Analyzing Dodd-Frank & Institute For Global Economic Growth, Richard Rahn

Jason Hartman and Adam start off the show discussing the impact of Dodd-Frank on the US economy. Then Jason brings on Richard Rahn, Advisor to former President George HW Bush and Chief Economist of US Chamber of Commerce for Ronald Reagan. They discuss cryptocurrency and there impact on the US currency, government, and their power.

Investor 0:00
Thanks for your support. Jason, I appreciate your support and your whole network. And it’s really been very beneficial to me and, and a whole lot of others. I encourage everyone to use your resources that you have. But thanks, thanks.

Announcer 0:12
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:02
Welcome to Episode 1288 1288. Thanks for joining us today. Our guests will be Richard Ron, chairman of the Institute for global economic growth, former Advisor to President George HW Bush, and Vice President and Chief Economist to the United States Chamber of Commerce during the Reagan administration. And I think you’ll find his interview to be interesting. But first, we want to move up in time to something closer to present day. And that is Dodd Frank. You’ve all heard of this very famous or infamous, depending on how you look at it. They’ll that became law. And it’s about 2200 Ultra confusing pages, I believe. We’re going to talk about that today a little bit. I’ve got Adam here with me, Adam, welcome back. Thanks for having me. Good to have you always on the show. You had Dodd Frank so Christopher Dodd and barney frank One thing I can tell you for sure is that Barney Frank had zero so far as i know absolutely 00 degrees Kelvin the absolute zero no banking experience, yet he passed a very significant banking law. And this law real estate investors would would say that it is hampered the market. Lenders home flippers would say it has caused just havoc on their recovery coming out of the Great Recession. There are lots of opinions about it, but let’s listen to a clip from a CNBC video. They’ve got a great YouTube channel, and I’ve been binge watching on YouTube lately, Adam,

Adam 2:45
it’s Jason’s Netflix apparently.

Jason Hartman 2:47
Yeah. Well, we are in the golden age of self education. You know, we really are and if you’re not taking advantage of it, if your kids are not taking advantage of it. They’re missing out big time because you can learn so much stuff online. It is absolutely phenomenal. So here’s a little info on Dodd Frank. And we will, of course, chime in with our brilliant commentary.

Adam 3:16
And after a series of efficient Senator Chris Dodd sent to barney frank. Yes, that’s where the name comes from. President Obama signed into law in 2010, with almost no Republican support. So what’s inside Dodd Frank? And how is it supposed to prevent something like the financial crisis from happening again? Well, it’s a long and complex piece of legislation. We’re talking hundreds of pages long, that brought about the most significant changes to financial regulation in the US since the reform of the Great Depression. So how is Dodd Frank space protect you and may we bring you experts to explain.

Adam 3:56
Don’t try and create your new council made up of speak weeks from the Treasury. Secretary the fed the SEC and more. Its goal is to keep bank hedge funds and companies from becoming too big to fail. It does that by making more money on hand. And they even have the power to break up companies that are in grave threat to financial stability.

Adam 4:18
agencies such as Moody’s and Standard and Poor’s evaluate how risky an individual company or even a government is to lend to so in theory, a bad rating those investors are these debtors may not pay back their loans. But

Jason Hartman 4:31
well, how did that work out? You know, Moody’s and we did some shows on this following the Great Recession, Moody’s was I mean, I don’t know some would argue they were complicit if not criminal in their positive ratings of these companies that just turned out to be a complete mess.

Adam 4:51
Yeah, whenever I was looking this up after I heard this, whenever I have watched it beforehand, and I thought to myself, no, I’m pretty sure before the financial crisis They were viewed competently because, you know, AIG is one of the ones that people say, you know, yes, you do insurance company.

Adam 5:06
So I thought, you know,

Adam 5:08
would it have been helpful back then and so I looked it up and this is from June 2007 am best company which is one of the ratings agencies affirm the financial strength ratings of AI G. Ai G’s domestic property and casualty subsidiaries got an A plus rating their corporate AIG got a double A’s I’m guessing that said just below the a plus. So I mean, I mean, you’re basing your investing upon that you would have invested you know,

Jason Hartman 5:39
yeah, but of course, and you would have lost your shirt, and then some

Adam 5:44
of the credit agencies to me, if they’re good, they mean nothing, and if they’re bad, they mean something. Well, you’re

