With the sequestration, civilian workforces will be furloughed, and the impacts will be felt socially and economically. Many dangers will occur as a result of furloughing so many Department of Defense employees. Vernuccio explains how these will affect military personnel.
The New York Analysis of Policy & Government provides practical reviews of key issues facing the United States on the federal, state and local levels. Vernuccio co-hosts the “And Nothing But the Truth” radio show on WVOX in Westchester, NY with Larry Allison. He has extensive experience as a legislative writer, columnist, and policy analyst, with a background in both Republican and Democrat administrations.
Female Voice: Welcome to Creating Wealth with Jason Hartman. During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness then you ever thought possible. Jason is a genuine, self made multi-millionaire who not only talks the talk but walks the walk.
He’s been a successful investor for twenty years and currently owns properties in eleven states and seventeen cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman: Welcome to the Creating Wealth Show. This is your host Jason Hartman. This is episode number 322 and thank you so much for joining us today. Today we’ve got an interesting show for you. We want to talk with one of our local market specialists in Kansas City and that is Zack who’s been on the show before talking about St. Robert. He’s going to help me do the intro portion of the show today and it’s not really about his product or his developments per say, but we might touch on that just a little bit. And we’re going to talk about a recent article about Blackstone and I think you’ll find that interesting. And then we’ve got as our guest today, Frank Vernuccio who’s the Editor-in-Chief of the New York Analysis of Policy and Government and he’ll provide some interesting perspectives for us in the second part of the show today.
So first of all, Zack welcome. How are you?
Zack: I’m doing well, thank you.
Jason Hartman: Yeah. You know I’d ask how are things in Kansas City, but I was just there two days ago so, I feel like I already know. Has anything major happened since I left?
Zack: No, I don’t — not to my knowledge. Just because — maybe the Royals won again, I don’t know.
Jason Hartman: Yeah, well that was fun. You and Jessica and your son Aiden and I, we all went to the Kansas City Royals baseball game on Monday evening and I don’t think any of us even know who won or lost that game.
Zack: No, I think Aiden was the most intelligent about baseball amongst all of us and he’s less than four years old.
Jason Hartman: And Aiden is three and three quarters years old so —
Zack: Yeah.
Jason Hartman: And there you go. There you go. You — I think they wasted those seats on us because we’re such big sports fans.
Zack: Yeah, oh exactly trying to figure out if we’re going to a hockey game or football or baseball or for what we were actually attending.
Jason Hartman: Yeah you know, I thought it was the Kings and the Lakers playing, actually. I just wasn’t sure but —
Zack: You were confused on what city you were in.
Jason Hartman: That’s true. You’re right, you’re right about that. Hey but let’s talk a little bit — you had an article you wanted to bring up. It was pretty interesting. It was in our content section and by the way, for those of you who are members and you’ve joined our members site at Jasonhartman.com, what we’re working on right now is we’re working on sharing all of these internal articles that we use in our business and kind of opening that up to all our members and somehow getting them to feed to our members website so you’ll have access to all this stuff directly. Many of these things we don’t even ever talk about on the show, some things we do, but just so you can kind of keep up a lot of you have asked, you know what are you guys reading, what are you studying, what reports are you reading, what newsletters are you reading, what articles and so forth, what books, so that will all be ultimately be in the members section at Jasonhartman.com, so this would be one of them. But Blackstone is denying that is the cause of housing bubble 2.0. Now, I don’t think we’re in housing bubble 2.0 but you know what are your thoughts about this article?
Zack: Well, I thought this article was quite interesting because it is actually in response to an article in the New York Times and the New York Times article is essentially accusing Blackstone of raising prices in all these neighborhoods — in all cities and being one of the private equity companies behind the rising prices and recovering 2.0 if you will, a real estate bubble 2.0 as they’re referring to it, and the real reason of it as a negative thing which was quite interesting and I found that quite intriguing.
