m pointing toward is how to get there quicker. It’s leveraging that skillset to be able to work in an area and environment that is conducive to what you want. If you’re working or you have that position, it doesn’t mean that you have to pick a place and risk it and move there. You can try places out. That’s leverage. Leveraging what’s going on in the environment as far as professions and the workplace is concerned and where businesses are going. Be able to operate your life, income, and profession from a place that you enjoy the most. That’s another huge opportunity.

In general, which I dedicated a whole season but it is the idea of doing something that you like doing. If you’re working to earn money and a paycheck, I believe that drains energy and the output that you’re getting, which is your paycheck, is there’s a significant amount of input that goes into that. I look at the output from something that you love doing and enjoy doing and know that you’re making a difference. The input is much less than if it’s something that you do not like doing. Pay attention to that input and output, and what is going in. Not time, but also energy, happiness, and fulfillment. What goes to your profession, and then what you get out of it?

Think about it, what are some of the crazy professions that exist? You can be a YouTuber or a social media influencer. Nobody thought that would be a business. You also have video game people. You have professional video game leagues where people are on salary. It’s looking at all the different professions, all the jobs that exist out there. I believe that there’s something that aligns with who you are and what you like doing, as well as allows you to operate remotely so that you can be and live in a location that is conducive to an ideal lifestyle.

Investment Leverage

Let’s get to investment leverage because this is big. I look at our world and for those of you who went in and deep dove into the Richard Duncan interviews and try to understand Ray Dalio’s How The Economic Machine Works is starting to see how important debt is to our society? The expansion of debt is how we grow. The contraction of debt is how we go into recession and how asset prices go down? We can argue the morality and the principles of what is and what should be? At the same time, what is the debt-based system, and how we purchase assets? How we use leverage to do that is vital. I’ll discuss both leverages from a financing standpoint and I’ll talk about leverage when it comes to employing other professionals with your money so that they all operate and you don’t have to do much for money to grow.

The first thing is real estate. There is this belief out there that is perpetuated by some of the financial celebrities of getting out of debt. I believe that your lifestyle from a debt standpoint should not be leveraged. Lifestyle is something that doesn’t produce additional cashflow but there are assets that do. If there are assets that produce cashflow, this is when financial leverage helps to increase cashflow, but decreases your input specifically. What I mean by that is, you could buy an investment property, rental property. There are always times to do it. You have to be particular, choosy, but going in and buying a property in cash.

There isn’t a tremendous amount of leverage. There is no financial leverage there. When you provide financial leverage, let’s say it’s $100,000 property, and you have $100,000 in cash. Putting $100,000 and buying one property, and let’s say your net rental income is $500. Doing that, you essentially have a $6,000 net return every single year, a 6% return cashflow, or you can incorporate bank leverage. That’s what interesting is that banks don’t lend on many assets, but they do lend on real estate assets. If you bought a rental property for $100,000 and you have $100,000 in cash and you chose to get a $50,000 mortgage, maybe a couple $100 in payments, but you’re able to obtain two properties with $100,000 in cash that you have.

That’s the thing when you use that leverage, what you do is double the asset value. You also increase cashflow beyond what that $500 is. It may be more after you factor in the mortgage payments. What you also do is align your investment choice with where the economy is going and how monetary policy impacts the prices of assets. When you look at debt as the Federal Reserve Central Banks increase debt, increase the amount of leverage in society, it’s going to push all prices up, and that’s known as inflation. When you have a $50,000 mortgage, the value, the purchasing power of $50,000 is not going to be the same in the future, if that is the trend, as far as where the government is going. The $50,000 you’d pay that down in payments, but also the value of that $50,000 will be 2%, 3%, 4% less because of inflation.

Good business rhythm frees up energy and time for you and your team to operate in a zone of creativity. Click To Tweet

Additionally, the asset of a piece of real estate will go up in value. I did a little mini-course about real estate investment. What it does is it explains, and it shows the financial numbers and details of buying a house in cash and then buying a house with leverage. You can see the difference and see how it plays out over the course of time. That’s financial leverage. When it comes to investments, I’ve owned lots of rental properties for many years. I’ve been a landlord. I’ve had my wife be a landlord. We’ve had property management, which means you have to be the manager of the manager. There comes, I would say the ability to employ those that have syndication, those that are professionals have history and essentially, aggregate capital and go into much bigger deals.

Ken McElroy is someone that I’ve made quite a bit of investment in. He’s the one I mentioned on the show, as far as the shirt that I’m wearing. Kenny has a company called MC Companies and they have tens of thousands of units around the country. In order to get into those big apartment complexes, which are several tens of millions of dollars, they aggregate investor capital. By investing in those types of projects, I’m not a landlord. I don’t have to worry about property management. I don’t have to worry about the tenants. I am able to leverage the experience of someone that is way more knowledgeable of markets. Someone that’s more knowledgeable about values and that has played out well for me.

There are a lot of people that syndicate that raises money. They do not have a good reputation or experience. Sometimes it does go sideways. That’s where the importance of due diligence and understanding the person who is putting deals like that together is paramount. That’s a big responsibility on your part. At the same time, the effort that you put into that and as you start to understand the variables to make or break a business that will allow you to make one decision, and then you don’t have to essentially make decisions again, other than maybe do this deal or not do that deal. All of the backend work is taken care of. That’s another example of financial leverage. I’m going to summarize personal and financial leverage. The definition of leverage is doing more with the same or doing more with less. You’re able to have more progress and have a multidimensional aspect to the decisions that you make.

Business Leverage

The importance of doing that is you’re able to employ the minds, efforts, and experience of other people. As I talked about in the show about leadership, it gets into the business side of things, which is where we’re going. From a business standpoint, I’ve made a ton of errors in business more than I’ve ever admitted to the show. I’ve admitted a lot in the book that I wrote. Some of them are micro, tiny errors. I made some big errors, judgment in people, hiring the wrong people, holding onto people too long, as I said, tolerating behavior, and not wanting to confront difficult situations. It’s taught me some valuable lessons and there was a lot of pain. It was difficult at the moment at the same time it taught me that here’s what happened. Here’s why it was painful, and this is how to avoid that in the future and do something better.

I look at leadership principles, the creation of culture, being a part of a company or being a part of something that makes a difference, as well as its mission-driven, honesty, and integrity and the ethical factor is also vitally important. When you see that compromised, then that is something that you steer away from, whether that’s the head of a company or a boss. You want to pay attention to their principles. When you start to see unprincipled behavior in one aspect of their life, chances are it’s happening in the business, even though there may be some masking there. I look at the company and the business you choose to be a part of an understanding of their values and principles. If those align with your principles and values. That’s vital in order to have a healthy relationship.

What that does is it saves energy. It conserves energy allows energy to be focused in the best areas. If something’s going to happen to the company in the future, and you’ve spent all this time, all this effort there and eco sideways based off of something, that’s out of your control. You’ve got to go start over. It’s understanding that now so that you have a better perspective of how things are going to be in the future. Going back to the leadership idea, leadership is being able to operate as a team, a unit in order to achieve a certain end. Individual effort is one dimensional. There’s only one mind involved, but when you have two minds, you essentially have a third person or third entity if you will. You have 1, 2 people, and then the combination of two people into the collaboration exchange of ideas.

Being able to lead to operating in a team is something that we’re not taught? This is not something that schools teach. It’s something that I believe is necessary in the business world, whether you’re in management, you own, or you’re an entry-level employee. It is being able to hone in on the skills of what good leadership is and start to lead people, support, inspire, do good to them, and praise their work. There’s a number of ways to do it, but that’s a huge aspect of a business. I’ll go back to what I explained from a personal standpoint. In business, there are many things that are not systematized. They’re monotonous and repetitive, especially if you’re a business owner. If your employee time is spent there when either technology, a system or SOP, Standard Operating Procedures, what those do is it creates uniformity on the things that are mundane. It allows employees and people to operate in a more creative zone.

TWS 55 | Leverage And Wealth

Leverage And Wealth: We are a debt based system and how we purchase assets and how we use leverage to do that is vital.

 

It’s the establishment of systems and businesses that allow leverage. I would say technology and business are also paramount. I see far too often people operating their finances, operating their customers and leads on spreadsheets, and there are much waste and inefficiency with the energy that’s spent there. The reason why I’m explaining this as if you’re a business owner, establishing good business systems, business rhythm, and meeting rhythm. What that allows you to do is systematize the predictable. What that does is it frees up energy and time so that you can operate in a zone of creativity, which creates even more ideas. It aligns those ideas with what is even more valuable to customers and clients and provides them more value, which ultimately grows revenue, grows the business, etc.

Leveraging business too, I see as understanding individual strengths within a team, within a unit, and not having the same person in each of the roles on the team. It’s having different personalities, complementary roles based on whether it’s a personality, based on skillset, based on experience and natural abilities. That’s also vital. I look at a business owner and their responsibility to always obtain leverage, which is doing more with the same or less, but also, I would put the success of an employee and that might be you. You might be either role in the ability to identify points of leverage. When you’re able to identify ways in which something can be streamlined when you’re able to identify, how to do more with the same or do more with less, what that does is it starts to present opportunities.

You may be saying, “If I do that, they’re going to think I’m trying to take their job.” If those types of relationships or feelings exist in the business place, that’s a business that I would say does not align with the principles and values of a successful business. That puts that in question. Getting into bringing a good amount of energy, ideas, creativity to a business that’s where I’ll go back to the personal leverage. As you’re able to systematize your day, I look at people not being able to operate at full capacity for eight hours a day. I would estimate and I know there are studies that have been done here, where energy, focus, and commitment is maybe 4 or 5 hours a day at the most.

That’s where I look at being able to have personal leverage so that you have a structured and organized routine in your life so that you can have more energy and creativity zone. Being able to bring that to a business, allow you to make a difference. As you make a difference, you get more money both as a business owner and as a person that’s part of a business. The two are connected, the same principles of success apply. That comes to life in general. The opportunities for leverage are everywhere. If you can have that word at the top of your mind and have it as a lens that you slip over your eyes so that you can view your life, where you are, your business or the business that you operate in and find, leverage, find the ability to do more with the same or do more with less. I guarantee that those are the principles that are going to make you more money and put you in the position of achieving wealth and living an even more fulfilling life.

Thank you for tuning in. I hope you learned something, go out and create some value, go out and find some leverage. Head over to TheWealthStandard.com. There’s also our resources section that is stockfull of businesses, services, and programs that I’ve followed to create leverage in my life. I know that it would make a difference in yours. I hope you find those resources valuable. Thanks so much again. Thanks for the support. Head over to iTunes, if you feel compelled to provide a review that always helps. Thanks again. We’ll talk to you. See you.

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My Top Takeaways From Tony Robbins’s UPW Virtual

 

Top-ranked life and business strategist Tony Robbins breaks records in the virtual events space with his groundbreaking Unleash The Power Within Live Virtual 360 Interactive Experience, which teaches thousands of people how to discover their power to break through limitations, overcome challenges and create the life that they want. In this episode, Patrick Donohoe shares his top takeaways from the UPW Virtual, the biggest virtual event ever. Whether you’re in it for your business, career or personal life, there is so much you can learn about creating a successful and fulfilled life. And what better time is there to learn than in these unprecedented times? Plus, Patrick answers a couple of questions concerning the Federal Reserve and the stock market. There is so much you can take away from this short but compact episode. Don’t miss it!

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Listen to the podcast here:

My Top Takeaways From Tony Robbins’s UPW Virtual

I hope you guys are well. I know we’re in rough times. I hope you’re gaining some insight and motivation from the show to help navigate these waters and find some fulfillment, joy, and gratitude as well as opportunities to grow and be even more successful. I wish you guys the best. This is what I’m going to talk about. It would be important to note this upfront. I’m going to get into the top four things I took away from Tony Robbins’ UPW Virtual. It’s the biggest Zoom call, virtual event ever done. There were 24,000 people there. Tony had this 360 screen that went all the way around. It was incredible. I had a great experience. I’m going to share four things there.