Jason Hartman 5:49
not a mean you’re not able to get if you’re not able to fool them into giving you a good rating, not gonna trust you. If you’ve got a good rating. Maybe, you know, this really goes Along with let’s call it the award and recognition industrial complex. You know, everything we see practically nowadays is fake, fake, fake. I remember meeting a guy in young entrepreneurs organization now called entrepreneurs organization. years ago, we were at one of their they call them universities, one of their big conferences overseas. I think this was probably the the one in Japan, if I recall correctly, or maybe it was Morocco. I’m not I’m not sure which one it was. Anyway, I was talking to this guy, we were having a drink, normal conversation group of entrepreneurs, couple hundred of them. So what does your company do? And he says, we basically help people get the JD powers award. So essentially, what you do is you go into this kind of a program, you hire an expensive consultant, and I guess that’s what what he was. And you basically learn how to get the JD powers award. Now, you know, this goes along with all of these fake awards, right? It goes and I’m not saying JD Power is totally fake, you know, none of these things are completely fake, right? But they are sort of purchased, if you will. And same with Hollywood look at the Academy Awards. I mean, I remember when Clint Eastwood won, I think he won Best Director right for Unforgiven, that movie, and most people said, the movie just wasn’t that good. But they thought it was a political thing, because Clint Eastwood had been around a long time and it was getting old. Like, right. Yeah, you know. So these various conferences I go to, there’s sometimes there’s an award ceremony and it’s just bogus. It’s just BS. Honestly, a lot of them are just, they’re just boring. Okay, I’m going to say, you know, these articles you see in magazines, all of this stuff, this media. It’s paid for. It’s not really earned media a lot of times, you know, it’s just bought, it’s all some degree of advertorial right. Even if it doesn’t say advertorial at the top of that the page or the website or wherever you’re seeing it. It’s purchased a lot of the times in some way or another.

Adam 8:20
Yeah. If you look at Moody’s said that Lehman Brothers had an A to rating which is one of the top ones, five days before it filed for bankruptcy. They actually put it on review five days before, so they said, We might be wrong. But if you had already purchased five days was not enough time.

Jason Hartman 8:36
Yeah, boy. Yeah. It’s just unbelievable. Imagine how many people their lives were completely ruined when Lehman went under. I mean, what you got to realize is we live in a super symbolic world where almost everything is just a scam. It’s all it is just the hype hype hype. All these trade magazines in our industry where you see people on the cover those covers paid for. I remember one was hitting me up years ago to be on the cover. It’s home. How much is it? You know, just a little trade magazine 30 $600. And I said, I’m not paying for that. Put me on the cover if you think I, you know, deserve to be on the cover, but I’m not writing you a check to be on the cover of your magazine. I just refused to do it. And, you know, it’s not like I’m so incredibly like, I’m some angel or something. I’m not okay. I’m just saying it’s just ridiculous. It’s fake. It’s all just fake. It’s fake news.

Adam 9:29
So yeah,

Adam 9:31
this is one of those things. You know, you might be wondering why we’re harping on credit agencies in a real estate investing show. But if you’re investing in these pooled assets, and the companies that run these things, and you know, commandment number three, maintain control, maintain control, even if you’re investing in a company who is being reported by a credit agency, and they tell you it’s good. You just never know.

Jason Hartman 9:53
Well, and it’s not even that Adam, it’s not that it’s just the company itself. It’s all of the company’s affair. The affected by, you know, it’s like throwing a pebble into a pond. Right. There’s this processional effect of all of its dealings. I mean, look at what Lehman and AIG did to the world. Yeah, it’s incredible.

Adam 10:15
Yeah. Except in the Great Recession, it was dropping a boulder into a lake. Well, fair enough. Yeah, to read a meteor