Jason Hartman: Well I mean, when it becomes a seller’s market and it’s commonly called a seller’s market because there’s so many buyers out there buying up product, buying up properties and you have a limited supply of product and you have a large supply of dollars chasing that product and with that, you get what we call inflation. Okay, when you have too many dollars chasing a limited supply of goods and services, and that’s exactly what’s happening right now in the vast majority of the real estate markets around the country. So, they’re accusing Blackstone of buying too many properties and driving up prices, right?
Zack: That’s correct.
Jason Hartman: Yeah. Well, what are your thoughts about that? I mean do you think that’s true or do you think that’s an unfair assertion?
Zack: Well, I think in certain markets it probably is — and no doubt, it’s having an effect on the pricing. The big thing that caught me is kind of an interesting perspective on it was from the New York Times is how they were phrasing it as such a negative thing but — negative thing that the prices were going up whereas, I bet if you pull articles I didn’t do this but I would almost guarantee you, you could find an article in the New York Times talking about how bad it was when our prices were going down and how bad that was for homeowners, and now they’re phrasing is that the private equity is essentially evil and doing a negative service to the economy whenever prices are rising because of that and now they’re phrasing that as negative. It kind of strikes me as a no win situation in — from that perspective on the war of prices.
Jason Hartman: Well you know I mean, this article — we’re reading the original articles on zero hedge, written by the gold old nom de plume Tyler Durden. Okay that’s obviously a fake name from the movie Fight Club, but that’s the typical populist angle of the New York Times. I mean, is that really — should that really surprise us? The New York Times left leaning New York Times the big evil or capitalist are buying up all the properties and not leaving them for the poor homeowners. But when prices are going down and people can’t sell their homes and whoa is me, they’re just never happy. It’s ridiculous.
Zack: Absolutely. No, I think overall this is what’s happening here I do believe Blackstone is having — and in all the property and not just Blackstone, all the money’s that being pulled is definitely having an effect. I’m sure you talk to a lot of your local market specialists just regarding the shortage of supply and the housing in different metropolitan areas just because of all the private entities coming in. No doubt it’s having an effect and no doubt that it was just doing it, just creating a flaw and solidifying the flaw in the housing value thus making it easier, making lending criteria, making underwriting criteria relax and go back to more normal type standards because there’s not the fear that the bottom of the pricing is still yet to come, so to speak.
Jason Hartman: Yeah.
Zack: It’s helping to elevate that fear thus making it easier for first time home buyers to come into the market and thus as a whole, I mean that’s — there’s huge ripple effects with that, I mean from consumer sentiment and consumer opinions to all those different things. There’s tons of ripple effects of how it has a very positive effect on the economy.
Jason Hartman: Zack, you know what’s interesting about this article it cites some of the price issues and the long term trend price issues and I’ll just share this little portion of it. It says home prices remain well below long term trends to — despite their recent increase. New home prices nationally are thirty seven percent higher than existing home prices, as opposed to the long term average of the thirteen percent. So you know what that says is that there’s still bargains in the resale market. That’s what that’s really saying and that statistic is also influenced heavily by where they’re building new homes. For example, if they’re building more new homes in more expensive markets then of course, that squid the averages and the medium. And then it says home prices are still twenty two percent below the long term price trend from 1951 to 1999. This is why home prices are rising even in cities where invitation homes is not buying like Detroit and Salt Lake City, where prices have risen nineteen percent and ten percent respectively year over year.
So, it’s pretty interesting. I mean the thing I find interesting is that home prices are still twenty two percent below the long term price trend and that’s — that’s almost a fifty year sampling. So pretty amazing deals out there still, right?
Zack: Well, absolutely. I fully agree with that.
Jason Hartman: Yeah. Tell us a little bit about what’s going on in terms of your development. You’ve got your new Kansas City project that you’re just about to open.
Zack: Yes. With that, I mean like we’ve talked in the past, we’re inquiring about one of the subdivisions from the hangover of ’08, if you will and being able to do a new development and being able to reduce the overall new construction price point thus to bring it back in line and keep it in line with what works rental rate wise by acquiring the sales subdivision we were able to get that at a deep discount, of course and helps make all that a feasible investor friendly type product.