At the end, there’s a couple of questions that came in through social media and YouTube that I’d like to answer. The first one was based on the interview that Andy Tanner and I did, which is, how do you go about studying the Federal Reserve System? The second question related to the stock market and came from one of the Richard Duncan interviews, which was, what is the Federal Reserve going to do if the stock market crashes? Thank you guys for being here. Thank you for supporting me. Thank you for taking the time to learn, grow, and take the steps necessary to take your life to the next level. I’m going to first get into a few recommendations that I have before I do the Tony Robbins thing.

There’s a company/app that I started using in 2008, 2009. It’s more like the end of 2009, 2010. It was a company called Lexington Law. Lexington Law was one of the first credit repair companies out there and their platform, system, and model are amazing. I know with job loss and with the crazy times that we’re in, credit is getting crushed. Credit monitoring and credit repair, these guys have the best. Credit these days is here to stay even though they change and adapt a little bit, it’s the objective way whether it’s mortgages credit, business credit, getting hired, or renting, credit is almost a necessity of good credit. Staying on top of it, even though I have a perfect credit score now, I still maintain monitoring because identity theft is still prevalent out there. Staying on top of it is also important.

They have some Credit Monitoring Services as well as Credit Repair Services that I still take advantage up to this day. Incredible company. They’re here in Utah and they’ve been around the longest. From my experience, it’s incredible. If you guys need that service, definitely check them out. The second thing is a new app that my wife and I started using, which is You Need A Budget. I have an accounting staff here for the business. I have bookkeepers that do some of the other business stuff that I have in investment, but for personal cashflow, it’s between my wife and I. You Need A Budget is one of those apps that has continually improved. It’s so easy to use. We use it all the time, it helps to identify money going out, and opportunities to be more efficient with that. Check them out as well.

Let’s get into what I took away from the Tony Robbins event. First off, for those of you reading for a while, I invited you guys all to come to the live UPW in San Jose. There was going to be one in Chicago neither are happening. Tony tried to reschedule and find that city. Finally, it was like, “Nothing’s going to open. It’s not going to happen.” That realization opened up a space for him to innovate and create a new level and precedent for virtual meetings and conferences. This meeting was amazing. There were people from all around the world. He had a 360 screen with people’s faces on there. I’m not sure from a visual standpoint. I probably wasn’t able to sleep because of all that light for that long.

I had this 360 screen. You guys can check out. Some pictures are all over social media and YouTube but it was a great event. I’ve been to a number of these events. The dynamic was different at the same time, the content and the experience was very similar and incredibly effective. He’s doing it again in November 2020. I’d like to invite all of you guys. This is something that allows you introspection and breakthrough. I have not found it possible in other areas of life unless you get fired, have a rough time, and your breakthrough happens to happen because of terrible pain, frustration, anxiety, depression. When you’re at the bottom, breakthrough usually happens.

This is a way that you can do it proactively. I know there is a lot of unemployment claims that are almost 40 million. You have all sorts of major companies filing bankruptcy every day. It’s a rough time. This is a time where innovation and solutions are the biggest opportunities ever yet. That is the paradox, during the times when nobody wants to innovate and they’re scared for their life to innovate is the time to innovate. This is an event that helps you understand yourself at a deeper level. Make sure you bookmark that. It’s virtual. You need an internet connection and you have to use Zoom but it’s amazing.

I imagine it is going to be even better because there were some quirks and some things I got kicked out a few times. At the same time, it pushed the limits of Zoom and I believe it’s going to be even better. For those of you who are business owners, entrepreneurs, investors, Business Mastery, which is also in an event I’ve attended a number of times and it has changed my business and finances. You guys have heard about it on the show a number of times, both directly and indirectly. Business Mastery is incredible and that’s going to happen August 19th through the 23rd, 2020. I can’t wait for that. It’s going to be incredible to see how he does everything virtually.

My UPW Takeaways

If you’re a business owner and investor, check that out. Here’s what I learned from UPW. These are things that I have maybe talked about before or the things that I heard and understood to an extent, but because of where I’m at in life, it’s always different when you consume information, especially in a good heightened state. You think about it differently and it makes more sense or it connects with you at a deeper level. The first thing I learned or had some breakthrough with is the Science of Achievement. Science is the ability to show reason as far as why something has become as an outcome. I look at achievement.

You're more likely to get what you want and achieve what you want if you are already fulfilled by what you have. Click To Tweet

The desire for achievement is within everybody, even if they don’t say that it is. People are naturally compelled to grow and to get to the next level, which is achieving a new level and then a new level, and it never stops. The Science of Achievement is to understand the method behind what is achieved and you do. It gets a little complicated detailed but I would say the easy way to explain it is, identify what you want first. It sounds self-explanatory but people have an idea of what they don’t want. They don’t know exactly what they want. Sometimes, people describe what they want as what they don’t want. I don’t want that. I don’t want to be poor. I don’t want to have this career for the rest of my life.

Identify what you want then it’s going about discovering those that have achieved that and hopefully more. When you’ve discovered that person, organization, etc., it is the study of their method and their method could be a mindset, routine, or language. There’s a number of things but I’ll use an example of losing weight or bodybuilding. Having a certain physical appearance as well as internal energy level. The idea is first to identify what you want, then you look at the science behind someone who’s achieved it. It could be, how much sleep do they get? What time did they go to bed? How do they prepare for sleep, so they get a good deep sleep and allow their body to repair itself at the highest level?

What do they do with their exercise routine? How do they prepare? How do they eat? What are the portions? Why did they choose those portions? You get into the science and study what it is you want to achieve. It’s been done before. We live in a shortcut society so everybody wants the pill or the quick fix, but the science of achievement has a method to it. The method is step-by-step, formulaic. It’s understanding that from someone who has achieved it and trying to embody what they do from how they speak. It comes down to what you want to achieve, but I’ll go back to the physical side of things.

How do you speak about yourself? What are the routines you take in the morning, the day, or the afternoon? How much time do you spend here? How much time do you spend there? Understanding that allows us to start to connect to, I’m not doing that? I’m going to do 70% of these things. Start to chip away at what I want. That’s the Science of Achievement. You identify what you would achieve, 99.9999% of what you most likely articulate has been achieved. It comes down to identifying the person group who’s achieved it and breaking down their methods, mentality, perspective, philosophy, and starting to compare.

The next thing is the Art of Fulfillment. This comes to the next paradox that I mentioned a moment ago. The Art of Fulfillment sunk in because of quarantine and the shutdown. I discovered that there was a certainty that I wanted with regard to my business, traveling, and this is on the calendar. We’ve done this, prepared for this, planned for this. Is it going to happen? I don’t know if it might happen. It frustrated me and a number of different instances. The idea of fulfillment comes down to, regardless of what’s going on around you, achieving what you want, getting what you want, or things being the same. It’s to be grateful, appreciative, and fulfilled as if nothing changed.

Now, I mentioned that we’re compelled to change and grow but the Art of Fulfillment, and this is why it’s an art, it’s different for everybody is to find ways in which you can appreciate how things are. You can appreciate what you’ve already achieved. You can appreciate and be grateful for all the things around you. Here’s what’s interesting. There’s a book called Letting Go by David Hawkins and it talks about the science of letting go, the science of art of fulfillment, and I’m so grateful where it essentially frees up space and energy so that what you do want to achieve is more likely interesting. You’re more likely to get what you want and achieve what you want if you are already fulfilled by what you have. I connected to that and started to appreciate who I am, what I have, and all the things to be grateful for around me.

It’s amazing what that does. Tony uses the example of Robin Williams. Robin Williams being one of the most loved people on planet earth, amazing actor, achieved all sorts of levels in his career, yet he never figured out fulfillment and that’s why he killed himself. The idea is, I’ll sum it up in a quote that he often uses which is, “Success without fulfillment is the ultimate failure.” Those are the first two things. The second thing is the Success Curve. The success curve is there’s also in economics, something called the S curve. It’s not the same but the S curve and success curve is first starts out as growth. Most people that study finance and wealth have heard and understand the compound interest that interest, earning interest, etc.

Most people don’t understand that the nature and tenants of compound interest. They look at this linear thing which, “If I earn 8% and 8% and 8%, and I earned it over the course of 50 years, I’m going to be this.” Life is not linear. Life does not happen like that. No tree grows to the sky. Just as much as in nature, there are things that stop at a certain level and then innovate at that level. The same thing happens with success and economics. I was in Montana and you had these trees that fell almost onto the river. You could see how it was bent over because the roots were sticking out, but yet it still stayed in place and didn’t fall in the river.

The trunk started to grow straight from that point on. This is the idea of success curve as well as innovation in economics or an economy. We’re seeing it all around us. We’re at the going down piece of the compound curve. Society and markets have grown. Things have gone up and there’s so much pressure on it not going up based on the same principles that got it there. That’s why you’re starting to see declines. This happens in our personal lives, nature, economics, markets, and society where you grow based on certain principles, and then it starts to decline. From a personal and success standpoint, you plateau. What gave you satisfaction before no longer give you satisfaction.

TWS 54 | UPW Virtual

UPW Virtual: Identify what you want first, and then look at the science behind someone who’s already achieved it.

 

It’s Parkinson’s Law, which is a luxury experienced soon becomes a necessity. How many people take for granted driving where people had to be on a horse or walk before flying? There’s so much we experience in life that was at one point a miracle and now it’s like, “Whatever.” If you look all around us, there are miracles. There are miracles everywhere but yet, the satisfaction of what we experienced initially as a miracle loses its luster. The success curve is understanding and anticipating that, but then also recognizing that in order to S it, instead of collapsing, S curve is innovation. You start to plateau then you decline, but then you innovate and find better ways of doing things, it starts to go up, then it becomes an S curve again, so on and so forth.

That’s the nature of things if you can anticipate. Instead of things collapsing all around you, it’s understanding what worked before no longer works. I have to innovate in order to continue to grow. That’s what I learned. Tony learned it as well because he kept wanting to do things the way he had done them before. He wanted to UPW Live. He wanted to do business mastery Live. You wanted to do all these events Live in person because of the incredible dynamic and experience it is for everybody, including himself. He can’t do that anymore. Now it becomes, instead of going down, I’m going to innovate and go up. He’s going to crush it. This set a whole new precedent for virtual events. It pushed Zoom beyond its limits. I guarantee it’s going to be much better the next round as far as these new virtual events. I’m excited for that.

A couple of the final things, and then I’ll get into some of these questions. Anticipation and momentum. When I talked about anticipation, it is knowing what I’m talking about and what I now realize is important to life and my satisfaction as an individual. I’m assuming yours as well and anticipating that these things are going to happen. They’re already happening. Now is an incredible opportunity to step back, reflect, and start to implement these principles. It’s anticipating that it’s going to continue to happen in the future. Looking at how we emotionally react to things, of course, we’re not going to look at this, which is logic.

We’re not going to look at this and instantly be able to implement it. It’s balancing the emotional and logical side of our brain and our makeup. Anticipate in the future is understanding the principles behind navigating water, as opposed to 100% jerk reaction, emotionally responding, or reacting to things, and then momentum. Momentum in physics, you have elasticity, the maintenance of momentum. Inelasticity is where you or the momentum declines. In order to get back up to the level where that momentum was, it takes way more energy than the amount of energy that left going down.

Look at losing weight, working out, or getting in shape. If you are in the peak shape of your life and you take 2 to 3 weeks off, you’re not going to go back to normal. It takes longer than three weeks to get back to normal. The idea is maintaining as much momentum as possible. There isn’t much momentum anywhere in society because people have been forced home. They’ve been forced in a sense to do certain things differently because people don’t have the certainty of what gave them fulfillment, success, a good experience in life before, now, you have to find new ways of doing it. The more momentum you lose in every area of life, the harder it is to get back. It’s the maintenance of momentum.

