Hello, and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli. Glad you’re joining me here today. Well, we have a doozy of an episode today. I actually had a guest on that I just finished interviewing earlier today about money of all things money and the confusion around money and how there is so much illiteracy about money and currencies and what inflation is and how it Im impacts us as investors. And then what was very interesting about my conversation during this interview is the concept of money supply. And I say that in air quotes because it forced me to look at money and money supply specifically from a, a different angle, a different life, more from, you know, the demand side of the equation rather than, you know, the Federal Reserve being in the media and the news all the time, and they are responsible for the money supply and they put it into the system or take it out and, and what does that do to interest rates and mortgage rates, and how does that impact everybody, including us as investors?
So it was just a very interesting conversation with a little bit of debate, and it kind of changed my view a little bit on how I’m looking at things. So it gave me more food for thought. And, and I wanna finish reading John’s book. It’s called The Money Confusion. We’re gonna talk about that at some length. In fact, this interview went quite long. It went for about an hour. So I’m going to break this interview up into two parts and release part one right here on this episode. And then part two, probably in a couple of days, it’ll come out very shortly thereafter. But try and listen to it through to the end because I think there’s a lot of interesting and somewhat insightful information in there and, and some good banter and, and debate and conversation. So I think you’re going to enjoy the episode. And on that note, let’s jump right in.
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Well, it is my pleasure to welcome John Tamny to the show. John is Vice President at Freedom Works. He’s the editor at Real Clear Markets great website, by the way, a senior fellow at the Market Institute and a political economy editor at Forbes. John is also the author of six books, maybe more now, but six books on economics and politics, including Popular Economics, very good book, the End of Work, and his most recent book, The Money Confusion. What a brilliant title. John, welcome to the show.
Thank you so much for having me on, Marco.
Good stuff. John, you’ve been around for many, many years. I’ve followed you on tv, I followed you on podcasts, on other people’s shows. You’ve got great books, all kinds of great comments and content, and even op-eds. Your op-eds are fantastic. So you have a lot of content out there for people to learn more about you and what you write about and talk about. But I only had a very quick bio for you. Why don’t you tell us a little bit more about yourself so people have a better understanding of who you are and what you do?
Well, probably the most important thing that I would stress is that, that I’m not an economist. I believe that economics is first grade material, that it’s common sense, it’s understanding human action. And I think economists have made boring what’s fascinating. But I think also what they’ve done is they’ve complicated overthought what doesn’t require much thought. And so my books are a rejection of economists in what they believe an embrace of just trying to understand why people do things how different things work as they do things. And, and I use, I never use charts or graph, rarely do I use percentages. It’s basically pretty much all stories from, from life as we know it so that people, because my belief is that everyone knows economics intimately. They just haven’t been taught it in, in a way that makes them think they know it.
Yeah. And hence some of your books like Popular Economics and the most latest book on your list is The Money Confusion, which is a great title. Tell us about that book. What inspired you to write a book title, the Money Confusion, and ultimately tell us, you know, what, what message do you hope readers take away from reading this book on the money confusion, which by the way, I started reading and it’s is brilliant.
Well, I start, what made me write it is I just think there’s so much confusion about out there about what money is. There’s this belief that money can just be expanded and circulate through the economy that that basically governments control, money supply, and in moving it up and down they can achieve optimal economic outcomes. There’s a belief that inflation is caused by too much demand, which couldn’t be more backwards. There’s a belief that I argue in the book, of course, that the, in that the, what they describe as inflation right now these higher prices has nothing to do with inflation. I’m one of these, I’m one of these odd birds making a case in the book and still making an op-eds that what we are enduring right now is not inflation, it’s higher prices borne of command and control that we experienced in 2020. So it’s a very different book. Everything in this book rejects traditional viewpoints about money, not from the, just from the left, but left, right, center, libertarian, you name it.
Actually, you might have just answered the question I was thinking as you were talking, and that is, does the book have, whether you mention it or not, does it lean towards, you know, the Austrian School or any particular school of thought or philosophy about money and money creation or modern monetary theory or anything like that? I mean, is is, is it in a camp?
