Housing Market Crisis: Causes, Data, and Future Outlook

[00:00:00]All right, the housing market is broken.

[00:00:02]And guess what? Newslash, it has been for a while now, and everybody has got various solutions that they're going to offer on either how to fix it or to give various explanations on why it's broke.

[00:00:12]The left says one thing, the right says another thing. Various people within the real estate market say something entirely different. Most real estate agents I know tell you it's always good, probably because they're trying to sell houses. But the bottom line is is that there's a lot of leading indicators right now in order to demonstrate that not only that the housing market is kind of in trouble, but it could potentially get worse. And yet there's different indicators which suggest that there could be a rebound. And it all just kind of depends on region. The bottom line is is what is the bottom line, right? Is there any way for us to be able to accurately predict what is going on? Is there any way for us to fix the wild fluctuations that have been taking place in the housing market for well quite some time now? And most importantly, how do you navigate the market as it is, not how we wish it would be? That is what we're going to discuss on today's episode of Making the Argument. I am your host, Nick Freigher. With me in the studio, my beautiful bride and co-house owner, uh, Tina, Queen of the Bees.

[00:01:06]>> Hello, everyone.

[00:01:07]>> And then, of course, we have our our potential uh, new house owner, firsttime house buyer, the Oracle of Virginia, Christian Hines. How are you doing?

[00:01:14]>> I'm really excited for this episode.

[00:01:16]>> All right. Well, we're going to dive right into it. But before we do that, we need to go ahead and let you know who helped us dive into this episode, and that is Ground News. In fact, we went over to Ground News and we started asking them, hey, where we can find articles about what's going on with the housing market. We found this one.

[00:01:30]Homebuilders navigate higher material costs, uncertain supply chains amid trade war, which, as you guessed it, is generally how the left is talking about rising house prices within the United States. But there can be no question that this is an actual factor and how we look at the cost of materials impacting the overall cost of the home. So if you want to dig in a little more on the topic of housing, then just type it right into the search bar and boom, over 9,000 stories from the left, right, and center along with links and summaries to each. Now remember, Ground News is both a website and an app that curates all the latest stories and provides you with insight into who is covering the news and why. So, if like us, you're a little tired of how other sites curate the news and want more transparency, go over to ground.news/mta and that will get you 40% off their vantage plan, which is what we use. And that's for just like $5 a month. You're going to be able to check out all of their many features and get unlimited access at ground.newsa.

[00:02:29]And thank them very much for being the primary episode sponsor this time around. Again, we love Ground News. We use it for all of the research that we conduct on all of the shows that we do.

[00:02:39]All right, let's go ahead and get into it. So, the first thing that we need to talk about here is kind of like the general perspective. I think that you you can't talk to anybody that doesn't currently own a home. I I would argue pretty much anybody under under 35 um who doesn't already own a home who feels like it's almost an impossibility.

[00:02:59]And and it's it's not hard to see why when you look at average home prices. I remember when I was a kid, right? So, when I'm, you know, 16, 17, a $100,000 house felt like an enormous amount. If you, if you were getting a $100,000 home, >> that was, you know, at a minimum three or four bedroomedroom, maybe a swimming pool, right? Like in a nice mature neighborhood, twocar garage. Like, this was just >> that that is that was what the expectation was for a $100,000 home. And obviously that is not the case right now. Now I will say that I we'll go ahead and share like our first story of buying a home. It was 2003. We were in Fateville, North Carolina, affectionately referred to as Fatnam. I was attending the special forces qualification course. We had just had our first child, Lily. And we found a >> it's 1100T >> 1100 foot threebedroom. Now think about that. 1100 foot three bedrooms.

[00:03:54]>> It had a little tiny galley kitchen with >> closetiz bedrooms. The master was decent size. It wasn't huge.

[00:04:01]>> It was like a the master was like a 12 x 12, >> but it had a master bath. I mean, >> and it had a bathroom. And then the kid the other two rooms were like 10 x 10.

[00:04:10]>> They were tiny.

[00:04:10]>> And then the um with a tiny little bathroom in between the two. And then um it had like a >> a little living room and a little dining room space and a galley kitchen with the laundry hooked to the galley kitchen.

[00:04:26]And it it had the worst duck wallpaper with little blue ribbons on the on the walls in the kitchen that I had to get off. And they had put it straight on the drywall. There was like nothing between.

[00:04:40]>> It was something of a mature neighborhood. I I wanted Yeah. But it was um and and we got that for was it 94,000?

[00:04:47]>> 93,000.

[00:04:48]>> $93,000. But what was our interest rate, babe?

[00:04:52]>> I think it was 9%.

[00:04:53]>> Yeah. 2000 2003.

[00:04:55]>> Mhm. And um and that was something at that time I was a staff sergeant in the army. Um I was getting jump pay. I wasn't getting SF pay yet. Um >> I was staying at home cuz Lily was a baby.

[00:05:07]>> Lily was a baby. And so you know we we could have we could afford that house.

[00:05:12]Um >> our mortgage was like 600 a month.

[00:05:15]>> Yeah. 600 a month. All right. Christian, you're going through the process of buying a house right now. Um what's your experience been like?

[00:05:24]It's been uh not fun. Let's put it like that.

[00:05:29]>> So, apparently after 2008, there was a million rules that were put into place, right? Because banks banks were giving out mortgages to Mickey Mouse, right?

[00:05:38]>> Yeah.

[00:05:39]>> And so, because they were much more strict about who they were going to lend to, >> it's just been the underwriting process has just been absolutely miserable. M >> it's like, "Oh, we need, you know, this list of eight things." And it takes me a week to do the eight things. And then they come back and they're like, "Now we need another five things." And I'm sitting here like, "Why didn't you just tell me that a week ago?" Like there there's a never- ending list of additional things that they need from me. So that's not fun. The other thing is is that >> um and Tina was just telling me about this right before we started the podcast, like inventory has collapsed.

[00:06:11]There's not a lot of uh houses on the market because everybody got locked into, you know, 2% mortgages.

[00:06:18]and they don't want to sell now because they feel like that, well, if I sell now, I'm going to end up with a house that's a six or 7% mortgage.

[00:06:26]>> Well, let me give you an example.

[00:06:27]>> You say that. You say that, but the chart I sent you says there's 500,000 more homes sellers.

[00:06:34]>> Yeah.

[00:06:35]>> Than there are buyers, >> but the grand scheme and and that's true. Actually, let me >> And to give you to give you an idea, too, like anybody that has gone through this process kind of understands that the interest rate is not you you think, okay, we got locked into when we bought our the house we're in now. We bought it in 2010 and we got it as a short sale.

[00:06:54]So, we got a we got a we got a good deal based off of what the price had been and then we got locked into like a interest rate under 4%.

[00:07:02]I remember when we put in an offer, we were going to move um and we put in an offer in another house and it was it was it was significantly more than the one we were currently in, but we were going to sell that one cuz that one had appreciated quite a bit. But the interest rates had now jumped up to 7%.

[00:07:19]And what was amazing was you don't truly appreciate how two or three points in the interest rate drastically increases your mortgage payment for the same house. And and so that which was uh accessible to you at a 3 or 4% interest rate is completely unaccessible to you at a you know five or 6% interest rate or a six or 7% interest rate. Like it it almost feels like night and day. And so it is important to understand the impact that the interest rates have on on the overall market. Um and and I think a lot of people have been have been feeling that because again if you bought it when you were getting that 3% you know interest rate you think well I was able to do it okay your same house at 6% you can't afford um so it is important to understand that that has a huge impact but you know it it's the other thing that's in so so again if if we can kind of all get on the same sheet of music with we're recognizing that most of us who are in the housing market now lived through the crash of like 2008 2010 time frame where like pretty much >> I mean I was a kid but >> yeah but but we're aware of what happened like I I remember where you had people just going out and they had the subprime uh mortgages.

[00:08:38]Now, it's important to understand something. Um, and and stop me if we're going to get to this later, but what if what actually led to the the subprime mortgages is important to understand because this was not something there's a lot of people on the left that say, "Oh, yeah, then you had all these greedy companies and greedy lenders and and they were trying to get as many people into the housing market as possible and they would offer you a loan that you couldn't possibly pay and then they would take your house from you."

[00:09:06]I'm not saying that didn't happen. I do think what's important to understand is that going all the way back to Jimmy Carter, they started to really push banks and and part of this was because it was considered anti-racism. It was this idea that well with redlinining and with with banks that weren't offering loans to minorities. There was this push by the federal government during the Carter administration that hey, we're going to pressure banks to give out more home loans. And then you you really saw push during the 90s under Bill Clinton because they actually threatened to investigate banks if you weren't giving out loans um or or if they saw racial uh disparities with respect to the loans that you were giving out. Now, one of the things that was interesting about that is that it turned out that minorityowned banks were less likely to give loans to minorities. And so that should have been an indication that this isn't just fueled by greed that there's there's reasons for this. Well, what ended up happening is politicians and and Republicans and Democrats are both to blame. But if you really want people uh Barney Frank and Chris Dodd were were two of the people that were really pushing this idea of well, we're going to use or we're going to use government organizations like Fanny May and Freddy Mack. And what's going to happen? Well, we're going to tell banks you need to be lo you need to be handing out more home loans because home ownership is the dream, right? And Bush was on board with this as well. Home ownership is the dream. So, you're going to push out more loans. And so they started coming up with these different mechanisms to do it. And what you've got to understand is that from the from the banking industry side and from the um mortgage side, they essentially had like over a century worth of data where they could tell you what the probability was based off of your income, based off of the type of job you had, based off of education. They could tell you whether or not you're going to be able to pay your mortgage. I mean, it was like clockwork. And this is why kind of the mortgage loan thing was was was fairly consistent. And then the government comes in and says, "No, we believe that home ownership is is a key and we want to encourage it and so we're going to come up with these mechanisms and we're going to force you to give out more."

[00:11:07]Okay. Well, if we're going to do that, here's the banks. If you're going to force us to do this, we're going to have a higher default rate. How are you going to make up for this? Oh, well, no worries. We have Fanny May and Freddy Mack and they're going to bundle these home loans. So, we're going to bundle we're going to bundle assets, subprime mortgages with standard mortgages into the same funds that then people are going to buy. And so, what we're going to do is we're going to kind of disperse the risk around the marketplace.

[00:11:32]And then there's also like this kind of underlying and because this is such a huge part of the economy, wink wink, nod nod, if something goes terribly wrong, don't worry, we'll bail you out.

[00:11:42]>> Yeah.

[00:11:43]>> Well, okay. Now you're the bank and you're thinking, "Well, I can make a crap ton of money on this by by basically offering you the loan, right?

[00:11:54]I I offer you all these sub now I'm getting money and then what I'm going to do is I'm going to bundle all of these loans and I'm going to sell it off to this government-run organization called Fanny May and Freddy Mack, which is government subsidized, and they're going to buy the loan from me. So, I made my money upfront and then I'm going to offload all the risk onto these Fanny May and Freddy Mack guys. Now, this is a very very oversimplified explanation, but it's not it's not incorrect. And so, you can say, "Well, the banks were greedy in the way." Okay, but you told the bank that you have to engage in a business practice that doesn't make sense for their industry. They're now finding ways to do it. Did they find some pretty shady ways? Oh, yeah. What was what was the name of each what was the name of the interest rates that like gradually >> our mortgages >> our mortgages right adjustable rate mortgages. So it was this idea that oh no no for the first three years you only pay this rate and then it jumps up to this rate. Well again for a first-time home buyer they're looking at that going oh I can afford this nice big beautiful home. Yeah. Until three years into it. I I actually have a story.