Jason Hartman: Yeah. And talk to us a little bit about financing that may be — and I want to say may be available on these because this really applies to people who have more than ten loans that they’ve maxed out their Fannie Mae ten loans and want to buy more. You’ve got some pretty good commercial financing. You’ve always been good at that in terms of your banking relationships. When I was out there we had a great BBQ lunch on Tuesday with one of your bankers and you’ve got another good source as well. Tell us about some of the financing that they’re offering.
Zack: Yeah, we’re able to — well first off these are triplexes. So, with the triplex it’s actually set up to where or we can set it up to where each individual unit can be pulled up individually. We run into — I won’t get into it in detail but we run into issues with Fannie and Freddie with that. We can still do all the Fannie and Freddie but it gets a little more of a this or that decision, whereas with commercial we’re able to do the whole triplex on one loan but if you ever decide to sell off one unit, we are able to do partial releases so it adds flexibility to the exit strategy and flexibility to the investment along with — it looks like at a minimum we’ll definitely have five and seven year fixed products on the commercial front, but it’s looking — I’m getting much more optimistic that we’re going to be able to secure a ten or fifteen year financing option on the commercial front, ten or fifteen year fix.
Jason Hartman: Ten or fifteen year fix but amortized over what, twenty five or thirty years, ultimately?
Zack: Twenty five.
Jason Hartman: Yeah, yeah. That’s pretty awesome. And what do the rates look like on that?
Zack: It’s looking like in the five with no points.
Jason Hartman: Yeah, yeah, fantastic. So that’s pretty darn good for commercial financing. You’ve got some pretty good options there. Fantastic, and what’s going on in the Kansas City market in general?
Zack: Overall it seems to be coming back. It seems like the overall — permits are way up, just a visual drive through. You see a lot more construction, a lot more bricks and sticks going up than you did twelve months ago, that’s for sure.
Jason Hartman: Good, good stuff. Well Zack, thanks so much for joining us today and talking about this and let’s get to our guest. We’ll be back with him in just less than sixty seconds.
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Jason Hartman: It’s my pleasure to welcome Frank Vernuccio to the show. He is Editor-in-Chief of the New York Analysis of Policy and Government and co-host of the radio program the Vernuccio/Allison Report. Frank welcome, how are you?
Frank Vernuccio: It’s great to be with you today.
Jason Hartman: Well, the pleasure is all mine. Tell us a little bit about what it is you do and then let’s jump into some important topics of today’s news sequestration, being not the least of them but give us a little background first, if you would.
Frank Vernuccio: Well, the New York Analysis of Policy and Government takes one major issue each week and tries to do an objective analysis of it, kind of like an executive briefing and we try to be as thorough as possible and as objective as possible, something you don’t get very much in today’s news.
Jason Hartman: Well that’s for sure. It seems like everyone has an agenda now days and journalistic standards have largely gone out the window in favor of opinion pieces, but maybe just touch on that for a moment. There was a survey I was just hearing about last night, actually, on talk radio. Well, I believe it was on Series — I believe it was on Fox and it rated the different cable news stations, MSNBC, Fox, CNN, on their percentage of opinion pieces verses percentage of actual news or journalism. And you’re probably familiar with this as well, but what sort of happened to the news media, if you will, and you know I just wanted to get comment on that before we dive into some of the topics.
Frank Vernuccio: Sure, I don’t know weather the news is ever truly one hundred percent objective. Clearly it wasn’t, but the reality of it is that in the past several years and particularly I think since 2008, the press has become very much more in the camp of one particular etiology and far less in the camp of being objective journalists. The survey that you mentioned found that some networks were more egregious than others. I believe it was MSNBC was about eighty five percent opinion and only fifteen percent journalism. The others had various other figures but were far better than that. But on a whole, we’ve abandoned the error of even pretending to have objective news and really gone over to the fact that more being yellow journalism in the sense that every newspaper, every media source with a few exceptions, mostly in the blogosphere, mostly in talk radio, tend to be more objective, but the rest tend to be more bias in favor of one candidate for one party or the other.