On Stock Market And The Fed: Questions Answered

Once you get there, it’s not losing that momentum. If it goes down, it’s recognizing it and then doing what it takes because you anticipated what it takes and understands the principles of what it takes to catch yourself and build back up. Those are the four things I took from UPW, Unleashed The Power Within. I didn’t attend all of it. I attended some of it on a couple of hour bike rides, but at the same time, I’m committed to going to November 2020 and playing full out. I hope you guys can join me. I’m going to get to a couple of questions as I said or answers the questions and then we’ll wrap up, but thank you guys for being here. Thank you for learning and support. Let me get into the questions.

How do you study how the Federal Reserve works? I first looked at this question. I was like, “Do they want to know how the Federal Reserve works or they weren’t the ones to learn how to study it?” I’m going to touch on both. The Federal Reserve means central banks around the world play an instrumental role in society and the economy. Hope you guys got that from the Richard Duncan interviews. To study how it works, I’d first want to look at understanding the fundamentals. We referenced in the video I did with Andy Tanner, How The Economic Machine Works, which is a video by Ray Dalio. I’ve watched that a bunch of times. In watching that, this is the best way I study and understand something which is preparing to teach it and then teaching it. I would teach it in five-minute segments and teach it to somebody that is somewhat familiar with it and then get their feedback.

In the teaching, you are going to realize some of the voids in what you understand or don’t understand. That is one of the best ways to study is by teaching and discussing. Form of a little Facebook meetup, teach it, understand it, do a watch party, watch How The Economic Machine Works together, start to see where the voids are, and how you understand it. Hopefully, you’re able to see the forces that are already in motion, and as one builds and other shrinks, it influences the outcome of markets, prices, interest rates. All of it is tied together. All talk is generally about a central bank. This is dating back several years and it’s a very Austrian free-market perspective.

A Federal Reserve central bank creates currency out of thin air. It is monetizing assets, which is mostly debt. What that means is that the Federal Reserve can create, let’s say $1 billion electronically and then purchase debt. It purchases a loan that either wasn’t there before or it’s purchasing it from somebody who already owned it. What that does is it manipulates the true price of the debt, which is ultimately a risk. It manipulates the price of assets because that money didn’t exist before. When you look at free markets, efficiency, innovation, as I said before, when things decline, go out of business and fail, that is not a bad thing. That is an incredible opportunity to innovate. I believe what the central banks are doing. European Central Bank has announced that the US central bank and central banks around the world are doing the same thing as the Federal Reserve, which is they created money out of thin air and gave it to people.

You have to innovate in order to grow. Click To Tweet

What that did is it flooded society with money that was not earned. That’s what I consider the immoral side of things because money is a receipt of value. When money comes without any value created, that’s not a natural transaction. There has to be an exchange. At the same time, that’s not how our system works. That’s what the point of talking about the Federal Reserve, their role in society and the economy with Richard Duncan. From general principles, freedom, and liberty perspective that I have, looking at how things should be is not going to get me anywhere. It’s not going to be valuable to anyone because it’s not how it works. It may be how it should work but it doesn’t work that way. I look at what Richard was promoting, which is paying attention to what the Federal Reserve does and the central banks on what they do.

If they’re purchasing these assets, those assets are most likely going to go up. If they’re stimulating here and stimulating there, it’s creating artificial signals that ultimately are going to come home to roost. Let’s go back to Kodak. Kodak, who surprisingly enough invented the digital camera. They created a business out of it which they didn’t, they got crushed because others create a business out of it but the government was like, “Kodak, you’ve paid us lots of taxes. You’re going down and we’ll give you more money.” Kodak is not going to do anything different. They’re going to continue to operate and they’ll have more money.

Ultimately, when the money dries up, then Kodak is going to have a massive bankruptcy and failure. They had a bankruptcy in a smaller failure at scale if they were stimulated. Right now, what you’re seeing is that people are being given money. Businesses are being given money but yet you still have tons of businesses that are going bankrupt. What’s amazing is I look at a lot of the businesses that are going bankrupt. Let’s look at retailers. JCPenney is a great example. Retail eCommerce has consumption in that method has gone up significantly.

It’s crazy, yet retailers are going bankrupt. It’s not necessarily the business. It’s how business is done. I believe that the way in which people consume and goods are created to consume is not at scale. It’s at a very micro level compared to before. That’s awesome because it’s creating a new way of doing things, which creates efficiency, variety, and different jobs in different areas. I look at when things fail. It’s not a bad thing. Going through the central bank, what it does is it produces false signals. When you realize that it’s producing false signals, you want to look at the unintended consequences. You want to look at, “If they’re giving money to an institution, economy, and society, there’s a band-aid effect there.”

It’s one of those like, “Is it a band-aid because they’re talking about another stimulus and another one.” This goes to Parkinson’s Law and you’re going to have this decline in productivity. This decline in personal responsibility because people are being bailed out. I’m not saying that there isn’t cause and importance in understanding that for a short-term thing, but when it becomes a long-term thing, it’s not healthy and there’s going to be unintended consequences. That’s my take on that. I would love for you to follow up on whoever is the question I answered, but teaching how the economic machine works is what is going to allow you to study the principles of the Federal Reserve and central banking around the world at a much deeper level.

The second question and I’ll end with this, which is, what if the stock market goes under? Is the Federal Reserve or central banks going to bail it out? There are two parts of this but this came from the Richard Duncan interview which Richard said. He would not be surprised if the Federal Reserve Act changed. In the Federal Reserve Act, parameters as far as what the Federal Reserve can stimulate is what they can buy. It started out as setting interest rates and now, setting interest rates by doing huge bond-buying with government bonds treasuries, government debt. They’re doing municipal, corporate bonds, even junk bonds.

They’re getting into the private sector, which is interesting but from an equity standpoint, they can’t buy equities and stock to my knowledge. If the stock market goes down, are they going to buy the stock? I don’t know. The stock market can’t go under. The premise there we first have to address, what if the stock market goes under? Our modern society is dependent on the stock market. It’s where businesses are scaled where they’re financed. I don’t see how the stock market could go under without society going under. If that goes under then none of what we’re talking about from a financial standpoint is relevant.

I look at first off removing that premise that the stock market is going to go under. Is the stock market going to have challenges? 100%. It’s going to have huge challenges because you’re artificially stimulating and creating false signals. There are a lot of companies that are public that got stimulus. You have companies that are propped up. A big thing that I’ve talked about on the show before is stock buybacks, where you have businesses that will take on debt. They’ll issue new debt and then they will buy their own stock with that because of supply and demand. It keeps the stock price high.

That was illegal through Glass-Steagall, which came about through the Great Depression and the stock market crash then. As you’re able to now stimulate business’ Fed buying debt, you’re going to prop up their value and then artificially have a stock price. There’s going to be businesses that are going to innovate through this and we’ll make out well given the stimulus. There are some businesses that if they keep doing what they’re doing and their business relies on artificial stimulation, which it’s money that they get but they did not create the value to get it, there’s going to be challenged. There’s going to be opportunities there. I know several opportunities where you have some entrepreneurs who are buying assets. I think JCPenney and Hertz are part of it.

TWS 54 | UPW Virtual

UPW Virtual: Money is a receipt of value. When money comes without any value created, that’s not a natural transaction.

 

I’m not going to go into what bankruptcy is. Bankruptcy is not a company going out of business. I’ll talk about it briefly. Bankruptcy is when a business restructures. When they’re able to go into receivership, which means all their assets, everything they owe, everything they own goes into receivership and then a receiver, a bankruptcy trustee will split up assets, they’ll sell, and get whatever they can. Entrepreneurs right now are buying up a lot of those business assets that are incredible with online marketing, with eCommerce. They’re going to freaking crush it. They’re buying assets at huge discounts, taking those assets, using modern marketing and commerce principles to improve and maximize those assets. There’s a tremendous opportunity as businesses go bankrupt, shuffle the deck, and you have very intelligent capitalist entrepreneurs that are optimizing the assets that were not optimized by the companies that held them before.

The last thing I’ll comment with Richard Duncan in equities. He alluded to the Fed bailing out equities being on the stock market. I want to put it past. I wouldn’t be surprised if that happened. It’s going to exacerbate the problem. It’s having an awareness of what’s happening, being able to anticipate the future and make decisions accordingly. That’s all I talk about. I appreciate your time. Thank you for sticking with me. Hopefully, those answers made sense. Go onto our YouTube channel, make comments there, social media, I’d love to hear from you guys. Email us as well at Hello@TheWealthStandard.com.

If you are interested in Tony Robbins’ Business Mastery, check that out. Go to the UPW, Unleash The Power Within in November 2020. For me, it is been the best investment of time. It’ll be a couple of $100. What you’ll be able to create and degree of happiness you’ll have as a result of it, fulfillment, you’re going to love it. Hopefully, you guys can put that on your calendar and make the necessary steps to attend that and benefit from it. Guys, you’re amazing. Thank you for your support. I appreciate you reading the blog. We’ll see you guys. Take care.

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Three Things I Taught My Kids About True Leadership

TWS 53 | True Leadership

 

True wealth is tied at the hips with true leadership. Leadership is the single differentiator that separates the highly successful from the rest of the crowd. We may have heard and read many things about leadership, but what constitutes true leadership? In this episode, Patrick Donohoe gives us the three things he taught his kids that will have an impact, not only on individual success but also on the welfare and advancement of society and the economy. Whether in politics or business, there is a universal need for true leadership. What can we change in the way we teach the next generation for it to truly become a leader’s pool? These three lessons seem like a no-brainer, but if they were, we would have been applying them to a much greater extent today. Listen in and learn more about true leadership that drives the creation of true wealth.

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Three Things I Taught My Kids About True Leadership

Thank you for tuning in to this episode. It’s going to be a short one, but it’s going to be packed. The title is Three Things I Taught My Kids, that I believe would change society, personal wealth, and happiness for the better, but significantly alter the economy. It’s going to be awesome. I’m excited to share it. Before I get into that, we’ve had some cool guests on a couple of episodes. Andy Tanner, a good buddy of mine has been on a few times before. My buddy, Jason Hartman. Jason’s another incredible guy. I feel fortunate with some of the relationships I have. Check him out as well as he has the Creating Wealth Show, JasonHartman.com, and a lot of other resources on there. One last thing before I get into what I prepared.

There’s a group that’s local here that I wanted you to know about. They’re called Operation Underground Railroad. I’ve supported and donated to them for a couple of years. I believe that there is an increase in what they’re trying to fight because of the shutdown in the quarantine. It’s the sex slave business. This may be shocking to some of you, but this is happening. This is something that’s real and it’s horrific. Part of me wished I had never known about it but I’m glad I do. I’m glad that there are guys like Tim Ballard, who leads Operation Underground Railroad, who is former Special Forces and Intelligence Operative for the United States government. He stepped away from that position and career to pursue this mission. It’s desperately needed, especially now because kids are home and they’re vulnerable. Technology is being used to exploit people that don’t have a voice. If there’s anything you can do financially is great, but I would say your awareness and support of it and spreading the word will make a difference.

There’s a documentary that talks about their mission. There’s a full-length film with Jim Caviezel, who played Count of Monte Cristo, as well as Christ in The Passion. It’s going to be great. It’s coming out soon. Be aware of it and let’s step up. There are many kids around the world that don’t have a voice. It’s incredibly terrible what’s going on with this industry. I’m not going to say more about it, but please get involved and make a difference.

