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Fed Policy and Economic Bubbles with Matt Taibbi

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Jason Hartman hosts guest Matt Taibbi, contributing editor at Rolling Stone and author of books such as Griftopia and The Divide as they discuss bubbles. They talk about how Fed policy has created bubbles throughout the years and how Wall Street takes advantage of average America. They dive into history to see what we can learn about bubbles.

Investor 0:00
Those who have understood that the paradigm has changed. And that’s perhaps we need to do something that’s counterintuitive. Like being in debt, which obviously we have all been taught is a horrible thing. You know, maybe it’s those few early people who understand that and witness that. So perhaps some people who are more sensitive to risk or more risk averse, or I don’t know what the perfection is, but the canary in the coal mine, if you want, and this is perhaps what you are and what you have been. I am surprised, Jason right. Now that’s basically what we are saying is not yet more mainstream. I’m not saying that this should be or that this should already be what everybody’s thinking that but so few people are thinking that or at least that so few people are vocal about it. So perhaps it’s just a well kept secrets and those who know we don’t want to talk about it, but I’m very surprised because this is so against the mainstream of what you’re reading in the paper.

Announcer 1:04
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:54
Welcome and thank you so much for joining me today. This is your host Jason Hartman with Episode 1111 One, Episode 1111 1100 and 11. Hey, that’s pretty cool. Okay, so this is going to be a special episode. And here’s why. You know, that famous article I’ve talked to you about over the years, it was quite famous in its day, during the Great Recession, or maybe post the Great Recession. And it was all about the bubble machine, the giant bubble machine. You know, that old saying, right? If you have a gun, you can rob a bank. But if you have a bank, you can rob the entire world. It’s sad, but true, folks. And but while both are sad, obviously, today we’re going to talk a little bit about that because we have got the author of that famous article from years ago on the show as our guest today and I’m really excited to share this interview with you. It is mind boggling how the powers that be the powers that run the financial world. Really they do just their tentacles are everywhere. They create these asset run ups, and then they crash them, and they make the loans on the way up, and they finance the deals. And then when they crash, they buy all those assets back. And it is mind boggling. This is one of the many reasons the rich get richer and the poor get poorer. And it is one of the other big reasons that we have a concentration of wealth. Of course, this is a complex topic. So it is debatable. And it depends, you know, you really have to be a statistician and I’m certainly not one and I, I don’t even play one on TV or on a podcast. You can slice and dice this so many ways like anything else right? But there certainly is a concentration of wealth going on. Depends on how you look at it of course, but one of the ways this is happening is because of this big bubble machine the bubble machine will talk about Today with our guest in just a few minutes, you know, as I was looking in an old box, I found a treasured item, you know, sometimes you got to open some of your old stuff. This is one reason I recommend moving once in a while. I found this old book, you know, one of these books that you you write in, kind of like a journal type book, and all of my handwriting on this very old book, probably from I’m gonna say age 18 to 22 years old. So in that part of my life, when I was, well, less cynical than I am today. Yeah, I’ll admit it. You know, I think it’s sort of normal. When you get a little older you do just get a little more cynical sometimes. Again, it’s a complex topic, right? Because I do believe it is an amazing time to be alive. But there are Also some crazy things going on out in the world. I mean, look at what’s going on in, in Washington DC, right? All you hear from this epically stupid media. I mean, I was listening to I almost hate to admit it, NPR last night, you know, I think NPR is the, their programs are for people who like to think they’re intellectual. Yeah, including myself. I like to think I’m intellectual too. But really, they’re so simplistic, honestly. I mean, it’s just unbelievable. I was listening to Planet money. You know, they just literally, it’s such a shallow analysis of things like the government shutdown, it is truly mind boggling. So if we say that the federal government has been in business, since I don’t know how about july fourth of 1776, let’s pick that as the date that the federal government went into business and now it’s shut down for 23 whole days. Oh, Katie bar the door. Right? You know, what do you do? You know, maybe maybe what Americans will realize from this shut down is how little we actually need all of this extra government. NPR profile the story of this woman who was trying to buy a house and couldn’t close on the deal because her USDA insured loan couldn’t close. Well, what the heck is the USDA? I thought they put a stamp on my meat right on my side of beef that steak right. What are they doing making loans anyway or ensuring loans? You know, what is the government in all these businesses for? It’s absolutely absurd. And then I was watching a short documentary The other night about racial inequality. And literally one of the giant causes of racial economic Financial inequality is Fannie Mae, government ensuring loans you know, Fannie Mae and Freddie Mac, right? Because they decide the winners and the losers, right. And this happens with every government grant every government program, every government contract, the government is in business of deciding winners and losers rather than the marketplace. And so if you want to reduce or end and eliminate any quality of all sorts, racial or otherwise, you know, get the government out of these businesses. It’s absolutely absurd that the government does all this stuff. I know there’s short term pain, I completely get it. Okay. But the long term the macro picture is the government shouldn’t be doing all this stuff in the first place. You know, we could probably reduce the size of government by 60 or 70%. And the whole country would become just incredibly prosperous. Yes, there be an adjustment period. I understand that. It’s just mind boggling. It really is. So be careful of the shallow monologue news media. Really, it’s, it’s messing with our heads, folks. It really is. And we need to guard against it. One of the quotes I found in this little book that I found in this box, but this quote, I thought was really good. And I had I have some other great ones in here that I, I just wrote them in my own hand, you know, and when you write things like your goals for the new year, in your own hand, it really sticks with you. The first one in this little book is there are no rules, laws or traditions that apply universally, including this one. Hey, that’s pretty good, you know, just means we have to use our head. And then there’s that famous Calvin Coolidge quote, nothing in the world can take the place of persistence. Talent will not nothing is more common than unsuccessful people with talent. Genius will not The world is full of educated derelicts. persistence. stunts and determination alone are omnipotent. The slogan press on has solved and always will solve the problems of the human race. And you know, whenever you come to a difficult time with your real estate portfolio or any other thing in life, just remember, nothing in the world can take the place of persistence. And then that jack Paar quote, I’ve repeated it many times. I love it. It’s the third one in this book. My life seems to be one long obstacle course. With me as the chief obstacle. JACK Paar. Great stuff. So I’ll share a few more of these. These are awesome quotes, quotes to live by folks. They’re really good. They’re really good. Hey, we’ve got meet the Masters coming up as many of you know because you’ve already purchased tickets. Congratulations getting in on those early bird prices. We are still in the early bird phase. We are on the second early bird pricing schedule now. So Don’t miss out on that. Go to Jason Hartman comm slash masters. We’re going to be announcing some awesome speakers soon will be a Newport Beach, Saturday and Sunday, March 23 and 24th look forward to seeing you there. Jason Hartman comm slash masters. Without further ado, let’s go to our guest and let’s talk about the giant bubble machine.