Jason Hartman: Let me mention an interesting theory I developed on that years ago, and I actually wrote an article in one of the trade magazines about this. I call it the monologue media verses the dialogue media, and here’s what I mean by it Frank, in the monologue media that’s traditionally the old sort of dinosaur media outlets network television, book publishing, newspaper publishing, of course there’s an editorial page and an opp ed page in the newspaper but it’s not the bulk of the publication, obviously. And the monologue media is sort of the old school media and it tends to — and I don’t even know what your leanings are but I’ll just mention this, it tends to in my opinion, lean very left, very liberal.
Frank Vernuccio: Well you’re absolutely right. The old Jay School concept of putting down who, what, when, where and why in each article seems to have gone out the window and based in the 1960s, the Jay School, the journalism schools changed their model. They went away from who, what, when, where and why and they started talking about something called advocacy journalism, which presupposed a point of view and you’ve set the facts to set your point of view so that you’re really not giving people information, you’re giving them opinion.
Jason Hartman: Right.
Frank Vernuccio: Now opinion is fine but it should be labeled as such and for the — those of us, the majority of people who are journalists, they need something to base their own opinion on and without the facts, you can’t get that.
Jason Hartman: Yep, yeah true. And so just finishing my point there, the dialogue media which you alluded to before, is largely talk radio and the blogosphere the online media. And so there the dialogue media tends to lean to the right or the conservative side of the spectrum and oddly I believe that is because it is something where people call into radio talk shows and they can debate points with talk show hosts. They can, most of the time, post — take a blog post and post a comment below the blog post. And so, it just begs the question regardless of your political leanings that maybe one side of the isle can withstand the scrutiny of debate and the other can’t. It’s just my theory.
Frank Vernuccio: I agree with you wholeheartedly on that. It’s interesting, if you compare for example Fox News, which is decidedly conservative in its journalistic opinion, nevertheless has a substantial number of folks on the left who will be guests on their talk shows. On the other hand, if you follow something like MSNBC, you find that there’s very little presence of anyone with other than a hard left point of view on that network.
Jason Hartman: Yep, I agree, I agree. And you know their slogan in and of itself is left leaning, you know the lean forward slogan that’s a liberal slogan, okay. You know that’s a [voice over].
Frank Vernuccio: Actually, I believe it’s a — yeah there’s a whole slogan thing that’s basically no socialist progressive standard slogan.
Jason Hartman: Right, also used by the Obama administration or Obama campaign. Okay good, well hey let’s dive into some of the issues that’s just kind of interesting to talk about the background out of which so many people’s beliefs are created in the news media, but sequestration obviously a huge news topic. It seems like we move from one crisis to the other in this country. It’s beyond ridiculous. It’s either a debt ceiling problem, a sequestration thing and frankly Frank, I never understood why they call it sequestration. I mean that just seems like a complete misnomer to me but maybe you have some thoughts on that.
Frank Vernuccio: Well, when President Obama first introduced the concept of sequestration and yes, President Obama did introduce it even though now he tries to avoid claiming credit for it, the concept was that you would set up a series of cuts so stupid and so radical that of course the two sides would get together and do anything to avoid them. They’d come together and compromise in a reasonable way. Well, what happened was — so in other words he sequestrated it away from the elected officials. What happened was they couldn’t come together and so now we’re stuck with this kind of goofy budget deal which nobody likes and which instead of cutting the fat, it’s cutting the muscle. It doesn’t discriminate between programs that are necessary and others that are really just poor which are out there to help elected officials get re-elected.
So, we’re seeing the disproportionate cuts where instead of just cutting nonsense programs, we’re cutting meat and the military perhaps is the most selig example of all. Defense accounts for only seventeen percent of our entire federal budget but it’s taking fifty percent of all the cuts. And we’re not talking about cutting some program that’s not really needed or some expensive weapons program that possibly we could do without, we’re talking about going to the heart and soul of our defense and we’re putting ourselves in an extremely precarious situation.
Jason Hartman: No question about it. I’d like to see that government is being cut or at least I should say the growth of government is being cut, which is the more proper way to look at it, but this should be done in a planned logical systematic manner, right.