It’s so interesting that yes, that I make a point in the book at one point where I say the Austrians and their views about central banks, that central banks can fo foster unlimited spending, that they’ve been making the modern monetary theory argument for decades. Mm-Hmm. My book rejects both. It just, there’s nothing and, and you’re talking to someone, if you could see all my books by Ludwig von MEUs, you’d say, wow. He’s, I mean, I I, I’ve read just about every single one of them and I’ve got copious notes, but I, I am strongly of the belief that just as Kanes referred to all of his disciples to Hayek, there was that famous interview, he said, oh, those fools, I think if Ludwig von Meas were alive today, he’d be horrified by what modern Austrians have done to his thinking. So, no, I’m not in a monetary sense, I’m not Austrian, I’m not Keynesian, I’m not a supply sider. I it, to be very honest, I think the two best books ever written about money were by Adam Smith and John Stewart Mill. Yet no one had would ever think to that The Wealth of Nations was about money. It had some of the best lines about money you’ll ever find <affirmative>. Same with with Mill’s, principles of Political Economy. Yet people focus on all the other things they did. I think if you wanna understand money, read Wealth of Nations, but few people have read it.
Yeah, it’s a cornerstone book. I have it on my bookshelf. So let’s jump ahead and then come back. So I, I was asking you before, what message do you hope readers take away from reading your book? Like, what is it you want to educate someone on as a takeaway.
I want them to take it away. That money in circulation is as natural a market phenomenon as the goods and services that money facilitates the exchange of, there’s this view out there that central banks supply the money that we use to transact, which is just so ludicrous. Money exists anywhere where there’s production, no matter what. There will always be money. This was something that meas understood. Yet his disciples today have just perverted it beyond, beyond beyond comprehension. And so my book just says, look at money as a market phenomenon, because that’s what it is. It is an exacting market phenomenon. It’s where there’s production and it’s never where there isn’t production.
So I, I guess another way of saying what you’re saying is that money tends to appear or be created because of commerce, not the other way around where we create currency or money, and then commerce builds around it. Is that a true thing?
Absolutely, absolutely. 100% correct. As long as there’s commerce, there will always be money. And it’s something I stress throughout the book. Never focus on money supply. If you’re talking about money supply, you’re no better than central planners in the Soviet Union because wherever there’s production, there’s money to move that production. This is something that Adam Smith understood intimately, that mill understood intimately, but that modern theorists about money have just have completely perverted. If you are productive, money will find you always, always, always, if there’s production, there’ll be money to move it around, because that’s what markets do. If you think that market free people produce goods and services and they do, yeah, money is taken care of. So stop focusing on it as though a creation of the measure that moves goods and services around is something that needs to be central planned by by government actors.
You, you kind of, I, I’ll, I’m sure I’m gonna butcher this, but you make me think of, you know, the stories I’ve read in the past that if you go back as far as like ancient China or wherever it was, or maybe it was Metopia or I forgot the name of the country or location, but people would actually use shells, you know, like sea shells and whatnot, like the most rudimentary crude things as a medium of exchange, that was basically their form of money or currency at the time. You know, they couldn’t print dollars or mint coins, they just had to get something that was in the environment and they would collect shells and certain types of rocks, and that was, that was money. Right?
Absolutely. Money’s just an agreement about value. Go to any prisoner of war camp and you will find that money is circulating even if dollars aren’t circulating. As I point out in the book, after World War ii, particularly in Germany, was so destroyed by the war that, you know, the mark that followed, they were utterly worthless, but money still circulated. In Germany, the most popular money, the most trusted money form in post-World War II Germany was cigarettes. But there’s always eventually something that comes up that producers agree on as the most stable measure of value. And, and this isn’t by government decree, it’s just, again, producers want to get equal value back for what they bring to the market. And because they do, they have an incentive to agree on, on measures. And, and that’s why I keep telling people, stop focusing on what the fed’s doing and what it’s supplying. It’s immaterial. If you’re productive, money’s going to find you.