[00:12:56]>> That's their fault. be and the reason why is like we want to we want to make all these banks the bad guys and stuff but when you take on a loan and you budget it into your budget and you go yes I can pay this loan and you know that that interest rate can go up by x% per year after this point you had people who they started off paying like 1,100 a month and they're like yeah I've got this big old >> 3600 square foot house and um and and I'm paying 1,100 a month and they're not even thinking. They think the market's so hot right now that I'll just sell my house before the three years is up. I'll just sell it and I'll I'll get to live in this house for three years for 1,100 a month. Then the market kind of crashes and now their mortgage went from $1,100 a month to $4,000 a month and they're stuck with the house and can't sell it now because the market's screwed. Yeah.

[00:13:56]>> And I mean, there were so many things wrong with the way that they did it. And we watched people drop like flies left and right, losing their homes, defaulting on their mortgages, um, short selling, everything else. And I mean, >> so it's it's important to understand all that to say, the whole housing market crisis that happened in the in the early 2000, first decade of the 2000s did not just happen because all of a sudden people got greedy. It it happened because the government decided to push a particular a particular agenda. They put tax dollars at it. They they pushed interest rates into a thing. They they pushed mortgage uh companies to do various things that encouraged builders to do various things. So there was there was >> they use the magic word discrimination in order to push it. So there there was so many factors that that played into why this took place because and and the reason why I think that's so important to understand is because a lot of the times when people offer solutions to this it's very very easy to point at whoever whoever seemed to have benefited from it and be like ah their fault when in reality it's no there's a lot of blame to go around on this to include a blame of personal responsibility. No don't take out a loan you can't pay.

[00:15:12]>> Yeah.

[00:15:12]>> Okay. banks who who came up with lending schemes that didn't make a lot of sense.

[00:15:16]Um, >> interestonly loans too.

[00:15:18]>> Interest only loans. And and then but the biggest one the one that the catalyst for all of this was the government trying to make it easier for everyone to own a home. And if you don't under if you do not respect that that was the catalyst. That was the thing that pushed this. that was the thing that made all this other stuff possible and you just blame who you kind of want to because it makes you feel good then you're not we're not going to be able to correct for the problem. All right. So that's that kind of leads up to where we are today. So I mean are we going to kind of look at the data behind the current?

[00:15:53]>> Yeah. So before we jump into that I I had a brief story that I wanted to tell you guys. Mhm.

[00:15:59]>> When my parents moved out here to Co Pepper 20 years ago, they were also sold on an ARM mortgage, but they ended up not getting it because they kind of realized the problem inherent to it.

[00:16:11]I've been sold on AR mortgages and the process that I'm going through here. And you know, it's it's the same idea, right? It's like, well, you get a lower rate now and it'll be fixed for a few years and then it'll adjust if it goes up or down, but you can always refinance. And I just sh every time that it was recommended to me, I shut it down because I remembered 2008 even though I was a kid back then.

[00:16:30]>> And the problem with the our mortgage was it was this assumption that interest rates were just going to perpetually fall forever.

[00:16:38]>> Yeah.

[00:16:39]>> Because it was like, oh well, get in on this mortgage now. You don't need to worry about the interest rate adjusting in 5 years because rates will fall and home prices will go up and then you'll be able to refinance. But if you go back and you look at like the Fed fund rate or the 30-year mortgage rate, and we're going to show these two charts in this podcast, what you ended up seeing was is that after 2005, the 30-year mortgage rate actually started to go up. And so, nobody could refinance because what?

[00:17:05]You'd be refinancing at a higher rate.

[00:17:06]Well, you didn't need that. You needed a lower rate to afford a fixed rate that you could actually meet your monthly obligations to. That's the whole reason you got in on the ARM mortgage in the first place. And so when interest rates were going up from say 2005 to 2008, that was building the pressure that eventually was one of many contributing factors that led to the the great financial crisis because you just had this rolling over of people that by the time you got to 2008, 3 years had already passed. And so all these people that were getting in on mortgages back in 2005 were just were going into foreclosure basically. Well, it's it's interesting that the the people that were pushing this sort of like these loan schemes and the government getting involved, probably the hardest in Congress were Barney Frank and Chris Dodd. And then when it all collapsed, guess who collapsed? Guess who came up with the new regulations on banking to prevent these evil banks from doing this again? Barney Frank and Chris Dodd. It was it was the you know, I think it was what it was the DoddFrank DoddFrank bill, right? And they blamed it all on uh shady banking practices. was like, "Are you are you serious right now? The the two people that the two people that are probably most instrumental within the political sphere of helping to cause this problem are now going to be the ones to come back and try to fix it."

[00:18:21]And and yet that's exactly how it went down. And so what is the what what is the nature when we talk about we we kind of that that gives you an explanation of why certain things broke last time. What explains why it's broke this time? Well, here's a good example. This is our home county right now. Yeah, this is Co Pepper County on Zillow. And this is the cheapest single family home on the market right now in Co Pepper County.

[00:18:48]278,000 >> for a three bed, one bath, 1,50 square 56T home.

[00:18:54]>> Yeah. Oh, boy. Ain't ain't she a beauty?

[00:18:58]Oh, man. And I I I love the damp ceilings and >> definitely the carpet >> dated kitchen and dated appliances and Oh yeah, it looks great, right? Like and again this is the cheapest this is the cheapest house for sale in Co Pepper County. Now >> you actually got a decent size yard.

[00:19:16]See, okay. I look at something like that and I get what you're saying on that, but like you can make that with a little bit of investment. You can make that totally.

[00:19:25]>> The point is it's the cheapest house for sale in Co Pepper right now.

[00:19:30]>> Yeah, that's crazy cuz I used to see even just last year I saw stuff in the, you know, 190s or 180s.

[00:19:37]>> I mean, if you keep scrolling down here and I just I'm not going to go through the whole list. I'm not going to Zillow.

[00:19:41]The whole podcast is not going to be Zillow doom scrolling.

[00:19:45]just the county.

[00:19:45]>> I have everything but lots and lands.

[00:19:47]>> Wow.

[00:19:48]>> Yeah.

[00:19:48]>> And and this is everything that's for sale in our county, our home county. So, I mean, look, 315 for not even a,000 square feet. And, you know, it's a bit of like a flipper job. Although, notice how they're starting to cut prices, but still they're cutting prices and it's over 300. So, my point is you can't get a box, >> a thousand square foot. I mean, this one.

[00:20:06]>> Well, wait. Go down to 315,000 again. I want to illustrate something. So, when we got our house as a short sale in 2010, um wasn't a huge house. It was an unfinished basement, but it was on 10 acres, um it was a 3bedroom, 2 and 1/2 bath on 10 acres, and it was 315,000.

[00:20:25]This is a 3-bedroom, one bath, 933 foot, and I'm guessing on a little lot.

[00:20:30]>> Yeah, it's a bit of a flipper job. As you can see, they've got the millennial gray going on here.

[00:20:33]>> Yeah, it's on it's on a little lot. Um and and that's >> Yeah, they've gone full millennial gray.

[00:20:38]>> Yeah. I mean it it's it looks fine flip >> job. Yeah, they they've definitely they've definitely put work into it, but 800 ft² lot.

[00:20:46]>> Yeah. The whole the whole lot, right? Is so that was the same price that you were able to get as a short sale for for again a three-bedroom, 2 and 1 half bath on 10 acres and with a finished basement, you can turn it into like, you know, a fourbedroom or or whatnot. Um but yeah, so obviously there's there's been a lot of changes in in 15 years.

[00:21:07]>> Yeah. Well, when we moved into that house, now keep in mind it was a short sale. So, um I actually found the paperwork in the house from when the gentleman before us bought the house and he bought it for like 530.

[00:21:20]>> Yeah, you about $530,000.

[00:21:23]>> So, where we are right now, you really can't get your foot in the door.

[00:21:30]I mean, unless you want to live in a very small less than thousand foot house, you really can't get your foot in the door for really like under 350.

[00:21:38]>> Mhm.

[00:21:38]>> And so for a lot of people that are starting out like well 350 I remember growing up for you said 100, right? For me I remember growing up and thinking like anything north of 300 let alone you know 400 that's a really expensive house.

[00:21:54]>> Yeah. And here in Cole pepper, that's normal or even below average in terms of what's on the market right now.

[00:22:01]>> And to give everyone an idea, co pepper is not like in a in a an especially wealthy area. We're not Lowden County or or anything like that, >> but we are a little bit influenced by the Northern Virginia housing market. It is hard cuz it's a it's too we're a little too far from you know the beltway to be a bedroom community but people try it and and one of the reasons I think why some of our pricing pricing has gone up is because for the last 5 years people have been able to work from home uh 3 days a week and they only have to commute two days a week. Well now it's within range. I only got to go in twice a week and I can live in Co Pepper County and they have caused the >> the prices to go up.

[00:22:46]>> And you know what's interesting is is you know we have listeners from all over the I mean we actually have listeners in other countries but within the United States we have listeners almost in every single state and we also have a decent Canadian audience and they have an even worse housing crisis than us. That's a whole another topic. But when you look at like the national numbers >> Yeah. Let's look at the median for >> there. Yeah.

[00:23:08]>> So, the Federal Reserve for some reason loves rectangles with their charts. So, if you scroll over here, >> what you end up seeing is, you know, we start in the 1960s and it's $18,000 for a median sales price in 1963. But when you scroll over to, you know, the modern period, >> look at it today.

[00:23:25]>> Yeah.

[00:23:26]>> It's 410,000 almost 411,000. It's actually come down since the peak in 2022 when it was at 442 almost 443,000.

[00:23:35]Yeah, we we Yeah.

[00:23:37]>> And so home prices haven't really dropped. And look at where they were right before the pandemic.

[00:23:42]>> Here's where they were in 2019. Remember when I said like 350,000 I thought was like a nice house? Well, >> the median home price in 2019 was 327,000.

[00:23:53]And look at what's happened since co what's interesting. I think some of this is because suddenly everybody started working from home and so they were like I'm going to buy this house because of co people were working from home so they thought I'm going to buy this house in a rural area and so then they all started buying these houses and but I actually think we're on a downward trajectory from 2023.

[00:24:17]>> Well wait wait wait a second wait a sec before we get too far ahead of it. The bottom line is here's what's interesting about this. If you look at 2020 right?

[00:24:23]So interest rates were kind of around an all-time low going into 2020 and then they had to they had to go up as a result of inflation. Um and so typically what happens if you see interest rates going up you you see people's capacity for both building and buying homes go down. But you >> that is the interest rate chart that I've now pulled up to show the audience too.

[00:24:43]>> Yeah. So you and if you go back to the early 1980s, right, it capped out at 18, you know, 37% or 53%. There you go.

[00:24:52]That's where my parents bought their house.

[00:24:54]>> Yeah. So, I mean, massive, massive, massively high interest rates, but when you 2020, interest rates started to go up, but so did the housing market.

[00:25:03]>> And and again, you you had a kind of a once in a-lifetime phenomenon with with COVID and the economy starting to open back up after CO.

[00:25:12]>> And so, you you can kind of see these two things happening in in parallel, which don't typically happen. uh as as interest rates are going up typically you're you're not necessarily a seeing a hot housing market at the same time and yet that that is what was going on in you know >> after 2020.

[00:25:29]>> Yeah.

[00:25:30]>> What's so interesting is when you look at the long-term uh scheme of things Yeah. So you have Paul Vulkar here in the 1980s he was the former chairman of the Federal Reserve raised interest rates to you know the Fed fund rate was like 15% or something like that and mortgage rates >> you're going to have to explain. You can't just throw out Fed fund rate.

