Virtuous and Non-Virtuous Inflation and Preserving Wealth Through the Coming Business Cycles

In this episode of the Creating Wealth podcast, Jason Hartman tuned in from the Ice Hotel in Sweden during his Venture Alliance trip. He mentioned several interesting aspects of the trip thus far, as well as an interview with guest Carmen.

Hartman then spoke with Alan Beaulieu, President of ITR Economics and the co-author of Prosperity in the Age of Decline about his views on the economy recently on topics of energy, inflation, and the millennial generation. The two looked at the differences between virtuous and non-virtuous inflation and the surprise that millennials are going to face at seeing actual inflation. Beaulieu also gave his views and explanations of the recent tariffs and the GOP tax reform.

From the Ice Hotel Suites

Jason Hartman begins the podcast from the Ice Hotel in Sweden where he is attending the Ad-Venture Alliance trip. He notes that thus far it has been a spectacular experience and the group has checked several amazing experiences off of their bucket lists with more to come when they visit Stockholm tomorrow. The rooms in the Ice Hotel are at -5℃ which is equal to 23℉. The weather has been great, with sunny weather and clear skies.

Hartman explains that he is recording in a regular icy room at the moment, complete with sculptures adorning the walls. He notes that the sleeping rooms are better to be in, but they’re hard to film in during the day as the rooms are open to tours during the day.

He mentions that there is also a program on Netflix where listeners can learn more about the 28-year tradition of rebuilding the hotel each year and what it entails.

Carmen, a guest on the trip, has agreed to participate in an interview with Hartman and states that this is a once in a lifetime trip, the best one she has taken so far. The experiences were worth the distance traveled, and she mentions that the group has enjoyed gourmet food so far, including mushrooms that were grown near the mines.

Hartman states that during his last 5-course meal he had, there was reindeer meat, moose, and salmon. During the first day, the group stayed at a palace built in 1630 by the name of Rosersburg, where they went skeet shooting.

He notes that each room at the Ice Hotel was designed by a different artist, and Carmen agrees that the sculptures in her room were amazing. There was a snail theme as well as lights that changed colors, and icicles with lights attached to them.

“It was like sleeping in art,” she says.

Hartman adds that his room was called Daily Travels and had carvings of people etched into the walls. He also mentions a space-themed room containing astronaut carvings and a globe made out of ice.

When asked about her involvement in trips and her investments, Carmen explains that she has been involved in real estate investing for two years, and that she has been to between four and six events. She owns properties in Memphis, TN. She states that she is interested in looking at some new investments, to create a passive income for herself to compliment her Amazon business.

Upcoming Events

Hartman mentions the upcoming events taking place in the Northeastern side of the country. He encourages listeners to join him in Philadelphia on May 19th for the Creating Wealth event and the Venture Alliance trip in New York City during Memorial Day weekend. For more information about the upcoming events, visit

What’s Next in the Economy?

Hartman welcomes guest Alan Beaulieu, President of ITR Economics and co-author of Prosperity in the Age of Decline, to the podcast.

Hartman mentions business cycles in relation to the Austrian School of Economics and states that the US has had bullish markets in stocks for the past nine years. He notes that people say we’re living on borrowed time and explains that when people are scared of business cycle shifts, they’re usually thinking that its time for a correction. Because we came out of such a low, though, Hartman states that he doesn’t know if we can measure from that low until now for accurate time.

Beaulieu explains that if you’re coming out of that sort of a low, it might not be fair to start timing the market from that point. He notes that he thinks there’s a correction coming but that it isn’t necessarily going to be a bear market. He states that there could be a series of corrections without getting into a bear market. It would be a pause that would get people to slow down on their spending, and it would have an impact on the economy.

When it comes to why this is, Beaulieu states that this is hard to explain. He mentions looking at his graphs and understanding the signaling. The Purchasing Managers Index growth metric involved signals a correction coming. If it happened, it would not be a surprise, Beaulieu says. He explains that he can’t time the market better than anyone else can, and though he sees a correction, he notes that he doesn’t know when it will be.

Virtuous and Non-Virtuous Inflation

virtuous and non-virtuous inflationBeaulieu states that the global market is going to cool a little as we head into 2019 but that it won’t be anything significant. It’s been quite hot and will cool down and pull back inflationary periods. He notes that labor rates are going to make for more consumption and bringing up the prices of commodities will encourage inflationary pressures. With the debt, we can find that the dollar weakens some and creates more inflation, he says. At first it will be a virtuous inflationary period and then in the late 2020s, the non-virtuous inflation will emerge. Baby Boomers will be able to retire with high savings interest rates, but this will not necessarily be good for everyone else.

Explaining What Virtuous and Non-Virtuous Inflation Is

In explaining virtuous and non-virtuous inflation, Beaulieu states that when inflation is at 2.5-3%, it’s enough to get the Fed’s attention so that they push up interest rates, but not by much. This is not going to cause the economy any real harm. It will cruise along at that rate, people are going to be thinking about how they can raise their prices for their businesses, and inflation will let businesses come along. When inflation gets higher, people will feel the pressures. Interest rates will go up and issues will compound which will lead to the unfriendly part of the cycle. This will be followed by a correctionary period, Beaulieu says.