The main variable that distinguishes the highly successful from the employee and the self-employed specialist is leadership. Click To Tweet

The Formal Education Trap

Let me get to what I taught my kids. The first thing I taught them was formal education is a trap. That got me in a little bit of trouble. It’s not the first time I’ve talked to them about it, but it got me into trouble because my eldest daughter is fifteen. She used it against me because she didn’t necessarily do well in one subject in school. She’s like, “You don’t care about that anyway. You say formal education is a trap or school doesn’t mean anything.” I will talk about that but there are some things and some context that needs to be created for you to fully understand that.

The reason I believe formal education is a trap, number one, it’s because the majority of our society believes the same thing. There are outliers and there are more outliers in large part coming from this disruption caused by COVID-19. The majority of us are wired to look at the world, business, our job, career and relationship based on how influential our education system has been in our life. In the educational system, we’re taught the individual is the most important. There are arguments that are about individual rights and so forth. I won’t get into that but when it comes to achievement, success, job employment, individual effort is one of the most limiting things in the world.

I’ll get to that but the idea of the individual being the most important individual achievement and effort, it’s so limiting, one dimensional, single-dimensional. You always have this rat trap, this rat race that you never get out of until you become something different from a mindset standpoint. I would say that the best book I’ve read that teaches the different mentalities of people is the CASHFLOW Quadrant by Robert Kiyosaki. He explains that there are essentially four ways to make money. There are four types of people out there when it comes to commerce. First is the employee. Second is the self-employed specialist. The third is the business owner and the fourth is the investor who invests in businesses. The education system and how I believe how it’s differentiated the employee and the self-employed specialist, it’s a trap because financially you never get ahead. You equate your success and money to individual effort.

TWS 53 | True Leadership

True Leadership: The idea that individual achievement is the most important is so limiting and one-dimensional.

 

What I explained to my kids was the main factor, variable that distinguishes the business owner investor, the highly successful to the employee and self-employed specialist, meaning a lawyer, a doctor, someone that has more education, is leadership. That is the main variable I believe. Good leadership, I’m not talking about manager’s management. I’m talking about true leadership. Leadership is it’s in contrast, in complete conflict to the individual. Leadership, a true leader, which I believe big business owners those that are able to take a team and carry a team to more and more achievement, that’s the multidimensional impact. You’re able to have a division of labor, specialization. It’s profound. That’s the second piece is this idea of leadership.

The Differentiator Of Success

The second thing I taught them is that leadership, the differentiator of success. The leader does not look after himself. He understands that by looking out for others whether it’s employees, customers, or clients, the better it is for himself. Instead of looking out for yourself, because that’s what most important, that’s how we’re wired and that being the best thing is looking at others. Serving them whether it’s clients or employees. How I got this to sink in with them is I went through what the average employee, an average specialist, and business owner that’s been in business for over ten years makes. For an employee standpoint, this was sobering for them because I talked about the average college graduate and what salary they make. We went line-by-line what’s taken out of a paycheck before they even get money in the bank account.

We went through federal, state taxes and what that means. We went through FICA and most people don’t even know what FICA stands for. We went through how there are two sides of FICA. You have 7.5%, 7.6% that is paid by the employee, but then you have 7.5%, 7.6% is paid by the employer, which could have been an increase in salary and pay. There’s almost 16% there. That’s what hits the bank account. You have health insurance, retirement contributions, housing, and transportation. You go all the list of the necessary expenses to live in modern society. The amount of money that went home was little. They were incredibly surprised by that because a lot of it adds up.

Leaders don't look after themselves. They understand that what's best for others is what's best for themselves. Click To Tweet

We went through the specialist. We use an example of what the average doctor gets paid and also the average attorney. We line out of the same thing and the amount of money they walked home with after their increase of housing, transportation, entertainment and food expenses. It was similar and they couldn’t believe it. They looked at how many years it took to go to medical school, to go to law school, how much more effort there, individual effort. We got into the business owner and the idea of a business owner understanding specialization, but also understanding how to lead. True leadership, there are several variables. There are amount of reference some books and material that have inspired me to be a better leader because I failed over and over again, and continue to fail in certain elements.

I connect anything that I’ve done that’s of significance to the understanding and implementation of that understanding when it comes to leadership. The idea is leaders don’t look after themselves. Leaders understand that what’s best for themselves is what’s best for others. That right there creates a connection where people are willing to work as a team to accomplish a certain end. This is multidimensional success and output. The individual only has so much time and energy during the day. It’s typically used with themselves in mind, but when you start to identify that to accomplish something amazing, big, a huge project and achievement, doing it individually is not possible. There are only many hours, time and energy during the day. The example I gave my kids is based on a documentary that we saw.

For those of you who have kids, you’ve probably seen Frozen and Frozen 2. Frozen 2 made $1.5 billion, believe it or not. I can’t remember how much Frozen made. Disney is an incredible company and we won’t get into that but there’s a documentary about the making of Frozen 2. It’s a four-year project, 400 employees associated with this specific project, but it essentially films them onsite. It’s profound how leadership principles are extracted from those examples where you have many different specialists, whether it’s graphic design, environment, and storytelling. Four hundred people accomplishing something significant with individualistically creative people, there’s a necessity for not only leadership but also structure systems and good business. It’s amazing.

TWS 53 | True Leadership

True Leadership: Anybody can be a leader, and leadership is highly lacking in our society now.

 

The Failure Myth

This goes into my third piece, which is a failure. Failure is a myth. I’ll summarize, the first thing is formal education is a trap. Second thing, the number one differentiator of success between ENS and BNI is leadership. The third thing is failure is a myth, and it’s only important if you want to be mediocre. In this Frozen 2 documentary, it was incredible. First off, criticism feedback is one of the quintessential components of a successful film. Other teams are working on other films, other projects that come in and scrutinize and give feedback on, “I don’t understand this. I don’t get this. Why are you doing that?” The idea of getting feedback about what in normal terms in society is, you did wrong or you failed that. For them, it was essential to improvement. It was essential to have the final product and the success that they wanted.

That was the vision. That was their mission from the beginning with this film. You look at the ability to rally a team to get feedback and in the end, a lot of the artists who spent months sometimes over a year on a certain piece of the film, song or element, and it was cut. Although it made an impact, they understood that as long as the film was successful and impacted people, they didn’t care. It hit me. A strong and impactful team, that’s what they believe. Their individual effort is important. It’s part of it. Their skillset is part of it. At the same time, it does not stand in front of the primary reason for being in a company, in a team with a mission and a vision. That’s what I’ll end with. The function of leadership isn’t reserved for a business owner. Anybody can be a leader and I believe leadership is highly lacking in our society now. It’s lacking in business and politics.

True leadership, there are some principles there that will not only change your life. It will change society and economy. I would say for those who are reading The Wealth Standard, our mission is about financial freedom, but true wealth is about living a fulfilling life. That requires, in my opinion, a relationship and benefiting the lives of others. There’s a symbiotic relationship. I would say it’s tied at the hip where true wealth requires the fundamentals of leadership. Whether you’re an employee or self-employed, you can incorporate leadership principles with clients, customers, strangers on the street, neighbors in your backyard. These are their fundamental things where we can build relationships by looking out for others within the construct of a team, a business. When you’re able to articulate a mission, create a vision that shows your team where you’re going and inspire them, there’s the magic behind that.

When people felt they’re cared for when they feel they’re taken care of and you have their best interests in mind and have their back, it’s magic what happens. I look at examples everywhere and I’m inspired by it. How I’ve learned about some of the principles of leadership are by books, podcasts, documentaries, but I’ll list a few things that I would encourage you to look into because leadership, it’s essential. These are principles. These are pieces of information that are not taught in formal education but are essential for success. The first one is Simon Sinek. I talked about Simon Sinek before. He has a new book called The Infinite Game, which is amazing. He also wrote a book called Leaders Eat LastFind Your Why and his initial book, Start With Why.

Jocko Willink, I started listening to him. He’s a former Navy SEAL Commander. He has a big neck, bald, deep voice, intimidating. He’s written a lot of books on leadership. He has a company that does leadership training and coaching. He wrote Extreme Ownership and The Dichotomy of Leadership. He also wrote kids’ books. I believe that they were because of the Wimpy Kid book series. He wrote Way of the Warrior Kid book series. I’ve read them with my son, Jack. The Wimpy Kid books and movies are banned from our house. That’s also awesome. Jim Collins’ Good to Great. He’s a classic. Deepak Chopra, I love Deepak. He’s such a deep thinker, but he has a book that he wrote over a decade ago called The Soul of Leadership, which is good.

Right now is the perfect environment to redefine the focus for your life and professional career. A good friend of mine, Mike Dillard, started a whole group to teach those that are driven, trying to reinvent their business, career and profession. He created a group called Revvenue. It’s time to take action, focus, reevaluate and find the opportunities. They’re everywhere. I hope that you find something that inspires you and you use that to make a difference in somebody else’s life. There may not be commerce and transaction, but believe me, that’s how the world goes round. The more you do it, the more it’s going to come back.

Thank you so much for the support. If you like this, go check us out on iTunes and give us a good rating. That always helps. Operation Underground Railroad is something I haven’t talked about before on the show but specifically with Wayfair, and a lot of other things that are happening because of the shutdown, there are many defenseless kids out there. They’re being exploited and taken advantage of. If there’s anything you can do, Operation Underground Railroad, they’re all over Facebook, Instagram. Also, Tim Ballard is the leader of that nonprofit. Follow him as well. You’re amazing. Go out and create some value. Bye.

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About Patrick Donohoe

TWS 53 | True LeadershipPresident and CEO, dedicated to challenging Wall Street with Personal Financial strategies and systems that work.

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The Monetary System And The Power Of The Fed With Andy Tanner

TWS 52 | Monetary System

 

There is so much going on in the economy right now that many of us are not familiar with that it’s often anybody’s guess what’s going to happen next. What are the things that we need to learn to be able to navigate this uncertainty? There is not much in monetary policy that we can control, but there are things we can do to thrive in our business. Renowned paper assets expert, successful business owner, and investor, Andy Tanner, discusses these things with Patrick Donohoe from the standpoint of practicality. He encourages you to learn about Modern Monetary Theory and understand the Federal Reserve’s power in commanding monetary policy. By arming yourself with this knowledge, you enable yourself to utilize information that is of practical importance in your own sphere.

Watch the episode here:

Listen to the podcast here:

The Monetary System And The Power Of The Fed With Andy Tanner

Thank you for reading this episode. It’s a fun one and it’s with someone that I’ve had on a number of times and his name is Andy Tanner. He’s one of the most informed guys that I know and also a very deep thinker. He lives in Utah close to me. We have to block out the entire day because we essentially get into all theories and perspectives. There aren’t many thinkers out there that are open-minded to the point where they can explore their own perspectives, their own opinions, and be willing to be challenged. He is definitely one of those people. We have a great conversation about the economy in general, where things are going, investment opportunities, what to look for and given what’s going on, it’s anybody’s guess how things are going to shake out. Some of the things we discuss are what you can start paying attention to and hopefully start to identify opportunities when they arise. I’m going to get to the interview. You are going to enjoy it. He is an incredible guy and great speaker, very well-articulated, and can explain things in very simple terms.

This is going to be a very appropriate conversation given what’s going on in the economy and there’s a lot. I include myself in the group that feels somewhat paralyzed, deer in the headlights, and trying to figure out what to do. I thought of no one better to pick my brain apart and help me understand what’s going on than Andy Tanner.

Patrick and I get together and when we do, it’s like the Smorgasbord Feast of reflection, sharing, and perspective. Patrick spends so much time learning and researching. We often say we live in an echo chamber but we share a lot of common relationships. Our friend Richard Duncan who’s a former IMF consultant, an economist, and one of the smartest guys that I know, I had a conversation with him and I think you had one shortly after that. We’ve come back together to talk a little bit about what we got from Richard. That’s what we’ve been chatting about and we thought, “We should do a show.”

