Politicians think that they can defy economic gravity with magic. It would be magic to think that you could reduce inflation by spending more money! The newly passed Inflation Reduction Act intends to spend a lot more money, but will it actually reduce inflation in the short term or even in the long run? Seems like a case of false advertising…
John Maynard Keynes was one of the most famous economists that ever lived. Of course, you know the idea of Keynesian economics, which is all about “priming the pump,” right? If you have a well and you want to get the water out of it, if the pump is dry it won’t work, or at least it won’t work very well. You’ll keep pumping and pumping, but no water will come out. But if you prime the pump by putting some water in it, then it will start to work. And that’s the idea of Keynesian economics. During times of economic despair, the government primes the pump. Keynes is right, but the problem is, the government always goes overboard and they succumb to special interests and all of the pork barrel legislation that the government is famous for…
Defying the Laws of Supply and Demand
Jason thinks that the folks out there who believe they can defy gravity end up defying the law of supply and demand. Remember, as Jason has told you so many times over the years, money or currency, just like anything else, is nothing more than a commodity. It’s just like gold or salt, oil, lumber or any other commodity in the world. Currency is just a commodity and guess what? All commodities are subject to this fundamental law of economics and that law is supply and demand.
Anything in the world derives value from two value driving components: scarcity and utility. So if currency such as the US dollar, or the yen, or the euro, or the peso has more supply, it will become less valuable. If there is less supply of it, it will become more valuable. But the second part of that equation – it isn’t just about supply and demand, but also function and utility.
As always, it will be interesting how the Inflation Reduction Act plays out. If you want something to work, you’ve got to have fundamental economics in play. This seems like another ploy to spend ourselves into oblivion, kicking the can infinitely down the road…
Don’t Wait for a Government to Save you
Over the last 12 months, real estate has outperformed gold, cryptocurrencies and the S&P 500, making real estate investing more relevant than ever. Income property is a multi-dimensional asset class. So for income property investors, (if you’ve done it right like one of our clients) you earned your return on investment from multiple areas – you earned it from mortgage pay down where your tenants are paying down the principal balance of your mortgage. You earned it from leverage because remember, the bank is your partner and you’re getting tax benefits. You’re getting all of these great things and the one that Jason talks about – his trademark term inflation induced debt destruction – the hidden wealth creator in real estate.
To sum it up, here’s one of Jason’s favorite quotes from Winston Churchill: “The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.”
We always have to see through the fog. When you’re in a battle, it’s hard to see the big picture. Just like when you’re in changing economic times, it’s hard to see the big picture. Looking at anything in life, there’s always a fog and we always have to step back, get our bearings, look at the big picture and think long term.
That’s when you can see the truth. Income Property is the most historically proven asset class in the entire world. There is simply no competitor so far to income property. There may be one someday, but income property is the most proven now. And currently, we still have negative interest rates compared to inflation, and supremely negative interest rates compared to real inflation numbers, not the manipulated CPI official inflation rate.
Speaking of Manipulation…
There is a lot of market manipulation going on when big business runs the show and when there’s a concentration of power in anything, whether it be political or business. The Federal Trade Commission announced last Monday that it is fining Opendoor Labs Inc. for its deceptive trade practices. The FTC alleges that the Eric Wu led ibuyer pitched its services to potential home sellers, using misleading and deceptive information that led sellers to believe that they could make more money selling their home to Opendoor than on the open market using the traditional home sale process. “Opendoor promised to revolutionize the real estate market, but built its business using old fashioned deception about how much consumers could earn from selling their homes on the platform.”
Let’s just say…there’s nothing innovative about cheating people and unfortunately, our world is full of scams. Which is why you absolutely need the education, foundation and right circle around you so you don’t get caught up in the middle of something you don’t want to be in. That’s why Jason started Empowered Investor Pro. It’s a tight-knit community of real estate investors, professionals and investment counselors whose vast experience will help you come out on top!
Learn more at JasonHartman.com and join us today! If you’re in the United States, pick up your phone and call 1-800 Hartman. Jason and his team make it easy for you to execute a nationwide plan and help you buy properties in good, sensible linear and hybrid markets around the country.
Catch the rest of Jason’s episode of The Creating Wealth Show on YouTube!
