Artificial Intelligence Changes the Finance Game

AMA5-22-15As far back as 1990, financial experts were predicting that in the not too distant future, investment and money management would be aided by sophisticated computer technologies. Flash forward a couple of decades, and that future is here.

Robotics experts predict that by 2025, robots and other kinds of “smart” digital technology will have achieved processing power equal to that of the human brain: an achievement of true artificial intelligence that promises to change our world in countless ways. Among them: investing, financial services and the global money markets.

The use of automated technologies in banking and finance isn’t new, of course; ATMs, so common now that we don’t even remember what the letters stand for, complex spreadsheet and asset management software, and even ebanking have been around for so long that these technologies are simply a part of everyday financial management for everyone from individuals to big corporations.

But true artificial intelligence takes those functions much farther, with the promise of making financial dealings of all kinds faster, cheaper and more accurate – as well as more user friendly. But experts warn that there are downsides to the onrush of AI technology, too.

What is artificial intelligence? It’s computing technology that’s several generations removed from simple automation. AI refers to the ability of a computer to understand questions, provide answers and offer options based on available information. With rapid advances in computing speed, AIs can sort information, make decisions based on branching options, and handle complex sequences o tasks in the same ay every time, removing the risk of human error.

The power of this kind of “smart” computer was once a novelty, trotted out to amuse and astound people with feats like beating a chess master at his game, writing poetry or predicting the future. But behind the scenes, supercomputers have been directing missiles, assisting in surgeries and medical research – and even acting as monitors and companions for the elderly.

Now, advances in artificial intelligence and other digital technologies affect just about every aspect of human life. Robots routinely assist nurses in hospitals. Artificial animals have been developed to move just like living ones, capable of traveling where humans can never go. AIs enable space probes to land on comets and visit Pluto.

These technologies also help to move money all around the globe. From the early days of ATMS and electronic transfers, financial experts now envision a world in which virtual financial advisors help with investment management and conduct transactions. Digital currencies can be kept and tracked in virtual “wallets” for transactions conducted at any hour, from anywhere.

AI technology will help investors calculate risk, make adjustments based on current conditions, and evaluate new opportunities. On the real estate front, these technologies let potential homebuyers take virtual tours of properties they’re interested in, “decorate’ them at the click of a mouse, and complete the purchase all in one interface.

It’s obvious that in a world where AIs are assuming more and more tasks normally carried out by people, some jobs filled by people would no longer be heeded. In this brave new world, financial planners, investment advisers, real estate agents and a variety of other professions would disappear.

Losing human jobs to technology is only one of the risks of runaway AI technology that worry many economists and market watchers. A world increasingly reliant on AI technology could be crushed if those systems were hacked or if they failed. And the increasing use of AI technology for military and defense purposes raises the specter of a global disaster arising from a system failure or other glitch.

Still, the shadow side of the advancing wave of AI technology is, as Jason Hartman points out, more of an opportunity, rich with benefits, than a threat. AI applications have the potential to revolutionize the way we do business and live our lives. And if you own a smartphone, use a GPS or boost your fitness regimen with a Fitbit, you know the AI revolution is already underway. (Top image: Flickr/ju-x)

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Fannie Mae and Freddie Mac: Still On top In Home Loans?

The Digital Revolution: A New World in 2025?

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Fannie Mae and Freddie Mac: Still On Top in Home Loans?

AMA5-16-15Ever since the great housing collapse of 2008, legislators and regulators have tried to scale back – or even eliminate – federal mortgage megalenders Fannie Mae and Freddie Mac. But as new regulations n private lenders, the agencies everyone loves to hate just keep on ticking.

Fannie Mae and Freddie Mac collectively account for the majority of residential home loans serviced in the US. But even as their much publicized troubles fuel calls for their demise, financial experts worry: if they’re gone, will the scandal ridden private lenders be able to step up?

Fannie Mae (real name: the Federal National Mortgage Association) is an old lady now – and one with a colorful past. Fannie Mae was first created in 1938 as part of President Franklin Delano Roosevelt’s post-Depression New Deal. Fannie’s original mission was to help boost home ownership by providing local banks with federal money to finance home mortgages.

Fannie Mae would do this alone as a government backed entity for the next thirty years. But in 1968 Fannie Mae was restructured, splitting into two separate entities: a new version o Fannie Mae that was placed into private ownership to keep it off federal budget rolls, and a new entity, the Government National Mortgage Bureau, or Ginnie Mae, which remained under government ownership. It dodged the post crash chaos and is still the only home loan agency that’s fully backed by the US government.

Freddie Mac, or the Federal Home Loan Mortgage Corporation, came along in 1970 and was originally intended to be a competitor of Fannie Mae, in order to create a more robust secondary mortgage market and remove Fannie’s monopoly. But as the housing market balloon swelled and eventually burst in 2008, Fannie and Freddie both faced the same troubles.

Facing massive losses after the housing crash, they were bailed out by the government to the tune of $188 billion and eventually placed into conservatorship under the regulation of the Federal Housing Finance Agency. They’re still under that conservatorship today. But both Fannie and Freddie continue to originate the mortgage-backed securities that back home loans serviced by a host of private lenders such as banks, credit unions and other kinds of financial institutions.

Amid calls for ways to impose better oversight on mortgage lending and protect consumers from becoming victims of predatory lending practices, lawmakers from both parties began to explore ways to phase out Fannie and Freddie. Possible scenarios included greater privatization, complete dissolution, and tighter regulation.

But in the meantime, new laws targeting the banking industry and private mortgage lenders were tightening mortgage lending standards and making it harder for marginally qualified buyers to get mortgages.

In the scandal ridden years after the crash, virtually all of the nation’s leading banks fell under investigation for charges of fraud, misrepresentation and other illegal activities. So the Dodd Frank Wall Street Reform and Consumer Protection Act became law in 2011, ushering in a number of new rules that banks and other private lenders had to follow in order to avoid penalties.

The new regulations included the creation of the Consumer Federal Protection Bureau, which promptly imposed the Qualified Mortgage Rule on new loans serviced by most banks and other institutions. In order to avoid penalty and major losses, banks had to ensure that the mortgages they serviced conformed to the tighter standards of the QMR, which included such things as higher credit scores, a stricter debt to income ratio, and larger down payments for home purchases.

But the new regulations meant many potential buyers couldn’t qualify for a mortgage, which threatened to stifle the already struggling housing market. In a time when home ownership was already at the lowest rates in over two decades, the new regulations designed to restore order in the housing market appeared to be stifling it instead.

In the meantime, Fannie and Freddie instituted new policies of their own, restructuring the loan securitization process and relaxing down payment and credit score requirements for mortgages they sponsored. These were steps aimed at supporting a housing recovery facing a slowdown because of the very regulations aimed at preventing another crash.

With the mortgage lending industry in flux and would be buyers locked out of the lending process, Fannie Mae and Freddie Mac continue to dominate the US home loan landscape And although they’re still in the crosshairs of legislation aiming to reform the mortgage markets, they won’t be going away any time soon. (Top image: Flickr/futureatlas)

Read more from The American Monetary Association:

The Digital Revolution: A New World in 2025?

How Does the Fed Manage Inflation?

The American Monetary Association Team

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The Digital Revolution: A New World in 2025?

AMA5-11-15Computers that move at the speed of the human brain. A world where every human being can know anything, anywhere, any time. Data streaming through a trillion sensors to connect the whole world. Though these things sound like part of a science fiction movie about the far future, that future is now.

Experts from a variety of fields including economics, robotics and psychology predict that those extravagant predictions of a sci fi future will become everyday reality in just one short decade. From modest beginnings in single computer chips, the digital revolution is expanding exponentially – and it has the potential to reshape life as we know it.

Robotics experts have long predicted that robots and other kinds of artificial intelligences will achieve the level of human intelligence, and that milestone is expected to come within the next decade. By 2025, a computer costing just $1000 will be abl3e to process data at 10,000 trillion bytes per second. If that sounds stunning, consider that it’s the speed at which the human brain already works.

Armed with that new level of intelligence, robots and other kinds of smart technology will play a much larger role in complex fields like medicine, with the potential to revolutionize healthcare. With greater precision and wider application, AIs could push health care costs down and give ordinary people far greater control over their own health.

These technologies are already in use in healthcare settings ranging from the operating room to assisted living facilities. Robots perform routine nursing tasks such as dispensing medicines and delivering meals, act as companions and monitors to the frail elderly, and conduct diagnostic exams. All these applications could streamline the healthcare industry and substantially reduce costs.

This brave new world of 2025 is also one of global connectivity and shared knowledge – the Internet of Everything. Within a decade, the world will be connected by a network of over 100 trillion networked devices. And those devices all have multiple sensors, working ceaselessly to collect data from multiple sources. The result? A multi-trillion dollar economy driven by an unprecedented flow of data from all over the world – and beyond it.

This massive, ceaseless flow of data collected by and streaming from cheaply produced and easily available devices could create a world of “perfect knowledge” in which anybody could in theory find out anything, anywhere, any time. For the first time in human history, knowledge is available to anyone who seeks it.

That puts unprecedented power in the hands of individuals rather than the gatekeepers society designates, such as schools, publishers and government entities. People who can’t afford expensive educations can learn from anywhere. Anyone with an idea can share it – and it becomes harder to hide institutional blunders and abuses from a watching world.

This world of perfect knowledge driven by the Internet of Everything also brings that knowledge and connectedness to virtually every corner of the world, creating new opportunities for people in impoverished and isolated areas of the world to connect with others and create new things.

Without realizing it, we’ve already stepped into that future world. Smart technologies, virtual reality applications and robotic assistance for a variety of tasks are relatively commonplace today. But those applications and many others are developing at exponential rates – and could do so virtually indefinitely.

That’s the prediction at the core of Moore’s Law, coined by Intel CEO Gordon Moore nearly half a century ago to describe what happens to computer transistors over time. According to Moore, the number of transistors that could be placed on a computer microchip would double every year – and that the trend would continue indefinitely.

Since then, Moore’s Law has been used in a broader way to describe the exponential growth of all kinds of industries and enterprises such as the current digital revolution, which is characterized by dramatic increases in power along with a corresponding decrease in cost, just as Moore predicted.

As Jason Hartman points out, we’re living in the most exciting time ever, a time when change is the only constant. And as digital technology advances at light speed in every area, change is coming faster and faster, with the potential to transform life as we know it in just ten short years. (Top image: Flickr/ju-x)

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Will Robots Steal Your Job?

AMA 119: The Truth About Real Estate Hard Money Lending with Salvatore Buscemi

The American Monetary Association Team

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AMA 119 – The Truth about Real Estate Hard Money Lending with Salvatore Buscemi

 

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Salvatore Buscemi is the author of Making the Yield: Real Estate Hard Money Lending Uncovered as well as the Managing Director for Dandrew Partners New York. He talks to Jason Hartman on the subject of finding experienced fund managers, the problems with crowd funding, dealing with inexperienced investors, and much more on today’s show.

 

Key Takeaways:

[1:45] Salvatore talks about his book, Making The Yield: Real Estate Hard Money Lending Uncovered.

[2:50] You can’t take $2,000 from someone and really invest or place that capital meaningfully.

[9:00] People are going to real estate fund managers who have no experienced and are losing their money.

[19:45] Real estate crowd funding deals are tricky, because now the developer is dealing with less experienced investors.

[27:20] You can’t make accurate predictions in an era where government and central banks intervene.

[35:50] People want more control over their investments and rather invest in someone who they have a good relationship with.

[39:30] Ask the hard questions first before you invest.

 

Tweetables:

There will be many problems in the world of crowd funding. Many lawsuits, many frauds. Get ready. They’re coming.

What’s great about real estate is it’s an imperfect market and that imperfection is what breeds opportunity.

When you do qualify these fund managers, you do have to look at their track record.

 

 

 

Mentioned In This Episode:

 

JasonHartman.com

 

Making the Yield by Salvatore Buscemi

 

 

Will Robots Steal Your Job?

AMA5-5-15The Second Machine Age has arrived. Tech experts now predict that by 2025, robots will have reached the level of human intelligence – and they’re poised to claim at least a third of the jobs done by humans.

Economists and job seekers have been worrying about the steady encroaching of machines into the working world for some time. ATMs were blamed for eliminating bank tellers. Self-serve checkouts took the jobs of grocery and department store checkers. Automated assembly lines put low-paid workers out of a job.

Add to that the steadily expanding use of smart software that conducts surveillance, navigation, and a host of other small and large functions, and it seems those worries are pretty well founded. But those early efforts to automate various functions for human convenience were only the beginning.

Robots and other kinds of automated machinery were originally developed to do the kinds of tasks humans wouldn’t, couldn’t or shouldn’t do – what a recent article from Business Insider calls the “dirty, dangerous and dull” work tasks. But as artificial intelligence technology moves forward, that’s changed.

Robots now assist surgeons in the operating room and nurses on hospital floors. They deliver meals in high security prisons and conduct medical exams and broker purchases. They even routinely beat humans at a variety of games and logic challenges. From simple automated technology, these mechanical workers are truly becoming another kind of intelligence, and their emergence in the white-collar workplace is making jobholders – and seekers – nervous.

Whether they should be nervous is a matter of debate. In an economy that’s driven by “job creation,” it’s ironic that existing jobs could disappear thanks to automation. But some economists argue that the jobs that could be lost to robots and smart software are largely ones that aren’t needed anyway – outmoded and irrelevant in rapidly advancing fields.

While that may be small comfort to the workers losing those jobs, some market watchers predict that the Second Machine Age will actually create more jobs, at least in the sectors related to the care and feeding of robots and AIs: design, development and maintenance. But those jobs usually come with a steep learning curve and require skills that displaced workers just don’t have – which in turn leads to a greater demand for training.

This Second Machine Age threatens to do for intelligence what the First Machine Age did for physical strength and endurance. That was ushered in by the Industrial Revolution, which saw the creation of machines that could work harder, longer and faster than any human could. Workers did lose jobs in the aftermath of that revolution, as industrial and commercial machines outperformed them at a fraction of the cost.

The possibility of a repeat of that scenario is what worries some experts, while others envision a future straight out of many science fiction novels, where robots rule and humans have either been relegated to machine serving slaves or eliminated altogether.

But just as in the First Machine Age, there are things that even today’s smartest machines just can’t do. They’re very good at performing linear, structured tasks and making decisions based on mathematical constructs and logic. But, experts say, they fail at some very human skills.

Artificial intelligences don’t work well when it comes to making judgment calls, responding to unexpected changes in sequences, and human interactions involving emotions like empathy. Fort hose reasons, trend watchers say, these evolving artificial intelligences will always need human overseers and colleagues to carry out those more complex tasks.

In any case, say futurists, there’s no need to worry about the coming of the Second Machine Age. It’s already here, sneaking up on us in many small ways we’re already used to: smartphones, virtual reality technologies, and GPS. Those things have become a part of life in less than a decade – and the coming decade will see much faster advances.

The Second Machine Age ushers in a new, exciting and uncertain future, with profound implications for the world of work. Whether jobs will be lost or eventually gained, it promises to have as much impact as the advent of the steam engine did a couple of centuries ago. (Top image: Flickr/PaulKeller)

Read more from The American Monetary Association:

How Does the Fed Manage Inflation?

The Wizard of Oz: An Economic Fairy Tale?

The American Monetary Association Team

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How Does the Fed Manage Inflation?

AMA4-28-15Cycles of inflation and its opposite number deflation have been part of the American financial landscape for well over a century. While some of these cycles are affected by outside events such as wartime, what many consumers don’t know is that our very own central bank, the Federal Reserve, plays a very active role in creating the rates of inflation that push prices up and buying power down.

The Federal Reserve took on the job of managing inflation back in 1913, and the country’s money manager has been on the job ever since, with interventions and adjustments aimed at keeping the overall inflation rate hovering around two percent.

The Fed uses several models for evaluating inflation, such as the Consumer Price Index, which tracks the actual cost of buying a set amount of fixed price good, Personal Consumption Expenditures, and other models established by the Department of Labor and other bodies.

Why would the Fed want to maintain a two percent inflation rate – or any inflation rate, for that matter? In the positive inflation model, when prices are higher, wages are generally higher too, and that keeps the economy growing. The dollar buys less, but prices stay up and the economy avoids recession.

If that doesn’t happen, the country could face a period of deflation – the opposite of inflation, when wages fall and so do prices. That could set the stage for the dreaded deflationary spiral of cycle after cycle of dropping prices that eventually leads to full blown depression.

As the Federal Reserve sees it, a little inflation offers some security against the threat of a deflationary spiral. As long as a modest amount of inflation is in place, prices won’t fall far enough to damage the economy as a whole.