The nuggets that we want to pull from it are what would be most valuable to you because there’s much going on in the economy that most people are not familiar with. In talking to Richard, I became clearer about certain things and I’ve had lots of response to it. That’s why we want to speak to him because the response isn’t necessarily what’s happening and what system do we operate in. It’s more geared to the system that we should operate in. That’s valuable. Andy, I’ll throw it on you first because in your business, what you teach is paying to what markets are doing, what asset prices are like and what impact do interest rates have on value. You’re looking at this every single day. When you talk to Richard, what stood out most to you that would help you better educate your audience and understand the economy at a deeper level?

The context you set around that is one that we should maybe dwell on is the idea of practicality. We can give our opinions and talk about concepts, but what is it that I can put into practice? Where’s the practicality? What we find, studied and learned, that’s the most valuable nuggets and the stuff I can use because, at the end of the day, when you learn something, you have to be able to say, “It isn’t about learning what’s right or what’s wrong, or what should be, but it’s what can I use, what should I study and what can I do in my own sphere?” That’s an important thing.

The thing I took away from Richard to answer your question, is we talked a lot about the idea of what are the consequences of stimulus in terms of money creation and debt? What are the consequences of the Fed? The right or wrong question is, should the Fed have this much power? Is that what should be? That’s up for debate, but the reality is they have it. Whether I agree with printing a lot of money or don’t, what’s the practicality of it?

I decided during COVID-19 very early on after I spoke with Richard during the pandemic that I was going to increase my study for monetary policy because the decisions I need to make practically are staying in stocks or buying protection stocks, or even buying new stocks and selling others. I’m making those practical day-to-day decisions based on watching much of the Fed than any other factor in the world. From a practice stallion standpoint, what is after the practice? Protecting stocks, holding stocks or buying new stocks, and you’ll have other asset classes too that matter. That’s where the rubber meets the road for me because I have to know that stuff.

That’s what I said to you in preparation to this. Ray Dalio’s video that I’ve mentioned on the show before, it became clearer to me about what he was saying. The main thing I walked away from my conversation with Richard is there’s this ideal way of that things should work according to me or another person, but then there’s reality. There are things you can control and things you can’t control. I can’t control the monetary system that I live in.

It comes down to what can I understand about it and subsequently, what can I do about it to improve my business, my lifestyle, to increase wealth, to help the audience? A lot of the feedback I’ve gotten was, “It should be like this,” “The Feds and the government should do this.” In the end, whether they should or shouldn’t, they’re going to do things that are outside of your control. If the Fed is going to do this, if you pay attention to this news, then you can subsequently see what the next domino is in that stack and make a decision accordingly.

The alcoholics and anonymous people are in a rough spot in their lives and so how do you find serenity? That serenity prayer for an investor is as good for an investor. It would be for someone that’s trapped in a substance abuse situation. With my wife and my sons during COVID-19, there’s unrest politically and a war of racism that’s raging. You look at a little 14 or a 12-year-old mind who’s very connected to media, sees the news, and this is an interesting time for family and that idea of serenity, where does it come from? It doesn’t come from maybe advocating so much as it is beginning here. Not that you shouldn’t advocate but, “What can I control and not control?” Let’s get the wisdom to know the difference, except the stuff you can’t and change the stuff you can. As I learn about things like MMT, Modern Monetary Theory, and the amount of printing money, I don’t have any control over the stimulus. I have a vote and that’s for another day. For July 2020, there’s absolutely no impact that I can have at least in my sphere of influence on whether or not we do another trillion dollars.

Accept the things that you can’t change and change the ones that you can. Click To Tweet

From a practicality standpoint, what does that mean to you as a reader? If you’re in stocks or an investor, you have to decide whether it’s right or wrong or whether we should be bailing ourselves out, or we should let the forest fire burn out for new growth, or should we spend money to fight the fire? Meaning, do we let COVID-19 burn through or do we keep trying to flatten the curve? Do we overwhelm the hospital system or not? All those decisions are out of our control. What I can control is, “Am I going to buy puts to protect stocks, or am I going to short to market?” For me, the answer is no because if they put another trillion dollars, which I think they’re going to have to do, clearly the stock market has made the decision to go with the Fed as opposed to any other number.

You and I looked at some charts going back to 2018 and everything was fine, coin’s rolling, unemployment’s low. At the end of 2018, the Fed says, “Maybe we should reload our gun a little bit. Maybe we should raise interest rates so we can lower them again in the rainy day, and the vicious market thing.” We had a chart and I looked at that and it showed, “We were more afraid of a market crash when the Fed raised the interest rates a half a point and we were of COVID-19 in terms of how it might affect the market.”

The Fed is the first domino in our monetary system, whether they expand or contract the money supply. That sets in motion as a cascading effect. I’m not saying that there aren’t consequences and whether that’s the right thing to do or not, it’s done. Knowing that, you can start to look at, “How is that going to impact unemployment, or impact housing, or my job, the company I work for?” You start to ask questions of, “What domino is next, and what’s after that?” What that does is it helps you to either play a more defensive role or play an offensive role. Defensive in which is, “That can negatively impact employment, therefore I should probably stock up on some reserves and maybe look at other places to live or another company to work for.”

To use your domino metaphor, it’s not only the first one to fall. It weighs more than every other domino on the table. When it falls, it doesn’t trigger one, it smashes half the dominoes on the table. From a practicality standpoint in making these decisions, it’s not only important to understand what it does, but what’s the magnitude of those decisions? You talk about this idea of whether it’s right or wrong in your opinion. I mentioned that the thing I would communicate with people if they want to study this is understand the power of the Fed. I understand how big that is. Not that it’s just the first one. How big is it to where it’s able to overwhelm the worst economic data that I’ve ever seen years of doing this and then I could look back and see?

We looked at those charts. We looked at the velocity of money which is you have productivity measurements at the lowest in history.

We’ve never had money halt like this in the US and that’s probably an extrapolation globally. We’ve never seen business haul like this and the Nasdaq is at new highs. COVID-19 didn’t even happen as far as the Nasdaq concerned. Think of the power of the Fed, we have the worst unemployment since 1929. If you’re talking about velocity, people should understand this. Gross domestic product is hard for people to understand because the number gets bigger and smaller. It can be very tricky. People think it’s a function of volume, but it’s not. It’s a function of speed. What it is, if you had a counter, they clicked every time money changed hands, the number on that counter would go up, that’s GDP.

I go and mow your grass and you give me $50. The government says to chain taxes me and then I take the remainder of that $50 and I go to R&R BBQ. Click, another transaction. That same $50 has been transacted twice. Now, the GDP has gone from $50 to $100. R&R takes it and they pay one of their employees. They take it and they go to a movie. None of those things are happening. I might mow your grass, but I’m not going to R&R because I’m scared of COVID-19. Even if I did, that employee is not going to the movies because they’re not open.

There’s been a halt to the velocity in those counters. Our GDP shrinks not because the amount of money is less. It’s because we’re not doing business, we’re not consuming what’s being produced. There’s something called the producer index, manufacturer’s index, and purchasing manufacturer’s index. If I’m a purchaser of raw materials to be manufactured into goods. I work at Tesla and I’m the guy in charge of buying the raw materials to make a Tesla. If I spend money to buy those materials to make a Tesla, I don’t think I’m going to sell Tesla’s. Now, all my money is caught in inventory, which is devastating to a business if you have money caught in inventory that you can’t sell, because that’s money you’ve got to pay on. If you’re leveraging, it halts.

When you look at the purchasing manager’s numbers where they all report what they’re buying, they’re the lowest I’ve ever seen because they don’t think they can sell anything. All of this stuff starts to grind to a halt and all these numbers should say, “Businesses are not going to be profitable. They’re not going to be able to pay dividends. They’re going to suck. Why would you want to buy businesses like that?” Because the Fed’s going to buy them up and drive the price higher with supply and demand. From a practicality standpoint, I see a detachment from fundamentals. I see an increase in supply and demand activity. That’s practical knowledge I can use to make decisions on where I want to be. Do you want to fight the Fed? That’s a big domino to fight.

You said supply and demand and its artificial demand based on fundamentals whether you’re going to get gain from it and dividend forum, long-term growth. The Fed stepping in that’s going to create artificial demand.

You could say that’s a bubble, but the thing of it is whether it’s artificial demand or real demand, the transactions are not artificial. The stocks are going to be bought and the price goes up and the stocks are bought. I talked with Richard Duncan and we disagreed on it. What should happen is the Fed probably should’ve stuck to buying US treasuries, but the Fed decided to buy corporate bonds and consequence at that. Janet Yellen comes out and says, “We should expand the Feds’ power to buy equities.” Richard said, “I agree. That’ll prop up the stock market.” I’m like, “Now you’re buying companies that suck. It’s like you bought all the crappy debt, now you can buy a crappy company in the name of keeping their stock price high. What if the company sucks?”

TWS 52 | Monetary System

Monetary System: The Fed is not just the first domino in our monetary system. It is the largest domino. When it falls, it smashes half of all the other dominoes on the table.

 

If you’re a technical guy and if you care about dividends, that’s probably going to be ugly, but if you care about buy low, sell high, the stock market is probably going to boom. That’s the power of the Fed. I gave you the analogy of Batman where he’s trying to find the Joker so he taps everyone’s cell phones. Lucius comes in and says, “This is immoral and illegal.” He says, “Yes, but I need this much power to get things done because we’re an emergency. The emergency deems that I use this power and abuse this power to find the Joker.” Lucius says, “No one man should have this much power.”

From a moral standpoint, we can talk all day about whether the Fed should be able to do all this crazy stuff and whether we should have that much power, but in reality, practically, there’s nothing I can do about that. I got one vote. That’s not much power and I can spend my time marching or I can spend my time preparing. That’s a big deal. I’m not going to march against the Fed, that’s a waste of time. I’d rather march for equality and racism.

Who knows if this monetary system is going to continue? It’s massive and it’s the entire world. What Ray Dalio talks about is, you have those three core factors. If you understand them, you can see how things are going to end up. If you have the productivity, then you have a short-term and long-term debt cycle. The long-term debt cycle is a new monetary system which comes around every so often. Who knows if it’s going to adjust, it’s going to be worldwide? When that happens, then you’ll know what to do about it.

Preparing for it to happen is one thing, but then acting after it happens is another. I look at acting after it happens is understanding the anticipation factor, which is seeing what they’re going to do, and then subsequently, what are the dominoes that fall after that? I look at trying to take a moral stand against the Fed is a losing battle every single time. Now that you have an understanding about how markets work, how the debt cycles work, how the Fed works and what they’re going to do if they stimulate, what’s going to happen? If they don’t stimulate, what’s going to happen?

They’re going to stimulate. It’s clear to me, even at the risk of the dollar, the more deflationary events that they see and historically in 2007, 2008 this happened, they have more confidence by balancing deflationary circumstances with inflationary policies, because they have made a total commitment not to go to 1929. A total commitment not to do that. These numbers are worse than 1929. They said, “It worked in ‘08. It’s going to work again.” We’ve got a $3 trillion debt in three months.

We’re going to put another trillion on top of that. They’ve made a total commitment to doing that. The dilemma someone has as an investor in a 401(k) holder is, “How does that affect things for me? What’s going to happen to my retirement?” I’m less scared for the entrepreneurs that are savvy. There will be some small business owners who are going to fly by night, but the entrepreneurs know what they’re doing. High-level investors, they study this stuff, they get it. The average person of 401(k), they’re not talking about what you and I are talking about. They’re distracted by other stuff. There has never been a more important time for financial education in the history of mankind.

Specifically in markets, because when there are leverage and unprecedented actions, you have big swings and that’s what good long-term investors don’t get. The bigger the swing, the worst the average. If you lose 30% in a month and then you gain that 30% the next month, you’re not back to where it’s even.