[00:25:46]>> Okay. So the the Nick reminded me of this. This is my fault. So, so the Fed fund rate is the interest rate that the Federal Reserve kind of sets for the government basically on an overnight basis. So, if you're interest payments, >> yeah, if if you're like a giant bank or something like that, you can kind of park your money in the Federal Reserve and get paid an overnight interest rate and on a yearly basis, it would be whatever the Fed fund rate is. But the vast majority of individuals and businesses and just entities don't have access to the Fed fund rate. That's kind of considered a floor.

[00:26:21]>> Yeah. But >> you get that if you're the federal government or like maybe JP Morgan.

[00:26:26]>> Yeah. But what's so interesting is is the Federal Reserve controls what's called the um short end of the yield curve, not the long end of the yield curve. When when I say yield curve, I mean basically the interest rate over over a period of time. So when we say short end of the yield curve, we're talking about interest on loans that are say um less than 10 years in length.

[00:26:49]>> The long end of the yield curve is anything like your 10-year Treasury, your 30-year Treasury, and those are the things that influence car loans, mortgages, personal loans, businesses that want to um you know, start out take on a loan to to get started. Most Americans are borrowing from the long end of the yield curve, but the Federal Reserve, they can set whatever they want on the short end of the yield curve.

[00:27:14]They don't really have control over what the long end of the yield curve is. And so when I said that, uh, you know, Paul Vulkar, who was the chairman of the Federal >> and the way, again, the way for everyone to think about it is they have a lot of control over the the short-term interest rates. They do not have a lot of control over the long-term interest rates.

[00:27:30]>> Yes. Most people usually are borrowing from long-term interest rates, not short-term interest rates. Sometimes you can get in on on short-term, but it's it's the average person is is borrowing long-term. And so when Paul Vulkar was the chairman of the Federal Reserve in the 1980s, we had massive inflation because of the the Carter administration.

[00:27:50]The 70s were a mess. And so he just hiked interest rates just insanely high and crushed inflation. Mhm.

[00:27:57]>> But what that did to mortgages was is that people were paying 18% mortgages in 1981. That was manageable though because home prices were relatively reasonable in the 1980s, right? I mean, in 79 they were $62,000 and today again they're over 400,000.

[00:28:17]What's so detached from the historical norm is like you said, when interest rates are going up, home prices should be coming down. And granted, home prices have come down since they're high in 2022, but they're nowhere close to here, right? Where they were from, say, 2017 to to 2019 or 2020. They they've you see this jump right where right before co it went from 317 for the median home to all the way up to 442 for the median home and it has not come down. At the same time though that in the again over the long-term period you had you had a 40-year period of falling interest rates just perpetually falling interest rates for mortgages from 1981 all the way to 2020 when they finally bottomed out at you know basically 2 and a.5%. But since then they've jumped and now they're at 6.74%.

[00:29:13]And you have so many people that are like, "Well, I can't afford a house right now because interest rates are so high."

[00:29:21]But they're actually not high in the long-term picture of things, right? If you I mean, interest rates right now are basically where they were like in in 2006.

[00:29:32]>> Yeah. and and they're actually lower than where they were in the 1990s.

[00:29:36]>> Christian, you know, you were saying that >> but the prices are so much higher.

[00:29:40]>> Okay. But you were just saying the prices haven't come down since. And here's the thing is that's technically wrong. Prices has come have come down 10% in 3 years, >> but they're nowhere where they were in 2019.

[00:29:54]>> Of course, they're not. But to say they haven't come down, we're only at the beginning of watching them come down and 10% in 3 years.

[00:30:02]>> Well, well, that's >> it. That is down. That is coming down.

[00:30:07]>> So, put it this way. Let's not look at it from the perspective of how much are you paying in terms of your mortgage in 1981.

[00:30:16]>> Well, it was a lot because you were paying 18%.

[00:30:18]>> Yeah. But most people understood that was a temporary measure, an extreme emergency to fight inflation and that rates would not permanently be 18% forever. So there were a lot of Americans that actually confidently bought houses in the early 1980s even though they were paying enormous interest rates because the the sticker price was cheap >> and they knew that rates would eventually come down and they would be able to refinance. And I I showed you here with the 30-year chart that that's what happened for a 40-year period.

[00:30:47]rates fell from 81 all the way to 2020.

[00:30:50]And so you had an entire generation of mostly boomers that were able to continuously refinance at a lower rate for a 40-year period. So they had massive upswings in terms of equity because they could buy an expensive house, eat the expensive interest rate at first, and they could under they knew that well in 5 years I would refinance at a lower rate and if I really wanted to in another 5 years I could refinance again at a lower rate. And you could do that for a 40-year period. Your whole lifespan as an adult investing into the housing market, you could do that. And so this number, mortgage payments, look at this, from 1981 all the way to 2012, it just kept dropping.

[00:31:31]>> Yeah.

[00:31:31]>> And even from 2012 to 2020, it didn't really rise a whole lot. At the same time that the housing market itself massively appreciated from 1980 to 2020.

[00:31:42]Look, it went from 64,000 in 1980 all the way to well, I mean, that's when it started to crash, right? All the way to 329,000 at the start of >> coh.

[00:31:52]>> That's a massive gain at the same time that interest rates are dropping. So, you can afford a more expensive house because the mortgage expense is falling. And it goes back to what you're saying that like people don't really appreciate how much of a difference a 1 or 2% interest rate makes.

[00:32:06]>> But now look at what's happened. I mean we're it's exploded since then. The the amount of mortgage um payments that somebody is making has gone up even though home prices haven't really dropped a whole lot. So for a lot of people that haven't gone in on the housing market and didn't really get to benefit just because they weren't old enough for a 40-year period of falling rates, they feel like that they're just getting screwed right now.

[00:32:29]And I understand it because you can say that like, well, home prices have dropped. Have they dropped to where they were in 2019? No, they haven't. But interest rates are significantly higher than they were in 2019. And so something is broken is what I'm trying to get across.

[00:32:43]>> Well, and the interest rates aren't even that high in comparison to what generations before us had. And that that's just it is everybody got used to these almost 0% interest rates for a period of time and and got totally spoiled on that. Well, >> I I remember like my my parents bought their first house back when not only Yes. So the houses were the their their house I think on Honey Run was probably like in the 70s when they 70 something thousand when they bought it um at with a very high interest rate, right? And but you're talking people made 20 grand a year.

[00:33:24]>> But you know what? If you're making 20 grand a year, it's a lot easier for you to put 20. Remember, this chart shows 20% down.

[00:33:31]The number of people that could put 20% down, even in the 1980s, is significantly higher than today. Because putting 20% down on a $50,000 house is only $10,000. Putting 20% down on a $500,000 house is hundred grand.

[00:33:47]>> How many zoomers out there have 100 grand to drop on a down payment on a house? Or even young millennials for that matter? Like that? Well, can this is this is also where we need to talk about some of the other factors that go into this because >> yeah, a huge number of these people already have overextended themselves on student loans as well.

[00:34:04]>> No, they absolutely there there there's no there's no question that the the student loans have also become a big issue and in eating away at dispensable income or or disposable income or or their ability to save or excuse me invest. Um I I think that when when we when we talk about the overall impact that inflation has on the economy when when the government is printing out all this money, it's it's doing a variety of things that we have discussed on a number of episodes. The big thing that it's doing is it's decreasing the value of your dollar. So if you're someone that is, you know, based off of wages, if you're someone that's b if you're saving money to put it down on a house, inflation is essentially eating your savings out from underneath you. It's a it's a hidden tax. At the same time that that's taking place, whenever whenever people that understand what inflationary monetary policy does to the economy, what they start doing is they start buying assets, right? You don't want to keep your money in dollars if the value of the dollar is decreasing. You want to take your dollars, spend them as quick as you can. And one of the things that has always been a stable long-term investment has tended to be real estate.

[00:35:09]But here's another thing that we need to understand about what artificially manipulating interest rates does. And this is going to take a little bit of a explanation, but it's really important to understand because interest rates are not just these arbitrary things that the Fed plays with. Okay? The way interest rates are supposed to work in a in a market economy is people invest. They they save their money. They put their money and they put it in the bank, right? And so that money that they put in the bank with respect to savings or whatever else it might be is money that they're not spending now but you figure are going to spend in the future. Well, as the banks, especially with fractional reserve banking, they make their money based off of handing out loans. So if you've got a bunch of money sitting in your vault as a bank, what you're doing is you're essentially losing money because you want to give that out into loans. Okay. What are some of the most stable long-term loans you can get? Building construction loans.

[00:36:04]Okay. So, what do they what does the bank do in order to get the money out of the vaults and into loans that are making money for them based off of interest? They lower their interest rates, right? So, now they're making it more enticing for you to take out a loan. Okay. Now, let's say you're in an industry.

[00:36:20]When do you invest in large-scale capital projects? Do you do it when interest rates are really high or do you do it when interest rates are low? You do it when it's low. But you don't just do it because the interest rate is low.

[00:36:31]who also do it because what what that is signaling to the economy is, oh, a lot of people are putting money into the bank for savings, which means they're going to spend money in the future. So now is the best time for me to invest.

[00:36:43]>> They're anticipating demand.

[00:36:44]>> They're anticipating future demand. So what do they invest in? Capital projects. I need more factories. I need no more, you know, storehouses. I need more, you know, uh, infrastructure in order to be able to to meet this future demand. Okay. By the same token, if you're a home builder and price and interest rates are are lower, this is a better time to actually build those materials in order to build houses as well.

[00:37:09]So now what is happening?

[00:37:11]Well, everybody is now competing for resources associated with construction materials, lumber, concrete, rebar, you know, what whatever it is. Um, all so all the things that go into building a h a lot of the things that go into building a house coincidentally go into also building capital projects. But here's here's the problem. It turns out that it wasn't that people were saving a bunch of money for future demand. The Federal Reserve had just arbitrarily lowered interest rates because we wanted to prime the pump for the economy or we wanted to get the economy going or whatever else it was. Well, now the end result is the price of all of your building materials just went up, but interest rates are low. So people have a demand for those. So did we increase the number the total number of building materials? No. Because quite frankly it's really expensive to set up a new lumber mill or whatever else it might be. Right? So now the price of all those materials goes up which means the price of the buildings go up but you still want to invest now because the interest rates are low.

[00:38:12]And then what happens? Oh well we end up finding out halfway through the boom. Oh there there there isn't a bunch of pent up demand. It's just the government's manipulated interest rates. And so the end result is you have a lot of these infrastructure projects that are now halfway finished. And those materials that were used on a bad project are not easily recuperated back in the economy toward where the where you know people would actually want those materials.

[00:38:42]And so this is why it's important to understand this government manipulation of the interest rate to try to manage the economy has very real world consequences for the price of goods and services because you're what you're doing is you're sending perverse signals to the marketplace.

[00:39:00]You're you're sending very perverse mixed signals to the marketplace and and individuals are are trying to grasp for resources, you know, and and they find out that there's not enough. So the prices go up and then eventually what happens is when you have those interesting and you have all these depreciated assets out there because they can't be fully built. Well, now all of a sudden you have a crash, right? And now what happens? Oh well, the government tries to reinven because oh we can't have a crash. We got an election cycle coming up. So let's let's throw money at the problem.

[00:39:30]So do you see how this boom bust cycle end up being >> the crash is supposed to actually >> correct >> correct >> malinvestment basically.

[00:39:39]>> Yeah.

[00:39:40]>> But the government doesn't allow crashes because the optics, right? Politicians don't want who wants to be the guy in office that crashed the economy. Yeah.

[00:39:47]So, if you if you want allowed to have correction, >> if you want a really good kind of funny and and easy to understand example of this, uh the guy who does uh Dad Save America podcast, um he he has two videos out there, and it this is going to sound crazy, but just bear with me, all right?

[00:40:05]It's actually a rap battle. It's a rap battle between um FA Hayek and John Maynard Kanes. And one of the things they talk about is the boom bust cycle.