Right. You know, just for listeners’ sake, sometimes I think listeners listen to some of the topics and the shows that I have on this podcast, and, and they’re wondering, well, I I want to be a real estate investor or an investor in general. You know, what does this topic have to do with it, whether it be on, you know, personal growth and development or mindset or, or the topic of money, which is what we’re talking about right here. But I think it’s important to be holistic and well-rounded and understand these different topics because they all connect, they all tie into the whole subject of creating wealth and investing and generating cash flow and all that stuff. So I just wanna say that because I think investors need to understand that if this might not sound important right now, it will all come together. So let’s take this back to the thing of money. You, you used the word once or twice, you know, trust, and clearly you have to have an element of trust with any kind of money or currency in circulation, because if you don’t, then it’s a useless means of exchange, right? Mm-Hmm. <affirmative>. So I don’t know if you wanna make a comment about how trust is important or tied to money.
Well, it’s, it’s essential. And how we know it is that the dollar is the world’s currency. If you and I were to fly to Tehran right now and we wanted to get goods and services, we better have dollars in our pockets. Mm-Hmm. <Affirmative>, same as if we went to Venezuela. If we wanted to buy a house in Argentina, we had better have dollars because no one takes Argentine pesos. Maybe most fascinating, but really not surprising when you think about it. If you wanna get goods and services in North Korea, you better have dollars. And why is that? The dollar has all sorts of demerits. It hasn’t been a fully stable currency for a long time. Right. But it is trusted around the world. It you can take a dollar anywhere in the world and goods and services will reach you for it. And it, the reason for that is that the dollar is trusted.
It’s accepted as a medium of exchange. Producers know that if they hand you a meal, if they hand you a phone, if they hand you clothes and you give them dollars that they can go exchange those dollars for other goods and services. And it’s too often forgotten that trade is not money. Trade is products for products, producers exchanging real things with others. Money is just the accepted measure that we trust that allows us to exchange it cuz we know we can get back reasonably equal value. And so trust is essential and without it, people aren’t trading. And when they’re not trading, they’re not progressing.
Interesting. So you’re saying two main things here, that trusted money that is circulating is a consequence of commerce and it’s not the other way around as some people or even economists seem to think it comes to be because you are having commerce. And then I think the other point you’re making is that it’s essential that money or the, or the currency be trusted as a measure, just like we, you know, measure miles or ounces in day-to-day. It’s basically the yard stick that we use in order to have a medium of exchange.
Yeah. You’re one of the few people that realizes all the crazy stuff I’m saying or, or understands all the crazy stuff I’m saying, but it’s, it’s exactly that money is not an instigator. Money is a consequence of production and it’s important to stress. And that’s why I bring up Teron and Pyeong Yang and everything. The Fed didn’t put that money supply there as so many economists wanted to be. They say, well, we want the Fed to increase money, supply this much. Wait, what? Money will always be there. Money is the trusted money is wherever there’s commerce and that’s why the dollar circulates around the world. It circulates because of market forces, because of production, not as an instigator of production.
Right. I don’t think it’s that hard to understand when you realize that money is really just a tool. It’s, I mean, I called it a medium of exchange, which is what most people refer to it as. It’s, but it’s another way to say it is, I think it’s not the end goal. It’s a means to an end. It’s not the end itself, right?
Absolutely. No one works for money. No one also lends or borrows money. What they’re borrowing is access to real goods and services. Right? When, when I hand you dollars, I’m handing you access to goods and services. And so that’s why bad money always disappears. And this is important because people say, oh, well, you know, that central bank is increasing money supply and oh my God, what’s gonna, if you’re doing something that’s corrupting the value of money, you’re increasing nothing. The money’s disappearing. Yeah. And, and for you say it so well and that this is obvious as in Yeah. Oh, okay, Marco, well you’re, you’re in Laguna Miguel I wanna buy your house with I’m gonna send you Argentine pesos, and your response would be, no, you’re not. If you want my house, I you will send me something that I trust <laugh>. Exactly. And so how would it be different in under any other scenario people want to get back equal value for, for what they’ve provided? Hence the dollar is the world’s currency.
Yeah. So you’ve mentioned money supply multiple times, and I know this is kind of at the core, one of the core things that we all talk about and you talk about, I think there’s a misunderstanding about money supply. Maybe talk about it, like what is it and where’s this money supply coming from and how does it impact us? I mean, that’s like multiple questions in one, but I, I’ll let you break it down and then I’ll, you know, move you along on that one.