Jason Hartman 10:22
25,000 miles an hour, you know. So Dodd Frank was ostensibly designed to prevent this from happening again. But it had all sorts of unintended consequences, or maybe they’re intended, I don’t know, where investors who were doing legitimate things, real estate investors, they were out doing foreclosure rescue kind of work. All that really means is that they were soliciting homeowners who were in or on the verge of foreclosure to try and buy their properties from them or loan the money. Dodd Frank restricted these kinds of activities, it restricted flipping activities. It restricted the structure and the type of financing you could do. So, yes, fewer people ended up with these what they believe to be bad loans. But also, fewer people got loans at all. Fewer properties were rehabbed, fewer people were rescued. It’s like looking at in the old days, remember, you know if any of you took photography class, like I did in the old days where you developed film, yeah, I know, millennials, Gen Z years. You don’t know what that is. film was this thing that you put in a camera, and it was, you know, you take it out and in a dark room and the chemicals would make it come to life. Basically, and you develop the film and you had a negative and you put an enlarger, you put the negative into the enlarger, and it shine light through the negative onto the photo paper and the negative was the opposite. What was on what you’d see on the photo? Right? It was the opposite image of that. So everything that was dark was light. Everything was light. It was dark, it was the opposite. And that’s really like what I talked about how you can hear the dogs that don’t bark. And that’s what happens with all this stuff. Everyone evaluates Oh, Dodd Frank did all this good stuff, but they never evaluate what stuff didn’t happen that might have otherwise happened and been good for everybody. Nobody evaluates that because you can’t hear the dogs that don’t bark. Let’s go back to the video.

Adam 12:36
agency loans during the financial crisis raised a lot

Adam 12:39
of eyebrows,

Adam 12:41
which is why God friend gave the government you college order these loans. Now the government has authority to Audit the Fed again in the future and all emergency loans must be approved by the Treasury.

Adam 12:54
Okay, there are many types of derivatives

Jason Hartman 12:56
gone. The government ever Audit the Fed. Decima speak

Adam 13:02
about auditing the loans?

Jason Hartman 13:03

Adam 13:04
the amount of loans

Jason Hartman 13:06
that No One No One, Ron Paul who spoke at our meet the Masters conference a year and a half ago, he was behind the movement to Audit the Fed and Ron Paul was so right about that. But nobody’s ever audited the Fed

Adam 13:18
talking about automating the loans if you think they can, you know, reliably audit all of the loans that are done by these banks and agencies every day.

Jason Hartman 13:25
Come on, it’s impossible. It’s totally impossible. Listen, I’ll take you back to a prior recession. The one that happened with remember the name some of you Gen Xers, baby boomers, you’ll remember this millennials and Gen y’s Certainly not. But Charles Keating, Lincoln savings and loan. I remember when that happened. And one of the issues with that is that the government was sending in auditors to banks, and the concept of the adjustable rate loan. It wasn’t new, that point But it was becoming much more complex in the way it worked. And with the possibility of negative amortization, and all these different caps and so forth. And they sent auditors into these SNL, the savings and loans like Lincoln savings and loans to audit these lending institutions. And the auditors couldn’t figure it out. It was just too complex what they were doing. Remember, the criminals and the private sector, which are one in the same usually, but I don’t know there are government criminals, public sector and private sector criminals, just like any part of the economy, public and private sector, right. And they’re always ahead. And the regulators are always following. The law enforcement always follows except in the movie Minority Report where they had the pre crime division, but we don’t have that yet. But hey, we’re getting there.

Adam 14:51
You have to look at it as you have regular people coming in to look at professionals spreadsheets, and the only way they can fully understand it. You have the professional, explain it to them, and they’re not going to explain it to them and say, and this is all illegal, and they

Jason Hartman 15:06
explain it to them and say, by the way, you know, have you ever considered a job in the private sector? Maybe we should hire you. And then suddenly the auditor becomes very enamored of the company that’s offering three times the pay package that the government pays them, right. So it’s, yeah, it’s a whole ridiculous fake news world we live in and fake world fake awards, fake magazine covers, fake ratings agencies. Yeah, fake fake reviews on podcast. I mean, some of my competitors with their fake reviews, oh, my God, it’s just a ridiculous world. You know, here here, we

Adam 15:43
want to be stable and one that did a complete opposite. One of the more controversial things is the credit.

Adam 15:51
Say you’re getting a company, a big loan

Adam 15:54
to get all that

Adam 15:55
money back.

Adam 15:57
The company goes bankrupt. Well, that’s where the credit

Adam 16:01
Shortly before Dodd Frank swaps were regulated and the sellers

Jason Hartman 16:06
so that’s a key thing. The CBS the credit default swap. That was something nobody understood. In fact, I think I remember seeing the 60 minutes episode while we were in but after the beginning of the Great Recession, as we were in the very bad times, and they were explaining credit default swaps, and I think they explained it really well. They said it was basically a form of insurance and it was like fake insurance. Because to give insurance, an insurance company that’s a regular regulated legitimate insurance company, the government requires them to have guess what reserves they have to have a certain reserve ratio just like a bank does, so that they can pay claims. Imagine that. But these companies offering CDs is the You didn’t have reserve requirements like that they could do these swaps. And when they did them, AIG just said, Oh, sorry, we can’t pay that, in essence, the claims, so the government had to bail us out. There you go. But it didn’t actually have enough money to pay out.