[00:40:16]And it's a really really I used to have my kids listen to it because it was a really easy way to kind of explain what was going on in this process and and recognizing it from two perspectives.

[00:40:27]And so I I I know it was like a light bulb went off on my head when I finally understood that no, the Federal Reserve constantly manipulating interest rates in order to try to help the economy is actually sending perverse signals which will create the next bust. So they're creating an artificial boom and what you're going to get is a bunch of malinvestment. And whenever you have malinvestment, the market automatically corrects eventually and then you you have a bust and then the government goes, "Oh my gosh, a bust. We can't have that. Lower interest rates, more money.

[00:40:59]Let's let's fuse it into the economy."

[00:41:01]Because when the government invests in the economy, but the economy isn't doing well, are they doing that based off of additional tax revenue? No. Because they don't have additional tax revenue. So how are they doing it? Well, they're either borrowing it and then invest in spending in the economy or they're printing it and spinning into the economy. So, once again, there's all of these there's all these bad inputs which confuses the marketplace and leads to busts and it it ends up becoming this self-perpetuating cycle. And so for everybody on the left that is saying, "Oh, this is just oh, capitalism. It's just so it's it's the boom and it's the bear and the bull markets and there's all these animal spirits and that's what's explaining why this can't be relied upon." It's like, wait a second, you con you guys constantly intervened into the marketplace, didn't it allow for necessary corrections and the end result is you perpetuated this boom bust cycle. I mean yeah is there going to be a certain degree of malinvestment that takes place is through the natural you know course of business absolutely businesses succeed businesses fail sure but the only way you get this sort of intensive boom bust cycle like happening almost by clockwork is when you have this sort of government intervention by central planners. So I I think it's important for people to understand that as we're trying to explain what's going on here is that anybody that's telling you that this is just what this is just greed. So let me get this straight. For decades the housing market was one of the most easy things to predict in the economy and then one day they all just got super greedy and that explains everything.

[00:42:38]No, I I don't buy that because all of those super greedy people in and of themselves couldn't control the entire housing market. The only entity within society that had the ability to impact the housing market at this degree at that point in time was the federal government. But now we actually do have other entities which can influence the housing market.

[00:43:02]Maybe not to the same degree as the federal government, but can manipulate prices. And this is where we get into things like Black Rockck.

[00:43:11]>> So, you know, on on the question of uh Black Rockck, a lot of people have pointed out that the Fed has created kind of a um perfect storm here with their low interest rates that they had really since 2008, from 2008 to 2020, because they created the perverse incentive for people to treat real estate as purely an investment vehicle rather than as you know, a set of homes to live in. And so if there's money to be made, right, if there's yield to be gained, you better believe that eventually savvy investors, corporations, they're going to jump into whatever that thing is. And so for a long time, you know, if you go back like 80 years ago, real estate was not necessarily treat I mean it it there was still a real estate market, of course, right? But it wasn't necessarily treated as a commodity the way that the elements of the stock market are treated. But that really started to change after the 2008 crash because it was really cheap for especially large firms to borrow money and then go in and buy cheap property because the 2008 crash had had uh you know brought about a correction within housing prices and then either hold those properties to then flip them at a higher price in the future or rent them out to people. Well, can I can I can I list one other thing that they ended up doing? And this is the part where this is the part where people on the left, the leftwing perspective, they have a point. The problem is is they don't draw the they don't actually draw the line back far enough. So, the point that they make is Black Rockck comes in and they they buy, you know, a couple houses within a neighborhood or whatnot.

[00:44:44]Um what they will do is is when they buy something and then they elevate the price and they get a sale for it, what happens is is every house every house on that block is now elevated to the price of whatever they sold that one house at.

[00:45:00]So, if Black Rockck comes in and buys a buys a um um a whole series of homes or whatnot within a particular area or whatnot, let's say that you you've had a bust. They come in, the government's printed a bunch of money, they thrown it out, banks and all these other stuff have have control of those assets first.

[00:45:16]They're able to buy up all these properties at a certain point. And then when they start pushing up, they they can because of because of the amount of supply that they control, they can start to push up the housing prices as a result of it. The end result is is that we all know how comps work when you look at the real estate market. When you're putting your house for sale, one of the first things a real estate agent will do is they will look at your type of house, the type of area it is in. Then they'll look at the surrounding area and they will come up with comps, comparative houses, right? And they'll say, "Okay, well, the comps for all this area is this amount. Therefore, your house could go for this amount." They go off of what's been sold and what's currently on the market. So Black Rockck had the ability to kind of manipulate the comp process in order to make the value of all of their houses go up as a result of it. And so again, are there market corrections that can take place as a result of this? Yes, but they controlled a large portion of the supply. Now people will point out, well, they only controlled 7%. That's enough to move the needle.

[00:46:11]>> That's huge, right? And again, we're not talking about 7% spread out equally across the entire country, right? No, they're mostly in concentrated dense metros that are growing that and this is why like home prices in West Virginia are still relatively cheap, right? But you go to like Phoenix, you Washington DC, our metro area. I Okay, we are not in the DC metro area, but you get what I mean, right? Close enough.

[00:46:34]>> The the point is is that, >> you know, we've actually talked about this in a previous podcast where I said the Fed can't print fast enough. Yeah.

[00:46:41]>> Which sounds at first glance that sounds contradictory, right? What do you mean they can't print money fast enough?

[00:46:47]Because asset price growth outstrips the supply, the money supply that the Fed is providing. And so the Fed's constantly finding themselves in a position, usually once every 10 years when you have some sort of crash, where they have to turn on the money printers and inject money into the economy, but then all that they're doing is they're refueling what we call the everything bubble.

[00:47:04]>> And the analogy that I gave is um twofold. Imagine if the Fed printed $100,000 and then gave it to to one guy.

[00:47:12]I mean, first off, I think that's a moral hazard that you're going to inflate the money supply and then that's the cancel effect, right? You're giving it to only a select group of people.

[00:47:19]This is part of the reason why income inequality is at an all-time high. It's not because of a failure of capitalism.

[00:47:24]It's because there's an artificial layer of inequality that's being placed on top of the normal natural inequalities that exist within people and their skill sets and what they go into. That always exists. The left is wrong when they just want to be hyper egalitarian, make everybody forcefully equally. But they have a point when they when they talk about an artificial level of inequality that exists. Well, a lot of that is because again the cancel effect. There's a certain group of people that are politically connected, right, that have access to money first and it's typically within banking. It's within um government contracting. This is what we call the managerial class. It's, you know, all the people in Northern Virginia, right? They kind of get access to the money first. And then the Joe Schmo is on the losing end of that curve because he gets the inflation that comes about with the increase in the money supply. But those who get access to the money supply first, they get to go and buy assets with that money. And so that that extra cash that's being >> that's the important part of they are buying appreciating assets >> and then you get you get stuck with debt and inflation. Yeah.

[00:48:27]>> And those that are the federal government itself and those that are connected to the federal government, they get assets. they get the benefit of that printed cash. So that's the first problem that that explains the inflation side of it. But there's also asset price inflation that comes about from this. So if the Federal Reserve prints $100,000, again, I'm just using numbers here just for the sake of the argument.

[00:48:50]>> They print $100,000, they give it to an entity, and then this person goes out there and he bids 100 grand over the asking price for a home on a on a block.

[00:48:57]Now, >> well, now he gets the house because he outbid everybody else, right? That's one bad thing. But he doesn't just increase artificially through printed money the value of the home that he just bought.

[00:49:09]He's now increased the value of all 10 houses on the block that he just bought.

[00:49:13]And so what's happened now is that >> home prices have gone up not a h 100,000. You haven't increased asset prices by 100 grand to match the increase of the money supply by 100 grand. You've now increased asset prices a million dollars even though the money supply has only gone up a hundred a 100,000. So you have inflation in the form of a constantly increasing money supply that eventually is going to trickle its way down into things that aren't assets, right? Food, >> price of groceries, >> groceries, gas, right? So you have inflation in the form of just it's more expensive to to buy normal stuff because that money eventually again will go into other elements of the economy. But you also have asset price inflation that is drastically outstripping say wage growth.

[00:49:57]>> Yeah.

[00:49:58]>> Because we're on a fiat currency system.

[00:50:00]So, when you look at, say, this chart that I I saw this um this tweet a few days ago, and this was crazy. This is um a tweet that says that the housing market has reached its most unaffordable level in history, and it's showing that like we're in a in a worse position than we were at the height of the pre208 housing bubble. But, and you know, a lot of people feel that way. Like I talked to, you know, my sister doesn't think she'll ever be able to afford a house.

[00:50:24]She's seven years younger than me. For a long time, I didn't feel like I could afford a house. I ended up getting two jobs, arguably three jobs, and now I can. But I feel like most people in their 20s and even early 30s just feel totally locked out of the housing market. They they feel this >> well and there's there's >> But you know what's interesting?

[00:50:43]>> There's a flip side of this that's crazy and we were hinting at this earlier in this podcast.

[00:50:49]>> It feels like that homes are more unaffordable than ever before. But again, >> interest rates actually, >> yeah, >> are normal. Yeah, >> if you go far enough back, they're lower than where they were in the 90s. And they're in line with where they were in the early 2000s. So interest rates are actually, again, I understand they feel abnormal because this was the abnormality right here, right? when we had 0% mortgages, >> you had entire you had entire generation. You you had entire like generation, half generation of people that were living with artificially low interest rates. And if you do that for like 10 years, you you get the idea.

[00:51:26]>> Return to normality feels like something's broken. So >> interest rates in the long scheme of things are actually normal.

[00:51:34]>> Mhm.

[00:51:34]>> Even though I understand they don't feel normal. And what's even crazier is that home prices. Oh, great. Give me a second. Ricking Trade Desk is like, "Do you want to join for free?" No. Um, give me just 30 seconds to pull it up. This is going to this is going to shock you.

[00:51:51]>> Well, and while you're while you're doing that, like, yeah, I think it's this is this is the part where when you when you look at um the government manipulation side of it, it cannot be underestimated. Like you can't talk about because even even in the people you mentioned, right, the the bad guys who are manipulating the market, either the politicians that are doing or the people that are politically connected, there's a whole other host of investors out there that are not necessarily the bad guys, but they see what's going on and they adjust appropriately.

[00:52:21]>> It It's actually arguably never been cheaper to buy a home when priced in gold.

[00:52:30]So this is the remember the uh 18% mortgages in the 1980s. This is home prices divided by gold. Yeah. Not not >> so basically the lower the lower this is in the chart >> the cheaper >> the cheaper it is to buy the house if you're buying it with gold.

[00:52:43]>> If you're buying it with gold. And so it bottomed out in 1980 which makes sense because mortgage rates drove down the prices really low. And then look we had this we had a housing bub an actual housing bubble from probably 1996 to 2008. And >> this is 2005 when it actually starts to drop. And it bottomed out in 2011. And it and it bottomed out at the same level in 2011 as it was in 1980. Well, look at it right now. It's almost ex it's exactly where it was in 2011 when priced in gold. And so >> I just explained that interest rates are normal.

[00:53:16]>> Yeah. in the grand scheme of things and and arguably lower than the historical average.

[00:53:22]>> Home prices >> are are almost tied for the lowest level since 1971 when priced in gold. They're they're as low as they were in 2011 and they're almost as low as they were at the absolute nadier of the housing crash in the 1980s when interest rates were like at an at a historic all-time high.

[00:53:42]And so in a way, homes have never been more affordable.

[00:53:48]>> As long as as long as you're not using as long as you're not using Federal Reserve, >> printed money homes. And so like you have this what we have right now is this >> here. Slide slide this over so people can actually see that >> what you have right now is this like crisis in the housing market where it feels again to go back to this tweet. It feels like it's just been more out of reach than ever before. But when but interest rates are actually normal. As crazy as that sounds, historically they're normal. Arguably below average.