You know, let’s just start with the very notion of money supply, insults reason. Oh. So a central bank or a monetary authority is going to provide proper amounts of money supply. That’s like saying a central bank or a central authority is going to plan production. Mm. Because money in circulation, as we’ve already agreed, is a consequence of production. That’s why there’s lots of money in Palo Alto and in Laguna Nigel, but there’s very little in El Monte and let’s just let, let’s think. Or San Bernardino, that’s not because the Fed planned it that way, but it is because where there’s production, there’s money to move that production around, move it to its highest use to exchange it. And so to focus on money supply presumes that no actually producers sit, lie and wait for central banks to supply money and then they start producing. No, no, no. The money’s always going to be there.
So, okay, so we might be talking about different things, not you and I, but when we talk about money supply, there is a supply of money. It’s something that we can effectively measure. You know, you call it the M two money supply or M three, whatever you want. There is a supply of money. You can estimate the number of dollar bills in circulation out there. Am I right in saying that or, or not?
You, I suppose you can. I don’t know why anyone would, because what’s the point? Okay. Money and circulation is the consequence of goods and circulation after which, what does it mean? Money circulates in enormous amounts in Palo Alto, but it doesn’t circulate much at all in West Baltimore. And if the Fed wanted to increase money supply in Baltimore, suppose it could buy up bonds from banks in Baltimore and increase money, but that money would disappear from Baltimore as quickly as it derived. And it would, because there’s nothing to circulate. There’s, there’s no very little production to move around. Conversely, the Fed could sell enormous amounts of bonds to banks in Palo Alto to quote shrink money supply. And it’d be of no consequence. Markets would reject such stupidity within seconds because the whole world wants exposure to what’s happening in Palo Alto. And so yeah, there’s money out there, but of course there is because there’s production. And if you, if we eviscerated every dollar in the world today, or if we, if the Fed gobbled up every dollar in the United States today, rest assured there’d be all sorts of Euros and yen and Juan circulating in the US tomorrow. And why would there be? Because there’s, the American people are the most productive people on
Earth. Okay, so correct me if I’m wrong, but my understanding is that the Federal Reserve, as well as the banks, can increase the overall money supply if they wanted to, or pull liquidity out of the markets if they wanted to. Now you correct me if I’m wrong on that, but if that is true, then what you’re saying is taking that one step further by saying that with the increase or decrease of the money supply, quote unquote, that’s out there, that supply of money will find its way to where there is productivity and more commerce. Oh, which I is I think the point you’re trying to make or am I wrong on that?
Well,I think we agree. No, the Fed can’t really increase money. Supply production will increase money supply because again, let, let’s imagine the Fed tried to increase money supply in El Monte, California. It couldn’t do it on its best day and it couldn’t because there’s very little production to rate that money supply. So it would probably increase it for seconds and then it would go to where it’s, it go to where it can be used just the same. Imagine if the Fed tried to shrink money supply in Seattle right now, <laugh>. Well, good luck because anything you do is going to be made up by domestic and global sources of credit. Yeah. Trying to be exposed to enormously productive economic activity. So yeah, sure. I spo I I just don’t think the Fed can do what people think it can do. Money is where there’s production and there’s nothing the Fed can do about it.
And it’s an important theme in my book. Let’s look at China, who were the biggest financiers of China’s enormous growth in the first half of the 20th century. It was two Jewish men who didn’t speak a lick of Chinese, but they had a good sense of where business was going on. And so Shanghai was the seat of enormous productivity. A fast forward to the present, it is illegal for foreign entities to own Chinese businesses that have a website. But guess who has funded China’s surge into a first-tier technological nation of producer of great companies, technology companies. It’s been American finance through offshore funding. All those dollars that are illegal to get into China, get into China easily. And that’s kind of my point. People thought, oh well the Fed is raising rates. Well what’s gonna happen? Boy, the economy’s going to slow down. Oh, please. I mean, really could any, what, what, what foolishness US dollars flow into China and liquefy all sorts of growth in China. Daily. Daily, daily. So we’re supposed to believe that the Fed can keep money out of the United States the, the very notion, vandalizes reason, but it’s accepted wisdom among economists.