That magic two percent of “protective inflation” is set by the Fed’s Federal Open Market Committee, a board that has determined that that number is reasonably consistent with the Fed’s mandate to keep prices stable and boost employment.

To do that, the FOMC directly intervenes in the nation’s monetary policies both domestic and international. And those manipulations affect both national policy and average consumers trying to balance a budget.

The primary way the Fed adjusts inflation rates via the FOMC is through tweaks to the federal funds rate, or the rate banks charge other banks – not consumers – for short-term loans. Although those rates pertain to bank-to-bank transactions, movement on the federal funds rates is passed on to other short term lending structures.

Movement in those short term lending rates in turn affect long term interest rates for things like mortgages and business startups – and activity there boosts economic growth and keeps money moving via consumer activity.

When the Fed reduces the federal funds rate, it has a ripple effect that creates a stronger demand for goods and services. Prices go up, wages go up, and inflation prevails. Those conditions can affect consumer confidence and business growth too, in terms of willingness to invest, take out mortgages and other loans, and manage assets.

Times can get tough, and inflation levels can spike. That’s what happened in the twentieth century, when inflation soared after each of the two world wars, and deflation plunged the country into the Great Depression of the thirties. When economic conditions indicate a dive into recession and depression, the Fed can resort to what it calls “nontraditional” ways to manipulate the nation’s money supply.

That’s what happened after the massive housing collapse of 2008. In the years that followed the crash, the Fed embarked on a plan known as Quantitative Easing, which involves much more than adjusting federal funds rates.

Between 2008 and 2014, the Fed undertook three rounds of Quantitative Easing. The last and most ambitious of those involved buying up billions of dollars in longer term mortgage backed securities, government notes and Treasury bonds. The goal of QE3 was to stimulate the economy by pushing down bank interest rates for loans like mortgages so that more people would borrow and more money would circulate in the economy.

Because the Fed can initiate its “nontraditional” interventions whenever it chooses, it can also end them when the economy picks up, and that’s what happened in 2014, when the Fed decided that conditions had stabilized enough to begin tapering off its massive securities buyup plan.

The Fed’s role in adjusting inflating rates doesn’t stop on the domestic front. What happens at home also has implications for international currency trading and the value of the dollar. High inflation – or correspondingly, deflation – affects the movement of gods and services worldwide and the value of the dollar against other currencies.

Keeping prices relatively stable and wages up means making adjustments as needed to the nation’s bank rates and monetary policies. And for the Fed, a little inflation can be a very good thing. (Top image:Flickr/imagesofmoney)

Read more from The American Monetary Association:

Inflation Rate Models Make a Difference

Does housing Drive income inequality?

The American Monetary Association Team

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Inflation Rate Models Make a Difference

AMA4-26-15Inflation is a word that strikes dread into the hearts of American consumers, who know that when it’s headed their way, their hard earned dollars will buy less. But different models of measuring inflation can make a big difference in how scary those numbers can be.

Inflation and its opposite number deflation have been around for a long time. The Bureau of Labor Statistics began compiling data from the Consumer Price Index back in 1913, and a new report from Business Insider tracks it even farther back – all the way to 1872.

Thpse figures reveal some dramatic swings in the purchasing power of a dollar over a century and more of reporting. That period covered two world wars and the Great Depression, which account for some of the extremes in inflation and deflation during the twentieth century.

The years of both World Wars saw a not surprising spike in inflation, followed by a period of deflation. And the Great Depression saw the deepest deflation of all. In between those historic events, the pendulum still swung from inflation to deflation, but on a much smaller scale.

In the 1970s and 1980s the country struggled with a new phenomenon – stagflation, characterized by both a stagnant economy and stubborn inflation. The years post-2000 show modest inflation, holding at a ten year moving rate of just 2.22 percent, which is just about at the 2 percent mark that the Federal Reserve considers “acceptable” to keep the economy humming along.

Overall, though, as Business Insider points out, all this accumulated data reveal that in the past half-century and more, the purchasing power of the dollar has steadily declined. Those numbers are based on inflation rates calculated by the Consumer Price Index, which determines inflation rates by tracking the amount of real money it takes to buy a fixed amount of tangible goods at any given point.

But those numbers aren’t absolute – and different models for determining inflation rates can yield up inflation rates that are either higher or lower, which affects both everyday consumers and policy makers who adjust economic and monetary policies based on those rates of inflation.

For the purposes of calculating the inflation rates that drive both public policy and consumer decisions, there are two types of inflation: headline inflation and core inflation. And the outlook on inflation can be either brighter or gloomier; depending on what model is used.

Headline inflation is the general model that consumers are aware of: the purchasing power of the dollar relative to a set amount of all goods and services consumed. That includes the prices of fixed commodities as well as those that fluctuate in price, such as food and energy.

Core inflation, on the other hand, reflects the rate of inflation for fixed commodities only, while excluding energy and food. For that reason, some financial experts and economists believe that calculating inflation rates in terms of core inflation is more accurate, since it reflects a fairly stable set of commodities.

Others beg to differ. Market watchers including regional Federal Reserve President James Bullard of St. Louis argue that failing to take into account those volatile goods offers skewed numbers to consumers and compromises the credibility of the Federal Reserve. Still others call for developing other models for calculating inflation that take into account such factors as the “relative price” of goods where spending more on one item means spending less on another.

Headline inflation calculations reflect the fact that energy and food make a significant dent in the budget of most consumers. But because the prices of those things can fluctuate wildly due to factors ranging from climate events to armed conflicts and even changing consumer preferences, core inflation numbers might give a more stable indication of trends in inflation.

The CPI and Bureau of Labor Statistics inflation calculations aren’t just for the benefit of consumers, though. Those trends are watched by the Federal Reserve and other policy makers who use them to make decisions about monetary policy and other kinds of legislation. That’s why s financial experts like Bullard and others are calling for closer examination of just how inflation is really calculated and what that means to everyday consumers and national policy decisions.

Whatever the calculation, inflationary cycles are a fact of financial life. And, in fact, a little inflation is often a good thing – witness the efforts by the world’s leading economies, including the US, to keep inflation within an optimum range, rather than trying to eliminate it.

But because there’s more than one kind of inflation, consumers and money managers of all kinds may want to take the CPI’s current calculations with a grain of that volatile commodity – salt. (Top image:Flickr/donbrown)

Read more from The American Monetary Association:

What’s Behind the World’s Debt Crisis?

The Wizard of Oz: An Economic Fairy Tale?

The American Monetary Association Team

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What’s Behind the World’s Debt Crisis?

AMA4-24-15On one spring day in late April 2014, the world’s debt clock checked in at a staggering $60, 656, 668, 640,014. That number changes by the minute, as do the totals for interest accrued – over $1,000 every minute.

The world is deep in debt – and becoming more indebted every minute, with no end in sight. Many countries carry so much debt that it can never be paid off. But debt itself is a stock in trade in the world’s money markets, which creates winners and losers in the global debt game.

How did the world wind up in so much debt? And what are the implications of massive international indebtedness for the future of both the US and world economies? Economist John Rubino spoke with Jason Hartman about those things on a recent episode of the American Monetary Association podcast.

As Rubino points out, the world now runs on debt – a situation that’s been accelerating over the past forty years r so, since the end of the Gold Standard. And that creates some unprecedented situations, such as negative interest lending and investors paying for the privilege of stashing money in safe havens.

The gold standard, or lack thereof, plays a key role in today’s world debt situation. From the first days of using gold for currency back in 643 BC, this precious metal, along with its less distinguished cousin silver, has created the standard of wealth that defined the status of countries like Spain, Portugal and France throughout their history.

By the mid 1800s, the rise of printed paper money and ever expanding global trade initiatives led major world powers to adopt the Gold Standard – a system that tied the value of a country’s curr4ency to its store of gold. In other words, a given amount of paper money could be redeemed by its movement for the same value in gold.

That worked relatively well for a while. But as the price and availability of gold began to fluctuate, so did the currencies tied to it. IN 1933, the US created the Federal Reserve to oversee and regulate gold and currency issues. But when World War I began in 1914, several European countries suspended the Gold Standard in order to print up more money to subsidize their part in the military effort.

That created runaway inflation, so after the war, most countries returned to the Gold Standard – or a modified version of it. But when the Great Depression hit in 1929 many countries had to abandon the Gold Standard again. People were hoarding gold out of a deep mistrust of banks, and President Franklin Delano Roosevelt froze gold dealings completely. No one could export it, hoard it or sell it.

That made the US the largest holder of gold in the world. But as the economy became more robust after the two World Wars, more trade was conducted in dollars – now widely seen as a stable currency. And so in 1971, President Richard M. Nixon signed an act doing away with the Gold Standard for good.

That, say some economists, paved the way or the current debt crisis. With printed money no longer tied to a tangible commodity, countries were free to print as much money as they needed to cover commerce and loans outstanding to other countries.

The value of money became essentially whatever the issuing government claimed it to be. And without tangible assets to back it up, debt became largely am exercise on paper, with many countries falling so deeply in debt they may never escape it.

The looming specter of all that debt has investors and everyday citizens worried that a house of paper cards could collapse and take their assets with it. Thus the rise of tax havens, secure places in various parts of the world where investors could keep assets safe from financial uncertain ad devaluation at home.

But that too is changing. Even as “good borrowers” are being rewarded for their debt management by increasingly good rates that push interest rates into negative numbers, traditional safe havens like Switzerland are encouraging people to use their safe banking resources to protect assets.

Those days of safe tax havens may be ending, though. Recent legislation in the US and a globally focused counterpart in Europe threaten to end the privacy and relative safety of offshore tax havens by requiring host countries to report accountholders’ assets to their home country – effectively ending the financial privacy that attracted users in the first place.

All these factors contribute to making the word’s debt less manageable, not more. And as debt, inflation and financial mismanagement plunge some countries into financial crisis; so market watchers worry that there may be serious crisis ahead.

Is there? Rubino notes that there are really only two options: a collapse of the entire system, or a round of inflation not just for the US but the world as a whole. And with the world’s hopes for financial stability resting on the paper tiger of printed money, tangible assets such as property remains as good as gold. (Top image: Flickr/elibrown)

Read more from The American Monetary Association:

The Wizard of Oz: An Economic Fairy Tale?

Do Currency Wars Drive World Economies?

The American Monetary Association Team

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The Wizard of Oz: An Economic Fairy Tale?

AMA4-22-15And all along, you thought The Wizard of Oz was a delightful children’s adventure, brought to life on the big screen in that famous movie starring Judy Garland.

But in the years since the movie put the beloved L Frank Baum story into the cultural fabric of American life, a variety of scholars, historians and economists have found deeper meanings behind the adventures of Dorothy and her little dog Toto.

At least seven theories have been advanced about the “real” meaning of The Wizard of Oz. That’s the title of the 1936 movie; Baum’s novel was actually titled The Wonderful Wizard of Oz, but we’ll use the film’s title to keep things simple. Among the leading interpretations of Baum’s story: it’s a Christian allegory that has Dorothy following the Yellow Brick Road to get to the Emerald City (heaven); it’s an atheist allegory (there is no wizard, which means there is no god), a feminist allegory (Dorothy triumphs), and more.

But as a new Business Insider article reports, the one theory that still captures the imagination of some economists and financial experts was advanced by a high school teacher named Henry Littlefield. His reading of the book sees The Wizard of Oz as an allegory about American monetary policy of the time – with implications for what came later as a result of conflict over maintaining the gold standard and the “ Free Silver” movement of the day.

If you’re hazy on the story, it comes down to this: little Dorothy and her trusty dog Toto are transported into the magical world of Oz, where they join the Scarecrow, Cowardly Lion and Tim Man in their journey along the Yellow Brick Road to find the Emerald City. After a long series of adventures, Dorothy clicks together the heels of her silver shoes there times and is transported home.

According to Littlefield’s theory, many of the story’s characters do double duty as metaphors for figures in the landscape of the American economy of the day. And Dorothy’s journey represents one that could lead to prosperous outcomes for the country as a whole.

This reading of the story sees Dorothy as the common citizen struggling to make sense of the economic realities of the world of the early 1900s, when unemployment was rampant, drought was pinching farmers who were in debt to the banks, and the country was debating what direction to take its monetary policy.

Carrying the theory forward, the Scarecrow represented farmers, who were indebted to bankers. As deflation hit the country in the late 1900s, their debt ballooned while those bankers got more money. Dorothy’s other companions, the Tin Man and the Cowardly Lion, also represent figures of the day.

The Tim Man, economists say, represents the industrial workers, who faced soaring unemployment rates in the waning years of the nineteenth century. That’s suggested by the Tin Man’s rusty joints and creaky movements that keep him from being effective.

For Littlefield the Cowardly Lion was William Jennings Bryan, a proponent of the Free Silver movement to add silver to the gold standard to boost the money supply The Yellow Brick Road was the gold standard itself, which took the traveler to the Emerald City, Washington DC, where everything was seen as dollar green.

There Dorothy met the Wizard, who’s believed to be Grover Cleveland or possibly William McKinley – both presidents who were known for not doing much to help the economy. Once Dorothy met the Wizard, she clicked the heels of her silver shoes three times and was able to get safely home – demonstrating that adding silver to the country’s money supply would help the economy out of its tight spot.

And Oz itself? Why, its name is the same as the measurement of a unit of gold – the ounce.

Clearly, the producers pf the legendary movie weren’t concerned with keeping the allegory going, though. The silver shoes Dorothy wears in Baum’s book were replaced by the famous ruby slippers in the movie, just to take full advantage of the trendy new Technicolor film process.

The gold standard was once the bedrock of US monetary policy. Throughout the nineteenth century and much of the twentieth, gold was bought and sold at a fixed rate among participating countries, and the value of currencies were tied to the value of gold. Silver was part of that equation too, in a system known as bimetallism. The Gold Standard Act was passed in 1900, the year that Baum’s book came out, so that lends some support to the “economic” theory about the message hidden in his book.

The gold standard effectively ended in 1971, when US President Richard M. Nixon severed the connection between a country’s currency and real commodities such as precious metals.

Literature is always open to  interpretation, and who can say what L Fran Baum really intended to say in his novel? But although literary scholars have largely dismissed Littlefield’s interpretation of the book, the parallels are striking – and the discussion serves as a history lesson for followers of American monetary policy. (Top image: Flickr/Photatelier)

Read more from The American Monetary Association:

Do Currency Wars Drive World Economies?

The US: World’s #1 Tax Haven?

The American Monetary Association Team

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Do Currency Wars Drive World Economies?

AMA4-17-15The major powers may rattle sabers and troops and weapons may move in places all around the globe, but there’s another, quieter kind of war that has the power to make or break economies. Global “currency wars” like the one we’re In right now affect rates of exchange, inflation, and the flow of goods and services everywhere in the world.

Currency wars come around periodically in the interconnected world of global finance, where what one country decides to do with its currency affects the monetary policy of another one thousands of miles away.

The current currency war has been going on for a few years now according to some financial and economic experts, who place its start somewhere in 2010. It made headlines in early 2015 when Switzerland abruptly decided to abandon its longstanding cap on the valuation of its franc.

Without the Swiss National Bank’s firm limits on the franc, it could float freely relative to other currencies, particularly the euro. The SNB’s decision came as the Eurozone was planning to launch a round of quantitative easing for the euro – putting more euros into circulation in order to stimulate spending.

The Swiss move caused economic upheaval at home and in neighboring countries holding franc-denominated debt. The rush was on to buy up more currency to back the debt, and the fallout rippled as far as the United States, with losses by major banks with heavy involvement in international currency trading.

Although the duel of the franc and euro made financial headlines and put the concept of currency wars into the public arena, currency wars have a long history. As a new article from Business Insider reports, there have been three of them in the last century or so alone. And they’ve changed the way the world does business every time.

What is a currency war anyway? Basically, it’s a race among nations to cheapen currency –just as price war among retailers is won by the one who can cut prices the lowest and still make money. In the world of monetary policy, cheapening currency can boost exports and keep those exports more competitive internti0onlaly.

A strong currency – like the dollar, let’s say – actually makes international commerce tougher, since an item costs buyers from places with weaker currencies more to make the purchase. While these cheaper currencies may encourage trade, they can also raise the prices of goods and services at home, providing fuel for a round of inflation and increased prices for everyday goods.

In the twentieth century, currency wars have lasted anywhere from five to fifteen years, with varying effects. The first of these came in 1921, when Germany completely devalued its currency in the aftermath of World War 1. Within a few years, France and Belgium had followed suit.