[00:54:15]>> Yeah.

[00:54:16]>> And we know when priced in gold, homes are as cheap today as they were in 2011.

[00:54:22]>> Yeah.

[00:54:22]>> And they're almost as cheap as they were in 1981.

[00:54:26]>> Yeah. And so how could it possibly be that like theoretically, right, if if you're in a normal interest rate environment and home prices are as cheap as they were in 1980 in gold, well now it should it sounds like it's a great time to buy, doesn't it?

[00:54:43]>> Except that our money our money is worth it. It's because we're pay excuse me, we're getting paid and paying for things with with money that's semi worthless.

[00:54:54]>> It's because asset price growth has outstripped productivity >> and wage growth >> because it's artificial. What in a normal healthy environment where you have sound money, asset prices would be going up because productivity is going up and wages are going up and people are naturally getting richer because you have innovations in technology which is deflationary. There's this thing that took place in the late 1800s called the great deflation. That destroys the Keynesian idea that deflation's bad.

[00:55:22]Deflation is what created the middle class in the 1890s. But that's there's two types of deflation. There's healthy deflation, which is technological growth, innovation, productivity. And then there's a deflationary credit crash. That's the Great Depression, right? The 1930s.

[00:55:35]>> Yeah. Let can let's give everyone an example of that real quick. The reason why we say cuz a lot of people hear the 19 the late 1800s like you mean the guilded age. It's like you're absolutely right that there were there was a subset of industrialists and whatnot that got fabulously wealthy. Fabulously wealthy.

[00:55:50]What they forget to tell you on the other side of that though is that they got fabulously wealthy by actually creating innovative in innovations within the marketplace that every made everything cheaper. The standard oil standard oil is the people that made kerosene affordable for poor people.

[00:56:08]Right? Carnegie is the one Carnegie used to there there was a government monopoly of people that would provide ferry rides in New York City. Right? And Vander, sorry, Vanderbilt. Vanderbilt is the one that came in and said, "I'm going to provide ferry rides for free and I'll just offer food on the ferry rides." He actually beat the government monopoly that was getting subsidized. You know, you can find the same innovations with Carnegie and everything all around. All of the robber barons that were now taught to hate, and there are things about them that are are not very nice, right? But all the people that we are taught to hate, they got wealthy not by controlling everything and then jacking up prices. They got wealthy by finding efficiencies in the marketplace that made a lot of things that used to be luxury items accessible to the lower and middle class and that drastically increased productivity and quality of life for everyone. Their quality of life increased exponentially. But the way theirs increased exponentially >> is by making everybody else's >> by making everybody lives. And if you think about that time period, the turn of the 20th century, this is when people went from they had >> phones, cars, electricity, like these were things that didn't exist in like the 1870s, but by the time you get to the 1920s, >> right? That's a that's a 50-year period.

[00:57:20]>> It all of these things popped up, right?

[00:57:23]And they didn't just come from nowhere.

[00:57:25]That's an example of like a defl a positive form of deflation that actually created the American middle class which is very different than the deflation you get say in Japan in the 1990s credit crash or the 1930s in the US which is a credit crash >> in a health in a healthy econ in a healthy economy when you have sound money and the government is not is not able to just drastically manipulate the currency whenever they want to like fund their spending habits. But what you have is again like you just said there's this connection is we get wealthier when you find ineffic or excuse me when you find efficiencies and innovations within the marketplace labor saving devices things of that nature. When you get all of that and it it makes the individual labor more productive their quality of life goes up at the same time that the people that are running the factories or investing in the capital project they're also going up as well. So, so you have this this gradual increase in the quality of life and wealth of everybody at the same time. Now, again, the left likes to point they like to point to the 80s is the starting point of it, but you have to go back to the 70s. Once again, I I don't mean to pretend like this explains everything because it doesn't explain everything, but it explains a whole hell of a lot, right? The moment the government was able to manipulate the economy through printing money in order to push its spending objectives, it could not do so in a vacuum.

[00:58:48]>> It was inevitable that we would get to this point the second that we uh divorced ourselves from the gold standard.

[00:58:54]>> And that's what I'm trying to get at because remember that that analogy of the Fed printing 100,000 but they increase asset prices by a million. Now multiply that over a multi-deade long period and much larger number sizes.

[00:59:06]that control the assets, which which again, this is the part that's so important to understand. There are bad guys in this story. There are definitely bad guys in the story. But when I watch the left talk about this on YouTube, here's how they describe bad guys, the people with money. It's like, well, wait a second. If if you had money, >> you know, and you know what? They're actually right because you know who has the most money?

[00:59:30]>> The federal government.

[00:59:31]>> The Federal Reserve and the Federal Government.

[00:59:33]>> But but the problem is, you see where I'm going with this? The problem is is that if let me ask you a question. If if I told you if if I told you a a plague was coming and you believe me and you have the ability to to buy up the necessary things you would need in order to to weather the plague well. Okay.

[00:59:52]Would we think, well, you're a bad guy.

[00:59:53]You weathered the plague well. Like, well, no. I I understood that a plague was coming and then instead of spending all my money on like going out on vacation or buying a yacht or whatever it was, I decided to invest in the things that would make it easier for me to >> No, I I I totally get your point.

[01:00:09]>> I know you do.

[01:00:10]>> It goes back to that meme that you've talked about.

[01:00:12]>> Stop. I know you do. Right. I'm I'm making this argument for the audience so that they understand that I'm not just shilling for capitalism right here or shilling for rich people. What I'm doing is I'm saying that the market has a way of correcting for things. And the more you understand how the marketplace is working, especially if you understand how the government is manipulating the marketplace, you adjust your investment strategy. You would be a You would be an idiot to be sitting on top of all of these dollars that you have as the government is engaging engaging inflationary monetary policy and just say, "Nope, I don't like what the government is doing, so I'm just going to allow all my wealth to be eroded war eroded away through inflation." Well, you're like, "No, like look, I'm going to buy up all these assets. Why? I have to I have I have to buy assets somewhere in in order to save against inflation."

[01:01:02]>> You're you're absolutely right. But on the social side and cultural side, there is a huge downside to this. And and the analogy I I will go back to the Roman analogy because it's the best one that I can think of.

[01:01:15]>> After the the Punic Wars, when Rome defeated Carthage, they imported millions of slaves into the empire. Same thing with when they conquered Gaul, when they defeated the Greeks, like in the in the late period of the republic, there was a mass influx of slave labor into Rome. And it wasn't like every single person. I mean, and let's take aside obviously the moral implications of that, right?

[01:01:34]>> Um it wasn't like every single Roman had had a slave, a personal slave that just did work for them.

[01:01:39]>> It disproport, you know, this this free labor basically disproportionately went to a small number of largely senatorial wealthy landowning elites. And so what could they do? They could build these giant villas in the countryside with hundreds or thousands of acres and have slave labor work on it all and they didn't have to pay them. They just needed to feed them and house them.

[01:02:00]That's much cheaper than a single Roman family cultivating their own plot of land by themselves. They don't have hundreds or thousands of slaves to do the work for them. And so what happens is is that they can crowd out the little guy >> because they had this free importation of of cheap labor to do so. And so what happened over time, it took a couple generations, but eventually the same Roman veterans that conquered go Gaul, that conquered Carthage, that defeated the Greeks, that actually were were responsible for bringing in the slaves in the first place through their military campaigns, were looking around and they're like, uh, you know, these senatorial elites are sitting there uh, you know, eating grapes and, uh, drinking wine all day long and making bank on their their giant estates and I'm uh, going through the Roman equivalent of foreclosure.

[01:02:48]and I'm now unemployed and homeless and I'm also a wounded veteran from the war.

[01:02:55]And so what did they do? They became the first populists in history basically.

[01:03:00]Not quite the first, but you get what I mean. Like like they they were among the first populists to ever emerge.

[01:03:05]>> They're the ones that we have the most information on, whether it's the Grae brothers and whatnot. They're we can see this trend taking place and we can understand why it's taking place.

[01:03:13]>> And they produced the Graei. They eventually produced Caesar and Augustus.

[01:03:18]This crowd, it was the popular. This is where you kind of get the origin of the term populism from. So, and so there's a there's a there's a cultural cost, a social cost to basically inflationary monetary policy >> because it lead because it leads to what we refer to as unjust income inequality.

[01:03:38]Right? Just income inequality is I work 40 hours, you work 20, I make more. Just income inequality is I'm a doctor, you're a janitor, I'm going to make more because of supply and demand issues. In unjust inequality is the government winners and losers. Yeah. The government is picking winners and losers. And guess what? You're one of the losers. Not because you did anything wrong. Not because the work you do is valuable.

[01:03:59]>> You were born at the wrong time. You couldn't refinance. You didn't have access to the 2% mortgages.

[01:04:04]>> Well, and to Tina's point too that something that is uniquely at the same time all of this is uniquely impacting zoomers and millennials. The other thing that is uniquely impacting zoomers and millennials is that it's not just inflationary policy or the everything bubble. It's not just the housing market that the government's tampered with. The other thing they've tampered with is the education market. This is the first generation that has I went out, I got my college degree just like you told me to.

[01:04:27]I got $80,000 in college debt in order to get it. And now I can't get a job because it turns out nobody wants somebody with another psychology degree.

[01:04:36]But all you told me was I had to get a degree. Well, even the even the degrees that are valuable that people basically took out 200 grand in loans for, >> they're struggling to pay them back too, even with their highpaying job. So, those people are graduated from college now. They're in the field that they're working in, and they're like, "Hey, I want to start a family and I need to have a house to raise my kids in." Mhm.

[01:05:03]>> Well, you and your spouse each have you've got 200 grand in school debt.

[01:05:08]Your spouse has a h 100red grand in school debt. Your spouse, are you going to continue to work? Are you going to pay for daycare? And um they're taking into account that you've already got 300 grand in debt with no collateral. It's unsecured debt cuz education there there's no collateral there. That's another that's another villain in this that I think people need to understand is higher ed actively lobbyed for the government to federalize college loans and then when they produced worthless degrees, not all of them obviously, but when they produced worthless degrees, they went back and lobbyed the government to forgive the college loans.

[01:05:45]So, let me get this straight. Academia goes in there and says, "Hey, in order to get more people in college, because we're the key to success, economic success, the federal government should be subsidized so that way poor kids can go to college." Then you end up massively increasing the number of degree programs which have zero economic viability, right? Not to mention the fact that you're allowing a lot of kids now to get into college that quite frankly would never have been able to qualify for the loan not because they were poor but because they weren't sufficiently academically astute to get into college.

[01:06:17]Because if you used to be able to get a private sector college loan, the difference was you had to show your grades. You had to show um um you know a depth of academic prowess and you had to be able to justify what degree program you were going into because nobody nobody in their right mind no matter how good a student you were was going to give you a loan to get a gender studies degree that was worthless. But when the government's the one fitting the bill using tax dollars in order to do it and then also private lenders now all of a sudden you can you can do it. And what does the university do? They respond by creating degree programs which are not based off of economic prowess, but based off of different priorities that have very little to do with you being economically sustainable. And so again, it's another one of those things where and then what do they do, right? Instead of them taking a cut out of the mill the billions they got from taxpayers, they lobby the government to do what? Forgive student loan debt. You can't forgive student loan debt. All you can do is transfer the responsibility of paying the debt onto people that didn't take out the loans, i.e. taxpayers. Well, how are you going to do that? Are you going to raise taxes or are you going to print more money?

[01:07:30]>> So, on on the print more money, this is actually why I I'm going to offer a bit of a black pill and then we're going to with a white pill.