So what impact then does the Federal Reserve have when they want to do two things? Cuz they, they have certain levers, not very many, but certain levers that they can move to you know, affect I guess the economy. Let’s just keep it very general. They can one, adjust, you know, the fed funds rate. Right? And that ha I’m sure has a trickle down effect. And two, they can play around with liquidity and you’re gonna have to help me out with this part of it. But they can increase, I hate to say the money supply cuz I think you’re gonna challenge me on this, but you know, if they’re able to open their computers and, and, you know, add zero to the amount of currency that they’re putting into the economic system, I’m not talking locally like Baltimore or Washington DC but, you know, to the US economy, does that not have an impact on banking and commerce and credit which businesses need and thrive on? Like me as a business owner, I need credit at times in order to expand what I’m doing or make acquisitions or grow. But it seems like it’s a chain where, you know, it kind of starts with the availability of credit, which ultimately goes up another level to banking and up another level to the Federal Reserve and how available they want to make credit. So am I off base here with this?
I think so, but I, I think, you know, your, I think you know that, that that is an impossibility. People borrow money for what it can be exchanged for, which means credit is a consequence of production. We have lots of borrowing in the United States because we have lots of production. The borrowing is a consequence of the production. The Fed can’t change that. It doesn’t have warehouses full of goods and services that people would borrow money to get. And so the idea that the Fed can increase credit, please, it can’t only production can increase credit the Fed because it let’s, it’s also the Fed is a creation of Congress. And so what is a creation of Congress has a lot of power, I suppose. Yeah. But even there only producers can create credit. And so you could argue however, the Fed can, can distort where credit goes.
Yeah, to some degree. But even there, okay, so the Fed projects its influence through the banking system. Oh my gosh. I mean, what the banking system, what, when I wrote my first book on the Fed in 2015, who needs the Fed? I think it came, no, it came out in 2016. Banks in the US represented 15% of total credit and that money was in rapid decline. Mm-Hmm. <Affirmative> most businesses, we know this from Michael Milkin, the greatest financier ever. Most businesses aren’t touched by banks because banks need to make loans that will be paid back. That’s the business they’re in. It’s, it’s not, it, it doesn’t make them bad or good, but banks are in the business of being paid back, which means they can only lend to a small portion of the population, which is why most finance takes place well away from banks. So I just reject the notion that the fed’s very, very powerful. You could attract funds because you’re a productive individual, not because of the Fed.
And so, okay, so I’ll take that one step further. If I have a, a viable business and I’m attracting funds I a could get that from a bank or lending institution, or b I can go out and get it from private individuals, private capital, which I, I’m sure is a very significant portion of where capital comes from. I don’t know if there’s a c in that list.
Private capital. There’s foreign capital. It’s in, in the book I write about how, you know, when Facebook was on its way up, it was quite literally attracting interest from investors from around the world, which wouldn’t surprise anyone. If you’ve got a good business idea, it finds you. And, and again, China is a reminder of this. The people who financed its growth back in literally banks were pulling up to Shanghai ports with ships and people getting off the boats trying to lend to Chinese businessmen. Hmm. They rec if your productive money finds you, these, these are the olden days. But nowadays, so Jack Ma needed all sorts of money for his various entrepreneurial endeavors. He was raising billions of dollars from US financiers offshore. I mean, you know, it’s illegal for American investors to own Chinese businesses, but they all do without American investment. The Jack MAs of the world, we wouldn’t know who they are. This was largely US finance. There’s a belief, oh no, the Chinese Central Bank is financing all this. Oh, please, they’re not nearly sophisticated enough to do this. This is, these are, are, are wise American investors doing it and they’re doing a great job and it’s beautiful. Mm-Hmm. <Affirmative>, it’s, they’re the Chinese are very good at commerce. Okay.
So I’m a real estate investor. A lot of people who listen to this show are real estate investors or soon to be real estate investors. What should we be paying attention to as a real estate investor out there? Should it be certain metrics in the economy? Should it be what the Federal Reserve is doing or not doing? Should it be what monetary and fiscal policies are, you know, coming from the government, what should I be paying attention to?