That launched a series of currency wars leading up to the present one, driven largely by the shift away from the gold standard that began in 1914 when the whole world went to war. Before World War I, the balance between gold and paper money remained steady. But in the war years, more money was needed – and that shifted the balance between gold and paper money.

That started the pattern of systematically devaluing currency during certain economic conditions. Successive currency devaluations by the world’s great powers in the periods between the two World Wars led to severe depressions and currency crises. The next currency war came in 1967 and lasted twenty years and spawned three major recessions.

The latest currency war began in 2010 and, as the Swiss demonstrated in their actions regarding the franc, it’s still going on. And if past currency wars are any indication, this one will likely last awhile. Thanks to a strong dollar and the disintegration of the old gold standard, the coming years promise uncertainty and constant change.

Currency wars aren’t won with guns and tanks, but with banknotes and policies. And for wise investors hoping to protect assets, the current skirmishes are worth watching.  (Top image:flickr/rieh)

Read more from The American Monetary Association:

Does Housing Drive Income Inequality?

AMA 118: Your Business More Efficient With Smartphone Technology with  Kirill Storch

The American Monetary Association Team

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Does Housing Drive Income Inequality?

AMA4-13-15The widening gap between the wealthy and – well, everyone else in America has occupied news headlines since the housing collapse of a few years ago. As the famous one percent gets richer and the other 99 do not, a new theory suggests that income inequality is really about housing inequality.

Income inequality isn’t new. It’s even become a part of the classic “American dream” in which a poor but enterprising individual can overcome a lack of money, rise above humble origins and get rich. But changing economic and cultural conditions have revealed that dream for what it always was – a fairytale.

In today’s world, technology, globalization and economic crises have combined to make it harder for the poor to get out of poverty and for the rapidly eroding middle class to hold the line. And while that’s going on, that small minority of the wealthy keeps on accumulating wealth.

According to a recent report from Medium.com, an MIT student’s current work suggests that this model points economists in the wrong direction. Under current conditions, those models for accumulating wealth through labor and wages may be less valid – and the real reason behind American’s stubborn income inequality has to do with housing prices and availability.

That’s the theory proposed by MIT graduate student Matthew Rognlie, who points out in recent research that in the tug of war between capital income and labor, or wage, income, capital income prevails as the route to accumulating wealth – if the equation includes housing.

As French economist Thomas Piketty proposed, wealth accumulates with one percent of the population because they’re investing in capital, not in wages. In other words, money accrues to those who invest capital in assets, including land, technology and innovations, rather than paying workers wages. The labor income model ties income inequality to factors such as stagnant wages, a sluggish job market and related factors that keep people from being able to accumulate capital and make investments that could open the door to building wealth.

But one of the most stable and enduring assets in the US and the world is housing: land and the structures that are added to it. Because people always need a place to live, land and hosing never goes out of fashion.

That’s not the case with technology and product innovations, which become obsolete quickly as new generations become available. And today’s innovation may be old hat tomorrow – or eclipsed by anther more cutting edge product from elsewhere in the world. That means that today’s technology giants may find the foundation for their wealth eroding with tomorrow’s innovations.

Likewise, in manufacturing an industry changing conditions may mean that today’s operations can’t be sustained at their current levels – and that the investment into infrastructure and personnel doesn’t yield up enough returns.

If those avenues for building wealth don’t have the staying power that they used to, housing does. It’s the common denominator for virtually everyone – and what happens with hosing is highly revealing about how wealth is distributed – and what that means for the future.

The availability and cost of housing creates clear barriers between income groups. As the US housing market climbs out of the rubble of the 2008 crash, home pries are continuing to rise, even as the inventory of homes available for sale continues to be tight in most markets.

That means that home buying becomes a reality largely for those with higher incomes and the ability to either pay cash or make large down payments on higher priced properties. That locks out lower income buyers, who can’t find properties to buy in their price range and who struggle with meeting mortgage standards and making down payments.

The lack of affordable housing in mid and low income markets, along with stagnant wages and an unpredictable job market, makes homeownership a matter of “haves” with higher income on the one side, and “have nots” on the other. And with fewer homes for purchase and fewer people able to buy those homes, rental markets heat up.

But even in the world of rental housing, demand drives up prices. And once again, higher rents and tight availability mean more access to those with higher incomes. And because of perennial demand for housing, investing in real estate becomes a route to building wealth.

Closing the income gap is always high on the list of ways to address inequality in American life. But a graduate students insights may point the way to doing just that – through the one asset that never stops being in demand. (Top image: Flickr/milestonemanagement)

Read more from The American Monetary Association:

The US; World’s #1 Tax Haven?

AMA117: What’s Happening Wit the World’s Debt with John Rubino

The American Monetary Association Team

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AMA 118 – Your Business More Efficient with the Use of Smartphone Technology with Kirill Storch

 

Jason Hartman invites Kirill Storch of Electric Web to talk about some of the interesting developments that”s happening in the mobile sector. Kirill tells Jason about how companies are putting smartphones on assembly lines to scan their products more efficiently, companies utilizing innovative tactics to make their internal processes go faster, and more.

 

Key Takeaways:
1:50 – Most people only think about how smartphones can help businesses from a sales point of view.
3:20 – The scan feature on the smartphone can now check in with assembly line managers to make sure everything is running smoothly.
7:10 – Wearable technology will probably change the way we do business.
10:00 – 10% of all US firms have invested in mobile technology and it”s estimated by 2016, 30% of companies will catch on.
12:40 – The solution to a company”s problems might be right there in their pocket

 

Tweetables:
“If I was a small company, I would look at your internal processes and ask is this something that can be improved.”

“Pick a high-visibility relatively low-intensity process and try to bring that over to mobile.”

“Jobs that are highly automated that a computer could easily do, those are probably the jobs that are least fun.”

 

Mentioned In This Episode:
ElectricWebMarketing.com

 

Transcript

Jason Hartman:
It”s my pleasure to welcome Kirill Storch to the show. He is with Electric Web and kind of an interesting angle, you know, everybody”s talking about smart phones and how convenient it”s made their life and businesses are talking about how they can drive sales with smartphones, but what about efficiency, what about inner prized management, you know, making your business more efficient by use of smartphone technology, so we”re going to kind of dive into that a little bit, Kirill, welcome, how are you?

Kirill Storch:
Doing well, thanks for having me.

Jason:
Good to have you and you”re coming to us from my home town in Los Angeles, right?

Kirill:
That”s right. Sunny Los Angeles.

Jason:
Tell us about, you basically boiled it down to five unexpected way that businesses can use smartphones to drive profit. Most people only think of it from the sales angle, you know, they think, “Oh well, I can do coupons, I can do an app and get people to listen to my podcast.” Or whatever that application is, but let”s talk about it from the other side of the coin.

Kirill:
Right, I think a lot of companies look at mobile applications in terms of driving top line revenue, that”s it”s just a way for them to access a new audience on their smartphones, but actually a lot of companies, almost 10% right now and that number keeps growing are using smartphones to drive the bottom line revenue, to improve internal processes and get a lot more efficient.

I mean, just to give you one example, any company with field employees, insurance inspectors, adjustors, maybe just contractors, gardeners, what have you, they”re using these smartphone apps to actually like together their workforce and make sure people are arriving to the job sights on time, people aren’t tardy, they use it to manage their employees and see if they”re working, you know, below national averages in terms of efficiency or above national averages and they also use it for the employees to call in sick and do various things that they used to call the home office for. So, that”s one quick example of how companies are using it.

Jason:
Tell us more about this. I mean, you mentioned law firms and companies that need to scan documents and so forth, lots of different angles.

Kirill:
The scanning feature on the smartphone is actually one of the drivers the way the companies are utilizing this technology and the way that they”re using this is probably going to surprise, I can”t name the company, but there is a client of ours who is a fortune 50 company and they have actually outfitted an assembly line of theirs for power cabinets, which is like the cabinets you put your tools in, they actually literally know have a smartphone standing on their assembly line as part of the assembly line. This is an iPhone basically right on the assembly line and what they”re using this for is essentially replacing, you know, the guy who used to stand there with a hardhat and check list that”s marking the parts off as it”s going down the line. It”s creating actually a really cool map for the manager so he can see exactly where are all the parts are on the line at any given time just by taking out their smartphone.

Jason:
So, does the phone recognize the part by actual visual recognition or is it scanning the barcode on it?
Kirill:
What it”s doing is it”s scanning the barcode. It”s unique on the actual piece. So, we have a little QR code that”s coming in and it”s being put on every single piece, so that”s how it”s recognizing it. So, yes, it is recognizing the exact piece it is, but it”s doing it through the QR code, so it”s not using the photo recognition software available on that isn”t quite developed enough to be reliable in every single situation, so you”re still relying on things like QR code technology and so forth, but the reason why they”re using smartphones is because everyone has one, right, so the manager of that assembly line at 2am in the morning can take out their smartphone and check out what”s going on with the assembly line. It”s really has to do with how ubiquitous the devices are, that”s why they”re using them.

Jason:
Give us some other examples, if you would.

Kirill:
Yeah, well you mentioned, you know, the law firm, there”s a couple of law firms that are using it in terms of scanning, pretty much anyone that wants to go green, which is a lot of companies. A lot of this has to do with just kind of capitalizing on ideas that are already thrown around in the boardroom already, right, things like efficiency, environmental consciousness, how do we actually act on these things, and a lot of people talk about it, but I think the smartphone is something that”s just sitting in your pocket and kind of a solution is just there, right. So, the law firms are using it to scan documents, document scanning, non-profits, I mean, there”s a lot of different agencies that are saying, well, we can use the smartphone at the point of entry and as soon as we get these documents we can just kind of scan them and put them into an online repository. So, that”s another big way that people are using. The scanning piece of it, anyway.

Jason:
But, the scanning piece unfortunately, you know, I”ve been intriguing by the document scanning ability of the smartphone, but unfortunately it doesn”t really, you know, it doesn”t really work very well. I mean, it obviously don”t have a paper feed, so you can”t scan large numbers of documents, but even then you gotta align it up, you know, and I know it helps you do that, obviously, but it”s still pretty difficult. Any thoughts? Is that on its way to being improved dramatically?

Kirill:
It is, but you have to – they are improving it, but you also have to think about what is the situation that the individual is in. If you”re talking about an insurance adjuster or maybe a railroad site auditor and they are out in the field, is it more convenient for them to take out their smartphone or do they have to then take the document, go back to the home office or hook up a scanner remotely, you know, so there”s little ways you can realize efficiency with it even though, you”re right, the scanners not perfect and it”s something that hopefully they”re working on improving on, but yeah, it”s definitely something that”s going to be imported for businesses. It”s not the only thing that they”re doing with it, there”s also, there”s all kinds of other uses as well, you know, aside from the scanning fees.

Jason:
Yeah, yeah. Good, good stuff. So, what other uses, just give us some more examples. I mean, these are great. How about in the actual application itself, you know, for example, my company is using Infusionsoft and they have an app for mobile. I don”t know if it”s very adopted though and I”m sort of curious how the Apple watch might play into this and Google Glass, you know, some day the wearable technology, if you have any thoughts on there.

Kirill:
Wearable are going to be probably one of the biggest drivers, you know, of just societal change in the next 10-15 years and subsequently also the way we do business. If you imagine the ecosystem and a large part it”s actually an underground ecosystem of developers that are coding for Google Glass right now, you”re talking about functionality that potentially could just change the way we live in society in a manner that”s more dramatic than the iPhone or Facebook or any of these other technological drivers and change. I casino online mean, imagine walking into a party or walking into a conference room with you Google Glass on and having information about people like the estimated income or the job description or what their background is or what their preferences are, right. Information that can be readily scrapped from social media right now. So, Google Glass can be a very, very disruptive force in the way we do business.

Jason:
I”m sort of wondering what”s going to happen with it though. For example, will the glass just scan the barcode, will it recognize the product, you mentioned the assembly line example. So, the iPhone I suppose just sits there on a stand and scans all these items going by like an overpaid union member used to do?

Kirill:
Yeah, you called it and in fact in that particular case it wasn”t one union member, it was five and those individuals are, they”re still working at the company. It”s not like we”re saying, hey, fire everyone and hire an iPhone. Those guys, I”ve actually had to chance to personally meet them because I went down there to launch this thing, they”re happy that they”re actually working upstairs now and they have different roles and they”re happier. I think a lot of people aren”t really happy with their jobs and I think the jobs that are highly automated that a computer could easily do, those are probably the jobs that are least fun, because there”s the least amount of creativity, the least amount of dealing with other people. It”s probably some of the least rewarding work you can do, so actually some of this automation, you know, it can be, it can be really great for people working at the company too.

Jason:
What do you see as the future of this? Where”s it going? What are some of the next couple of steps and any advice you have on how someone listening might just use this now on their small business, you know, maybe they don”t develop an app, but they just use existing apps out there, you know, any thoughts on that would be great too.

Kirill:
I think the trends are pretty clear. Right now about 10% of all US firms have actually invested in this and by the way the name of this is MPI – Mobile Process Improvement. So, just improving internal processes in your company using mobile, mobile phones. So. 10% of all firms in the US have invested so far and it”s an estimated that within a few years, you know, by the end of 2016, over 30% of US firms would have made the investment.

So, it”s growing really, really quick. It”s burgeoning industry, it”s growing fast, and some key players that are investing in it are, you know, known for their innovation. You have Amazon putting big money into this, United States army is putting big money into this, and they”ve already saved, you know, upwards of 15 billion a year just between the two of them, right, so there”s a lot of money being saved through this technology.

If I was a small company, I would start first by looking at your internal processes and asking yourself, you know, is there something here that can be improved. What is a process that is relatively simple that is not super efficient right now. So, pick one process. Don”t try to make your whole business go mobile right away. It”s too much work. Pick a high-visibility relatively low-intensity process and try to bring that over to mobile.

The first thing you do is maybe look at some existing apps that are out there that can already do this and if not you can think about an out-of-a-box solution, which is like a customized dashboard, so like an APN or a SERA data solution and then lastly, you know, you can”t find something that 100% meets your needs, you could look at doing a custom app build, which would be maybe an upwards of 60 grand or something like that, so that would be I think the way I would start.

Jason:
$60,000? Is it really that much to build one of these types of apps nowadays? I thought that prices have just plummeted in app development.

Kirill:
Not for applications like this because there…

Jason:
I was thinking that.

Kirill:
Yeah. This is very different than a fun consumer app, because if you think about it there”s all these different angles, so security is a really big one. You”d be surprised how much work has to go into just msecurity, mobile security, if you”re a large firm like this and you”re investing in this application, you have to make sure that thing is ironclad. A lot of work goes into making sure all the employees know how to use it, use ability testing, anytime you”re in an environment where you”re trying to introduce a new process into an existing organization, you know, the costs they tend to go up because of that.

Jason:
Good stuff. Well, any other things I should be asking you that I didn”t ask? You know, that you just want people to know?

Kirill:
Well, I think that, again, I think a lot of people when I read their mission statements or their vision statements or I look at the golden plaque in the lobby. I see these words like, we”re committed to innovation, we”re committed to efficiency.

Jason:
Yeah, the generic words.

Kirill:
They”re generic and then I think, I don”t think, you know, so many people are saying, well, how are we actually following through on this commitment to innovation and I think a lot of, you know, people are sitting there in the board room while their smartphones collecting Facebook notifications and saying we need to be more innovative and it really just ends up being lip service when the solution might be right there in their pocket. So, I think just taking out that phone and taking a second look at it and just researching the existing smartphone ecosystem, the out-of-a-box app solutions like I mentioned, APN and SERA data or the custom apps solutions, which is what we do and also we have a white paper actually that we commissioned some grad students to do, so you can check that out as well if you wanted to get a starting points, a free white paper, if you wanted to get a starting point about, you know, some of the research on the subject.

Jason:
Yeah, where can people find that.

Kirill:
So, they can find that at ElectricWebMarketing.com. Again, that”s ElectricWebMarketing.com and the white paper is right there, just scroll a little bit below the fold and you”ll see it, just go ahead and download it.

Jason:
Good stuff. Thank you so much for joining us today and telling us about this important trend and I just hope it will really trickle down to small business to where, you know, virtually everybody listening has a small business, right, they have their own solopreneurship things. Everybody”s got some idea in the back of their mind, maybe they haven”t executed on it or they”re doing to one degree or another now and it”s just awesome that these tools are just democratizing everything, every area of life, so it”s an exciting time for sure.

Kirill:
Absolutely.

Jason:
Alright, thanks for joining us.

Kirill:
Alright, thank you, Jason.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

The US: World’s #1 Tax Haven?

AMA4-7-15The phrase “tax haven: conjures up images of shady money being squirreled away in chilly Swiss banks or sunny tropical ones –a way for businesses and people to hide their dealings from the authorities at home.