Jason Hartman 10:31
It’s my pleasure to welcome Matt Taibbi. He is contributing editor for Rolling Stone and winner of the 2008 national magazine award for columns and commentary. He’s a New York Times bestselling author of Griff topia, bubble machines, vampire squids and the long con that is breaking America. also the author of the divide American injustice and the age of the wealth gap and the new book heat Inc. How and why the press makes us hate one another Matt, welcome. How are you? Thanks very much. I’m doing very well. Jason, good to have you on the show. You’re coming to us from New Jersey. Is that correct?

Matt Taibbi 11:07
I am from Jersey City. Fantastic.

Jason Hartman 11:09
Well, when did you do the article in Rolling Stones about the bubble machines? That was quite a few years back, wasn’t it?

Matt Taibbi 11:16
It was it was right after the 2008. election, I had never covered the financial services industry before. And I had been mostly a campaign reporter. And after the economy collapse, they first they assigned me to do a story about AIG and why AIG collapsed. And we got such a response from doing what essentially was a translation for ordinary people about how Wall Street works, right that I ended up doing it for eight years. So the next story after that was about Goldman and that was the bubble machines.

Jason Hartman 11:51
One. I remember that article, Matt, and it was a rather famous article, as I recall, and I have talked about it many times on my show. Over the years, it’s just great to have you on the show. Because now this is going back from memory. But you know, you talked about Goldman Sachs a lot and, and how they create these bubbles. And then when the bubble deflates, they profit they profit on both sides of the bubble, which is pretty brilliant. But, but I hate it at the same time. You know, I always I call Wall Street the modern version of organized crime.

Matt Taibbi 12:28
Yeah, a lot of people say that. It’s like only the last names are different. They don’t have the Italian last names, but there are some similarities for sure.

Jason Hartman 12:37
There’s no question about it. Well explained to us how that works, how the bubble machine works, how the bubbles are inflated, you know, in the cycle of easy credit and expansion, and then they pop they always do you know, back over 100 years ago when the Federal Reserve was created. Ostensibly one of their mission statements was to prevent these extreme Equals in the marketplace and in the economy and into, you know, end the bubbles. But they haven’t done that at all.

Matt Taibbi 13:08
No, and I think you can probably trace the modern patterns of bubbles to Fed policy. I mean, a lot of people look back at the late 80s. And they look at what happened with the crash in 87 as a precursor to what happened in both the 90s tech bubble and then the subprime mortgage bubble afterwards, because, you know, essentially what happened was the street got wiped out at seven, and then the fed you know, rather than let all that pain kind of have a corrective impact on the economy, they completely loosened interest rates and you know, the the analogy I kept hearing was everybody drank themselves sober. They were allowed to sort of quickly recapitalize reinflate move into the next scam, you know, which turned into whatever it was junk bonds are in tech stocks. There’s a continuous cycle of inviting people to come in until the market can no longer bear it. There’s a rush for the exits, individual traders cash out, but everybody else gets killed. And that’s what happened on a smaller scale leading into the subprime thing which dwarfed all the rest of them.

Jason Hartman 14:20
Yeah, sure did. Okay, so and feel free to be simplistic or in depth and sophisticated as you like, but how do they create the bubbles? And when we say they, it’s sort of all of them, right? It’s Goldman Sachs. It’s the Federal Reserve. That’s, you know, the Treasury. Everybody has a hand in it, obviously. But there are certain powers that are just incredibly powerful when it comes to the ability to play God and create bubbles and then intentionally burst the bubbles, right. Take us through that kind of the chronology of how that works, if you would.