I hate to tell you your business because you know, it’s so much better than I do. But I will say in my fourth book, which is called They’re Both Wrong. And then my upcoming book that I, I’m writing with Jack Ryan, who some of the people watching know from, he ran for Senate against Barack Obama. He was a former Goldman Sachs partner who has a belief like I do that housing is an essential market. Good mm-hmm. <Affirmative>, but it’s not necessarily a good buy for most people. We could be wrong, but one of the things we point out in the upcoming book, and I pointed it out in other books, is that what the Fed does with interest rates isn’t as powerful as people think when it comes to how housing does. If you look at the 1970s, the Fed was aggressively raising rates. Mm-Hmm. <Affirmative> yet this 1970s housing was the top asset class in the US and really nothing else came close. I mean, if you
Top in, in what sense? Like in terms of capital appreciation, appreciate in terms of what?
Yeah. I mean if, if you look at the initial Forbes 400, it was largely property and oil based. If you look at what, what was happening in the housing market, it was a very good market in the 1970s. And so what, and then of course everyone remembers the, the two thousands that housing was, was a hot asset class. And the thing that stands out to me is if you look at periods when the dollar’s losing value and and to me the gold price is the best indicator of this. It’s just this objective measure that, that it’s still out there. Then the common denominator in the seventies and the two thousands was the the dollar was in free fall hard. A and, and again, even that’s nothing new. It’s just well known. You can read Tolstoy and find this out that in periods where people don’t trust money, hard assets do best.
Yeah. Well, I agree. And that’s why I love real estate. It’s a hard asset. Yeah. You know.
It’s, it’s in fact, I, so, okay, so, you know, the argument I I keep making is that when banks rushed into real estate, they’re actually rushing away from risk. No one wants to say that. They say, oh, no, no, no, no, no. Banks were taking big risks and making sloppy loans. Well, actually banks can’t really make sloppy loans. Most of those loans made in 2006, 2007 ultimately performed. Banks were moving away from risk. Historically, banks didn’t touch housing because it was, it was low risk. They were, they were getting a bit more aggressive.
So, well, my understanding is that banks love to lend on real estate because it, it’s collateral, it’s a hard asset. Precise and it’s collateralized.
Collateralized. Yeah. So lower risk, whereas banks can’t touch Silicon Valley. You know, Silicon Valley Bank was a servant to Silicon Valley. Yeah. It wasn’t lending to startups because to lend to startups is to lend to something that most, there’s nothing hard to lend to. Usually the business vanishes very quickly, and so banks can’t lend to that mm-hmm. <Affirmative>, but banks, it’s too risky. So look at what Silicon Valley Bank was invested in treasuries. I mean, they were so risk averse. And so whereas, and, and then they had, they had a lot of exposure to MBS as well. Yeah, same idea. Something collateralized that, that mm-hmm. <Affirmative> that’s less risky.
Yeah. Interesting. I think what we’ve been talking about to some degree on and off is two sides of the same coin. When you talk about the Federal Reserve and, you know, printing quote unquote money and putting, you know, creating a money supply, you know, stuff that, you know, you making arguments against. I think we’re talking about the supply side of currency and what you’re talking about, and what I, I think I’ve been talking about a little bit is when you talk about the production and commerce, I think what we’re talking about is the demand side of that coin. And so I almost want to think that we’re, those are both right answers. <Laugh>, you know, I know you don’t fully agree with that, but I think there’s two sides to this equation. There’s a demand side and a supply side that ultimately leads to what we’re calling money supply. You probably don’t agree with that, right?
I don’t, I don’t disagree with that. I, I think it’s important to stress what, what I, I, I mean, I think what you’re saying is that to produce is to demand money, and it is
To produce is to demand money. Yeah.