Switzerland and the Cayman Islands top the list of the world’s best-known – or most notorious – tax havens, places where foreigners can stash money or assets to avoid taxes and other kinds of prying eyes in their home countries. But as a recent article from International Man reports, it turns out that the world’s leading tax haven is actually the United States.

A tax haven, as defined by the online investing glossary Investopedia, is a country that allows foreign businesses and individuals to deposit assets and conduct financial business with little or no tax liability in a stable political climate. That’s why steadfastly neutral Switzerland has been the world’s most recognizable tax haven for years.

But one of the most recognizably stable countries in the world is the United States. The US dollar continues to set the standard for international monetary trading, and for all its political polarization, the country has a firm foundation of political and economic stability that makes it a attractive to those in places where government wobble and currencies can lose value fast.

That’s why the US fits the definition of an ideal tax haven in every way, at least for now. US property laws are transparent, making it easy for foreign individuals and businesses to buy American real estate or other assets, and set up banking and investment accounts. And in some states, led by tiny Delaware, many transactions routinely stay out of public records.

The security and secrecy the offered by US banks and other institutions makes the country an attractive place for investors and businesses to protect themselves from tax laws at home and to keep many kinds of transactions out of the public eye – a plus not just for illegal dealings but for legitimate businesses that need to keep a low profile.

Those factors are partly behind the surge in foreign investment in US real estate, see by many throughout the world as a very safe investment that endures. It’s also behind another surge in foreign corporations establishing a presence on US soil as a way to avoid corporate taxes at home. And of course individuals also use US banks as safe place for cash and assets that might be vulnerable at home.

Though tax havens often carry a taint of the illegal or marginal, being a tax haven might actually be good for a country, especially one like the US, which welcomes billons of dollars a year into its economy from foreign deposits and investments. That level of foreign investment may boost the country’s overall economic health, and cement the status of the US as the world’s leading tax haven, but it also raises concerns among some financial experts and market watchers.

The heavy influx of foreign capital and corporations onto US soil, they say, ties the country to the whims of foreign governments and takes control from Americans, What’s more, they argue, the tax haven perks enjoyed by those foreign investors are not available to US citizens.

And that’s true, but for a good reason. The very definition of a tax haven states that its main function is to provide foreigners with a way to keep financial transactions secure with minimal tax liability. It’s the flip side of Americans using foreign havens like Switzerland or creating a “shell” company abroad in order to claim offshore tax status.

What’s more, the climate is changing for tax havens everywhere, with repercussions for the status of the US as a leading repository for foreign funds. A new law, the Foreign Account Tax Compliance Agreement, has been enacted in the US in order to force foreign banks to cough up information on their American accountholders.

On the international front, an extensive list of countries (including Switzerland and the Caymans) have signed off on the Global Account Tax Compliance Agreement, which requires reciprocity in reporting – or intend to in the next few years. These laws would require any bank holding foreign accounts or other investments to report them to the accountholder’s home country.

That means that even as the US legislation requires reporting from foreign banks, those banks could also require reporting on US account held by their citizens. That ushers in a new era of financial transparency that, say some civil libertarians, makes financial privacy of all kinds a thing of the past – and removes one of the major reasons tax havens can flourish.

For now, American investors and individuals can sidestep the new reporting rules and level the playing field by creating accounts and corporate identities in non-participating countries or moving offshore to escape harsh domestic corporate taxes. But as more and more countries join the campaign for financial transparency, tax havens everywhere may become an endangered species.  (Top image: Flickr/ evgeniy dodorov)

Read more from The American Monetary Association:

AMA 177: What;’s Happening With the World’s Debt with John Russo

Do New Laws Erode Finacial Privacy?

The American Monetary Association Team

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AMA 117 – What’s Happening with the World’s Debt with John Rubino

 

John Rubina is a second time guest and sits down with Jason to talk about the economy and the huge money bubble that’s happening right now. John is the author of Money Bubble: What to Do When It Pops and he talks a little bit about his book on the show. John and Jason sit down to talk about Switzerland’s economy, what’s happening with China, and much more on today’s AMA show.

 

Key Takeaways:
2:00 – Germany is currently paying negative interest rates on bonds. How is that possible?
5:15 – So many people want to open banks in Switzerland that the Swiss are telling customers that they have to pay them instead of vice verse.
10:05 – Governments are keeping negative interest rates in order to stop a financial collapse.
19:30 – If you add up all the debt in the US right now, it comes out to about $2 million per family.
25:45 – The US can use their military power to get what they want, but at the end of the day there’s no reason why China and India need US dollars to trade.
32:15 – Since the 2008 crash, the world has taken on 57 trillions in new debt.
36:10 – Jason and John talk about the benefits of owning property.

 

Tweetables:

“They’re going to negative interest rates in order to keep the global financial system from imploding.”

“We now have about $2 trillion of various kinds of paper out there that trades with negative yields.”

“Since the 2008 crash, the world has taken on 57 trillions in new debt.”

 

Mentioned In This Episode:
I Like Local
Car2Go

http://www.businessinsider.com/housing-recovery-about-renters-2015-3

DollarCollapse.com
The Oil Card by Jim Norman

 

Transcript

Jason Hartman:
It’s my pleasure to welcome John Rubino back to the show. He is editor of DollarCollapse.com. He is the co-author of the Money Bubble: What To Do When It Pops. John, welcome, how are you?

John Rubino:
Great, Jason. How are you?

Jason:
Good to have you back on the show and where are you located?

John:
I’m out in Idaho. Little college town called Moscow, which is about three hours below the Canadian border.

Jason:
That’s spelled like Moscow, Russia?

John:
It is, except for some reason we pronounce Moscow, I don’t know why.

Jason:
Not to be confused. There’s no Vladimir Putin there.

John:
No, we’re not a fascist state.

Jason:
He has messed things up I’m going to say, maybe we can talk about that during the interview. Gosh, you know, there is so much going on in the financial world. It is fascinating right now. Not the least of which, I guess you’re just about to write an article on Germany is now paying negative interest rates on bonds. I don’t even know that’s a way to say that, because there are not paying, so what’s all about, John?

John:
Well, in a growing section of the world now, if you want to lend money to somebody, you have to pay them rather them paying you and there’s about 2 trillion dollars of bonds outstanding in the world that have negative yields right now and this is really extraordinary, but the background, the general..

Jason:
Let me ask you before you go on, has it ever happened?

John:
Never on this scale. There have been brief instances in the pat of certain bond having negative interest rates or negative yield.

Jason:
So, when you buy a bond, you’re effectively become a lender, you’re lending money, and so in this case what dynamic is happening? Your German bond holders are basically paying to lend money.

John:
Yeah, to understand how this happened, we have to take a couple of steps back to understand how we got here and basically what happened was in 1971 the world went off the gold standard, effectively, and at that point we broke the link between all our currencies and anything tangible. So, currencies just became fiat currencies, which means they exist by government decree or government fiat and they are valued at whatever level the government says they should be and this basically gave the governments of the world an unlimited printing press.

They were able to create as much new currency as they wanted and they didn’t have to prioritize any more. They didn’t have to decide between guns or butter, they just went for everything all around the world and so we ended up taking more and more debt year after year after year and creating more and more currency to over the debt and so we ended up with a globally grossly indebted society, you know, every major country owes way more money than it can ever hope to pay off and that is deflationary, because this debt has to be serviced, which means you have to get money in order to pay the interests on your debt which creates demands for currencies like dollars which is how most debt in the world denominated and that forces down interesting rates, because everybody wants currency so that means if you have to lend, sorry, if you’re burrowing, if you’re a good burrower, everybody wants to lend to you.

So, now people are terrified and they are looking for safe places to put their money because all of this debt out there is scary the people who have capital to invest and so there deeply attracted to the few solid places left to put money, which are the German economy is consider safe, the US economy is considered safe, a few others countries and a few major corporations, so these guys, because everybody wants to put their money with these entities are able to borrow money at more and more attractive rates year after year and it’s going negative now.

For instance, to invest in Swiss Francs, to open a bank account in Switzerland, so many people want to do that, but the Swiss are able to say, well, we’re not going to pay you, you have to pay us if you want to put money in our banks, and so that’s spreading around the world in the safe heavens. So, what’s happening is we now have about two trillion dollars of various kinds of paper out there that trades with negative yields and that’s historically unique and introduces all kinds of distortions in the financial markets because to take just one of the big ones, their whole industries out there that depend on positive interest rates to function, you know, a money market fund for instance. That’s a huge industry, multi-trillion dollars and it is based on the fact that if you give a money market fund some of your money, they pay you a little bit back in return for your funds.

Jason:
People should understand too, you know, since we’re bringing this issue up that money market funds are not insured.

John:
No, no, they own short term corporate paper.

Jason:
You can lose money in a money market.

John:
See, the money market fund doesn’t want you to know that. They want you to think of an investment. A money market fund is the same thing as owning cash, but it pays you a little bit. So, it’s like a bank account but a little bit easier to get to because you can use a money market fund to transact and stuff and so that requires though that the money market fund be able to make some money on the money that you give them and if rates are negative, which means money market funds actually have to pay in order to invest that money that you’re giving them, then they can’t pay you, and all of a sudden, they’re worse than cash. If you have your cash just sitting under the mattress, it’s not losing any money, it’s not cash flow negative for you, but in a money market in a negative interest rate environment it is.

So, that industry just implodes if that happens. Pension funds take in money from, you know, teachers or fireman or whoever with the idea that they’ll invest and then build up a nice big account and then pay back those teachers when they retire. Well, that requires positive interest rates on bonds for the pension fund to invest in and if that’s not the case, if the pension fund can not earn anything on its bond portfolio than it can’t build up a nice big account to pay out when its members retire and that’s the case for a lot of pension funds.

Now, they can’t find a new place to invest their money, so what they’re doing is they’re going after riskier investments. They can’t invest in bonds, which are fairly safe, then they’re going into stock, which go up and down and they’re going into jump bonds, which are very risky, they can go down 30-40% in a bad year and so, all of a sudden these pension funds that are kind of guaranteeing for future retirees can’t make that guarantee anymore.

So, that industry when it’s understood that’s the case is going to have to change radically and that’s a multi-trillion dollar industry and insurance company is the other one. You know, if you’re an insurance company, you’re taking money from your premium of your customers, invest it, and then you keep that money in order to pay out when your policy holders need to cash up their policies for whatever reason. Well, if you can’t earn any money, you can’t satisfied those obligations either, so your industry implodes. That’s what negative interest rates will do to big section to the financial service industry. It’s very, very damaging for a lot of people.

Jason:
Okay, but why does this situation really exist anyway? I mean, I don’t know if we really got to understanding of that, so people want to park their money. People, companies, institutions, whatever, they want to park their money and they’re basically paying for the privilege of parking it. I mean, that’s just a mind boggling concept.

John:
Well, let’s approach it in a micro-economic sense. You’re taking on all this debt and a lot of it is, shouldn’t been taken on in the first place, it’s called what’s (#27:39) investment. It’s bad paper that is going bust. You know, Greek debt, much of Europe’s debt, a lot of what was burrowed by China, a lot of the debt in the US now. This is paper that wants to default and that’s very deflationary, so the world’s governments in order to keep this bad paper from defaulting because of their past mistakes, they’re pushing interest rates down and creating huge amounts of new currency that’s flooding the market in order to paper over their past mistakes.

Well, interest rates have been pushed down year after year after year and it hasn’t worked, so what the world central banks are doing now is pushing interest rates beyond zero. They’re going to negative interest rates in order to keep the global financial system from imploding, because that is what happens when you burrow too much money. If you make money too easy, too many people start borrowing and they tend to borrow for things they shouldn’t have borrowed for, they invest in things they shouldn’t invest in, those things don’t work out.

Jason:
Everything has value based on its scarcity. That’s the general principle of economics right there and when you make it plentiful, the value declines, obviously. I mean, this would seem like economics 101 or really before that.

John:
Yeah, so what we’re doing now is creating so much new currency, you know, with quantitative easing, with government buying bonds from the open market with newly created currency that just creates a flood of new currency.

Jason:
So, why haven’t we had just massive inflation yet? In fact, until about a year ago, I mean, we had, you know, some inflation, it’s always understated, but now even those who understand the shadow states like John Williams, they’d be hard pressed to argue there’s a lot inflation right now. Can the government, you know, the US and even some other countries, not all, can they just defy gravity like this forever and how are they doing it?

John:
Basically the huge amount of debt that we took on in the past a lot of it is going bad and that’s very deflationary, because when, for instance, when a company can’t make its payments and it defaults on its debt that in effect takes money out of the global financial system, you know, the money that company had borrow just evaporates, it ceases to exist. That’s deflationary and so we’ve got this huge debt bubble bursting out there. We’ve never taken on this much debt, we’ve never seen this much debt go bad, and that’s very deflationary.

At the same time, counter acting that, we’ve got the world central banks with unlimited printing presses just shoveling money out the door and so those two very powerful, unprecedentedly powerful forces are kind of contending out there and it’s been swinging back and forth for a year or two. It looks like deflation is winning, you know, that was 2007-2008-2009 when we look like we’re going to tip into another 1930s style deflationary depression and then the central banks open the flood gates and money came out of everywhere and then it looked like we were going to tip over into some kind of inflationary spiral and now the pendulum is swinging back to deflation, but through it all, we’re taking on more and more debt. We’re creating more and more currency.

So, we’re not fixing anything. We’re just borrowing more and more money to try to prevent a catastrophe occurring because of our past mistakes. You know, we’re making new and bigger mistakes right now, but that gets us through the next election cycle or the next corporate reporting period or whatever, but it does not fix anything.

So, that’s why it doesn’t feel like it should feel based on these statistics when you see the amount of money that’s created or the amount of debt we’re taking on. Yeah, we should be in an inflationary spiral right now, but you have to look at the old debt we took on and watch what’s happening with that and that’s very deflationary. So, I think eventually the unlimited printing press triumphs the huge but finite debt collapse, so we do get some kind of currency crisis where..

Jason:
That’s a good way to put it. See, the printing press is unlimited, the deflationary forces are by definition limited. I mean, they have to be. I guess the only deflationary force that’s not limited. I mean, all the monetary deflationary forces they are, well, maybe they’re not even quantifiable exactly, but they are limited for sure. They are finite, there’s no question about it, but the only one that is maybe not finite would be the deflationary effect of technology and we’ve certainty seen that in our lives in so many ways. I mean, we’re in an amazing era of technology. I’m sure they thought that when the steam engine invented maybe too, but I don’t know. Like I wanna say, John, the famous last words of any person who is about to get themselves into trouble is, “This time it’s different.”

John:
Yeah, yeah. Well, this time it’s qualitatively and quantitatively different I have to say, because, yeah, you know, past technological revolutions have been extraordinary, but this one is amazing what’s coming. I mean, artificial intelligence, solar power, and robots, and 3D printing, they’re going to change the world in really unpredictable ways. Yeah, technology is deflationary because we allows us to get better at doing things and enables us to make things more cheaply.

Jason:
So, that’s true on the first, that’s like, that’s like the phase one of the technology. The phase one of the technology is it comes into play and it makes things easier, less expensive, more efficient, and better, right. We both agree with that, but maybe phase two of it is that ultimately that leads to a higher expectation of consumers and a higher quality of life and, you know, I’m trying, I’m wrestling with this idea, but that would seem to me inflationary ultimately and then we have to look at the employment issue with especially robotics, because that’s one a whole another Pandora’s box, but go ahead with that.

John:
So, inflation and deflation are really monetary events, okay. If you have stable money. For instance, 200 years of the classical gold standard before World War One, we had no inflation for 200 years! In fact, we had a little bit of deflation each year. Money got a little bit more valuable year after year. Prices went down just a little bit year after year and that was because one, the value of money stayed the same in terms of its supply, you know, the amount of gold in the world went up about the same rate as the human population, so the supply was imbalanced and at the same time new technologies were making things a little bit cheaper year after year.

So, we had a little bit of deflation and that’s the normal situation for a healthy society and so now that we’ve got all these inflation one year, deflation the next year, that instability comes from the fact that we don’t have stable money anymore, so we’re seeing prices of things bounce around in really strange ways, but that has to do with the fact the supply of money and the velocity of, you know, all the distortions that come from extremely easy money and really variable government policies with regard to how much they print and stuff like that. That’s just destabilizing, so if you look back when money was stable you see that steady small amounts of deflation are the normal way for a healthy society to operate. It’s not that we’ve drifted away from that, that’s because we’re making policy mistakes. It’s not anything to do with the nature of money or anything, it’s just we’re screwing up and so we’re reaping the world wind of really stupid economic monetary polices of the past 30-40 years.