Adam 17:19
Thank you, thanks to Dodd Frank these insurance products.

Adam 17:25
So when you deposit your money into a bank, you expect for it to be kept safe and sound. Before Dodd Frank.

Adam 17:34
Piggy Bank,

Adam 17:36
banks could use your money to trade for their own personal gain. Now they have to get out of that business, unless you specifically asked them to trade on your behalf. So do

Jason Hartman 17:48
all these, we need to do some more and we’ve discussed this on prior episodes, but we need to discuss the Glass Steagall act. That was the other big one that changed everything that and Dodd Frank

Adam 18:00
Rules mean we’ll never see something like the financial crisis again, the jury’s still out on that one. Supporters, the bill said has improved regulation and has made the US financial system is more stable. But critics ego prank because the Obamacare for the economy, and I’ll do it needs Americans with fewer choices, high costs and less freedom and that is first what does the future hold for an act with regulators even after five years, I’ve only completed to that job. Dodd Frank was never popular with Republicans. So it’s likely with a republican president and congress some, if not all, could be called Living its future and uncertain.

Jason Hartman 18:39
Right. So check out that video. It’s on the CNBC channel. We’ll put a link to it in the show notes. You know, it really explains it pretty well. They do a good job with that. Adam, we are selling a lot of those new properties, new construction properties in Atlanta. So congratulations to all the listeners who have purchased those. And you’ve got another one you wanted to talk about before we get to our guest right? Yes, we

Adam 19:00
had one come up in Merrillville, Indiana. And it’s a three bedroom, one bath. And it’s 1400 and 50 square feet. price point is $136,900. So less

Jason Hartman 19:11
than 100 bucks a square foot cost of construction, and it rents for $1,395. So over that 1% Mark, and we must say that as a projected rent, and all of these numbers are projections on the performance, it may be rented already, but we would still say projected because, hey, the tenant might stop paying three months after you buy it. And then that did not come true. So, you know, like, the only thing guaranteed is death and taxes, obviously, but Yeah,

Adam 19:42
go ahead. And so looking at 25% down with four and three quarter interest rate, which is very, very feasible in today’s market, you’re looking at a cash flow of $223 a month. That’s fantastic. And that’s what the vacancy rate of 8% maintenance percentage of 8% one of the things

Jason Hartman 20:00
I’m really excited about is that it this upcoming prophets and paradise event, we’re going to be property tours. You can actually tour properties at this event. We’ve never done that before this type of event. Of course, we’ve had property tours, but not with the two day conference included. So it’s going to be just a jam packed weekend. That property tour will be on Friday and we might add a second property tour possibly for Sunday evening. We’re working on that. Adam, any more news from our other investment counselors on that one?

Adam 20:27
I have not heard anything. Okay, clear speaking. It’s in the works in the width.

Jason Hartman 20:31
So stay tuned for more information possibly on a second property tour. At our Orlando prophets and paradise event go to Jason Hartman Jason Hartman to check that out and get your tickets. One last thing before we get to our guests, we are going to talk about or I’m going to talk about really, really exciting vehicle that is actually better than My favorite vehicle attempt 31 tax deferred exchange. And it’s certainly better than the highly overrated and highly overhyped opportunities own. So I think you’ll really like this, it’s a way that instead of doing a 1031, tax deferred exchange, you can literally sell your appreciated properties or your properties that even if they haven’t appreciated, if you’ve been taking depreciation against them, and you would have recapture, you can avoid most of that recapture. And it’s complicated. So, we’re going to have a whole discussion about this at profits in paradise. And you can buy new properties or not buy properties at all. You can invest in something else if you wish, just like a self directed IRA. But if you buy properties, guess what? Here’s the magic magic incredible thing. You start the depreciation clock over At the top, which is incredible, incredible, because here’s what happens when you do 1031 exchanges over the years. And this last one I did. I’ve done a few of them into this last apartment complex I just sold I sold it for $5 million, purchased it with a client of ours. And we sold that one we got 5 million bucks even for it, which was pretty good. Because we only purchased it for I think like 2.7 million. We had some fix up cost in there. It’s not quite as good as it might sound, but it was pretty darn good. It was a good deal. I thought I got to do a 1031 exchange and I’ve I’ve identified properties I’ve entered into the exchange. You know, I’m going to try and do the exchange. But my backup plan is this awesome vehicle. I’m going to tell you about a profits in paradise. If I don’t complete the exchange or if only complete part of the exchange, guess what? On the properties that I buy out of this vehicle. can start the depreciation clock at the top. I don’t have to carry out over that depreciation that was all. I’ve already run a lot of it by doing several exchanges before this. So very exciting. more to come on that. Jason Hartman live com. Adam. Let’s get to our guest.