Hartman states that inflation helps people who have a lot of real estate debt so that they can pay their debts back in cheaper dollars. He explains that this is what we’re doing with China and Japan.

The Next 12 Years for Social Security and Medicare

Beaulieu explains that the dangers are in demographics, and Hartman agrees that it’s becoming a serious issue now, with cohorts being larger than they used to be. The Baby Boomer generation was quite high up and now the millennial generation is even larger. People are living longer, and the retirement age is way too low, leaving no way to pay the bills in Social Security and Medicare.

Beaulieu explains that there are 40 million Baby Boomers drawing from Medicare and prescription drugs but states that in just 12 more years, there’s going to be around 70 million.

Japan’s Demographics

He mentions that Japan’s demographics are worse than ours, with their population declining every year. They’re the second largest foreign holder of US treasuries, and as their tax base erodes and they take care of their aging population, they’re going to sell those treasuries. It’s going to put upward pressure on the US interest rates to keep up with the selling treasuries. Beaulieu explains that flooding the market with any commodity lowers the value. Japan’s problems will become problems for the US as well due to being a debtor nation.

He notes that Japan might be the first domino to fall. Their manufacturing will move offshore, and their young people are going to start chasing opportunities elsewhere. Japan might very well become an island nation of people who can no longer support themselves.

Hartman adds that Japan doesn’t have a lot of assets to sell, unlike the US who could sell our ports if needed. He asks what all of this means with the greying of America. Young people are coming up into an anemic market, and it doesn’t measure underemployment. He points out that many people with college degrees are working in food service, and that this doesn’t work well with student loan debt.

Every Industry is Trying to Find People

Beaulieu answers that the future isn’t as bleak as we might think. Wages are going up and every industry cannot seem to get enough people on their payroll. He notes that we need to create labor for the jobs available, encouraging fewer college degrees and more skills. It’s important for young people develop career skills, and we need to honor and encourage vocational schools.

He states that the millennial generation is going to have a better wage increase than other generations have. People thought they’d live down, but millennials are revving up the economy and moving into suburbia. They’re starting to want children, and they’re the biggest demographic in car purchases now. The generation is also quite safe and follows their budgets.

Hartman agrees that millennials are oddly frugal because they saw their parents get burned in the economy when they were children. A lot of families had to move due to foreclosures, and now millennials are 36% of the homebuying market. He states that as a percentage of their own numbers, it feels like they really aren’t buying that many homes.

Beaulieu mentions that it’s important to look at the millennial generation in two segments. There are two different age groups in the millennial generation and that the 30-35 age group is pretty dynamic.

Five Sources of Inflation

In being asked about the five sources of inflation, Beaulieu explains that increasing wages brings about inflation, as does the likelihood of the debt in US and China leading to some devaluation of the dollar. He also mentions commodity inflation. He states that in history, there have been major swings in inflation and we’re due for one. The pendulum will swing full circle.

He notes that the millennial generation isn’t going to have any idea of how to deal with the inflation because they’ve never really seen it before.

Hartman agrees that they don’t really know what inflation is, unlike Baby Boomers and Gen X who have seen inflation first-hand by living through the 1970s.

Beaulieu explains that it is his generation’s job to teach millennials, and he encourages them to listen to older people’s stories and pay close attention to their mentions of inflation.

The Golden Age of Stable Energy

When Hartman mentions gas lines and having to wait three hours for gas, Beaulieu states that the US doesn’t have to worry about that happening again, as we produce 96% of the energy we consume. The US buys from Canada, Mexico, and Saudi Arabia, but it sells refined Saudi products back out to the market. Beaulieu explains that we don’t really need the Middle East and notes that the US had a tanker bring 700,000 barrels of oil to the Middle East. We sent them oil instead of the other way around.

Hartman adds that it’s amazing that fear-mongers in the 1970s were talking about peak oil then, compared to what stability we have now. He recalls that the world used to be a darker place at night. Freeways did not have lights, and everything was about energy conservation. He mentions that Jimmy Carter used to encourage people to wear a sweater inside their homes to keep energy costs down. There has been a shift to a more abundant world.

Beaulieu points out that we have all sorts of energy types and that we truly are in a golden age of energy stability.

Hartman adds that there is also more efficiency in the things we have that use energy such as LED lights for example. It’s amazing how 8 watts is now equal to what 100 watts were before. Energy efficiency has skyrocketed. Everything uses less energy now than it did back then.

Reasons to Be Excited

Beaulieu mentions that people often ask him why he’s excited and he answers: energy, manufacturing, and millennials. A recent study before the tariffs states that manufacturing costs in the US was only 1% more than the cost of manufacturing in China. People are down on manufacturing, and he mentions that he wonders where people are getting their news.

When asked, Beaulieu explains that he is not a fan of the Trump tariffs, as blanket tariffs are dangerous, and they invite the Law of Unintended Consequences to cause problems. Thousands of people are likely to lose their jobs, and he is not a fan of it. As far as the tax reform goes, there is a lot to love. It simplifies and shortens the tax code, but Beaulieu states that he does not believe that the reform is going to create what it intends to create. It isn’t going to create more cash. Businesses were a wash in cash before, he says. Giving them more does not mean that they’re going to spend it.

In closing the episode, Beaulieu mentions that his book, Prosperity in the Age of Decline is available on and listeners can also visit his website at