If you lose 50%, you’ve got to have a 100% increase to get back to even. We looked at the numbers on debt. Just the private debt alone in corporate stuff is bigger and then a GDP already. If you have national debt to GDP. The national debt is about $22 trillion, $23 trillion, and $25 trillion. Corporate is bigger than that. The GDP is shrinking because the velocity of money is stopping. How important is it to know the power of the Fed? It says you’ve got unemployment bad, all those producer indexes, all those, consumer indexes, the debt is high, GDP shrinks and the Nasdaq’s at an all-time high. That’s the power of the Federal Reserve.

In hindsight, look at how quickly they responded.

If you look at the subprime meltdown of ‘07 and in ‘09, it hit the bottom. Over three years, they say, “We’re going to do this much a month.” On the way up, they still thought we were struggling and say, “We’ll do $50 billion a month.” It took years to put that amount. In COVID-19, $3 trillion in a week.

If you look at what the mortgage industry did where within days or week automatic forbearance, “Here’s what you can do. You can defer it,” the last thing they want is default because if they default, then you have all the credit swaps. They get triggered if there’s default on the mortgage bonds. They’re at a different level. They learned a lot from 2007, 2008, 2009. They’re using all of those tools to combat this and it’s almost immediate.

What’s frightening is you use the word artificial. Think about this. All the people who did get laid off are not working. What I’m saying is, is the paycheck is artificial because the work’s not being done. We’re getting paid and they’re going to take that money and go up. It’s the transaction that matters, not the artificiality of it. These are not artificial transactions. It’s artificial wealth. In other words, “I got laid off, get my signature check. I’m still going to the grocery store, but that’s not a true representation of my standing. It’s borrowed money from the government.” That works with assets too, “I decide to buy stock and that money is coming from borrowed money, but yet whether it’s a real demand or an artificial demand, the transaction is still happening.”

Underneath all this, you also have people who are employed or unemployed. What I mean by that is you have the Paycheck Protection Program, the PPP loan. If you take that money, Patrick, are you allowed to lay people off? If no, your check is an unemployment check now. It’s coming from you instead of the government because you have people that are not working and when they don’t work, you lay them off. The government says, “No. We’ll send money to you to keep them employed, but they’re not working.” Our unemployment is higher than we think because they’ve got the government unemployment program, but PPP is a corporate unemployment program. The number of unemployed is higher.

The best thing to do as an investor right now is to study Modern Monetary Theory and the Fed. Click To Tweet

I’ve got a lot of friends who learned how to trim and learn how to innovate and been forced to economize. A lot of them have been telling me, “This is one of the best things that ever happened because we got smarter as a business.” They’re not going to hire those people back. It isn’t like when we go back to a new normal, it’s like, “We need everybody again.” They’ll say, “No. We’ve learned to use technology.” “This telecommute stuff is cool. There are technology and online meetings and I have this manager, I realized he didn’t do a $100,000 worth of work.”

Here’s the thing, even though there was no intervention by the government, there were stimulus, unemployment benefits, PPP loans and other programs, disaster relief programs. Those helped at the same time, the psychological impact. You can’t paper over that. Even though it wasn’t the impact of loss, it was pretty close. What happened is in those moments, that’s where the greatest lessons are and that’s where you learn to be more efficient.

You’re smarter. You asked different questions. You’re aware of different things and you no longer tolerate what you may have tolerated in the past. That’s going to change the nature in which businesses operate, regardless of what happens with the Fed if they continue to stimulate. This is still in motion. The dominoes are in the process of being hit or falling. Who knows how they’re going to land or when they’re going to land? Regardless, these things are in motion.

If you understand that, “It could fall this way or it could fall that way,” you’re not going to be able to control that, but hopefully, you can get a grasp on, “If they do fall, what am I going to do?” or, “If I think they’re going to fall, what’s a way in which I can mitigate my risks or have additional options?” It’s an incredible time for learning and introspection. I would say the one thing that’s in Ray Dalio’s How the Economic Machine Works is the idea of productivity. That’s one thing that is, you’re creating the money or the currency that people are spending, but productivity is probably at the lowest level ever and it’s continuing. It’s hasn’t necessarily come to fruition yet.

Richard Duncan talked about productivity and creditism. When I talked to him, he says, “There’s no capitalism anymore. It’s creditism because you can’t have productivity without expansion credit.” Dalio talks about expansion contraction though. That’s inevitable and he’s right. MMT, Modern Monetary Theory believes in expansion without contraction. They believe as far as debt goes, you can expand it. That the expansion-contraction comes through money supply, not debt. If you can run deficits to high heaven, it doesn’t even matter.

There is no problem with the debts because we can print money, it’s all inflation for them. From a practicality standpoint, it’s like the book, Rich Dad Poor Dad, where it talks about go to school, get a job, save money. You can’t do that. If the MMT is all about inflation and saving money, you have to be smart about saving money because it can be a bit devalued quickly from a practicality standpoint. The occupation that is scariest is a teacher.

I’ve never homeschooled my kids before. I always thought, “A lot of people do it, but I don’t want to spend time.” Name one person you know that’s homeschooled their kid and regretted it. Name one person you know that’s homeschooled their kid and said, “I think I’m going to put him back in public school.” With homeschool, all of a sudden, I realized, “This is a good quality time with my kid, where he’s not playing a video game and I get to be his teacher.” There are dopamine hits by being a teacher and having victories with your kids.

I also realized that if he has a question, I don’t ask the teacher. I go to Khan Academy, google it and I realized, “All the teacher is doing is grading the assignments. I’m getting a better relationship with my kid. This is time well spent. I can do this.” The school boards are screaming for people to go. From a practicality standpoint, what do I practice in my life? People are going to find they’re not relevant and that their skillset wasn’t as valuable as they thought it was. “I think you’re going to see a private tutor.” A private tutor is going to be more valuable than a public school teacher in a hurry.

That’s again going into the dominos. If that could happen, it may not happen or it may happen, but if it doesn’t and you’re a teacher, what do you do to prepare again? How do you position yourself to capitalize on what happens? Whether it should or shouldn’t happen, something’s going to happen and you’re going to ask her what to do.

You are going to produce more values to teacher but you’re going to hire private teachers for your kids and we’re going to be more involved in that.

“That’s so expensive. We can’t afford.” It’s like, “These are $15 to $20 per hour.”

A public school teacher says, “I’m going to become a private tutor for five families.” They’ll probably make more money than they ever made in school. Who am I going to pick? The one that’s kind to my kid, makes things in a simple form, does a good job, and goes the extra mile. You can’t hide behind tenure professors.

There’s never been accountability in education until now. I’m not saying it’s perfect accountability, but they’re being challenged. There are other options and that’s the nature of a market.

To our readers, “What is your education hierarchy?” In my education hierarchy, there are four levels. There’s stuff that’s vital, important to know, interesting to know, and stuff that’s trivial. For most people, when they think of education, a school board determines what is where. If I say, “Dissecting a frog,” they put that as vital. Every kid should dissect the frog, not just the surgeons, nor the doctors, but every kid cuts up Kermit. That’s vital to them. How about financial education? Trivial?

TWS 52 | Monetary System

Monetary System: The Fed is where the power is. Study it.

 

This is the opportunity. If you want to have practical knowledge you can use, you certainly worry about moral hazard, how things should be, and what is your education hierarchy from a practicality standpoint? What is the knowledge and skills that can help you in your situation? What do you need to learn? What do you want to learn? Take that away from the board of education and say, “I’m a graduate now. I’m 50 years old. What am I learning right now? I now get to choose what I want to learn,” “I’m going to give you my counsel, what should I learn?” “I’m not your school board of education. You’ve got to decide that.” If you’re not studying Modern Monetary Theory, don’t know who Warren Mosler is and haven’t watched his video about his business card and guido out in the hall with the gun, better google that.

That’s what we’re going to do, whether you like it or not or whether you think it will work or not. In my echo chamber I live in, most people think MMT won’t work. I’m not afraid of it not working, because if it doesn’t work, it will fail, we’ll start over and forest fire, new growth grade. What I’m more scared of is that it does work because you have Batman with unlimited power and no Lucius. He’s retired, resigns. That’s frightening to me, but it’s the world I have to live in. I got to buy stocks in that world of MMT.

At the same time, looking at our monitoring system as it stands, there’s a different level of accountability. However, we’re straying from that because the whole world would have to completely transform in order to have enough tax revenue to pay debt back. There’s probably enough to pay back the interest.

When you take a civics class in high school, you learn legislative branch, judicial branch, executive branch, that’s about it. In understanding how the Federal Reserve works, if I ask people, “Who’s Jerome Powell, Janet Yellen, Ben Bernanke, Alan Greenspan?” Half of them don’t know, maybe more. “How are they appointed?” “The president appoints them.” “Who has oversight?” “Congress.” That’s all a facade because the fact of the matter is, even if I disagree with them empty, we’re so far down the road that even if you choose me, I probably have no choice in what my policies are because we’ve chosen that road and the only way to do is go further down that road.

You have to prepare for that. “How long does it last?” Look at Japan. They’ve invented the generational mortgage for 100 years. Part of the legacy you give your kid is the mortgage or the house has to be sold, paid off with a sale. “What’s wrong with that?” That’s what they say. They’ve also innovated in that they have a 235% or 250% debt to GDP. They had it for a lot of years. It hasn’t seemed to bother them. If you’re predicting that this stuff will crash and the big short, the biggest stress those guys had was their timing of it because they thought it would happen sooner. It wasn’t happening fast enough and they look like geniuses. How many other people were doing the same thing, they had the time too early or too late? Look at those lines like geniuses. That could have been 1,000 other traders. They happen to guess right on the time.

They needed somebody to help them broker and negotiate it. It wasn’t $1 on the dollar.

A lot of those derivatives were invented by their negotiations. They didn’t exist before they broker them. The world we live in, if people think, “There are turmoil and all this type of stuff.” The smartest thing you can do, in my opinion, study Modern Monetary Theory and the Fed because that’s the biggest domino in the world. We mentioned that chart of the volatility index, which is the fear gauge. I looked at where we are and where we are at the end of 2018. Based on that index, we’re more afraid of the Fed pulling back stimulus that will cause more fear of a market crash than a global pandemic will. Think about that.

Look at where the VIX was going into 2019 and December of 2018. It’s at a higher level then than it is, with the worst employment numbers we’ve ever had. The worst economic numbers, the GDP is going to suck. We got social upheaval in the United States to a degree that I’ve never seen in my young 50-year life and yet we have less fear of the market going down, less fear of a market crash for the global pandemic, social upheaval, and unemployment. Less fear than we did when the Fed started tightening policy. The Fed is where the power is. Study it.

Let’s do some takeaways. You stated that there will be stimulus. What makes you think that?

From what I’ve been able to read and ascertain, the velocity of money stops. Picture currency as a current, like a river. The dam is a stoppage of that. COVID-19 stops it. The currency stops. That velocity that we talk about stops. How do you break through that dam? You pour more money in and put pressure to move things forward. In other words, COVID-19 stops me from having a business and going to the movies. We’ll pour money into that so those people still have money to buy groceries and do stuff. We pushed through. All we did is kick the can down the road.

COVID-19 is still there, it’s getting worse in a lot of places, all the loss in money isn’t stopped again. That’s where it is and that’s where this money has gone through and pushed it as far as it goes. It still stopped, got to have another round. We’ve got to have another round to businesses in business, to keep payroll on the payroll, to keep unemployment gone. Unemployment in six months, that’s more of the fall, but there’s still not enough money. From where I’ve read and seen, it is going to take another quarter trillion of stimulus to get us through. Who knows what happens in the fall?

What impact is the second quarter in earnings going to have?