Jason Hartman 23:24
It’s my pleasure to welcome Richard Ron. He is chairman of the Institute for global economic growth, former economic adviser to President George HW Bush, and Vice President and Chief Economist of the United States Chamber of Commerce during the Reagan administration. Richard, welcome. How are you? I’m just fine. It’s good to have you and where are you located?

Richard Rahn 23:43
I’m in Great Falls, Virginia now. Fantastic.

Jason Hartman 23:46
Well, you are a fan of cryptocurrencies and, you know, I guess it’s almost a little bit surprising. Maybe not, I don’t know. I’m a little surprised to see someone who’s, you know, worked in government and around government for so long. Be a fan of digital money. But you were working on it long before we ever heard of Bitcoin, right?

Richard Rahn 24:05
Yes, back in 1976, the great Nobel Prize winner, Austrian economist, fa hyack, wrote a book called D nationalization of money. And as a time I was fascinated by that book, because he laid out all there was no reason for money to be produced by government back historically, in private, and it got me thinking at that point, I was also an advisor to the New York Mercantile Exchange to be Commodity Exchange, and we were looking around for new things to trade. And so I had started fiddling around with idea of currency baskets for commodity baskets, based on a lot of high x work. There was a lot of problems back then doing it from a technical standpoint. And so 20 years ago, I wrote a book called The end of money in the struggle for financial privacy policy. digital money could operate. And that was before Bitcoin and the advent of blockchain, which made a lot of this possible. But my real fascination and concern is the idea of private non government monies. But of course, in the modern rule, they will all be digital and encrypted. And that’s how I how I got where I am.

Jason Hartman 25:24
Well, that’s quite interesting. You know, Richard, I can see and I’m a fan of FA Hayek, of course, but I can see how there isn’t a need for governments to run the currency. But from a government’s perspective, they wouldn’t want to give up that control, would they? And from a central bankers perspective, they wouldn’t want to give up that control. I mean, that’s an essence their biggest product. I mean, I would argue that the biggest product of any government is its currency. Feel free to take issue without but why would a government want to give up control of these things

Richard Rahn 25:59
right? They don’t want to give up control. But the idea of central banks is something relatively new in human history. The first one was in Sweden in the 1600s. But they didn’t really catch on until the late 1800s. And it wasn’t until the 1880s that the Bank of England became actually part of the government. Before that it was private. We did not have a central bank in United States until the Federal Reserve Act in 1913. Set up the Fed in 1914. And countries got along perfectly well without central banks. And central banks course gave a huge amount of power to people in government. And as you know, people in government love power more than anything. But the central banks have had a very poor track record, back when we were on the gold standard. So the world was on a gold standard, really, from 1870s till 1914. It was one of the most prosperous errors ever in the world is first error, globalization. You didn’t have periods of rapid inflation, quick recessions, they used to call them panics. But they usually only lasted a few months. And so you have actually a more stable world. And then once you have central banks, which took over from the gold centers, a period of time where you still had gold, but that’s a last 30 years, 40 years, we’ve had just strictly fiat currencies without a specific bank backing that has not been particularly well, the world monetary

Jason Hartman 27:27
order. I wouldn’t disagree with any of that. I’m just saying what would be government’s motivation to ever allow this in fact, one of the arguments I’ve made many times as much as I would love to be wrong about cryptocurrencies, but I don’t think I’m going to be the powers that be just aren’t going to let them take over in any real way. I don’t think I again, I’d love to be wrong about it, but why would they? You know, why wouldn’t they just ultimately if crypto currencies Bitcoin, etc. Got too powerful if they got to too much of a foothold, they might just make them illegal or do something to make it very difficult to trade, maybe there will be a crisis of some sort of fraud. Maybe they’ll engineer it, right? You know,