[01:07:40]>> Hopefully. Um, I actually think this is going to get much much much worse before it gets better.

[01:07:46]>> I think a lot of people are waiting for a housing crash that's not going to come because interest rates are actually historically normal, arguably below average, >> even though it doesn't feel like it. And as we showed earlier, home prices when priced in gold are almost at an all-time low.

[01:08:02]>> Mhm.

[01:08:03]>> Are they really going to go much lower or are hard assets like gold simply going to keep rising? So that's so go ahead and explain that. I mean that that's a pretty good explanation.

[01:08:14]>> So so think about it this way. The United States currently runs what they call and and by the way if you want to um learn more about this I highly recommend there's this really small YouTube channel called Infronomics and he puts out video almost every single day and and he talks about a lot of this stuff from a data analytic standpoint.

[01:08:31]He pulls up some of the same charts that that I've shown before on things like um uh Trading View and stuff like that and he walks through this problem and he has a very similar critique to the one that Nick was espousing recently about asset price growth and basically the everything bubble.

[01:08:47]>> Mhm.

[01:08:48]>> So he's pointed out that the United States and he's right on this. The United States is running what we call right now a twin deficit, which means that the federal government is running something like a 6% uh budget deficit to GDP ratio.

[01:09:04]>> You know, it's almost a $2 trillion annual federal budget deficit. Well, the country as a whole is also running basically a trillion dollar annual trade deficit.

[01:09:13]>> Where's that money coming from over a long enough period of time? The analogy that that I've used before with Nick is um you know Nick and and on the topic of free trade, Nick has brought up a good argument that like well I have a really large trade imbalance with Walmart, right? I buy from them and they don't buy from me. That's a giant trade deficit. But that works in my favor because I want the products that they're selling me. That's great, but it only works because you have a trade surplus with somebody else. In this case, your employer, >> right? If you didn't have that, you would not be able to sustain that trade deficit with Walmart for long. Right. If somebody if somebody was sp if somebody like me was spending $500 a month on Chick-fil-A and then he lost his job, I may or may not be doing that and then he lost his job. Well, I guarantee you Christian would not be running a $500 a month trade deficit with Chick-fil-A for long, right?

[01:10:05]>> It has to be made somewhere else in the economy. The United States has been running a trade deficit perpetually since 1978.

[01:10:12]So that's almost a 50-year endless period of perpetually worsening trade deficits. And we also have run a budget deficit since really like 2001.

[01:10:24]>> Yeah.

[01:10:24]>> So a 20some year budget deficit, a almost 50-year trade deficit. Where's that money coming from?

[01:10:30]>> Mhm.

[01:10:31]>> Well, we're printing it.

[01:10:32]>> Mhm. And so as long as the supply of dollars, the increase in the growth of the supply of dollars is outstripping the growth in housing supply, home prices are going to keep going up. And what's going to happen is is that other assets like gold or silver, maybe Bitcoin, but certainly gold and silver are going to go up to compensate for the the continual debasement of the currency. And so what I'm trying to get at is that this problem is not going to be fixed because the federal government is addicted to basically infinite debt and zero industrial capacity. We are over consuming as a country and we've been doing that since the 50s and the and our government is certainly over consuming in so far as they are spending more money than they are collecting in taxes.

[01:11:18]>> So let let's let's kind of let's kind of we we've talked about the various perspectives on here. We've talked about the various data that we're using to to drive this. I think the other thing too that we have to remember about the real estate market specifically and and this applies to a lot of various commodities and services and things, but the real estate market I I would argue even more so than other things because there there's a there's there's what the federal government can do that can man manipulate the real estate market which impacts everybody to a degree. But obviously the housing market is going to be very very different in San Francisco than it is the suburbs of Houston. And some of that also is impacted by state policy. It's impacted by local building policy. We have the NIMI movement which is the not in my backyard. So Johnny Harris talked about this and Johnny Harris is on the left but Johnny Harris pointed out. He goes the same blue cities that are complaining about oh we don't have enough affordable housing are the ones with the most building restrictions. Here in Virginia we just had this fight where on one hand the Democrats are trying to actually spend more money in order to make it easier for you to buy a home. But then they're also the ones putting a bunch of new restrictions on green energy, on green spaces. Well, every time you add one of those restrictions, you make the housing more expensive. They're also the ones that like to do things like renter protections where where they say they make it harder for you to evict somebody.

[01:12:31]>> Well, they wanted you they wanted the government to pay renters to help them sue their landlord during co >> Yeah, that that was the amazing part is we said, "Okay, if you're going to spend $2 million to help people sue their landlord, you know what you could do? $2 million to help them pay the rent." Like do you do understand that the renter also has or the person that owns the property still has a mortgage to pay in many cases or they're losing money as a result of this. Why would you rent to somebody that will refuse to pay you?

[01:12:56]>> And you know what will happen if the landlord gets foreclosed on the property that they own? The renter is going out, right? Is possess is repossessing the the property. The renter is not going to stay there. Well, and this is always the whole thing where it's like they're always looking at the immediate problem without having any understanding of all of the various things that led up to the problem. I I'll give I'll give you another example of this of just the second and third order effect. I know someone that, you know, um well, I'm not going to go into that. I'm not going to go to that story. I'll just put it this way.

[01:13:26]Every single time they try to come up with something to combat house prices that restricts a property owner's ability to manage their own property, they either end up with more expensive rent or they end up with slums. You see this with rent controls. It's like, oh, you know, we need rent controls. It's these greedy property owners.

[01:13:47]>> You get caprini green is what you eventually >> and then the property owner goes, okay, it's it's more expensive to maintain this than it is to actually own it. And and for everyone telling me I'm nuts, we did a Wyman on this where there was this really interesting story where an acolyte of Solinsky had gathered all these renters in a in a slum and they had said, "We're we're going to finally get the landlord to come to heal and he's going to fix these problems." And the landlord shows up with his lawyer and the lawyer says, "Before we get started, my client would like to offer the tenants the ability to buy this property for $1."

[01:14:21]And the tenant starts celebrating and the tenants's representative, the activist lawyer goes, "Wait a second.

[01:14:28]Why does he want to sell it for a dollar?" It's because the practical reality was with all the government restrictions, with all of the taxes, with all of the regulations, it was cheaper for him to sell this asset for a dollar than it was for him to maintain it. And that seems ridiculous to people that think, "Oh, well, these are all just rich, greedy people." If you create the those sorts of conditions, you will get those sorts of results and people will offload assets. And the response is, well, they're so rich in these other areas. Why don't they just, you know, eat the cost a little bit and and create nice housing for people?

[01:15:03]Would you would you do that in your own life? Would you do that in your own life where you're constantly losing money on projects in order to do something nice?

[01:15:12]And here's the other thing I will point out because we've heard this all the time and it has to be addressed before we move on to kind of the how do we manage this? How do you actually um navigate this environment? Everyone that is saying, well, couldn't we just solve this by the government building more housing?

[01:15:28]Do you have any idea how much government has spent on building projects, on building section 8 housing, on building all these? And yet we still have the problems. Why is that? Well, because when the government builds something, they don't do so with any sort of long-term focus on what it's going to actually cost to maintain a property.

[01:15:53]The reason why so many of the government-built projects have either been a torn down or b turned into crimeridden slums is because they're operating off of an entirely different motivation, an entirely different incentive structure.

[01:16:09]It hasn't worked.

[01:16:12]So I I know it sounds easy that oh the cure for homelessness or the cure for mortal affordable housing is for the government to just build more.

[01:16:20]And yet they've done that and yet it hasn't yielded the results. So at what point do you bother to go back and ask the question why is that? And actually start to understand perverse incentive structures versus positive incentive structures.

[01:16:34]The same politicians that are telling you pointing the finger at everybody but them. Why is it why is it that in every single blue city two things are happening simultaneously?

[01:16:48]They are consistently electing progressive politicians that advocate for more government spending on affordable housing, more rent controls, more everything else, and housing is incredibly expensive, not being built or turning into slums. If those two things have happened in tandem in every single blue city for decades on end now, okay, you you on YouTube, Red Tube, you have not stumbled upon some sort of ancient wisdom that has never been discovered before, right? It's been tried. It's failing. Start to ask questions like why?

[01:17:28]Because unless you're willing to do that, then I'm going to come to the conclusion that this is not about you trying to actually solve a a really significant crisis, a real problem. This is about you trying to engage in class warfare or accepting whatever solution makes you feel good. You're not trying to relieve the suffering of people trying to find a home. You're trying to relieve your own angst about it. And then you're trying to create a class warfare situation. And guess what?

[01:17:52]You're picking the wrong class.

[01:17:56]But the class is the very politicians that have created these conditions. So let's go into what do we do about it?

[01:18:04]>> There's one more negative data point that I want to show people.

[01:18:07]>> Wait, wait, real sick. Rend Mule said this question. And insurance companies are abandoning whole markets. Will the Feds step in? Random Mule, why are they abandoning? Why would an insurance company that desperately wants to write you a policy refuse to write you one?

[01:18:21]They make money on selling insurance.

[01:18:23]Why would they leave an entire region?

[01:18:26]So why would they leave California?

[01:18:28]Well, maybe it has something to do with the fact that when we look at the various conditions that cause wildfires to sweep through and destroy. And by the way, I'm not talking about something we don't know. Tina's mom and dad lost their home twice to flood and once to a wildfire. They were lived in paradise when the Paradise campfire went through and destroyed everything. And the crazy part was is that anybody that was living in that area, especially within the fire service, could have told you this is all going to go up some point. Why?

[01:18:55]California would not allow for they make fun of Donald Trump for talking about raking. He's not talking about a bunch of people out there raking with rakes.

[01:19:02]He's talking about the process for removing underbrush and that can be done mechanically or it can be done through controlled burns. But California wouldn't do that. Why? Bad for the environment. Then what they also did is with PG&E, Pacific Gas and Electric, they forced Pacific Gas and Electric to invest in wind and solar as opposed to using money to actually improve aging lines. So PG&E complied. The end result is you have a PG& cable spark fall out and then go right into underbrush which immediately lights up like that. And then what does Gavin Newsome do? This is what global warming gets us. you if you're an insurance and then what do they do? They pass legislation which tells the insurance companies you're not allowed to charge so much because it's too expensive to get insurance. So what are we going to do?

[01:19:50]Well, the government's going to come in and we're just going to we're going to force you to sell it for lower rates.

[01:19:54]Well, the only way that you can get that to work is if you tax people more and then subsidize the insurance companies.

[01:20:01]Or the insurance companies just say it no longer makes sense to insure people in this particular area from a combination of government policies and natural considerations within the marketplace. And so if the feds step in, all you're really doing at that point is you're saying, "Okay, taxpayers, you're now going to subsidize the bad policies of California by using taxpayer dollars to support the insurance."

[01:20:27]Now, again, I'm not claiming that there aren't really bad, shady insurance companies out there. There absolutely are. But once again, we have to step back and look, why would an insurance company that makes money off of insurance refuse to insure various people? And once you start to dig into that data, what we end up finding is would you if you owned an insurance company, would you insure in that marketplace? I wouldn't.

[01:20:51]>> The insurance companies got a bailout and so did P Gen cuz P Gen had to uh they had a class action lawsuit against them over this. P Genie lost and they they had to do a payout. What happened?

[01:21:04]Oh, well uh California bailed them out.

[01:21:06]Bailed P Genie out.

[01:21:08]>> And why did they have to?

[01:21:11]Because how else are you going to get your energy? It's a government controlled monopoly.

[01:21:14]>> Well, what's what's crazy >> a massive self-licking ice cream cone though because >> those people that got the insurance payout for their homes they lost >> had to pay federal and state taxes on the insurance payout as if it was income.