Frank Vernuccio: You’re absolutely right, and the fact is, if we just went back to a budget of 2008 which wasn’t so great either, it was spending too much even then, but if we went back to 2008 we’d see a lot of our problems go away. The growth of spending from 2009 till now has been astronomical and not just in a sense of an overall budget, I mean we’re talking about growth in programs that really didn’t make any sense. Let’s look for example at some of the stimulus programs. Seven hundred ninety one billion dollars went to the stimulus program and no one can produce any real results from it.
You know the last time something like this is tried during the great depression of the 1930s we had things like the civilian conservation forum, which built forests — saved forests for national parks, built bridges, built dams, built buildings, but the seven hundred ninety one billion dollars of the stimulus program just seems to have evaporated into the [inaudible] and we got nothing for it.
Jason Hartman: It’s just sad. I mean the waste is incalculable. It really is. Talk to us a little bit about the DOD though and the furloughing of so many of these employees. Is that really as big a danger as some think?
Frank Vernuccio: It sure is. You know again, we go back to the fact that defense takes only seventeen percent of the budget, but it’s taking fifty percent of the hits. Every single civilian employee of the Department of Defense is having their hours cut by twenty percent. No other agency is suffering that kind of loss and we’re not talking about people who push paper, or who do nonsense jobs or bureaucratic jobs. We’re talking about the folks who keep our air planes flying, who keep our ships afloat, who treat our military veterans and families when they get sick. So you know it’s a hard time to be in the American military right now for a whole host of reasons, but if a guy who’s toting a gun in Afghanistan has to think that his wife back home can’t get the medical treatment she needs because of these cuts, well that’s pretty serious.
But there’s an even more unusual angle to this whole story. Because a lot of those civilian employees and DOD are really dedicated to their jobs, some of them wanted to come in on their days off with no pay and continue to do the jobs of keeping our military equipment safe. And bizarrely enough, a memo went out from the Pentagon forbidding civilian DOD employees from volunteering on their day off and — which leads to the larger question, was this a hit intentional to just reduce the budget or is this part of the larger anti-military mindset that the Obama administration has expressed — well certainly since before Obama became president, he expressed this even as a United States senator.
Jason Hartman: Well — okay, so are you saying that Obama as much as he complained about sequestration, thought it would actually be good for his agenda?
Frank Vernuccio: I have to tell you, if you study this, it really is a great thing for the Obama agenda. It really does exactly what the president, even before he became president — again as the United States senator advocated to do it. So, I don’t think there’s ever been much of an impulse on the part of the White House to avoid sequestration.
Jason Hartman: Yeah, yeah. Well certainly as far as the completely immature politicking and the blame game goes, it seems like it’s right where Obama wants it to be, but you know I didn’t know from an overall agenda point of view he would think that. So that’s interesting.
Well, what other issues are big in your reporting, in your analysis now days besides sequestration?
Frank Vernuccio: Well, I think one of the biggest issues that’s not being discussed about but which has become I think an increasingly crucial issue is the drop in the defense posture of the United States. Now if you go back to 1990, the United States Navy had six hundred ships. Today, we’ve got two hundred eighty six. We used to have thirty seven combat wings in the United States Air Force. Today we’ve got twenty. There were eighteen divisions in the Army, now we’ve gone down to ten. And unfortunately while we’ve been slashing our defense posture to the bone and we haven’t even mentioned the fact that the president has effected a unilateral reduction in the United States nuclear forces, our potential adversaries overseas have been ramping up their military spending to an unprecedented degree. Today, the people’s republic of China has a military that’s every bit as capable as ours.
If we look to Russia, Moscow has returned to a cold war posture. As you may recall, last summer strategic nuclear bombers from Russia were sent to both the west coast of the United States and flew over some of our bases in the pacific. At the same time, a Russian nuclear submarine was cruising off of our golf coast. Now of course you’ve heard all of the news lately about what’s going with Iran and now it’s going on with North Korea, which is openly threatened to [inaudible] a nuclear missile in our direction as soon as they’re capable of doing so which will be by the way next year in 2014.
So, I think the biggest, un-discussed story on any of the news media right now is the really vulnerable and increasing vulnerable position the United States faces around the world when it comes to defense issues.