Richard Rahn 28:12
any us one little sneaky thing they do is requiring you if you trade Bitcoin, every time you make a purchase or sale, you’re supposed to record it all as a capital gain or capital loss. And so of course, the record keeping requirements here are mind boggling complex. That’s just one little thing they do. And there’s no revenue gain to government with that because it’s a zero sum game, but that’s just the kind of harassment and they all engage in. And so you’ve got the, you know, the old classic battle between those who want freedom and those in government who try to put the foot on freedom, and the struggle will go on, but I think awesomely governments will lose Because advances in encryption and with the internet and things like the blockchain, make it increasingly difficult and very costly for government to go after everybody. My view is what will happen is there’ll be many different types of what we’re broadly referred to is crypto currencies. I’m one who believes in you need to be backed by something real, rather than just a computer algorithm in a way that Bitcoin is. But there’s people trying to do crypto gold, crypto, silver, other precious metals, and so forth. I’ve got a company where we’re doing alone, but these experiments will take place, they’ll serve certain markets, and people increasingly find a ways around curses. Now, if you start to have rapid inflation again, in a way we had in the late 1970s, the movement towards crypto currencies, really the accelerated. The thing is holding it back now is the fact that we have Virtually no inflation. But that’s not from a condition.

Richard Rahn 30:03
Yeah, I agree. But

Jason Hartman 30:04
the movement that people may want it, but the government’s don’t want it there, right. So, you know, and the central bankers don’t want it. If a cryptocurrency took over what the Fed just closed and say, Oh, well, I guess you don’t need us anymore Bye.

Richard Rahn 30:19
Eventually that could happen. We take a look at the people can override the will and government. Let’s just take something like marijuana, which has been illegal all through my lifetime, but increasing numbers of people smoking marijuana. And finally, the government has been given in sort of state by state. And we can pick up other things like that, where the government that would love to control and they’ll try to but they’ll lose the battle. That’s the thing really protects our Second Amendment is the fact that it’s going to be very hard for government ever to get everybody’s gun. If we were a society, which didn’t have white gun ownership then government could easily do it. But the fact is, since we got more guns and people, the idea of government going in and take everybody’s guns is not realistic,

Jason Hartman 31:08
right. But the government has much more powerful things than the firearms we can own. Obviously. I don’t know. I mean, conceptually, I agree with you. But from a practical point of view, if the government wants to get them, they’ll get them the government’s have pretty strong adversary.

Richard Rahn 31:25
Yeah, they can target anybody. And they can target every one of us because there’s something like more than 4000 federal felonies. So as most people can go a week without committing a couple felonies.

Jason Hartman 31:38
I have the author of three felonies a day on the show. I mean, everybody’s just breaking the law all the time. Now, every single person listening is breaking laws they don’t even know exist. It’s absolutely ridiculous. So

Richard Rahn 31:49
the government can always target anybody, but the government trying to target everybody and the cost of doing this, let’s say with a crypto currency. Let’s say you’re in some foreign country. And we decided to trade whatever, buy some cryptocurrency, whether it be Bitcoin or digital gold or whatever. And if you’re doing it encrypted, peer to peer, I think government focuses on either one of us, they’ve actually could find this. But the cost of doing this, for so many transactions becomes overwhelming. And it’s a battle I think I’m at tend to be an optimist. I think it’s a battle that governments will ultimately lose. And I sure hope they do. And there’s no reason for them to have monopoly and money. Because like every other monopoly, they’ve screwed it up.

Jason Hartman 32:36
And they don’t need to have a monopoly on money and taxation at the same time, because they can simply tax everybody by inflating the currency. That’s attacks. It’s totally interesting how the IRS and the Federal Reserve came about right around the same time, within about a year of each other, to have both. It’s like this double checkmate, you know, You can have one or the other, you can have a taxing agency and tell people to pay their share. Or you can have the currency and you can inflate away the value of it. But in our case, since 1913 or so, they can do both simultaneously, simultaneously, right? Okay, so diving into the cryptocurrency side of things and the digital money side of things. Who do you think will be the winner in this game? Will it be the sort of the original Bitcoin or will it be one of the others? What are your thoughts about the huge landscape of digital money out there?