[01:21:32]>> Not to mention that all the people that came in to provide aid for the people of Paradise, guess what that also attracted? It attracted thousands of people, homeless people, people with drug addictions from the Bay Area, from the Bay Area,outhern California. They all came up to Northern California and they set up little homeless encampments and they were getting food. They were getting money.

[01:21:49]>> They pretended to be fire victims and got in line with the fire victims and took resources that were meant for the fire victims. So the last thing that I want to show you guys before we try to answer the question of what should you do about it is I don't I don't see asset prices dropping in the real I mean I don't see any asset prices dropping anytime soon in part because of basically smart money thinks that inflation's going to keep rising and so they're they're piling into you know tangibles right you're seeing gold bitcoin not that bitcoin's necessarily tangible but you get what I like like scarce assets, right? They're they're they're hitting kind of all-time highs. And not just scarce assets, but all asset classes like the S&P 500, the NASDAQ, gold, Bitcoin, and real estate.

[01:22:37]Almost all of them are at an all-time high right now. And what's so interesting about this and arguably dangerous is interest rates might actually go higher. You know, I in this process of me getting a house, I was talking to a lot of people and they were like, "Well, Christian, um you know, don't worry about the you know, I know that you're having a huge mortgage in part because I I bought a more expensive house, but don't worry about it because you're, you know, you're going to uh marry the house and date the interest rate." And I'm like, "No, I'm not. I'm probably going to be stuck court ordered with the interest rate because u you know, I'm going to be paying alimony towards the interest rate because the the the problem is is that I don't see interest rates dropping." And then they would counter him and be like, "Yeah, but um the the Fed's going to lower interest rates. There's there's talk that that the Fed's going to lower interest rates, and they already did last year." And and Trump wants the Fed to lower them even more. And when Jerome Pal is out of office in in what, like 10 or 11 months, >> uh Trump will nominate somebody that will declare that we need lower interest rates. And so the market will eventually realize this and you know, it might take a year or two, but we're going to get lower interest rates and then you can refinance. And I'm sitting here like, "No, the Fed fund rate might drop, right? That overnight rate that that the government can set that really affects them more than anybody else. They can control that short end of the yield curve. They don't control the long end of the yield curve." Jerome Powell has no ability to control what the 30-year uh bond yield is.

[01:24:04]He historically he would have an indirect ability because he would lower >> the way that it worked historically is that the Fed would lower interest rates or raise them and then the bond market would react in response to that and be like, "Oh, well now we anticipate an environment that will require higher or lower interest rates." So that we will follow in suit. Now the short end of the curve will just do it almost automatically because they're very more strongly tied to what the Fed overnight rate is. But the long end of the curve will also follow suit in line with whatever that projection is. But you can get what they call a a bare steepening, which is that the long end of the curve rises much faster than the short end of the curve. And that's really an anticipation of higher growth and higher inflation. Yeah.

[01:24:51]>> And by growth, what they really mean is asset price growth. And I already laid out that I think you're going to get higher asset price growth because the government is running what they call a twin deficit. It's running a budget and trade deficit and that money has to come from somewhere and that money is going to go into something. Well, it's going to go into assets to keep up with the increase in in money supply. And so >> I I I I anticipate that you're going to have, as crazy as it sounds, higher interest rates and higher assets asset prices. And we actually have the data to show it. The last thing that I want to show here on the black pill front, >> yeah, >> is >> this is crazy and I'll try to explain it. This black line here is the Fed fund rate.

[01:25:31]>> And so, if you allow me to uh hide everything just to illustrate that the um the the like I said, the black line here, that's the Fed fund rate.

[01:25:42]>> Yeah.

[01:25:42]>> And so, you see that it kind of >> the Fed fund rate has dipped >> and it's dipped. They lowered it at the end of last year and now there's talk that they're going to lower it even more. Trump wants it all the way down to like here. He he wants like a 200 300 basis point cut. Yeah, that's like a two or three percent. That'd be a lot.

[01:25:57]>> Well, look at what happened to the 30-year Treasury bond and the 10-year Treasury. Here's the 30-year Treasury bond. Look at what happened after the Fed started cutting interest rates.

[01:26:08]>> Look at this.

[01:26:08]>> So, it went up, dipped, and then went up again, and now it's dipping again.

[01:26:12]>> It It's So, I mean, you see that it's it's tied here where it's like the Fed starts raising rates, and you see the 30-year starts climbing.

[01:26:18]>> Yeah. And then it climbed even more. And look at what happened after the Fed started cutting. Almost immediately, the 30-year started jumping. Here's the 10-year. The 10ear is now in green. It's in it's in tandem with it. And remember, Americans are borrowing based on really the 10 and 30-year because that's the long end of the curve. Yeah. And so I can very well see this is something that you only get in like countries that are heavily indebted that are trying to basically sweep under the rug the debt by oh we're going to lower the interest rates and then we're going to refinance all of our debt at a lower interest rate.

[01:26:53]>> It's basically where the bond market has lost faith in the Fed like they don't trust >> they don't trust it anymore and they're going to demand a higher interest rate.

[01:26:59]And so the bond vigilantes of like the 1990s that forced Bill Clinton and New Gingrich to balance the budget, >> I can see them coming back and being like, "Oh, I see exactly what you're trying to do. You're trying to lower interest rates and then refinance $36 trillion in debt at 0% interest rates >> to screw me over." Well, the bond market, which is larger than the stock market, bond lenders are not in the business of losing money.

[01:27:24]>> This is the part that people don't understand because we use a lot of these terms and it and it doesn't make sense to a lot of people. So let me just like explain this in a way that it made sense for me and that was when we say bonds what we mean is you are giving the government money and they are giving you a bond which collects interest. So I don't know if anybody had their grandma giving them savings bonds, you know, uh I did US treasuries or or stuff like that. You can buy local municipal bonds, you know, you can buy all that stuff, right? So what it is is I'm and the reason why it's always it has historically be considered safe because the government can always tax to give you your money back. They're legally obligated to to to pay the interest on the bond. But when they start lowering interest rates like that, again, where the bond market gets nervous is you're trying to screw us over. And so now we're not going to buy your bonds. Like this is important to understand. You don't have to buy the government bonds.

[01:28:14]The government has to entice you to buy the bond. How do they do that? Higher interest rates. But if they're lowering their interest rates, fine. I don't buy your bonds. But but again, if if I don't got to give you my money and you're not going to give me an interest rate that actually makes sense, I'm not going to buy your bond. And so you're going to have to who will buy the bond?

[01:28:32]>> So who will buy it? Oh, the Federal Reserve will. Why? With this money we've printed. And that is what we call right there yield curve control. Yeah. Which is a whole another topic for a whole another time. Maybe we'll do a wine minute on that as well.

[01:28:43]>> So, all right. So, you you've kind of you've kind of we've look we've made the case all across the board. Here's the question. You've already predicted what you think is going to happen next and we're going to go through and who what do we think is going to happen and what should you do about so you think that we're going to be in this really really awkward position of asset prices continuing to go up, housing prices continue to go up um while interest rates also either remain steady or what slightly increase >> or maybe even increase.

[01:29:10]>> Okay. So what is that? So then what what course of action? Again, we do not give advice on financial advice or real estate advice or whatever, but what are you going to do with that being your prediction?

[01:29:20]>> So I I think we're starting to turn into a a renter nation, unfortunately.

[01:29:25]And the way to get yourself out of that is you need to start accumulating assets that will go up faster than this to get yourself into a pos. If you're if you're 21, right? If you're 10 years younger than me and you definitely can't buy a house right now, >> well, you can buy the type of assets that might outstrip >> the other asset growth on some of these other things like stocks or real estate.

[01:29:49]And the the things that I think are going to be performing quite well are like commodities, >> gold, silver.

[01:29:56]>> When you say commodities, that's a big category. the commodity is a dangerous oil or copper or you know things that that have a continual demand that you can't just print into existence but there's always a continual demand for things like raw metals for for oil like that's what I mean by commodities even food talk about corn >> yeah like soybeans go into the soybean future soybeans market but like >> well look the reason why I want to be careful about this and once again emphasize we don't give financial advice is because there there's no quicker way to lose your your lunch than getting involved in commodity markets which are bas based off of weather patterns in Brazil.

[01:30:30]>> That's okay. That's why I'm I'm joking when I say I'm not actually giving Yeah.

[01:30:33]My advice to zoomers is go invest in the soybeans market. No, what what I'm trying I'm not trying to give a specific asset class that you invest in. What I'm trying to say is think critically here about >> money's being printed. It's being created. The government is massively in debt more than you >> and they need to have lower interest rates or else they're just basically going to go bust. So, what's eventually going to happen is they're either going to try to do some sort of refinance at lower rates, or maybe you get a resumption of quantitative easing, which is money printing, or the extreme form of quantitative easing, which Japan did in the 1990s.

[01:31:08]>> And and well, actually, they picked it up after Shinszo won in 2012, which is yield curve control, where the Federal Reserve just buys Treasury bonds and says, "We're just going to force the whole bond market to be lower, including the long end of the curve, the 30-year bond." Well, there's what what you can do. A couple things that you can possibly do. One is you can start buying assets that are going to go up faster than these other things, including home prices. I don't think homes are going to be the um fastest performing asset in the entire country over the next say 10 years.

[01:31:42]There's other things that are going to outstrip the cost of homes. Yeah. We saw it in gold, right? By gold stand, you know, when you measure it by gold, home prices have actually been falling. Yeah.

[01:31:53]>> And so gold is going up faster than home prices are. Bitcoin has definitely gone up faster than home prices are. It's cheaper today to buy homes in Bitcoin than ever before. And and so again, I'm not saying that therefore just pour everything into gold and Bitcoin. But think about it from the perspective of what other things out there that I can buy or invest in today that are going to go up faster than home prices. Well, because that's essentially again that's essentially what the >> that's what the real inflation rate is in a way.

[01:32:23]>> And again, that's what that's what people who actually have money and are part of, you know, I hate using the term investor class, but they they invest in that's what they're doing. Like they when they see it when you know that inflationary monetary policy is inevitable, you invest in those assets which are, for lack of a better term, inflation proof. That's not really an accurate description, but that's what they're doing. They're they're looking at the stuff that's going to go up at the same time that that inflation goes up. All right, >> hang on. There's one more thing that I want to say and it'll be a great segue for Tina.

[01:32:51]>> Okay, >> cultivate a skill, too, because I think a lot of people have this idea that, well, I need to buy the perfect turnkey house and then I'm good to go. But for a lot of people, just unfortunately, they've been priced out of that. So there's plenty. Like for example, I'm currently watching a series on YouTube of a guy that bought a row home in Philadelphia and he's like totally gutting the whole thing and basically rebuilding it. And he's even younger than me. He's a couple years younger than me.

[01:33:16]>> And he bought it for like 230,000. And yes, it's a lot of work and some money to put in to redo it, but when he's finished, it'll be a beautiful home that arguably will be cheaper than if he had just bought a turnkey home. M.

[01:33:30]>> And so one of the other things too that you can do is cultivate a valuable skill set. And Tina's actually done this.

[01:33:35]Tina's redone the deck >> on this house.

[01:33:38]>> Like she didn't call in a contractor to come in and and spend I don't know how many thousands it would have cost.

[01:33:44]>> There was a $7,000 quote on it and it was really only like >> I think it was like $6005 or $600 worth of materials.

[01:33:52]>> So she's bought $500 $600 worth of materials to then redo the And she did it herself. her for the audience, her and Nick's mother tore out this whole deck and then between themselves basically rebuilt the whole thing and at a fraction what like I guess a tenth of the cost basically of what it would have been if you had used hired labor and a contractor to do it yourself. And so in terms of like what you can do is you can buy a flipper or fixerupper and instead of flipping it like HDD, you know, GTV style to sell to somebody else, you can flip it for yourself.