It’s been a mixed bag because one person’s tragedy is another person’s opportunity. How much business do you think Zoom is worth? Some of the ones that have been wild that I haven’t understood is like Wayfair. Why does Wayfair do well? People are sent in the home and they’re, “Let’s repaint,” “Let’s buy new furniture.” How come Wayfair is up? You have companies that have done very well in this time. It’s like technology has been great or earnings have been good, others like banks are not so well. It’s a mixed bag earnings-wise.

What about GDP?

It’s going to shrink.

TWS 52 | Monetary System

Monetary System: Our GDP shrinks not because the amount of money is less, but because money velocity is slow.

 

Do you think that’s priced in already?

No.

Is the Fed intervention priced then?

Yes, which is scary because a couple of things happen. The biggest thing is the Fed. They keep money pouring, things will be okay. You’ve got a small amount of stock market propping up. You’ve got Robinhood who got three million new accounts, E-Trade had another 300,000 accounts, Ameritrade had 600,000 accounts out in the first quarter. That’s new money coming in from everyone’s check. The real stuff is from the Fed. It’s the trillions, not the millions that are being brought up.

The GDP is going to drop and it’s probably priced in. Also, people see the opportunity in a low market. When you see a drop in the market, it’s tough because you know that the Fed might pour another trillion into it. It’s hard for people not to buy dips, thinking that in the short-term, it’s going to do well, because they think it’s on sale and I think they’re right. Instead of the Fed is going to put in that much cash, how can you not have got exposure to equities if there’s that much cash being dumped in? I do know that all investors are watching the Fed and if they dump money in, regardless, “Does the number matter anyway? “GDP and unemployment were bad.” None of those numbers matter. It is the Fed. As long as they keep pumping money in, what do I care with GDP and unemployment?

The other thing too is they have a good bet. What narrative do you use that keep people at bay?

If you’d asked me what the most important number in the economy was, I would say, GDP, number one. Employment, number two. Corporate earnings, number three. Growth, number four. Those are the top four numbers I would care about. If you asked me that now, I don’t care about any of those numbers. How much money is the Fed going to print? That domino blows away. It creates a detachment from fundamentals, in my opinion. I said that to Richard Duncan, “If they start using money to buy equities, does that create a detachment from fundamentals?”

He goes, “Where have you been in years? The 401(k) caused a detachment from fundamentals because people are buying broad-based indexes with no evaluation on schedule. Every two weeks they’re put on by broad-based index economies with no Warren Buffett research on the companies.” The detachment fundamentals mean that I care less about the GDP, earnings, employment, and all the stuff we used to care about. I got one question, “How much money is the Fed going to print?” None of the other numbers matter if they print.

This is my big takeaway from what I’ve learned. Now that we know that, what are the practical things somebody can do? We’ve mentioned them already, but I would say the first thing is you need to understand the monetary system that we’re in and also a monetary system that we may go into in the future. You alluded to the MMT and Warren Mosler who propagated that, what are the best ways to understand how the economy works? I’ve referenced Ray Dalio. I think it’s a good introduction to it. What else would you recommend as far as understanding how our monetary system works?

I love Richard Duncan stuff. His stuff is complex. It’s not something that someone walks into and says, “That was an easy class to take.” He has on monetary policy, $500. I’ve referred a lot of students there to learn that. Even bigger is what you said before even start trying to learn is what your context. The first thing I sit down and do, as I say, “How am I thinking about this? What can I control and where do I want to put my energy first before I even do any of that?” The second thing I look at, “What value I give to the world, where do I fit in the value I give to the world, and is there a threat to me of obsolescence risk?”

Can you name those levels again?

As far as your hierarchy, “What is vital for me to know right now?” I can’t give an answer to everyone, because everyone’s in a different situation.

People can categorize the value they bring.

They have to ask that question of themselves as, “What’s vital? What’s important?” People say, “What’s the difference between important and vital?” I always tell the joke with this. I say, “It’s very important that my wife gives me a present on my birthday.” “It’s vital that I give my wife a present on her birthday.” The word ‘vital’ means, is it important for me to have my hand? If I lost my hand, would that bother me? Yes. It’s important that I have my hand, but it’s not vital.

The difference between vital and important is vital is without it, you die. Important is it’s a huge advantage to know it. Interesting is interesting, “It engages me. It’s fun to observe.” Trivial is trivial, trivial pursuit. It’s meaningless. Barely even interesting, that’s trivial to me. Value is in the eye of the beholder. The reason that is, is everyone’s circumstance. On my wall is a wristwatch from the 1993 NCAA tournament.

The only way you get one of those is if you played in the tournament. That’s probably worth $300 if I sold on eBay, that’s their value on it. You gave me $1 million for it, it’s yours, but for $100,000 I don’t do it. Value is in the eye of the beholder. What’s vital to you? What’s important to you? I have to say, “What’s my occupation. What value do I give the world? Do I need to change that? Do I need to enhance that? How do I do this with me and the world?”

It doesn’t have to be a completely new career. It could be, “I’m a teacher,” the circumstances or the environment in which you teach.

What’s wrong with innovation? People want security. They want it the same. They want to hold on to ten years. It’s like, “I want to do this,” “I had this plan in my life and I don’t want to change it.” Change is not a word people like, but improvement is a nice word and improvement is a form of change. “Do you want to change things about your life?” “No. I don’t want to change anything in my life.” “Would you like to improve your circumstances?” “Yes.” That’s a form of change.

Understand the rules of the game so that you can play it. Click To Tweet

What’s wrong with thinking about that? I would say if you’re an investor, which is the guys I speak to or your 401(k) guy and you’re worried about retirement. First thing, top of your list is sovereign fundamentals, MMT, and monetary policy. What can be the single most and the important thing to learn is? Start studying that. I have courses on it that I teach, but I’m still changing my courses because I’m still a student learning more. I know this is the thing that I learned, that I do know. It’s ultra vital to understand that. Not to change it, not to advocate against it, not to agree with it, but understand the rules of the game so I can play it.

That’s the most important piece of is rules of the game. There are certain rules in our life that we can have control over, but there are some universal rules as far as the global economy is concerned, you don’t choose. They’re laid out and said, “Do you want to operate in this type of economy using this currency and these resources, these are the rules.” Most people are waking up and living the same Groundhog Day every day. Understand what’s going on and then wish things were in a different way and want to advocate that. This is where the wisdom comes in as far as the serenity prayer, which is understanding the differences that are out there and understanding the actual environment that you’re in, and how you would behave in that specific environment. Also, anticipate environments to come and how you can prepare yourself.

I don’t like to always go back to what I’ve taught in the past, because is what I taught in the past valid now? Are there universal generalized principles that are true in all cases? I don’t know. Are they there? I don’t know. There are three that I’ll leave everyone with. The first one was the hierarchy, what’s valuable to you? What’s vital? That helps you determine what you want to study. It’s vital to remove yourself from a context of advice.

It’s one of education. They’re different. Advice is when you’re asking people what to do. If you’re finding yourself saying, “I wish I knew what to buy right now.” Tell me what to buy. You’re going to lose your money because advice is usually changeable, wrong, and cost too much. Get out of asking, like going to a planner and saying, “What should I buy?” He doesn’t know any more than you do. If you say, “Should I buy Bitcoin?” If I say yes, how much smarter did you get about Bitcoin? By saying, no, how much smarter did you get about that?

You’re asking for fish, you have no fishing skills. The third one you mentioned is once I do learn something, and I do feel I have some knowledge, temperament is huge because it’s your temperament that allows you to execute and do what you’re supposed to do instead of what your God or all this is telling you to do. When I read the book, The Intelligent Investor, the first time I read it thinking, intelligence was knowledge. The second time I read, intelligence is temperament. Intelligence is thinking, not being emotional, not freaking out. That’s what I would say. Temperament, education, no advice, learn what’s important to you. That’s where you’d start.

I hope the readers got a lot out of this. It’s something that I think I have. You’ve been curious about as far as understanding where we’re at, where things are going, and then using that law deductive reasoning, where you’re able to understand things. I think that’s the nature of the world that we live in and there’s so much information, but if you focus on information that can potentially impact you, your employment, your assets, your lifestyle, your wellbeing, that stuff is the most important. It should be at the top of the list. You have to avoid some distractions from other entertainment and information out there.

We’re in a very interesting time. A time when there are lots of things going on at the same time and it’s more important than ever to understand things for yourself, as opposed to relying on others for their opinions and their perspectives because sometimes they may maybe right. The one thing they may get wrong might impact your life in a negative way. Now is the time to take ownership, take stewardship of your life, your wealth, what you understand about it. Hopefully, that leads you to make great decisions.

I wish everyone well. What a difficult time for our human family and I feel like an empath. I feel like when they’re hurting, I’m hurting. It’s been more difficult to have prosperity. It’s more fun to have prosperity when everyone else is being prosperous. It’s tough for people. If there’s something we can do, email us, ask us and if there’s a way we can lift and serve, let us know. Thank you, Patrick.

We mentioned a lot of things, books, other people, and blogs. If want to go there to access those it’s TheWealthStandard.com. If you haven’t checked out the Resources Section yet, we’ve got a lot of cool resources on there that you’re going to want to know about in relation to episodes that we’ve had, but also some other interesting things I think you guys would benefit from. Hope you guys are having fun and enjoying this different type of lifestyle that we’re in. Take care. We’ll talk to you later.

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About Andy Tanner

TWS 52 | Monetary SystemAndy is a renowned paper assets expert and successful business owner and investor known for his ability to teach key techniques for stock options investing. He serves as a coach to Rich Dad’s Stock Success System trainers and as the Rich Dad Advisor for Paper Assets.

As a highly sought after educator, Andy has taught tens of thousands of investors and entrepreneurs around the world. He often speaks to students at the request of Robert Kiyosaki, showing how paper assets can fit into the Rich Dad system of investing. In 2008, Andy was key in helping develop and launch Rich Dad’s Stock Success System, which teaches investors advanced technical trading techniques to profit from bull and bear markets.

He is the author of two books: “401(k)aos” and the soon-to-be-published “Stock Market Cash Flow,” a Rich Dad Advisor book on paper asset investing.

Andy has also created an online investing course called “The 4 Pillars of Investing.”

 

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Economics Basics And The Futility Of Bailouts With Jason Hartman

TWS 51 | Bailing Out Companies

 

In the midst of an economic crisis that none of us has any control over, it would be interesting to know what the government is doing. Does bailing out companies really work? What things do we need to understand to make sense of this crisis? Jason Hartman, the Founder of the Platinum Properties Investor Network and host of The Creating Wealth Show, returns to the show with Patrick Donohoe for a short but insightful discussion of this issue. They go back to some of the basic principles of economics and reiterate the very nature of the economy and what really matters most in the creation of wealth – capital formation. Taking cues from the Austrian School of Economics, they argue that the failure of some businesses is a necessary, albeit painful, learning experience of how to provide a service, thus making bailouts not only unnecessary but counterproductive.

Watch the episode here:

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Economics Basics And The Futility Of Bailouts With Jason Hartman

Thanks for tuning into this part two with Jason Hartman. He is another one of those deep thinkers that helps me to check my assumptions and perspective. The episode that we did with Richard Duncan sparked a lot of comments and questions around what’s going on. This is something I’ll do in the next episode with Andy Tanner. We talk about what is the system that we are in right now, not what the system should be or what the Fed should be doing or what the government should be doing. It’s what they are doing because those things, we don’t have control over. When we operate our mindset and subsequently, our decision comes from that, with something that doesn’t exist, which is a hope. Oftentimes, we make the wrong decisions.

The more we understand about how the economy functions, how the short-term debt cycles and specifically long-term debt cycles, which is the monetary system, how they work, we can better understand where things are going. That’s where I talked about Ray Dalio’s How The Economic Machine Works. That’s important to understand. It’s a very well articulated video that helps us understand the system that we’re operating in, whether it’s good or bad, whether we think it should be another way or should be the way it is. It doesn’t matter. It’s the way that it is. That’s something that we can’t control, but we can control how we operate it and the decisions we make with our investments, with our money, with our wealth.