Richard Rahn 33:31
Well, Bitcoin ahead of that is being first and grabbing market share. But since it’s basically based on a computer algorithm, even though it’s proved to be unbreakable, I just become a bit of a skeptic that that can hold up over the long run. And I am one who believes that the money should be anchored in something real, that it can be totally digital and encrypted. And again, Eddie metal and precious metal and commercial metal Will do or even you could do various a culturals. I mean, hyack going back this book and 76 it’s not to be commodity baskets, which would be the basis. And it could be, and it was a lot of experiments taking place now is probably several thousand people are out there, like I am experimenting with various things, and a markets will ultimately determine. People forget that 100 years ago, at the beginning of the automobile age, we had more than 2000 different makers of automobiles in the US. It hadn’t been sorted out whether we were going to have steam driven automobiles, or electric or diesel or gasoline engines or whatever. And all these things got sorted out by the market. And then you had went down to an oligopoly, the same thing will eventually happen probably with digital monies. People will try lots of different things. And eventually, certain things will show to be better than others. And there’s no reason why you can’t have specialized courses for Certain types of transactions which may not be applicable to others, why is it

Jason Hartman 35:04
that you say Bitcoin won’t work because of the algorithm? Because it’s, you know, it’s basically a bunch of code. What’s the problem with that is that they slow processing time, and so many people use it, or what,

Richard Rahn 35:17
because the way it’s structured, the process in time will increase in the cost of that. But even though it looks unbreakable, now, something will happen. I have no idea of what, but somebody will find a way to mess it up. Because with everything, and because there’s nothing, there’s no there there. And again, I’m old fashioned. I like to be able to hold my money. And even though he said, Well, you’re doing aluminum. You can’t hold much in terms of value in your hand. But we can start around the world. And services is perfectly fine store value. Again, a computer algorithm. Well, let’s say you had a When these global cyber attacks by North Korea or somebody were sets down electrical grids are in place, then Bitcoin is dead for a while to reestablish. But if you have something real, you may not be in a transaction for some period of time, but the value is still there.

Jason Hartman 36:19
Tell us a little bit about your career, if you would, and what it was like to work in the Reagan administration, or well for the Chamber of Commerce and rigored and ministration. And then with George HW Bush,

Richard Rahn 36:31
well, I started off as a professor, and then I ran American Council for capital formation. And I got involved with the original supply side group, Laffer and some of his colleagues back in the late 70s. And ronald reagan used to say, Well, I like the rest of the season and have to unlearn the economics he learned because he learned his economics has a degree in economics before Keynes wrote his book, so here right from the beginning, but we have A group of people worked on the tax policy side. Very bright, very innovative. And it was exciting times because, you know, we’re shifting the whole economic policymaking during an 80s and early 90s, where Reagan really was interested in economics and understood it and could engage in a substantive discussion. The first george bush quickly learned nice man smart man. But he didn’t really care too much about economics. He wanted his advisors to come up with conclusions. He wasn’t interested in that much in the detail.

Jason Hartman 37:37
Yeah. The contrast that with his predecessor, Reagan. So Reagan was quite interested, right. He had Arthur Laffer, and you know, he was very into it, right?

Richard Rahn 37:46
Yeah. He clearly understood at all and it was, that was an interest. George Bush’s interest is more in foreign policies and other things right. And it just playing wasn’t interested, Sandy, bigger depth and stuff. And so as one reason the got off track, because we designed the flexible freeze, and no tax increases which ran on an 88. But equipment bad 89. And wish place? I said I’m out of here. I didn’t think it would work. And of course, it didn’t realize the recession needlessly. But those things are you love and learn? Yep, definitely. And after that I basically became much more entrepreneurial, build some businesses, and I had gotten interested in the economic transition Eastern Europe, I had some experience working in the communist countries. I end up sharing the Bulgarian transition team, and also serving as an advisor to guide our who was the first nine comments by Mr. Raja and elzar. A very fascinating years talking about the study and really, a 1990 through 94 five, and the fact that you go in there and have some influence on total economic transformation in the country was very exciting time for economists. And we’ve got a number of joint ventures during that time and brought in some us businessmen. Because my years at the chamber I knew a number of CEOs. And so we created some joint ventures and all that was very interesting. And I did that for about two years.

Jason Hartman 39:22
Yeah, no good stuff. Richard, thanks for joining us. Okay. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using, and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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