Cause you’re, because you’re producing to get things. Yes. And so you’re, which means yet you’re producing for money, but you’re really producing for what money can be exchanged for. And so in a productive economy, money’s going to be everywhere. But the, it’s an important distinction because again, most people, it’s, it just, it, it almost, I, I tear my hair out reading commentary saying, well, you know, the, the Fed shrank M two this quarter, and because it did, economic growth is going to slow this much. Oh, come on. You know, it d it doesn’t work that way. E even if the Fed could shrink money again, let’s, let’s, let’s say the Fed just said, we get, we need to slow down activity in Silicon Valley. Well, good luck. People are lined up. You know, I always try to remind people that I don’t, I’m, I’m just trying to think what’s the hottest company in Silicon Valley right now?
But let, let’s forget about right now. However many years ago was Uber the top Silicon Valley unicorn. If I had called up unicorn Uber, Uber c CEO and said, Hey, I’ve got a couple million for you. He would’ve laughed me out of the room. You said, I’m get in line. You’ll never get into my company. And if you go back to Apple in the 1970s, and I have this in the book, there were people who were showing up to Apple from England sitting in their waiting room saying, I’m not leaving until I can give you money. Because the lineup to get in there w was so enormous. Right? And so it just, it’s so backwards the way people presume that, well, the Fed can slow the economy. No, it can’t. If there’s productive economic activity, they’re the line, the line of people who wanna get in to that is, is so enormous. It will overwhelm what the Fed does in seconds.
Yeah. I see what you’re saying. And I’m starting to get it. I’m, I guess I’m looking at it from a different perspective in, in listening to everything you have to say, and I guess the way I’m summarizing it in my head is this, that the economy is a machine. And if there is demand for products and services, then there will be a need for commerce or more commerce, which we measure as, you know, gdp, the gross domestic product. But if GDP and productivity goes up, it creates a void. This is my, my interpretation. It creates a void that requires more currency, more money, and so that void will just naturally bring more of that money or currency in, which is what we’re talking about as money supply to help grease the wheels of this economic machine because of that productivity.
Absolutely. It’s, but it’s just, it’s a market phenomenon. What do investment bankers do? They’re just constantly searching for good ideas to finance, and it’s kind of fascinating. Investment bankers compete with each other to finance interesting ideas. And you look in private equity, they compete with each other to win the right, to basically run into a burning building and fix a broken company. Venture capitalists compete. The number of VCs that were fighting to get in the door of Uber however long ago. And so it’s not in the book, but I, I talk about Uber in the book, but I, a friend of mine who has since passed away had a lot of money and he, he actually did email in DC the local Uber rep in DC and said, Hey, can I, can I give you a couple million? And this is when they’re still private <laugh>.
Do you think that she responded and, and, and this was a sophisticated investor, you know? Yeah. The, the competition to fund good ideas is ferocious and it’s global. Yeah. And so we’re focused on the Fed. I mean, it’s, it, it’s just beggar’s belief. And so I strongly believe that over time people say, how did we ever waste so much time focusing on these guys? And I always remind people if Ben Bernanke and Janet Yellen and Jerome Powell were actually powerful, our economy would be too weak to discuss. And you and I certainly wouldn’t be having a convers. I mean, look at how we’re conversing. You’re in Laguna, I’m in Washington DC and we’re having a conversation online. This doesn’t happen in centrally planned economies, where, where some central bank is controlling the flow, the cost, and amount of credit. Oh, please. Yet everybody focuses on what the fed’s gonna do.
Yeah. Innovation happens in a capitalistic and free market society. And we don’t have a hundred percent true capitalistic or free market society, but I mean, it’s as close as you’re gonna get right now in the world. Darn right. So, and this is where innovation happens.
Well, that will be the end of part one of this episode with John Taney. Hope you’re enjoying it. It starts to branch off into another direction here in part two, which will be released here shortly. So if you’re listening to this and you have the time to go right into part two, do that. Otherwise, if you’re listening to it when it’s been released, you’re gonna have to wait for a couple days. But that is it for today. I appreciate you listening. Hope you’re enjoying this episode thus far. Get your free strategy session from my team. If you want to have a conversation about the markets and investing in real estate, where to invest, what’s available, all that stuff. If you have questions about real estate or investing in general, you know, be sure to let me know. You can contact me through the website for passive real estate investing. And remember to subscribe, literally takes you about three seconds to do so. Thank you for listening, and we will see you on our next episode.
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