[01:34:26]>> Okay.

[01:34:27]>> Yeah. I I agree with Christian that it's it's important to learn how to do certain things yourself. There's plenty of things that are totally on the level where uh you can watch a YouTube video to learn how to do this. You don't need to call somebody for it, right?

[01:34:41]>> Um but but then again, some stuff looks very janky and DIY, so you want to be careful about that. But okay, so what I was going to say is I think um I disagree with Christian with the his idea that the the obviously in the long run uh the housing market's going to continue to rise, but I think we are going to see a collapse of sorts. I really do. Um I understand that as far as interest rates go, they're low. And as far as this and that, I I I get what you're saying as far as the market is is concerned, but people aren't numbers and people still make different choices. And when when you have interest rates higher and the housing market is so high, I mean, I understand in comparison to gold, but most people don't have gold.

[01:35:33]We're working off of a useless currency right now. So, or not you, >> yeah, >> semi worthless currency. they're making it more and more worthless anyway. So, because that's what we're working off of and that's what everybody gets paid in their paycheck. Uh you your your wages aren't keeping up with this and most people just aren't going to be able to buy a home. So, like you were saying, we're going to see a lot more people renting. I also think when you're dealing with people, people have a tendency to make different choices when presented with kind of an impossible scenario like this. And because this hasn't happened, uh, you know, in ages, if ever, right, this type of a scenario, you're going to have people getting a lot more creative with their housing options. Listen, there was a day when families used to actually stick together and pull resources more. And we've all gotten very used to the idea of living on our own little plot of land, with our own house, with our own stuff. And as soon as we, you know, get to a certain age, we want out of mom and dad's place and we want to go off on our own. And now we're seeing people actually make the decision to stay home till 27 now is the average age of launch. So I do see indications that people are uh sticking with their families longer at the same time that the government's trying to rip down the family. But I do think that uh one of the best things people can do is maintain quality relationships with their family. Be considerate. be loving toward your family because you're going to need them.

[01:37:19]>> Yeah.

[01:37:20]>> And it has so far been this thing where I can just discard my family over little minor differences and we're going to fight over everything and I just want out from under them. It I think we are going to see family ties come back together. I think more people are going to try to pull resources to manage a a higher standard of living together with family. I mean this whole compound idea is is a largecale version but I we are seeing families buy slightly larger houses and three families move into it.

[01:37:57]you know, um we're starting to see things like that where it's like, look, my family's getting older. My boomer parents sell their house and we sell our older our house, our first home or whatever. Or we take our down payment that we've never had a house, let's say, and now we've got a down payment and we're going to pull resources and we're going to live in a bigger house together now. And I think we're going to see people creating different options like that. And you're going to see people's mindset change from I'm gonna live on my own and be my own self-sufficient to I'm gonna maintain quality relationships with my family so that we actually like each other and we can live in the same uh on the same property or even in the same home depending on you know what works for them and you're seeing people be able to save more money and things like that. So, I do think we're going to see a collapse in the housing market.

[01:38:51]And the reason why is because people still are not making enough money to accommodate that much of a house. You know, it's just not working. You've got you've got pressures like student loans and other types of debt. I mean, I do not I do not foresee people biting without some government gymnastics happening. I do not see this ending well for the housing market shortterm. Now, obviously long term, housing markets always go up, but but short term, I think you're going to see people uh >> Okay.

[01:39:26]>> Yeah. I I think you're going to see people make different decisions.

[01:39:29]>> All right. And as is typical, I'm going to split the difference.

[01:39:33]So, um I I think that in some areas of the country, I think in some regions, you you are going to actually see um significant drops in in housing prices.

[01:39:43]I I think in other places it's going to remain probably more stable or continue to go up in ways that, you know, we didn't anticipate. And I think a lot of that has to do with what Christian's explaining here is that this isn't the this isn't the 2008 market where you could point to a couple of factors and say, okay, yeah, this kind of explains why it jumped up and why there's been a correction and how the government responded to it. I think there's a couple things that we have to understand. One, I think Christian makes an incredibly good case for why it's possible that we could we could experience this really really weird environment where because interest rates are going down and because of other other government manipulations within the marketplace, housing prices could continue to either remain flat or maybe even ek up a little bit. I I again I tend to believe that it's it's going to be a lot more regional than national overall. Um, but I think there's some environments where you are just going to out of necessity see a a pretty significant correction take place. When it comes to the good news, um, I'm really I'm pretty much just going to repeat what what Tina said, although I think there will be some differences in the way it's applied. Um, I I think that I think that families, which share a certain set of values with respect to how they look at the nature of the family, um, I I let me let me back up just a little bit. No matter where you were in the United States or no matter how strong or important family was to you, if you weren't Amish, you you you left at, you know, between 18 and 24, you left, you went off to college, you did whatever else. And even if you loved your family, you stayed in contact, there wasn't this idea of we're all going to like live together, you were going to leave. Then there was this whole idea of coming together out of absolute necessity because you couldn't get out of your mom's basement because you couldn't afford anything. But that didn't actually engender greater family affection and connection. So that's where I think the difference is going to be. It's those people that are looking at all this going, you know what? So I think you're going to see it very prominent within the homeschool community. I think you're going to see it very prominent in communities for which um like religious faith is is very strong. They're going to lead the charge. And what you're going to start to see in those environments, uh homesteading community is another one where you you're going to start to see in those environments is it's not about launching later. It's about family that bought some property and weren't trying to go for a McMansion, weren't trying to go for anything that they were trying to go with something where they could slice off a couple of acres or just keep their family close or they could build something that you know it might be a tiny house for some people. For other people it might be a very very modest structure, but what's going to end up happening is people are kind of like maybe to the extent that it's the homesteading side, they're working the land a little bit. They're sharing the burden of some of the responsibilities.

[01:42:18]And so mom and dad get a little bit older. They're not able to take care of the maintenance a little bit, but they slice off, you know, whatever three or four acres and they help carry they help take care of some of the property and now they were able to get a sweetheart deal on a on a piece of land um or maybe on a small house that they never otherwise would have been able to afford.

[01:42:38]>> Someone literally just said that in the chat lit almost word for word. Well, because the because the other thing that's going on is and this is something that somebody else brought up and Whitfield I think brought this up with respect to older people trying to sell their house at rates that they're cover like so again if you're an older person that got in locked into a house and you own it outright or you got locked in a really low interest rate you don't mind saying I'm only going to sell if I can get this rate. Well, new constructions in many cases are actually going for less than what older constructions are going for simply because nobody feels if you're older, you don't feel this this drive to sell.

[01:43:17]So, I could see I could see an environment where builders are willing to actually go in and build something that's maybe a little bit smaller and you you see some sort of deal going on where they can get a better rate on a house that's that's a little bit more affordable or whatnot. But I I do think you are going to see the idea of the the family plot, right? or not the plot but the family property where you are going to see more and more people either going in together in order to buy a piece of land um whether it's families whether it's close friends I think you're going to see that as a natural response but I think you're also going to see them doing it in the places that are less likely to have the government or the state legislature coming in and restricting it or coming in and and coming up with high taxes uh high regulations you know all kinds of requirements. This is where I actually think you might see a place where people move to states that are a lot more friendly from a tax environment, from a building environment, from a regulatory environment. Um, and then instead of just going in and buying their one little house, you see families going in like we're going to we're going to invest in a state that hasn't lost its mind and we're going to buy a sizable piece of we're going to pull our resources. We're going to buy this.

[01:44:30]we're going to build here and we're going to help each other out. And and again, from the homesteading perspective, maybe they're running cattle or maybe they're doing other thing. From other perspective, it's just, you know what, it's nice to know that mom and dad are close by if I need to drop off the grandkids or if I need to. I'm not going to drop my kids off at daycare. I'm going to drop them off at mom and dad's place cuz I got to work in order to make ends meet or whatever else it might be. But I think you're going to see that that family structure becoming a lot more unified. Uh I I think you're going to see a family unit becoming a lot more like a unit, which is to say shared values, shared mission, you know, shared traditions. And I think and and there's going to be times where you bump heads, right? There's going to be times where that proximity is not always going to be lolly dogs and puppy, you know, or or lolly dogs, puppy dogs and lollipops, right? You're going to see you're going to see headbutting. But in a lot of other ways, like on the whole, it's going to allow people to be able to enjoy a quality of life that they haven't experienced for a long time by maintaining those those family connections.

[01:45:29]And I I actually I actually think that for a lot of people, this is going to be an incredibly frustrating environment because it feels like you just can't win coming or going, right? you just it because no matter how much you think you figured it out, there's some new legislation, there's some new law, there's some new regulation, there's some new new manipulation of the marketplace, there's some new, you know, spending bill and and you just feel like you can't catch up. For other people, I think they're going to start to self- select geographically and by and with association. Who do they associate with? And I think you're going to see this this kind of return to this idea of multigenerational um and and moving not just for a low tax rate but moving for worldview.

[01:46:16]And I think I think the people that do that are going to thrive in ways that the people that are constantly trying to catch up with whatever the marketplace happens to be doing today based off of whatever Congress has decided or the Fed chairman's decided. I think they're going to continue to get frustrated and angry. And the problem is is that they're going to try to fix everything through just another again another Fed chairman, another politician, another president, another and I think the people that actually look for something that's a little bit more at home and and stable, I think they're the ones that going to be able to weather this better.

[01:46:46]Uh, and the question will be is is how many people are willing to pick up on that? So, I don't know. I I see I see a possibility. Um I see a silver lining in all of this. Um that as frustrated I am with the government manipulating things in in these ways that make it so difficult to predict. Um people kind of get around it. And I could also see those people again, I could I could see that sort of mindset becoming dominant enough in certain states where when you do see this push to drive these other ideas or ideologies, they're going to be strong enough in those states to keep it out.

[01:47:22]They're going to be they're going to create the sort of policies that cause people it's like you're not just coming here because it's lower tax rate. If you're going to push these sort of ideologies or agendas, move along because we're not going to make it comfortable for you here. And that's the sort of self- selection, the sort of self- sorting that I think you're going to see. That's it's going to be interesting to see how it develops in the next two decades. But I think it's going to happen. I think it's going to happen. Well, hey, once again, if you enjoyed today's episode, we want to give a big shout out to the uh the the title sponsor, Ground News, for all of the access to great information and to well, and again, not just not just the news, but knowing where the news comes from and not only who's telling the story, but why they're telling the story. And in fact, if you go to ground.news/ news/MTA, you can get 40% off of that Vantage plan, which is the very plan that we use in order to research for these episodes.

[01:48:12]That's our prediction for uh what could happen to a very very crazy housing market. As you see, I think a lot of us agree a lot of us agree on the the different factors that are impacting the overall housing market and making it a a uniquely difficult time, especially for younger people to be able to afford a home and to be able to get started in life. Another thing that we didn't even get in get into is uh birth rates and how that's actually going to impact things because that will have a huge effect going forward. But there's going to be a lot of ways that people respond to this and try to affect political change to try to deal with it. And lo and behold, it's probably not going to it's probably not going to yield the results that they want because they're going to be trying to look for solutions that are politically viable, not viable long term. But the people I think the people that focus a little bit more on taking control of their own destinies in conjunction with family and friends that have similar worldviews, I think they're going to be the people that are not going to be untouched by the storm, but are actually going to be able to weather it a whole lot better and learn something very, very important in the process. And that was the most important thing going forward is not just who's president, right? It's about who you actually share your life with. And so maybe it's a good idea to invest a little bit more on the relationships around us than the relationships with the people that we have in Washington DC. Once again, thank you very much for joining us and we'll see you next