Jason:
Yeah, no question about it. So, where are we going? This wouldn’t be a complete conversation at all without many issues, but certainty one big one is reserve currency status of the dollar. You know, your book is called the money bubble, what to do when it pops. So, what are your thoughts there?

John:
Yeah, well, the term money bubble refers to the fact that over the past 30 years we had a series of financial bubbles, junk bonds and tech stocks and housing and those have all been fairly localized bubbles that have happened on a bigger stage, which is the money bubble, which is fiat currencies being created in huge quantities and government debt being issued in unprecedented amounts and that’s the big bubble on which these little bubbles have come and gone and when the big one, when the fiat currency bubble pops then everything chances, because then we lose faith, you know, in the past we lost faith in junk bonds one year and tech stocks a decade later and housing, but we’re going to lose faith in our money at some point in the not too distant future and then that changes everything, because that means your bank account, your stocks in your stock brokerage account, every kind of financial account that you’ve got, everything is affected by that.

Jason:
But why do we have to lose faith in our money? I mean, it would seem that when you do the math, you’re absolute right, but as we’ve talked before I’m sure at least my listeners have heard me say before, it’s about a lot more than just math, right, because you know, when you’ve got the world’s largest military, when you’ve got the world’s largest economy, granted it’s built on a house of cards, but you know, you’ve got all of these advantages, I mean, do we ever lose faith in our money or does this can just get kicked down the road forever indefinitely?

John:
Take a few statistics first to kind of set the stage for this. If you add up all the debt in the US financial system right now and that is government debt and mortgages and the unfunded liabilities of social security and all the rest comes to about two million dollars per family of four and that’s not mythical, it’s not make believe, we as American citizens have to deal with that in some way either by paying incredible amounts of taxes or by directly writing the check for whatever. So, we’ve already reached the point where, you know, it’s hard to see how we manage that, because that’s vast more than the average family can handle and historically, see, there’s nothing really unique about what the US is doing in a historical sense, big powerful trading countries in military empires have been this way before, you know, they get over extended, they create too much currency, they can’t protect their borders any more because their military is stretch to thin.

Jason:
We don’t even want to protect our borders. That’s even scarier.

John:
We want to protect the whole world, our interests in the whole world. You know, we’ve got military bases on a 100 countries, we’ve got boots on the ground.

Jason:
Yeah, but a lot of those interests are false. They’re just basically interests that are invented because central bankers want to profit from wars.

John:
Well, see, this is what empires do though, they assume that their interests, because they’ve been all powerful for a long time, they assume that their interests are much greater then they actually are and they take on responsibilities that they can’t handle, that they can’t pay for, and then they destroy their currency in an attempt to finance things that they can’t manage and so we’re in that sense no different from the Roman Empire, which seemed eternal at the time, you know, it lasted for a 1,000 years and then it had a hyper inflation and then descended into corrupt and barbarians took over, you know, but you can go through almost any other major military and industrial empire that has ever existed and it’s all gone the same way. We’re making all those mistakes, you know, we’re borrowing too much money, we’re taking on commitments both at home in terms of the entitlement state, which grows year after year and overseas in the military empire, which leads us to intervene everywhere in the world. We think everything is our business.

Jason:
I know, it’s a completely absurdity. We gotta just get out of everybody else’s business, you know.

John:
But we’re not. We’re digging even deeper and hey, even more. So, eventually, you know, to get back to our question about how that affects the dollar, eventually the numbers become overwhelming. We would have burrowed so much and caused so much instability at home and around the world that people won’t see dollars as the safe heaven anymore. So, it’s not a question of when or it’s not a question of if, it’s a question of when.

Jason:
I’d say that you’re right when you’re doing the math, but I don’t know if you’re right when we talk about issues like, well, we can just force them to have the dollar as the reserve currency, because we’ve got the bullying power to back it up, you know? I’m not saying it’s right or fair, I’m just saying it is.

John:
But see the stuff that allows you to get to the point where something is a bubble is frequently pointed to as the thing that will keep the bubble going, but it’s frequently not the thing that can do it, you know, you can go back and look at why they thought tech stocks would keep on going up forever, but really that was, those were the reasons that tech stocks had gotten to being a bubble in the first place, but they didn’t keep it going forever and so on with all the other bubbles, well the US is, well, fiat currency in general is kind of the same thing. Yes, the US can project military power around the world and insists that somebody like Saudi Arabia only accepts dollars in return for oil, but can they do the same thing for Russia? Can they do that with China?

Jason:
Yeah, they can, actually. I think so, because I’m not saying we’re going to launch the ICBMs in Russia or China, God forbid we do that, but number one, China is not going to go too far wrong, because we’re its biggest customer. Russia is almost out of business and we’re probably doing that as a weapon of warfare with oil price declines. Basically, you know, I had one of my guests on Jim Norman who wrote a book called The Oil Card that basically his theory is that and, you know, he’s got a lot of experience in the oil industry and his theory is that oil, the price of oil is basically determined by the future markets and the US is doing this just to destroy Russia and to hurt China a little bit and to destroy Venezuela and boy, if you look at, I don’t know about China, I don’t have a comment on that one, but if you look at Russia and Venezuela, God, it’s working.

John:
Yeah, we have used oil historically as a weapon against Russia. We used it to break the Soviet Union back in Roland Reagan’s day when they cut oil. We’re trying it again. At the same time Russia is setting up a bank settlement system that is separate from the current Swift system that the world’s bank use.

Jason:
But, so what? What does that really mean?

John:
It means they can operate with their own currency without having to use dollars. They’re cutting deals with China right now to ship energy. See, to China and Russia who are basically emerging powers, our ability to use our military power, which is financed with the world’s reserve currency is a huge problem for them.

Jason:
And the boots are probably made in China, by the way.

John:
But you see this to them is not the appropriate way for the world to operate and they’re accumulating enough power, especially in the case of China and to extent India and Russia to be able to push back and so it doesn’t happen tomorrow, but it’s moving in that direction, because we’re abusing our power. How many times do we get to force down the price of oil to punish a somewhat power, but not as powerful as us, country and get away with it before they take steps to do something about it. So, they are taking steps, you know, they’re cutting bilateral trade deals where they use their own currencies. There’s no reason why China and India need dollars to trade. They each of currencies. They can do swap where they each hold each other’s currencies and then just send them back in forth in return for goods and services.

Jason:
Really, really fascinating and complicated stuff. Did you want to mention anything else about like say Switzerland for example? Because they had some big news, what was it about, four months ago maybe I want to say.

John:
Switzerland is a really interesting kind of canary in the currency gold mine where the Swiss have historically managed their finances pretty well and the Swiss Francs therefore have been a safe heaven currency. It’s where you put your money if you want it to be stable and don’t want to worry about it depreciating or anything else and so when the US aggressively starting buying back bonds and doing QE and then the Euro zone started doing the same thing, because they were mismanaging their economics and borrowing too much money and having to push down interest rates and monetizing their debts, doing all the things that an over indebted country does.

Money started flowing into Switzerland and that pushed up the price of the Swiss Currency to the extent that really hurt Swiss exporters, because they price their stuff in Swiss Francs for selling to the rest of the world. Swiss Francs goes up, that makes their stuff more expensive and was really hurting the Swiss economy. So they had to peg the currency to the Euro, which means their going to adopt Euro’s own levels of inflation going forward.

Now, that means they’ve basically just given up. Now, people in Switzerland responded to that, because they didn’t like the idea of them just inflating away their currency, so they responded to that with a referendum that would call on the Swiss central bank to start buying a lot of gold and to back their currency with gold, basically. There were a lot of provisions, but that was the basic one.

So, they had an election about that and the Swiss government and the Swiss national bank just went after these proposal, because it would really tie their hands and make it harder and harder for them to operate the way they wanted to operate, so the proposals lost, but still, it was an interesting experience to see the Swiss people attempt to bring Gold back into the center of their financial system.

Jason:
So, the fact that didn’t pass. I mean, what’s the take on that? Is it that the Swiss people would have to make sacrifices and be more responsible and, you know, they didn’t like that because of the instant gratification? What’s the vibe on that?

John:
Well, there were a couple of things. One is that there were several referendum all on the same subject more or less and there were a lot of different parts. There was so much out there, there was something in there for anybody to dislike, you know, everybody could find something in this list of new rules that were proposed that they found disturbing so gave them a reason to vote no. It was a much simpler referendum, they just said, okay, we’re going to buy back this much gold and that would have been simpler and it would have worked, probably would have passed, so there were things that were easy to criticize from almost anyone’s point of view.

The other thing is, yeah, if you tie your currency to gold, which would make it much more stable and much more rock solid than the other currencies in the world, your currencies would go up in value and that’s a problem for any country, you know, when there’s a “currency war” going on, when everybody is trying to force down the value of their currencies, if you don’t participate, your currency goes up versus those other currencies. The stuff you’re trying to sell gets way more expensive and your exports sectors drops down into a depression.

That’s what Switzerland was kind of looking at if they backed their currency with gold and didn’t participate in the currency war, so the export sector, all the big industrialists and bankers in Switzerland were terrified of that and I guess with good reason, because it’s not clear you can just surrender in a currency war. You know, if everybody else is devaluing, you kind of have to play along and so that’s the big lesson from this, which is that no body can opt out of this. The whole world is going to have to aggressively devalue your currencies, because that’s what happens when you burrow too much money.

Jason:
Yeah, it’s crazy. So, do you agree with my thesis that technology could save us all? I mean, it’s kind of like you accumulate all this debt, be totally irresponsible for five plus decades, and then you get rescued by technology. I mean, it’s certainty debatable we’ve been rescued by technology all along the way. I mean, fracking rescued us from much higher oil prices, I’d say, and gas prices, right? We’ve been rescued a million ways. China rescued us with lower consumer product prices, globalization, I mean, all these things really are enabled by technology at one form of another.

John:
Well, Jason, on one hand you could say, yeah, it rescued us in the sense that it stopped a collapsed that would have happened earlier, but in another sense you could say it enabled the worst of our natures. It allowed us to continue to increase burrowing year after year to make the problem even worse when it blows up it’s going to be much, much bigger than if we had had our come Jesus moment in 2000, right after the tech stock cash. You know, we possibly could have restructured the global economy back then to avoid protracted depression, but we didn’t and in that time we tripled our debt since then.

We’ve just kept on borrowing more and more and if technology was the thing that allowed us to do that, then it wasn’t the benefit for society. All the new things that have come along. If they kept the depression that really had to happen, because that’s the only way to get out of debt, historically, then just made it bigger out there in the future and it’s continuing, you know, we’re still borrowing huge amounts of new money. (#50:38?) company just came out with a study that said, “Since the 2008 crash, the world has taken on 57 trillions in new debt.”

Jason:
It’s insane.

John:
Yeah, it is and so there are only a couple of ways to get out of that much debt. One is to have a collapse where everybody just stops paying and they all default or you inflate your way your currencies so that you’re paying back your debt, but it’s in currency that’s worth a third as much as the original currency was. So, you know, one way or another, that’s our decade ahead. We gotta choose one of those two things.

Jason:
Yeah, we shall see, we shall see. So, you talk about inflation coming in the future how it must come and I agree with you by the way. Any ideas as to when, you mentioned the next decade, I mean, how you know, are we three to five years away to see some significant inflation?

John:
You know, I thought this game had to end in 2005. So, I’m a decade late with my prediction now, but yeah, it just seemed like the numbers didn’t work a long time ago and we’ve been able to keep it going and there are, you know.

Jason:
And they keep getting worse.

John:
Oh, the numbers keep getting much worse.

Jason:
It’s like we’re doubling down, doubling down on a bad business plan over and over.

John:
Or a more down home analogy is we’re a family who, you know, one of the bread winners lost a job, but instead of cutting back and adjusting our life style, yeah, we max out credit cards now and we still got all the stuff, we still just as good as the neighbors as we ever did, because the SUV is still in the driveway of our big house, but our credit card balance goes up year after year after year and pretty soon those teaser rates are going to jump up to 21% or whatever and at that point it’s over. So, that’s the question, when does the teaser rate jump up to a more realistic interest rate and bankrupt us? We can’t know that, because it’s probably due to some external event, you know, something happens somewhere that sets off the chain reaction and then everything falls apart, but we can’t know what that thing will be. You’ve probably seen Jim Rickards.

Jason:
Oh, of course, I’ve read all his books, yeah. He’s great, he’s great.

John
So, his analogy is the snowflake on a mountain side, you know, when there’s a mountain side that has seen a lot of snow fall on it, it’s ready for a avalanche, but you can’t know what snow flake is going to fall on what pat of the mountain side to set off the avalanche and there’s nothing special about the snow flake, you know, it just hit at the right time at the right place and so that’s the way it’ll be with us where something will happen, you know, Greece is an example of a possibility or some bank somewhere going bust all of a sudden or some other country. All kinds of things that could happen. There’s lots of catalysts out there and you know, one will happen at some point and then everything will change.

Jason:
Yeah, give out your website.

John:
DollarCollapse.com

Jason:
DollarCollapse.com. You can get the book there or on Amazon of course. You know, the thing I want to say as much as all this bad news sounds is that the strategy is long term fixed rate debt attached to commodities if the inflation comes, inflation is basically going to pay down that debt for you. It’s inflation induced debt destruction, but if it doesn’t come and somehow we continue to defy gravity then we live in a world where the only thing you can expect is yield and that’s why I still love income property, you know? So, that’s my thing, you know.

John:
Yeah, well chosen real estate tends to well.

Jason:
You gotta have it with income, you can’t do these high priced markets that are risky that don’t have cash flow. You gotta be able to outsource your debt to your tenants first and inflation second.

John:
Yeah and you have to be able to manage the property. A lot of people, I’ve noticed friends who get entranced with the idea of rental houses and things like that without quite thinking through the idea of when the toilet breaks it’s their job, you know?

Jason:
It takes a little bit of attention, but you know, the return you can earn is so much significant because it’s multidimensional. It’s not just about, you know, buy low, sell high, it’s not even just about dividends, it’s tax benefits, control, expenses you can write off, it’s like having a little side business and then you get the leverage and the historically low fixed rate debt. I mean, when are interest rates, you know, it was arguable certainty a couple of years ago that interest rates, we were already in a negative interest rate environment with home mortgages, but now I don’t think so. I think you’re actually paying your mortgage, although rental property or income property owners don’t pay their mortgage because the tenants do, you know, if you just buy a home in which you live, then you’re paying, because I do think you’re borrowing at higher rates than inflation right at the moment, but certainty that’s been debatable in recent years.

John:
In general the intellectual challenge of investing in this kind of market is both interesting and really scary because we never really been here before and so it’s fascinating to try and manage money in this kind of environment, but it’s also kind of a minefield, so I don’t envy professional money managers on the one hand and retirees on the other, because they both face some really tough decision where there aren’t extremely clear answer like there used to be just, you know, there was a mix of stocks and bonds and cash would get you through pretty well and it’s not like that anymore. So, these are really fascinating very scary times coming.

Jason:
Well, hey, thank you so much for joining us again. We’d love to have you back. You’re always interesting guy to talk to. Folks, thanks John Rubino, thank you so much.

John:
Thanks Jason.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

AMA 116 – Mobile and Digital Banking in the United States with Jay Sidhu

 

 

Jay Sidhu is the CEO of Customers Bank and his bank has just come out with a new digital banking service called Mobile Bank that can be done right from your smartphone. Jason Hartman is interested in learning more about Mobile Bank and talks to Jay about how America’s banking system is riddled with inefficiencies, Bitcoin, and more on today’s show.

 

Key Takeaways:
1:40 – Customers Bank is a business bank and Bank Mobile is a consumer bank.
5:20 – What’s the difference between Bank Mobile and Allied Bank? Jay explains.
8:45 – Jay shares his thoughts on Bitcoin.
15:40 – Jay believes the FDIC definitely has the money to pay in case a crisis happens.
22:10 – Uber is great because there’s finally some competition in the taxi monopoly and the same thing needs to happen in banking.
24:00 – How does Mobile Bank make money if they have no fees? Jay explains.

 

Tweetables:
“Banks charged $32 billion dollars last year in just overdrafts alone.”

“32 billion is three times what America spends on lung cancer and breast cancer alone.”

“I think Bitcoin can replace the real aluminum coin, but it’s not going to replace the real currency.”

 

Mentioned In This Episode:
BankMobile.com

 

Transcript:

Jason Hartman:
It’s my pleasure to welcome Jay Sidhu to the show. He is the CEO of Customers Bank and we’re going to talk about digital banking, mobile banking, and the big Wall Street banks and make some interesting comparisons today. Jay, welcome, how are you?