Jason Hartman: I sort of wonder though if the military isn’t benefiting in a sense from the same issues that private industry is benefiting from in terms of scalability and technology, may be something to consider. And you know I don’t want to see us as a weak country by any means, militarily, I think we need to be strong but with drone planes and I have my disagreements with the drones especially in U.S. air space, very much concerned about that, but with technology, are we able to cut? Are we able to gain more if you will, killing efficiency through technology and can we cut because of these new technologies?
Frank Vernuccio: Well, the problem is with every new technological advance there’s always a counter advance and the technological advance that the United States endured for years really has been diminished sharply by the progress of our potential adversaries. For example, at one point in time American satellites could pinpoint targets around the world without any fear of being destroyed. Now of course with the demonstrated capability of the people’s republic of China to destroy our satellites in orbit, that advantage might not last much longer. In fact, it’s probably pretty much gone now. You know, and you go forward to different types of planes. Our planes which we have not really engaged in the purchase of as many planes as we probably need, some of our aircraft are being flown by pilots whose grandfathers flew the same planes.
Jason Hartman: Well you’re talking about probably the B52 there right, the work horse?
Frank Vernuccio: That’s absolutely correct, as well as some of our tankers and some of our others. So that’s become a real problem. With sequestration now, one of our biggest sifts of power in the water has been the aircraft carriers, now we’re seeing that some of our carriers are going to be docked because we don’t have the money anymore to float them. So a lot of the advantages that the U.S. used to have, we no longer have.
Jason Hartman: Well okay, I don’t want to belabor the technology point too much but I want to maybe move on to kind of the next point of that and just further playing devil’s advocate with you, I really like some of the things that Ron Paul was saying. And you may not be a Ron Paul fan, I have no idea, but when you look at the military I mean do we really need — you know forgive me if I don’t get the number exactly right, one hundred and seventy bases in foreign countries? I mean that just seems like —
Frank Vernuccio: Well the philosophy behind that began as far back as the end of the war of 1812. It was the decision of the United States, consciously or consciously, that we would not wars on or close to our soil, and at that point the United States began a concept, particularly after the first world war of reaching out and preventing fighting from going anywhere near the American coast line. So the concept of putting bases in Europe or Asia or anyplace else was that we’d stop any kind of foreign advance away from or homes rather than waiting until the enemy got here and fighting on the spot.
Now whether — you know you can debate I guess a particular base or a particular site and so forth, but I think it’s a pretty good idea to keep fighting far away from our soil and that probably makes sense.
Jason Hartman: Yeah, I agree with you. We have a pretty nice position in the world geographically though, with these two huge motes around us and you know I don’t think we need to worry too terribly much about our neighbors except the one who is invading us illegally from the south, but that’s sort of a different process.
Frank Vernuccio: You’re possibly right. I mean you bring up a great point on that because over the past ten to fifteen years, both the Chinese and the Iranians, and it still boggles my mind that the Iranians are doing this, have made significant inroads into Latin America. For example, the Chinese have two “civilian” bases on either side of the Panama Canal which is an incredibly strategic position. Chinese military are training the military of some Latin American countries and we’ve seen and we’ve discussed lately, extensively because of the death of Hugo Chavez the influence of Iran in that particular country.
So you know, when you bring up the point about a danger to the south it is there and you know perhaps the motto that we have of some terrorists flying in from the Middle East with a bomb, might not be as potent a problem as an illegal immigrant or an Iranian or terrorist fighting among legitimate illegal immigrants, and that’s a mouthful to say.
Jason Hartman: Yeah, it’s a total oxymoron, if there ever was one.
Frank Vernuccio: Coming in as if an economic illegal immigrant and smuggling in weapons of mass destruction, it’s not inconceivable and there’s a great deal of fear that that attack could occur.
Jason Hartman: Yeah well, no question about it. But I mean after a 9/11 2001, the government of course had the opportunity to hermetically seal our board to the south and they didn’t do it because there are political and economic reasons which are just politically correct and we want to import deflation so we can inflate everywhere else and it’s just a terrible situation all in all, beyond ridiculous.