Jason and I start to get into it. It’s a perfect introduction to the next episode, which is going to be with Andy Tanner, where we dive even deeper. Thank you for your support. Thank you for visiting the website and subscribing to the newsletter. We’re trying to announce episodes and other things. Thank you for those who have taken advantage of some of the resources on TheWealthStandard.com. Jason and I mentioned a few things here that are notable. You can go over to YouTube and watch the video. Go to YouTube/thewealthstandard. You can subscribe there. Let’s get to my interview with Jason Hartman.

TWS 51 | Bailing Out Companies

Bailing Out Companies: Our economy is in large part based on debt and consumption.

 

Patrick, it’s good to see you again.

Same here, Jason.

One of those listener questions you sent over was about the economy growing and shrinking and why that happens. We could talk about the business cycle or a variety of things, and then we have to ask ourselves, have the rules changed in an era of pandemics, riots, civil unrest? What do you think?

Money is ultimately debt. Click To Tweet

It’s interesting that people are asking these questions. It’s because they’re more aware of what’s going on in society than they have been in the past. This is a question that you can spend days on. There are whole PhD programs on why this and why that as it relates to the economy. The long and short of it is the economy is the measurement of resources that are used for particular purposes. When an economy grows, that indicates that there is an increase in production, increase in value. In a nutshell, in easy terms, that’s why an economy grows in theory. Our economy is different than when those first economists started to define economies and then start to measure it.

Our economy is in large part based on debt and consumption. That’s where it gets complicated in a sense because most people think that money is value, but money is ultimately debt if you think about how money is created. It’s a different monetary system than the past. At the same time, the more you understand about that, the more questions you can ask because previous to COVID, the economy was growing at a small percentage. Also, what was growing was the expansion of credit and debt. That is what expanded the overall economic growth.

TWS 51 | Bailing Out Companies

Bailing Out Companies: If you just continue to Band-Aid a wound, it will eventually get infected, and the person’s going to die.

 

We live in an economy that’s built on a house of cards essentially and money is created through debt and this crazy fractional reserve banking system we have. Both of us have studied that stuff a lot. If people don’t understand it, it’s obscure and it’s hard to get your head around. It’s so weird. We read books like Creature From Jekyll Island. We both know G. Edward Griffin. I’m sure you’ve interviewed him. I have him on my podcast several times. It’s hard to get your head around this stuff. Even if you think you get it, there’s another layer. You can keep peeling back the onion on this. I do think we’d be remiss if we didn’t talk about the good old-fashioned business cycle, and that’s largely an Austrian economic type of thing.

If there’s any economic school of thought that I most subscribed to, and I think you too, it’s the Austrian School. This is by no means an academic definition. It’s a man on the street view of it where they would say that the opposite of it would be John Maynard Keynes. The opposite of it would be Karl Marx who, as much as I don’t like him and don’t agree with him, I have to give him credit. He’s responsible for the deaths of hundreds of millions of people. I’m not giving him credit for that. I definitely do not like his ideas, but he is far and away the most influential economist in world history. He changed the world massively. The entire Soviet Union was based on his idea.

Sometimes you need contrast to understand the value of one system versus when it’s compared to something else.

The growth and the crash of economies is a dance between the rational and the irrational. Click To Tweet

I’m glad you pointed that out. That’s good. The Austrian School would say the way to create wealth is through capital formation and production. That’s the reality and it totally makes sense, but we don’t live in that world as you were alluding to. We don’t live in a world of reality. We live in a world of money being a super symbolic idea and an idea based on Fiat. We live in a world where Keynesianism has prevailed largely. It is the way it is. Going back to that Austrian School business cycle concept, they would say that the economy always acts in cycles. If you’re looking at a chart, there’s this cycle where it’s a boom time. There was expansion and more inventory of products and services created. They might even say inventory in the world of services. If we look at what happened during the shutdowns, when nobody could get a haircut, go to a nail salon, get a massage. Nobody could get a lot of stuff. Those are all services. Even services have an inventory in a sense because if those businesses go out of business, which many of them will or have already, there’s lower inventory.

We mostly think of inventory in terms of widgets. This is an economic widget. Inventories expand because manufacturing expands, credit expands. Everything’s going well and there’s a wealth effect and people feel good. That gets to a point where people start to wonder and they start to lose faith in the system. They think, “This can’t go on forever. Maybe we better save a little money for a rainy day. Maybe the sun won’t always be shining.” They start to rein in their horns a little bit. You see the stock market pull back. You see some bad days occur. You see the houses in your neighborhood aren’t selling for those crazy prices they once were selling for. You see it’s not quite as easy to get a raise at my job or to get a new job or to get that promotion or maybe my company laid a few people off, people’s search get a little bearish. That sets up for the next cycle, which is the bust.

TWS 51 | Bailing Out Companies

Bailing Out Companies: The highest risk investment is when there’s peak euphoria, but the best time to invest is when there are greatest fear and despondency.

 

Those are great thoughts. If you think about it, the growth and the crash of economies is in large part the dance between the rational and the irrational. From a rational side of things, people are naturally wired to grow, first and foremost. They’re wired to either get the same for less or get more for the same. Meaning, the efficiency of phone and technology, you’re paying a little bit more, but look at how much more you’re getting compared to 5, 10 years ago. You get the same for less price. The Apple’s new C version of it is much less. At the same time, it still does a lot. In a nutshell, that’s the rational side of things.

Like you alluded to, Jason, you have the irrational side of things, which is emotion. A lot of times it drives behavior to one direction or another. When someone becomes afraid, they behave a certain way. When somebody is excited, they behave a certain way. There’s an investor curve as far as risk levels are concerned. The highest risk investment is when there’s peak euphoria. The best time to invest is when there’s the greatest fear and despondency of people.

Buy when there's blood in the streets and sell when everybody's partying. Click To Tweet

The blood in the streets metaphor, buy when there’s blood in the streets and sell when everybody’s partying.

That’s a very Austrian way of looking at things, but I would say the thing that’s important to understand about the Austrian School of Economics is it’s based on freedom. There’s no government intervention. If somebody makes a bad choice, whether it’s starting a business or allocating capital to something and they fail, there are no bailouts. They have to fail. They go bankrupt. They go out of business. That’s necessary for the learning experience of how people provide a service, provide goods, to make sure that what their ideas in their mind is in demand in the economy. That’s what I love about the Austrian School.

It’s creative destruction.

TWS 51 | Bailing Out Companies

Bailing Out Companies: Bailing out companies is not a capital investment.

 

We’re so afraid of failure. Failure is one of the greatest teachers especially in business. If you continue to Band-Aid something, the bone is eventually going to break. The wound is going to get infected and that person is going to die.

That’s a good point. I would put it maybe another way though. We all saw that with the bailouts in the Great Recession. A lot of people were upset about the bailouts and they artificially prevent what needs to happen. Those failures, those bankruptcies, those businesses going away needs to happen. When you don’t let it happen, when you interfere with the process, when the government comes in and bails them out, then you get this situation where you’re encouraging bad behavior.

If you want to create real wealth, you simply got to have capital formation. Click To Tweet

There’s a moral hazard as they say. The greater economy in general become these zombie companies. The whole economy becomes this zombie economy. Think of it this way, when you wake up in the morning, the first thing millions of people do is they have a cup of coffee. I know it’s the first thing I do pretty much. You want to jumpstart your system and your system will naturally wake up. You don’t drink coffee, but I do and I didn’t use to. I had this girlfriend got me into Starbucks years ago. Ever since then I’ve been addicted, not to them but coffee in general. I need it, but you don’t need it.

You still wake up, but I need it as a crutch. My system has become used to it. After a while, like any form of addiction and caffeine is an addictive substance like many other things and behaviors like drugs and alcohol. That’s what we think of as addictions, like overeating or whatever. There are lots of little addictions we all engage in all the time, little addictive behaviors here and there, little compulsions. The nature of it is you always need more to get the same results. The same thing happens to zombie companies and zombie economies. The poster child of this would be Japan. They first have the last decade. They then have the last two decades and then going into the last three decades where their economy, no matter what you do, it can’t get to where it was. They have the highest debt to GDP ratio at about 230% of any developed country because they keep spending into it. After a while, it doesn’t work anymore.

Those debt levels continue to grow and so forth. I love one of your ten commandments of real estate investing because it alludes to using debt and using leverage as part of purchasing an asset. These days, people don’t use debt to purchase their assets and their savings. What it does is it goes against our economic system, which is fueled by debt. Debt is essentially priced into everything including real estates and cars. You look at what exists now, whether it’s the Japan economy or our economy. The growth of the economy in large part is due to credit expansion when there is stimulus.

TWS 51 | Bailing Out Companies

Bailing Out Companies: We live in a world of credit-based assets, and when the credit dries up, things get tough.

 

That’s why the Federal Reserve in the United States has had to do constant quantitative easing and continue to expand because they have to grow. The reason why they have to grow is because there’s interest due on the debt and they need to pay the interest. It’s one of those things where they have to grow the economy so that there’s greater output, greater taxes, which then pays the debt. Richard Duncan, I’m not sure how much you studied him. He understands as well and not to say that it’s a good system. It’s an incredibly flawed system, but it’s the system that we have. As credit expands, things are most likely going to grow. As credit contracts, things are going to crash. Debt is like an accelerator. It’s like gasoline or jet fuel to a fire. It makes everything go quicker, faster, and worse.

The difference between using leverage to buy real estate versus a country or bailing out companies that shouldn’t be bailed out or spending on the welfare state, that isn’t a capital investment. Whereas the property you’re buying, as long as it’s a sensible property, is a capital investment. The bottom line is that the idea is if you want to create real wealth, you’ve simply got to have capital formation. The capital can come in the form of savings to invest or in terms of assets that produce income. That’s it. It’s that simple. You cannot spend on welfare programs or bailing out zombie companies to grow your economy. That’s not the way to spend your way out of it. It gets progressively more difficult. It requires more stimulus every time, more caffeine every time, that idea.

I’ll end with this, which is interesting when I realize this. Let’s say you have a government worker that is renting a home that you own. You’ve purchased it with leverage. You’ve purchased it the right way. They’re paying, but the way in which they’re paid is based on the government being able to have debt and be able to provide capital in the form of debt so that that person can get paid. It’s the same thing if a person works for a Fortune 500 company that is fueled in large part by corporate bonds, which they use to capitalize their company, work their company, and grow their company. That money is then used to pay this person who then pays the rent on your property. It’s the same thing with the suppliers of lumber and builders. A lot of that supply comes from being able to have access to debt, which allows them to produce. It’s interesting to see debt as this foundational thing or the dynamo that’s required these days in order for the economic machine to be working.

We live in a world of credit-based assets and when the credit dries up, things get tough and there’s another cycle right there. This is good stuff, Pat. Thanks for having this talk with me.

This was great. I love the conversation. We kept it as simple as we can.

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About Jason Hartman

TWS 49 | Economy ReboundJason Hartman is the Founder of the Platinum Properties Investor Network and host of the Creating Wealth podcast, which is heard in more than 180 countries. Jason is a genuine self-made multi-millionaire and serial entrepreneur who owns 21 businesses in investing, financing, real estate development, and SaaS software. He has owned properties in 11 states, had hundreds of tenants, and been involved in several thousand real estate transactions. He has visited 83 countries, enjoys adventure, fitness, and lifelong learning.
Jason Hartman is the host of 23 podcasts with listeners in 189 countries, over 15,000,000 downloads, and over 5,000 episodes where he shares powerful strategies for business, investing and living the good life. Check out his podcasts and resources at www.JasonHartman.com or www.HartmanMedia.com Available on iTunes and your favorite podcast platforms.
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