Jay Sidhu:
Oh, thank you very much. It’s great to speak with you.

Jason:
Good to have you. Give our listeners a sense of geography tell us where you’re located.

Jay:
We’re located in Pennsylvania outside of Philadelphia and the market we serve extends to Boston down to Philadelphia.

Jason:
Okay, fantastic. How do you define yourself? Are you, for example, are you a regional bank, a mobile bank, a digital bank, how do you define your company?

Jay:
Yes, we are actually more of a business bank, it’s a commercial bank, and we’re broken into two different divisions. So, Customers Bank, which you introduced me with is a business bank where 95% of our revenues come from our businesses and then earlier part of this year we start a consumer bank that we call Bank Mobile, which is purely a digital bank and Customers Bank, which is the business bank works very few branches, so it’s not like a traditional bank, but it’s a very high growth, very high touch, very much a personal service, so we call our strategy a high touch supported high-tech. That’s at Customers Bank and we call our strategy bank mobile, which is a digital bank more like high-tech with high touch like features.

Jason:
What do you mean when you say a digital bank? If you could define that for us.

Jay:
Yeah, it’s a very good question. A digital bank to us is where you can do all your banking that traditionally you had to go to a bank branch to do such as, open an account, get some advice, talk to a person about anything that’s important for you, be able to open any kind of banking relationship all through your smart phone, your tablet, your laptop or your desktop, so bank mobile, at bank mobile, by taking a picture of your driver’s license. It fills up about 85% of all the information that’s needed to open an account, so the other 20% is you’re ask a couple of questions and your account with bank mobile is open and the account could be a single account or a joint account and we can have, you can have a checking account, you can have a high-rate savings account, on top of it you get line of credit and lots of other features. If you’re interested, we can talk about, but it’s very revolutionary because customer’s today believe that you can buy a ticket around the world in 5 minutes, but it takes you 25 minutes after you walk through a bank branch to ever do business with a bank.

Jason:
That is true, but I would submit to you, Jay, that buying that airline ticket isn’t very easy either.

Jay:
Yeah.

Jason:
Given the way the airlines have figured out how to manipulate the consumer so much, but yes, certainty you can do it online and it’s probably a lot more convenient than it used to be. I guess we can agree on that. Now, when you talk about the digital bank, would that be the same or similar to Allied Bank, because they don’t have branches, is that, is that how you make that definition or is there some other nuance that I’m not hitting on there?

Jay:
No, it would be Similar to an Allied Bank, except is not the pure digital bank. Allied Bank, you can deal with Allied Bank once you open an account and an account opening involves also some communications like sending your signatures, sending your authentication of your ID and those kind of things through the mail and Allied Bank is principally for folks who are looking for a high rate on their savings account. So, as you know, they say no branches equals high rate, that’s Allied proposition. Our proposition is effortless banking and no fee banking and no fees whatsoever as well as high rate on your money that you are keeping in a savings account plus you get a personal banker plus you get a financial consult based upon any issue that you’re facing right now, plus you get 55,000 ATMS, now that’s similar to Allied Bank, and on top of that, if you ever want to send money to your friends or what not, you can do it totally free if you only have their email address or their cellphone and the like. These are the kinds of features that you would normally expect to make your banking transitions effortless. So, we are like a traditional bank in the palm of your hand.

Jason:
When we talk about traditional banks, I mean, everybody has always complained about all of the little garbage fees here and there and they’re so hidden and you can’t really analyze them very well. I’m sure this is by design. What is the movement in the banking industry? I’m sure you see the banking industry or at least the consumer side of it wanting what you offer and your type of plan, but what’s going out there with this? I mean, do you feel it’s kind of scammy all these little nickle and dime fees with these big banks.

Jay:
I think it’s outrageous. To give you an example why I feel that way and why I believe you are absolutely right is one example of one fee and that’s called an overdraft fee or a bounced check fee. When you add up all the money that the banks collected from consumers including those who made honest mistakes, now here I am a bank chairman CEO and even I have bounced checks in my life and it’s because everybody can make a little mistake, but banks charged $32 billion dollars last year in just overdrafts alone. That equated to, if you look at the amount of money that they advance to their customers, they equated to about 1800 percent on the money you give to the customer when you pay their check. Now, is that fair? Is charging something like 30 times than what payday lenders charge? Is that right?

Jason:
No, it’s not. It’s not right. Yeah, so when you’re saying payday lenders, those are like outrageous, outrageous rates they charge.

Jay:
You know there’s 32 billion is three times what America spends on lung cancer and breast cancer alone. 3 times!

Jason:
Unbelievable, unbelievable. Speaking of fees and so forth. One of the things the crypto currency people like to talk about is, you know, they believe this whole monetary system will be decentralized and Bitcoin or something like that will really be the future and I would love to be wrong about this, but I think they’re wrong, because I think the powers that be are so big, governments and central banks, but what are your thoughts about crypto currencies and Bitcoin and so forth. Do you see this as any significant movement or is it just a flash in a pan.

Jay:
I think it’s more of the latter, the flash in the pan and I’ll tell you why. The technology behind Bitcoin is really fascinating and that technology is based upon the technology that’s used when you play game. It’s amazing what you can see and what can happened and you get real-time impact and you can have the little symbols on your laptop or your tablet pop up and start talking to you. It’s a similar technology so that you can actually create sort of a synthetic currency and if the other party is willing to accept that, it becomes a currency, but the fundamentals of currency go way beyond that and currency has been around for centuries based upon real value as perceived by the recipient and that value is dependent upon the economic strength of the issuing country or the issuer of that currency and that can not be replaced by technology.

So, in my view is in certain cases like large funds transfer, money transfer or in certain very small instances like admittances of $5 or $100 or $50, there is bound to be a revolution because our existing system is very inefficient and the technology that’s been developed for Bitcoin will be the technology that will be used for real-time transfers of payments, but Bitcoin replacing the dollar or the euro or any other current, I don’t think it’s going to happen in my life time and I don’t think it’s going to happen in this whole century.

Jason:
Yeah, I would have to agree with you. I don’t know what these people are thinking. It’s almost like a religion these debates I’ve had with people. They have furor, these huge belief in this, and the same is trust of the gold bugs and I don’t know why they think the governments of the world and the central banks of the world would sit idly by while one of their greatest powers is just taken away from them. These are the most powerful entities the human race has ever known. They run militaries, they control so much of the entire world, and currencies are a huge part of their power. Why would they give it up? And then they say, okay, well they don’t have the answer to that one, so you can, you can answer that one in a moment, but then they say, well look at the technology of Bitcoin, well that technology is not unique to Bitcoin, yes, maybe the block chain came from Bitcoin, but it’s open source, you know, they can make a new dollar called Dollar 2.0 and it can have digital block chain technology.

Jay:
Absolutely right. It’s a little bit like the gold rush, it’s greed that’s driving the development of Bitcoin technology and they’re hoping that they’ve built a strike gold like all the, you know, the people went to the west to strike gold in a big way or to strike oil in a big way and by the time people realized that this is not the real stuff, they already made their money and they’re out spending it some place.

So, beware to rely on Bitcoin. You can buy cars with it, you can even buy tickets to stadiums to go see a football game on Bitcoin today, but I think it’s all just to try to create a differentiation in this technological field and I completely agree with you. Certain small transactions just like coins that replaced paper currency in certain ways, I think Bitcoin-type stuff, which is a digital coin, can replace the real aluminum coin, but it’s not going to replace the real currency.

Jason:
I just want to say that everything I just said about Bitcoin, I hope I’m actually wrong about it, but I’m not. I would love to be wrong about that, by the way, I just want to say that for the record. So, is there any difference in terms of the safety of ones money in a physical bank or a virtual bank?

Jay:
Not at all, not at all.

Jason:
Because it’s all virtual, really, in the final analysis isn’t it?

Jay:
It is all virtual, you know, when you put your money in a regular traditional bank. It gets shipped out of there, it’s kept in a safe, and it’s shipped out of there for the reserve or some place else and it’s moving around, it’s all a virtual currency. The main thing is that now rather than you have to go the bank, with an aide of a smartphone, the bank can come to you and you can conduct your banking. It’s a whole lot safer than relying on a postman delivering all the information about you including your name, your address, your account number, your signatures, where you spent the money the last 30 days, all the checks written behind it, and when you get the credit card statement where all you spent all your credit card transactions. Imagine somebody following that mailman and picking all of that up. That is a threat. Over here, all that information is coming to you in a secure way, in your hands, without a threat of anybody taking stuff out of your mailbox and compromising it.

Jason:
Yep, you’re absolutely right. No question about that. So, speaking of safety though, during the financial crisis, the FDIC increased insurance limit to $250,000 per account investing. If, and this is a huge question obviously, but if there is, and many people think there will be, a banking crisis in the future or a financial crisis or a Wall Street collapse or a dollar collapse. There’s so many flavors of this, but it certainty will all affect the banks in one way or another, whether it be a huge inflationary or deflationary crisis or whatever happens. If something happens and if a lot more banks insolvent, the FDIC doesn’t have the money to pay. Now, granted, the government can turn on the printing press and bail out the FDIC, but what are your thoughts on that?

Jay:
I think first of all FDIC definitely has the money to pay it because FDIC is owned by the United States government. If the United States government in this case of FDIC or in the case of all the consumers goes totally bankrupt, like you said, they can still control the printing press and so I think I would be absolutely clear that there should be no American who has any account in an FDIC insurance institution who should lose any sleep over the safety of their money whatsoever, because the day an American consumer loses their money, you might as well forget about living on earth.

Jason:
The faith in the system will be destroyed, of course, if and when that ever happens, but interestingly though, and yes, they could turn on the printing press, but if you look at it from the actual, and I can’t remember the numbers at all, the amount on deposit and the amount the FDIC has, and then I’ve read some articles where it’s compared to other types of insurance and other insurance companies and it’s been said by some that any other type of insurance would require a much higher reserve ratio to pay claims, right?

Jay:
I think they are misinformed and there is no other insurance company that is has the United States government behind it and the monetary system behind it and the monetary fund behind it. You’re talking about the dollar which is the international reserve currency. That’s why I think they’re just using scary tactics and there is no truth to it whatsoever because I know in 2009 we had a customer come in who took out a million dollars and we asked him what are you doing with it and he said, I’m going to dig a hole and put it underneath it, and guess what, that money was stolen. It’s kind of stuff is nonsense and very extremely irresponsible and there is no better place to keep your money than in a FDIC insured guaranteed bank and the reserves can be tremulously changed and (#17:50?) and they are based upon the risk profile that the government saves and that is the way the insurance system works, but the largest and the strongest insurance company in the world is the federal departed insurance corporation.

Jason:
Well, okay, so I agree with you there in terms of the backing by the government, but I was without a bailout. That’s what I was addressing, without a bailout, okay. You don’t need to be defensive about it. I mean, I’m not saying you are.

Jay:
This is a fact though. I’m sorry, but when I’m passionate about it, when people try to..

Jason:
Let me make a distinction though and this is what I was going to say, okay, is that I had Peter Schiff on the show and we all know where he stands and he’s been wrong massively. I will remind you Peter Schiff, I remember when candidate Obama was running for president the first time, Schiff said that there’s going to be massive inflation and gold is going to be $5,000 an ounce by the end of Obama’s first term. Well, he was so wrong about that, it’s not even funny, but he did say something kind of interesting about the FDIC when he was on my show and this was a while back and he says, the FDIC will give you your money back. You’ll get your money back, you just don’t know what it’ll be worth, because if they do turn on the printing press to cover claims, if there’s a crisis and all of these things are huge ifs, I completely understand that, but since you’re a banker, I wanted to ask you about it, then the money would be inflated, it wouldn’t be debased, that’s all.

Jay:
It’s always a possibilities, but that has nothing to do with losing your money. Does economic inflation and deflation has nothing to do with reserves of FDIC. So, that’s why I think inflation and deflation are the policies of the federal reserve to really avoid deflation into a worried inflation and there are controls installed by the governments of the different nations and especially the one that’s in the United States. Every body was talking about that the money supply surged that we had in the last recession or the great recession would cause a high level of inflation, well, guess what the biggest problem in the world today is deflation, risk of deflation, not inflation. So, it’s amazing, It’s amazing. Things do work! You know, in our systems and the trust in the government of the United States.

Jason:
It’s certainty not in the government’s interest to have problems or defaults or anything like that, so I completely agree with you. I’m just asking a few questions here. So, back on to the subject of whee you are, I mean, do you see, your service has been called the Uber of banking, okay, and Uber has revolutionized an industry obviously and it’s been a great thing and all of the other companies out there like Lyft and so forth that are in that business are just doing great things for people, do you see the big banks coming into this market. I mean, they must be, right?

Jay:
Yeah, I think they are saddled with inefficiencies, so the reason why Uber is doing so well and I think there’s a need to have Uber-like experiences in banking is because the Taxi medallions by having a control on the supply created a value of a medallion like in New York to be somewhere between $800,000 to a million dollar. That is like a monopoly.

Jason:
That’s unbelievable. Russian guys own all the medallions in those cities.

Jay:
Yeah, so whenever you have a monopoly like that and you have a control on the supply rather than a free enterprising system, you artificially hike the prices and you need the competitive forces to come in and make it balanced and provide the kind of benefits. So, here it is, somebody can drive a brand new clean car for five to six hours a day, provide an exceptional service to the customer and the driver who drives from six to seven hours a day he also buys his own car and he makes two times as much money as a driver off a taxi cab.

Now, that’s the benefit of technology and that’s the benefit of Uberization of the taxi field and that’s what’s needed in banking. It’s the biggest ripoff that exists in our economy that the banks are ripping off consumers because they didn’t know how to attract consumers, so they’ve built all these branches in the most expensive street corner and now they don’t know what to do about it because in their wisdom they signed leases for 15 years, guess who’s paying for it? It’s the customer’s who are paying for it. It’s the baby boomers who are paying for it and the middle income American’s who are paying for it.

I would love to see the research dollars going into cancer and into breast cancer and into vegetables and health of the country be doubled and tripled and quadrupled without any debt being going to the country rather than having the most inefficient banking system in the world. In Africa you can do more mobile banking, but mobile banking in the United States is still considered like, wow, that is crazy. That’s why we started Bank Mobile with the idea that we want to create a new revolution and we’re going to charge no fees whatsoever. That forces us to use technology to make the customer experience fantastic and provide and guarantee them if you bank with us if you don’t feel like you’re getting the top notch experience, you gotta find some place else, but you should never be charged a fee.

Jason:
It’s unbelievable. I mean, it’s awesome. So, Jay, let me ask you though, for your bank when you do the mobile banking, I mean it’s a great vision you have, when you do that, how does the bank make money? Is it simply on deposits and loans? I mean, there’s no fees at all? It’s just a clean, completely simple thing, right?

Jay:
The principle is you keep your costs low. The costs of running a bank can be very low if you don’t have branches.

Jason:
I was at a Wells Fargo branch just a few days ago and I even commented to the woman there. I said, you have all this real estate. I mean, you’ve got branches everywhere. There’s just too many of them. You don’t need this many branches. You walk in and these branches are huge and there’s no body in them. What do they do with all of this real estate? My God.

Jay:
I know Jason, they just keep charging more and more fees. They’re charging more and more fees, they’re paying less and less interest. Now, here we are as a bank, Bank Mobile pays 75 business points on savings and JP Morgan, Chase, and Cities of the world and what not, they one to five business points. What is the difference? That’s billions of dollars. The difference is it’s not just the fees, but they’re paying for the branches by paying consumers less on their savings by charging more for their loans and by charging fees. Now, is that good for the economy? No.

Jason:
You’re absolutely right. It’s just going to a very small group of banksters. Absolutely. Well, Jay, this has been a very en lighting discussion. I appreciate your passion. Give out your website, tell people where they can find out more about you.

Jay:
Okay, well it’s BankMobile. That’s an app on the app store or on Google store and BankMobile.com

Jason:
Yeah, fantastic. Jay Sidhu, thank you so much for joining us today.

Jay:
I appreciate it so much, Jason. Thank you.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

California’s Drought Hits Wallets – and Health

AMA3-28-15It takes nearly five gallons of water to cultivate a single walnut – more than it takes to grow a head of lettuce. But in drought stricken California, the water it takes for those and other fruit and vegetable crops is in drastically short supply – and that has effects far beyond the borders of the Golden State.

The entire state of California is in the throes of a drought of epic scale, with conditions ranging from “abnormally dry” to “exceptional drought” from North to South. Drought conditions have persisted for so long that even heavy rainfall does little to mitigate the problem.