Let me ask you this, just maybe this will be our final topic to cover. You’ve got a post about the fiscal cliff on your website, and we started off talking about sequestration and the government’s side of the economy. Well, what are your thoughts overall Frank, about the economy and where we’re going? Are we — particularly, are we headed into a time of significant inflation?
Frank Vernuccio: Well, it’s almost hard to see how you could avoid that. You know, we’ve gone through a period where we now accept periods or amounts of unemployment which would have been considered unacceptable just a few years ago. Although consider the point a turn figure of unemployment is terrible in and of itself —
Jason Hartman: It’s totally manipulating.
Frank Vernuccio: — in the —
Jason Hartman: It’s really —
Frank Vernuccio: — absolutely correct.
Jason Hartman: — you know it’s really twenty — it’s gone up twenty percent or more when you calculate —
Frank Vernuccio: I agree with you fully.
Jason Hartman: — yeah.
Frank Vernuccio: But within that percentage, even with the accepted government figures — the official government figures, there’s another figure that’s startling and frightening and that is a thirty eight point one percent of long term unemployment. People who have legitimately within working age want to work, that have been unemployed for so long, that they’re considered long term unemployed and as you know, people have been out of the job market for a considerable period of time have a very hard time ever getting back into it. So, we look at the replacement of that thirty eight point one percent, and again as you said before, it’s probably higher than that taking them out of the productive job market and they’re making a living or trying to live basically on government handouts.
Now if we have fewer and fewer people producing goods and services and have fewer and fewer amount of workers who are paying for benefits for those folks, well that economy can’t endure very long. Sooner or later it’s going to crash and we have done all sorts of things by manipulating the fed, by manipulating currency and interest rates and so forth so that we keep putting the problem off a little bit further and further. But when it all falls apart, it’s going to be spectacular and terrible.
Jason Hartman: And you say spectacular as if that’s a good thing. Yeah, yeah. Well you know, I see very significant inflation in our future. Like you say, I don’t see how it could be avoided and the other interesting massive manipulation in the numbers is when you look at the GDP stats and you adjust them for inflation and population growth and the U.S. economy is shrinking rather dramatically and it has been for quite a while. I would say — you know I haven’t done the math on this but it’s a relatively easy equation to figure out, you just — in view of the population growth and the labor force growth, and then real and then reported inflation so you can have two sets of books, if you will, and you see that our economy is shrinking at a rate of probably over ten percent annually.
Frank Vernuccio: Well, I think that’s a legitimate concern. I mean you even look at the amount of our exports. Our exports have been reduced pretty sharply. I think they dropped five percent the last figures that I saw. We can’t be a nation that produces nothing. Again, we go back to this sort of strange idea that somehow or another, we can just survive on giving benefits to each other without any kind of concept of well, who pays for that or where does the money come to pay for it? And you get this stressing comments from government such as well, we can print more money. No you can’t. That’s only works — that’s a ponzi scheme, it can only work so long. We’re manufacturing — we’ve been unilaterally disarming and manufacturing as well, so we kind of have got to stop this nonsense of thinking that we can all live by working for the government and maybe occasionally swinging a few hamburgers to make a buck or two. It’s not going to work.
Jason Hartman: Yep, very good point, very good point. Well hey, give out your website and tell people where they can learn more.
Frank Vernuccio: Sure, our website is usagovpolicy.com and if your listeners would like a free subscription to my newsletter, they can get one by simply sending their email to [email protected].
Jason Hartman: Fantastic. Well Frank, thanks so much for joining us today and let’s keep the faith if there’s going to be some sort of turn around, some sort of America centric technological advance that will make us rich again or at least maybe the politicians in the environmental lobby will let us start mining our own natural resources. We didn’t have time to talk about that but there is some hope out there.
Frank Vernuccio: That would be great.
Jason Hartman: Yeah.
Frank Vernuccio: That would be great. Thank you so much. I look forward to being with you again.
Jason Hartman: All right. Appreciate it.
Frank Vernuccio: Take care now. Bye bye.
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Transcribed by Debra
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