California’s water shortage has many causes, some related to climate change and shifting weather patterns, others entirely due to human interventions. In a heavily populated state, residential consumption is part of the problem. According to new statistics reported by Mother Jones, Palm Springs residents account for a staggering 700 gallons of water per person per day.

In less affluent areas, consumpti0on is significantly less. Riversiders use around 300 gallons a day, and in working-class Long Beach residents use under 200 gallons a day. But although residents are warned to limit toilet flushes, restaurants are asked not to serve water unless a customer asks, and the “drought police” issue citations for watering lawns, the big consumers of the state’s finite water supplies are large corporations, industries and tourist attractions.

Fracking, mining, golf courses and Disneyland may be among the leading water consumers in the state. But a major part of California’s water goes to agriculture. The state is the little known “breadbasket“ of the United States, responsible for producing the bulk of the produce the rest of the country eats every day.

California produces 95 percent of all US broccoli, 92 percent of the country’s strawberries and 90 percent of its tomatoes. But while those crops are also grown elsewhere in the country, California leads the nation in the production of nuts. Accounting for 99 percent of all almonds and walnuts and 98 percent of pistachios, California dominates the US nut market.

And nuts take a lot of water. Drought conditions are threatening to create a shortage of almonds and push prices up for all nut sand nut products such as pistachio ice cream and almond milk. And while the drought’s impact on nut production may seem extreme, it’s just one example of the impact drought conditions in California will have on the rest of the country – and the world.

Economists expect California’s drought to push prices for most of the fruits ad vegetables America consumes every day to near record levels. That’s not counting the higher priced organic versions of these products, which are generally higher under all conditions.

It’s not just the drought that creates higher prices. The cost of bringing those fruits, nuts and veggies to markets across the country also plays a role, in pushing prices out of the reach of some consumers.

And that could have a major impact on other aspects of American life. Dietary guidelines old and new emphasize the consumption of fruits, vegetables and nuts as the cornerstone of healthy eating. All of these are rich in nutrients and healthy fats that contribute to heart health, weight loss and a strong immune system. They’re potent weapons in the fight against obesity and the leading causes of death in the US – but if they’re priced out of the budget of many Americans, that could change.

Getting Americans to eat their veggies has long been a frustration for nutritionists and healthcare professions –even in the best of times. But the higher prices caused by California’s drought could push people toward less healthy alternatives – and that, some economists fear, could have a long term effect on the health care system.

The effects of the drought may prove to be a boon for other agricultural states, though. The production of some of California’s leading crops could shift to states in the South and Midwest where water is more plentiful and cheaper. That could also draw other commercial enterprises away from California, which could boost the struggling economies of states suffering from a stagnant job market and limited opportunities.

But what won’t happen right away. It takes time for crops to grow and get to market, and for other kinds of businesses to set up operations. There may be ways to reduce the impact of California’s drought on the heath and the pocketbook of American consumers – but those changes are a long way off.(Top image:Flickr/EvgenyDodorov)

Read more from The American Monetary Association:

Wikimedia Fights NSA For Your  Civil Rights

Millennial Entrepreneurs Change the Economic Game

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Wikimedia Fights NSA For Your Civil Rights

AMA3-26-15The National Security Agency’s domestic surveillance operations hit the headlines last year to a volley of outraged objections from civil libertarians in the US and abroad. But while the news coverage has faded, the spying hasn’t – and a new lawsuit filed against the agency by the ACLU on behalf of an unlikely coalition of plaintiffs aims to change that.

As Newser reports, the new suit, called Wikimedia vs NSA, was filed on March 10 2015 by civil rights watchdog the American Civil Liberties Union. The named plaintiff, Wikimedia, is the parent of popular online encyclopedia Wikpedia and several other online “wikis,” or online information communities.

Wikimedia isn’t alone in challenging NSA’s right to spy. Joining the online information giant is a long list of plaintiffs committed to human rights and civil liberties including the Global fund for Women, the National Association of Criminal Defense Lawyers, PEN American Center. Amnesty International, Human Rights Watch, the conservative think-tank the Rutherford Institute and the Washington Office on Latin America.

The suit challenges the NSA’s domestic operations as a violation of US cttizens’ First and Fourth Amendment rights. But it also alleges that the Agency’s snooping puts the entire Internet communications structure at risk with its “upstream surveillance” practices.

In the old days, government snooping was accomplished by simpler means, such as intercepting a target’s mail, tapping phones or bugging rooms. In the digital age, though, it’s possible to expand the scope of spying on a mass scale, simply by tapping into the structures everyone uses every day to conduct business and make personal connections.

That’s what “upstream surveillance” does. The Wikimedia suit, which also names the Department of Justice as a defendant, calls it the “suspicionless seizure and searching of Internet traffic” on US soil by NSA and its related intelligence agencies. Upstream surveillance involves is accomplished by tapping directly into the physical “backbone” of the digital communications structure that connects the US with the rest of the world.

By jacking into the actual cables and routers that carry Internet communications, NSA can capture enormous amounts of data from communications while they’re in transit, either domestically or headed out of the country. The operation seizes both business and personal communications indiscriminately in a search for tens of thousands of search terms it considers sensitive.

NSA isn’t alone in this operation, though. Investigative reports revealed that ajar US telecommunications carriers were only too happy to help, making their hard and software available to the snoops – and also, their customer databases.

Wikimedia and its fellow plaintiffs charge that by tapping the “backbone” of the Internet, NSA threatens the very foundations of democracy itself. By capturing masses of data without grounds for suspicion, they say, NSA is violating constitutional protections against unlawful search and seizure, and threatening personal privacy and intellectual freedom.

That’s why Wikipedia heads the list of plaintiffs in the case, which also names the US Department of Justice for giving NSA the green light on its domestic spying efforts. Wikimedia stands for freedom of expression and information – and the expansion of knowledge. It’s those principles that NSA threatens most, they say, by compromising people’s right to privacy and the ability to share information without the fear of government intrusion.

But it’s precisely that freedom that concerns NSA and the other major players in the intelligence game, such as the CIA and State Department. The claim that free sharing of knowledge and information lets terrorists hatch plots and grow cells of followers that could one day destroy the country. Putting as many communications as possible through the sieve of red flag search terms is essential to protect the nation.

Whether those concerns are founded or not, the NSA itself fell victim to the free flow of information when former contractor Edward Snowden famously blew the whistle on its domestic spying operations. Details hit the headlines and well-publicized investigations began, shining unwelcome light into the shadows surrounding the nation’s number one spy.

As a new report from the consumer site Common Dreams points out, documents leaked by Snowden specifically name Wikimedia as a good surveillance target due to the high volume of traffic related to its sites. Now the online information collective is fighting back,  not just for the privacy of individual Internet users – but for the security and freedom of the Internet itself.  (Top image: Flickr/ju-x)

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Virtual Reality Tecnology: Big Changes for Business?

AMA3-24-15No more real estate agents? No more brokers and financial advisers and money managers? Those jobs and many others could be obsolete in the next five years, thanks to advances in digital technology that put many of their functions into the hands f users who can take full control of a range of financial transactions with the click of a mouse.

Online financial management isn’t mew. For years, a variety of websites and apps have been helping users find and buy homes, trade stocks, conduct banking transactions and more. It’s possible to browse home listings, apply for a mortgage and conduct credit checks in minutes – and get 24/7 support for all those things on any device you choose.

Advances in video and “smart” applications are pushing the envelope even farther, though, with even more sophisticated uses that promise to bring major changes to the way we do business in just about every sphere of life. Leading the way: virtual reality and artificial intelligence applications that can eliminate distance and streamline decision-making.

Some forms of VR-inspired technology are already in use. In real estate, for example, its now possible to take “virtual home tours” of properties via videotaped walkthroughs of homes up for sale on a listing site. Video technology also lets doctors consult on cases and examine patients that are halfway around the world.

But advances in VR tech make it possible for an individual to be “present” in places miles away, with a 350-degree view of surroundings in real time – and to virtually move in space. That technology has enabled fathers far from home in military deployment or other job situations to be virtually present for the birth of a child or milestone family events. It’s also allowed consulting doctors to “sit in” on medical procedures and surgeries.

Thanks to Amazon and other online retailers, the concept of the “recommendation” engine is already familiar: based on your previous choices, the site you’re browsing offers other suggestions you might like. But artificial intelligence is getting even smarter, with the potential to mine a user’s history for clues about what they’re looking for and construct an entire catalog of potential choices – all on its own.

In combination, those technologies have the potential to forever change the way the world does business – not just for large corporations or specialized industries, but for the average consumer in daily life. They have the potential to save money, reduce energy waste – and out users in control.

That could eliminate a wide range of professions that evolved to assist people in handling complex transactions that until recently, they really couldn’t do easily on their own. Take real estate, for example.

In pre-digital days, a prospective homeowner usually needed the services of an array of professionals to finalize a home purchase: agents with access to property listings, mortgage bankers, and more. The process could take weeks or even months.

Today, many of those tasks are accomplished via online listings, mortgage pre-qualifying applications ad more. And with advances in virtual reality technology, they may well be accomplished entirely online at the user’s leisure, with virtual home tours that let browsers try out the property by uploading images of their own furniture and décor, or by adding landscaping and other features to the scene.

Smart technology on the site would also store a detailed set of user preferences to make new recommendations – and initiate bids or financial transaction right from the site, without the need for an agent, broker or other third party professional at all.

These technologies are now in their early stages in a variety of other consumer and business related environments too. It’s possible now to “try on” glasses, hairstyles and even new facial feature before plastic surgery – just by uploading a photograph. The fashion world also embraces aspects of VR and AI tech to show buyers outfits and accessories before they buy – and make other recommendations based on those choices.

Widespread applications of VR and AI technology could eliminate the “middleman (or woman): in many situations, with less need for travel and professionals to bring two parties together on a deal. Since information is available to everyone, any consumer can make educated decisions about finance, commerce and more.

Advances in VR and AI applications are coming fast, putting the world of tomorrow into the hands of consumers today – and offering them more control than ever over the decisions that shape their lives. (Top image:Flickr/webtrends)

Read more from The American Monetary Association:

AMA115: Learn About The New Advances in Regenerative Technology with Patricia Cox

Millennial Entrepreneurs Change the Economic Game

The American Monetary Association Team

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AMA 115 – Learn About The New Advances in Regenerative Technology with Patrick Cox

 

Jason Hartman invites Patrick Cox on to the AMA show to talk about the Apple watch, stem cell technology, and why the FDA is holding back on amazing advances in the scientific and medical community. Patrick Cox specializes in the field of transformational technology and has worked closely with scientists all over the world. You can visit Patrick at PatrickCoxDNA.com to see him experimenting on himself and creating brand new muscle tissue.

 

Key Takeaways:
4:10 – There’s a lot of scientific advances going on, but the media has always been bad at reporting science.
9:40 – Right now there are drugs that can cure common life-threatening diseases, but the government takes a long time to approve them.
15:10 – The FDA banned a natural product that reduced inflammation and one of Patrick’s friends had a stroke because he couldn’t take the plant anymore.
22:30 – If the FDA is the problem, what are other countries doing in the regenerative field?
26:00 – Patrick gives his opinion about the Apple watch.
28:00 – Big technology companies are supporting medical companies, which can help with a lot of roadblocks the medical/science community is currently experiencing

 

Tweetables:

“The problem is that the media has never been good at covering science. The profits in big media have disappeared.”

“The SSA is underestimating our lifespans.  It would make the debt over hangings appear even worse than we think it is.”

“It was thought that damage to the heart caused by cardiac events couldn’t be repaired, but we know that is not true.”

 

Mentioned In This Episode:

http://www.patrickcoxdna.com/

https://www.mauldineconomics.com/

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Patrick Cox to the show. He’s editor of the transformational technology alert at Mauldin Economics and we’ve had John Mauldin on the show before. It’s great to be talking to Patrick about some interesting stuff today. We’re going to be talking about Apple’s new smart watch. We’re going to talk about longevity and what’s going on in that field and, you know, how this all interplays with the economy. Patrick, welcome, how are you?

Patrick Cox:
I’m fine, thank you, Jason.

Jason:
Good, good. It’s good to have you. Just give our listeners a sense of geography and tell us where you’re located.

Patrick:
I’m on Marco Island or maybe in Marco Island, which is about the same latitude as Miami. I’m on the west side of the state off the coast from Naples.

Jason:
Okay, fantastic. So, you’re in Florida, good, good stuff. What are you covering mostly in the transformational technology alert newsletter.

Patrick:
Bio-technologies, disruptive bio-technologies for the most part.

Jason:
And what’s the hot topic of the day? There’s so much going on out there. It’s really just an exciting time to be alive.

Patrick:
It is. It’s actually overwhelming. It is my job to keep track of it and I’m not sure that I do, frankly. There’s so much going on. The point that I try and get across to people is everybody knows Moore’s law. Everybody knows that microcircuits double in power at a given cost every 18 months to 2 years. Well, bio-technology is actually making faster advances. The cost of a genome is falling at twice of the rate of, genome sequencing, is falling at twice the rate as the cost of a chip.

We’re seeing this across the board and all kinds of tools in bio-technology, but we’re not hearing about the results for a variety of reasons. One is that the FDA won’t let companies involved in the research say anything, really. So, you really have to dig to find out what’s going on, but it’s worth it because it’s going to have a profound impact on everybody’s lives.

Jason:
Is the FDA just saying that would be like a forward looking statement and it’s kind of like a public company in a quiet period, is that why they’re not letting people talk?

Patrick:
Yes, that’s part of it. It’s a big part of it. The FCC and FDA are both very restrictive. My wife is a nutritional biologist and she calls this phenomenon information hoarding and just about everybody in the profession hates it, but if you’re apart of a business, you’re really restricted in what you can say, what kind of forecasts you can make.

Jason:
Okay good, well, what are some of the exciting things? It’s interesting that you say, it’s more exciting than what we’re hearing. Most people would think probably that would be the opposite. You know, they’d think, there’s all these people out there promoting their wears and trying to get attention in the market place, but it’s actually a little bit more quiet than the reality, I guess, huh?

Patrick:
Well, you know, part of our problem is the media, which has never been good at covering science, is disintegrating. The profits in big media have disappeared. I’m proud to say I actually played somewhat of a role in that. I was at Netscape when we destroyed the dominant paradigm and did away with the monopoly and information dissemination that was keeping the old media in power and now that’s gone.

As a result of that, however, the number of journalist who are covering science, even badly, has diminished. You have to read the journals, you have to be attending the conferences, you have to be talking to scientists to know what’s going on, but it’s worth it because we’re seeing true revolution in human life and the important thing to understand though it’s a continuation of a revolution that’s been going for 100 years, during which time average health spans, life spans, in North America have doubled, but that will accelerate.

Jason:
It’s interesting the distinction you just made. It maybe more important that the health span has increased so much more than the life span, because, you know, people are living healthy, active lives right up until the day the croak and now if we can increase that life span and health span, move it up another 20-30%, that would be pretty amazing. Big implications for the economy too. Both positive and negative, I’m not sure.

Patrick:
Absolutely and you’re right, it’s a two-edged sword, but the pain is largely political. Right now the social security administration is underestimating our actuarial lifespans, because it would make the debt over hangings appear even worse than we think it is. The only solution to that given a rapidly falling birth rate and a rapidly expanding older population is that we invest longer, we work longer, and all of that is possible with technologies that already exist. I’m not speculating about what’s coming around the corner, by the way. I’m telling you right now, if we had the permission to roll out these technologies, we can increase lifespans by decades.

Jason:
So, what’s stopping us from rolling out these technologies? Is it something as simple as FDA approval or what?

Patrick:
That’s a big part of it. Forbes magazine estimates that for every approved drug, the pharmaceutical industry spends $4 billion dollars. Now, some people say that’s too high and it’s only $1.5 billion dollars, either way, it’s crushing. Fortunately, the Japanese who are farther along this road, they have a much larger older population and even lower birth rates in America and Canada has just recently done away with phase 2 and phase 3 clinical trials in the area of regenerative medicine, which may be, arguably, the most important area of medicine today, stem cell medicine. We’re seeing, out of necessity, governments begin to recognize the need to start looking for cures instead of trying to stop therapies from coming to market, which is essentially what the FDA is doing today.

Jason:
Milton Friedman did some writings about the FDA years ago.

Patrick:
He was a friend of my, by the way.

Jason:
What an incredible friend to have, boy, wow. You must have had some conversations with him. Wow. I would have loved to talk to him if I could go back. You know, he did some really good writings about the FDA and what you’re saying is very reminiscent of that. Why is the FDA getting in the way like this?

Patrick:
Well, this is the nature of bureaucracy. If you know Friedman, you know the iron triangle. Bureaucracy once created doesn’t want to go away. In fact, it’s on impulses to self-interest. I mean, bring up some other economists if you look at the public choice school, George Mason, bureaucrats and politicians act in their own self-interest and that essentially leads to the institutionalization of these organizations, which have enormous power over everything that we do.

So, for instance let’s take viruses, there is a, there are several new technologies, brand new platform, completely new sciences that are off the radar. The average medical journalists are not hearing about them, DNA vaccines, and then these contragate nanomole ligand structures, which are in fact nanotech machines, either one of these technologies, both of them have been proven in multiple animal models and because they work in fundamentally different ways than the small molecule drugs, which is what we think of in terms of drug discovery and approval.
\
I’ll just tell you they were working people. These companies can’t for legal reasons, but they were working people, but instead of rushing them to market, instead of helping these companies bring these new technologies to fight influenza, Ebola, HIV, herpes, the government is obsessed with not being put in the position where they let something through that may have some side effect later on, which is an absurd position to take when so many lives are at stake.

Jason:
Yeah, it really is. So, we’ve heard a lot of talk about super bugs and the scary proposition of these bugs, you know, these viruses becoming immune or bacteria I should say.

Patrick:
They do adapt. Viruses also can adapt, but normally when we talk about super bugs it’s bacteria.

Jason:
Right, absolutely. So, it’s interesting what you said about the viral aspect. You know, of course, all we really had for viruses, so far as I know, is interferon, which is, of course, massively expensive.

Patrick:
It doesn’t work.

Jason:
Yeah, questionable too. Give us maybe your top three, if you would, your top three technologies that would extend life, extend health. I would just assume all the creators of these technologies would just be pushing, pushing, pushing the FDA to get it out there.

Patrick:
Yeah and it’s really dangerous. If you offend the FDA, there’s no telling what’s going to happen because, bureaucrats and the FDA are human, they’re no different than any of the rest of us, I don’t want to paint sort of conspiracy, but they are, many of them are really well meaning and dedicated to public health, but they are incentivized to avoid any kind of risk and what that leads to, institutionally, is way too much caution, especially in these days of personalized medicine. In the old days, you know, if you took a drug and it only worked half of the people and 20% got sick, it was failed. It was not allowed on to the market.

Today, we can take, with a small test, you can check gene expression and find out whether or not this cancer drug will work for you or not and give the drug just to those people who need it and for whom it works, but the FDA has not adjusted to the new model of personalized medicine. Cancers, there’s half a dozen new technologies that right now are paying tens of millions of dollars and waiting slowly through this swamp like labyrinth of regulatory process to get them to market, but I predict when they make it, which is in the next five to ten years, cancer will be come a minor irritation. It will be, essentially, solved. I think cancer is already solved.

By the way, since you bought up super bugs, bacteria, I think we will see clinical trials in the next six months that prove that is beating, both in terms of systematic infections, but also in terms of hospital acquired infections, there are topicals that can be used in surgery that will do away with most of them. This is a non-problem that media loves to, you know, the big scare story, and they’re incapable of looking at the science and tracking the companies that have solutions. There is one in particular that I’ve been following for five years that’s just getting very close right now.

Jason:
What’s the name of it?

Patrick:
That’s Cellceutix.

Jason:
So, that’s one. Do you have two more sort of leading things?

Patrick:
I’ll give you two more, you know, people pay me a lot of money for this, so that’s all I’m going to give you, but one, because I haven’t been able to actually include it in the portfolio, which is an alkaloid, which is being researched and moved forward by the Roskamp Institute in Sarasota, Florida. Roskamp is the world’s leading neurological research group. It was founded by Robert Roskamp who made an enormous amount of money by providing assist living facilities to mostly to Alzheimer’s patients and when he retired, I dunno 10-15 years ago, he put 100s of millions of dollars into an institute, hired two of the scientists who were responsible for the most important discoveries in Alzheimer’s and gave them probably the best equip lab in the world. I don’t know how many PhDs there are now, close to 100.

The best tools that exist, the most modern equipment, and they’ve been looking at various approaches to Alzheimer’s and someone came to them with an accidental discovery, which is an alkaloid related to nicotine called anatabine. Now, they were as skeptical as I was when they first heard this, but they did the tests and what they found was it was the most effective anti-inflammatory agent ever discovered. Nothing comes close. Nothing comes close. It knocks down CRPs and because it’s a national product, it was available for hundreds of thousands of people to use, but we know that it knocks down your C-reactive protein panels to useful levels.

So, for me, it did away with my arthritis almost immediately, changed my life. So, for four years this was available and was expanding rapidly through word of mouth for the most part. A friend of mine here on the island ran out about a week ago, he was using it, one of the effects of using it was to control really serious supraventricular tachycardia and within days of running out, because the FDA decided it was going to have to go through an approval process about 3 months ago, he had a stroke and other people are saying Crohn’s disease remanifested itself, arthritis.

This is a national product that everyone in your audience has eaten multiple times. It’s in tomatoes, eggplants, the nightshade family, the solanaceae plant family. This is a remarkable discovery, which I think is going to be worth many years of additional health span, but the FDA decided based on a study that showed, beyond shadow of a doubt, that it prevents long-term brain injuries following a concussion, traumatic TBI brain injury, that it was obviously a drug, therefore it had to be approved.

The company is in fact, the spin-off company, which is Rock Creek pharmaceuticals is in fact taking it through the drug approval process, but the FDA has apparently pressured the company to take the nutraceutical from the market in order to give them the IND, initial drug development, permission. So, now it’s off the market and it’s just a catastrophe. That’s one.

The other one, now we’ll go to the other end of the spectrum, which is stem cell medicine and that’s bio-time energy. If you’d like to see some of the stuff that they do, I have a web page called PatrickCoxDNA.com. If you go to that web page you’ll see pictures of my fiberglass skin cells taken from inside my left arms, which were engineered to become identical to the embryonic stem cells that I came from and then engineered into cardiomyocytes, heart muscles, heart muscle cells. I, in fact, have a video of my rejuvenated heart muscles cell beating in a dish in Northern California.

Jason:
You really do like being the guinea pig. This is interesting that you do your own stuff. I love it. This is great.

Patrick:
I do. I could tell you more. There’s a lot more than this, but those cells, those rejuvenated, those are essentially zero year old heart muscle cells where as my heart muscle cells are 63 years old. We know from animal studies and we know from experiments that if you introduce those cells into an aging animal, which I am, that they can graph and they express growth proteins that then repair the heart.

So, until recently it was thought that damage to the heart caused by, you know, cardiac events, could never be repaired, but we know now that is not the case. There are a number ways, GDF11 is a protein that the English scientists have proven can be used to rejuvenate the heart, but these heart muscle cells in this video were just one of many. We can essentially, bio-time, take your cells, take them back in time to become immortalized embryonic light stem cells, and then engineered them to become anything you need.

They have a subsidiary in Israel, which is working on retina fills to replace blindness caused by macular degeneration and we know that works. It’s only a matter in time before that goes into clinical trials. It could be knee joints, connective tissue, it could be liver or kidney, there really is no end to this. So, rejuvenate medicine is really the biggest breakthrough of our era.

There’s lots of more traditional kinds of medicine that I discussed before, cancers, I think Alzheimer’s we have a really good handle on. It won’t be one solution, it’ll be a number, because dementia is actually a lot of different conditions caused by a lot of different conditions of aging, but we’ll get that. So, that type 2 diabetes, obesity, all of these conditions are in fact solvable many of which with generative medicine, but that takes us to the end of hayflick limit, which is the number of times naturally that our cells can replicate. It’s about 120 times, which is why, you know, these ultra centenarians that we read about live to be about 120, sometimes 122.

Jason:
So, is it replication is only once a year? I thought they replicated, you know, every 90 days or something.

Patrick:
No, it really depends on the cell types and there are some tricks whereby the cell will replicate once and that cell will then split, but essentially you have 120 telomeres in each of your cells. When you’re a kid, when your healthy, you have no inflammation, no fibrosis, you have perfect myocardial function, we’re on the solar cycle. As we get older, as we get sicker, inflammation, and all these other factors that start to affect the way we age, then we will accelerate that process. Typically, then they will localize one organ, burn through all your all your telomeres, completely stop replication, and you’re die, but regenerative medicine can fix that. So, really what we’re looking at is the end of the traditional 120 year limit.

Jason:
Amazing. This is really interesting stuff. When do you think we’ll see the dam-break at the FDA? And if it’s FDA that’s the problem, you know, what other countries are doing this stuff and using these technologies?

Patrick:
Japan is leading the way. Japan, because they, Japan made a decision, and were criticized for it at the time, to not to bring in a bunch of immigrants, because they were afraid that these people would not assimilate. They were afraid that were going to bring people who were essentially hostiles for the Japanese tradition. At the time they were accused of being racist, etc. Now..

Jason:
They’d probably love some immigrants. They’ve got a huge demographic problem over there.

Patrick:
Well, it’s not clear that they would. I mean, they could, but they’re very selective. As a result of that, I don’t remember what their birth rate is, but I think it’s about 1.2, their population is plummeting. At the same time, their older population is growing and getting older, so they know they can not keep the promises that they have made to their older population…

Jason:
Neither can we, but we have the reserve currency so we can just print it. Yeah, that’s another discussion. I agree, I’m just joking.

Patrick:
But, they face their problem. That’s one of the reasons the Japanese have been so focused on robotics is they knew they don’t have the labor to take care of all of these older people, so they put a huge amount of money into robotics that can help care for older people once they’re no longer capable of taking care of themselves. However, that’s not going to fix everything, so they have really begun to reform to their regulatory process and started to think about encouraging important technologies rather than just discouraging them, which is what we, in essence, are doing in America and also in Europe.

wThose are beginning to change. This necessity is forcing governments, even Great Britain for example, despite the fact on the surface they have national health care program, they’re broke, and the people hate the health care system in practice, though not in theory; so they’re beginning to deregulate a lot of various different medicines that are strictly regulated in the United States. So, your question, when will the FDA reform? I think it will be shamed into it when other countries start to take business away from American and begin to pull people through health tourism.

Jason:
It makes me wonder, you know, if I should be flying over to Tokyo to get some kind of longevity treatment, you know?

Patrick:
Well, at some point, this is October 1st that these new rules kicked in, so it’s going to take a little while, but the first clinical trial for stem cell therapy is already scheduled in Japan.

Jason:
Well, before you go, just talk to us of the significance of the Apple watch. You know, this whole quantified self-movement is pretty interesting and I think we just got a huge new tool coming our way that’s going to make it even more interesting.

Patrick:
Right, my interest in..I’m really exciting about this, but it’s not specifically about the Apple watch, more it is about the entrance of Silicon Valley, the IT crowd, into health care, because, you know, I worked in Silicon Valley and I have friends still stay in contact with them, the IT world moves fast. When something is happening, people work long hours and they rush, they want to be the first to the market. So, we saw what happened when Google spinned off 23andMe, tried to push genomics, genetic sequencing, interpretation for health into the market, which is they just ran up against this wall of FDA which basically lend to disaster.

That was a good thing, because it signaled to the industry what they were up against. Now we’re seeing with Apple, they’ve already withdrawn their health app and it’s probably for regulatory reasons. I don’t think it’s actually a bug in the software.

Other people are also entering into this phase by-times in-health applications. This really interesting startup with Eric Schadt from Mount Sinai genomic center in conjunction with the Weizmann Institute in Tel Aviv, which is the master databank of all genomic knowledge. Rafael (41:56-41:57) is the CTO who built really the first search engine, Excite, and is also very well known in the Valley and is now on board with this project.

What this means is we’ve got tech folk now coming up against the roadblock of regulatory resistance and that’s a good thing, because these people don’t take no the way the medical industry does.

Jason:
That’s great. So it’s really like a new vibe, you know, it’s like the tech community is different than the AMA, which has wanted to preserve it’s monopoly, it’s business, and so forth. It’s just a whole different vibe, it’s a different mentality, right?

Patrick:
It is, Google has announced they have a new startup with one of the board members from Genentech, who says we want to cure aging. When Google wants something, they pull out the stops, which means for the first time in our lifetimes, the medical establishment has allies in this desperately important task of reforming our regulatory agencies.

Jason:
And it’s interesting because the tech companies really have something to bargain with when it comes to the government. Google can just agree to let the NSA run rampant through the servers. *Laughter*. They’ve got something to trade, unfortunately. Of course, I’m being massively sarcastic and I hate that idea, as I’m sure you do, but I just had to throw it in for morbid humor if nothing else, but yeah, it’s really interesting, it’s really interesting. Well, Patrick, give out your website, tell people where they can learn more about your newsletter.

Patrick:
Well, if you go to Mauldin Economics, there will be some link. You know, I actually don’t know the URL.

Jason:
Okay, so just the general website, Mauldin Economics. We’ve had John on the show a few times, so you guys do great work there and keep it up. This is an interesting conversation.

Patrick:
Thank you.

Jason:
Thank you.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Millennial Entrepreneurs Change the Economic Game

millennial entrepreneurs change economic gameMillennials get a lot of press lately – most of it bad. This generation of new and recent college grads keeps on making headlines for its staggering student loan debt, problems fitting into the working world, and lack of interest in traditional “adult” goals.

But many Millennials are turning those very negatives into positives, with a rising interest in entrepreneurship that could change the American economic landscape forever.

The Millennials – those born between about 195 and 2005, make up the largest demographic group n the US today. Their numbers eclipse even those of the legendary Baby Boomers born in the surge of domesticity and prosperity that followed the Second World War.

Today’s Millennials are the children and grandchildren of that famous generation, which made its own much-publicized mark on the American cultural scene by challenging traditional attitudes about sex and identity. Like their parents and grandparents, today’s Millennials face criticism from an “establishment” that sees them as selfish, uncommitted and ignorant of the protocols of adult life.

It’s true, many milennials are leaving school with thousands of dollars worth of student loan debt. Because of that, many are opting to live at home or with friends to save money. The employment picture is muddy for these new graduates, too. Many can’t find jobs in their fields – or jobs at all.

Employers complain that Millennials don’t fit the workplace. They don’t understand work culture and traditional expectations for the 9 to 5 world. They’re more likely to jump from job to job, ignore unwritten “rules” and show little interest in getting ahead. That means that as a group, they’re also delaying the traditional milestones of adulthood: buying homes, getting married and having children. That is, if they pursue the se things at all.

And just like previous generations did with the Millennials’  Boomer parents and grandparents, today’s traditionalists despair, dismissing these new grads as a lost generation with no hope of achieving what their parents did.

But do they want to? Not necessarily. Just ask Brian Maida, a New Jersey native profiled in a recent article from Next Shark. At the tender age of 27, he’s a flourishing real estate investor, who spent two years post-college living at home to save up the $14,000 that would let him buy his first property. Leveraging that investment, he bought another – and is now on track to purchasing his third rental property.

Maida isn’t alone. According to a recent Huffington Post article, 60% of Millennials consider themselves entrepreneurs – and fully 90% recognize entrepreneurship as a mentality. The reasons for these attitudes may have their roots in the 2008 housing collapse and overall economic downturn that followed, when jobs were scarce and unreliable and owning a home didn’t really offer any security for the future.

That made creating your own job a more attractive possibility – and it takes those often criticized attitudes toward work and the o-called adult world to make it work. Living at home allows new entrepreneurs to save money and incubate startups. Rejecting the stereotype of the workplace opens the door for new ideas and innovative approaches. And the Millennials’ much-publicized love of technology gives thee new endeavors global reach.

The rise of the millennial entrepreneur has implications for the US economy overall – and for the ideals its culture holds dear. Why bother with college if you can start your own company with the click of a mouse? And why bother with traditional workplace protocols when your job may well disappear in another recession?

Home ownership is at a twenty year low, with little likelihood of rising much, since Millennials choosing to live on their own are opting to rent. Many of them are skipping car ownership entirely. And marriage and family are going on hold – for many, permanently, with implications for retail, education and employment.

Entrepreneurial startups may open new doors for everyone, with opportunities for employment of a different kind and new contributions to the economy in the form of new products and services. While not all Millennials are opting to strike out on their own, the impact of a wave of entrepreneurship by people in their twenties could last for decades.

Like their parents and grandparents, the Milennisals are defying cultural norms. And like the Baby Boomers, too, the attitudes and choices these young people make have the potential to change the social and economic landscape in ways that can affect everyone – for many years to come.  (Top image Flickr/StependePolo)

Read more from The American Monetary Association:

AMA114 – The Universal Life Insurance Scam with Richard Proteau

Can Apple Turn Gold Into Profits?

The American Monetary Association Team

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