Matt Taibbi 14:54
The core idea is you’re trying to invite everybody to put as much money as they can into This sort of investment bubble, in the case of the subprime crash, one of the things that happened was they found a way to use derivatives to pool and package subprime mortgages in a way that allowed them to take junk rated mortgages and sell them as triple A rated securities.

Jason Hartman 15:21
So in when you’re saying they, in this part of the conversation, you’re talking about Goldman Sachs mostly right?

Matt Taibbi 15:27
Yeah. Investment banks for the most part, so you most people out there, they might be familiar with a lender like countrywide or, or, or Long Beach or, you know, one of those companies, you probably heard from them, they probably knocked on your door and offered you a refi or a mortgage, and they got everybody to sign on the dotted line and they got, you know, gazillions of these loans. And the reason they were able to do that is because there was a huge market for people buying these securities because they were able to use a process that sort of Miss Mark security Right, they were actually not worth a lot because a lot of the people who are buying these loans were they didn’t have jobs. They couldn’t afford the house. They weren’t even citizens in many cases, but there was no due diligence. And so people were buying tons and tons. And so they were investing in what they thought was American real estate. Right? So this massive, massive speculative bubble, and real estate happen.

Jason Hartman 16:24
So wait a sec. So you mean when people were investing in what they thought was American real estate, they were buying the securities that allowed all that money to flow into the mortgage market, right? Is that what you mean when you say that,

Matt Taibbi 16:38
exactly. And typically, these were individuals that were doing this. These were typically institutional investors. So usually they weren’t going after pension funds or hedge funds or insurance companies. So it you know, the way this works is kind of strange, you’d get a representative of a big investment bank and they would take out some state official who makes $81,000 a year representing the state’s employee pension fund, like, like CalPERS would be an example. Well, that wouldn’t be state but it

Jason Hartman 17:12
Yeah. Teachers. Well, that is sort of state I guess, but it’s the Teachers Retirement Fund in California, the big one, they were huge, obviously.

Matt Taibbi 17:21
Because they have tons and tons of money. And that’s what they do. They go after these whale fun, right, right. And they take out this official and you know, they’ll they’ll take him to the Super Bowl or a strip club or whatever it is. And

Jason Hartman 17:33
they’ll whine him and dine them. They’ll say,

Matt Taibbi 17:35
Hey, why don’t you buy $2 billion worth of this stuff? And the presentation, they’ll give you this great, you know, it’ll it’ll cost less than a comparably priced security or comparable real estate security, but it’ll have excellent returns and people bought tons of this stuff. But it turned out that the actual mortgages inside the package were really dubious, and that’s why a lot of people woke up in 2009 And found that their retirement fund lost 40% of its value. So it was it

Jason Hartman 18:05
was a pretty devious scam when you get right down to it or no question about it. So that’s when everybody’s 401k became the 201 K, as they say, right, right. So they wouldn’t wine and dine, one of these officials who made the investment decisions for these retirement plans, you know, the person making $81,000 a year, you got the bankers that are making millions every year, taking them to strip clubs, the Super Bowl, doing the whole thing. And you know, of course, they made the decision, hey, we should invest with you. You know, one of the funny things I’ve always found in life is that, you know, the crooks in the world of business are always the most generous people. You know, and they always buy off all these people around them. They like they overpay their employees, they overpay their vendors, and everybody loves them because they’re dealing with stolen money. It’s pretty easy when it’s not your money.

Matt Taibbi 19:00
These people were they were expert. One thing they they’re able to do is sell, you know, she talked to people on Wall Street, you’ll find yourself saying, Wow, that’s a great investment. Like in two seconds, they’re able to get you mentally into that space. So the ability to identify somebody who’s the gatekeeper for a huge pile of money somewhere and get that person to fork over with me not that’s what this was all about.

Jason Hartman 19:22
Yeah, right. Right. Okay. So this is the run up cycle right in the bubble, right? This is when the bubble is being created. They’re meeting people to invest in these dubious assets or even many times in that example, assets that don’t even exist in the first place, right when they’ve taken the same loan, the same mortgage, the same piece of paper, and sold that piece of paper into 33 different pools. So right, it’s literally not even there. It’s not just the quality of loan being subprime, you know, letting the janitor that’s making 50 grand a year by a $900,000 house. It’s not just that, you know, it’s a duplication. It’s a cloning of assets that where the assets are just vapor. They’re not even there, right?

Matt Taibbi 20:08
Yeah. No. And sometimes it was even worse than that. You’d have the synthetic credit default collateralized debt obligation, right,

Jason Hartman 20:15
which was CDO. Yeah.

Matt Taibbi 20:17
Yeah, exactly. So essentially, what you have is you have like a, think of it as a taco that has a whole bunch of other tacos in it, right. But inside the individual tacos are just bets on other mortgages. I, it’s really hard to contextualize all this stuff. But essentially what they were doing, they ran into real people to lend to so they started creating credit default swaps that were paying to existing loans. And then they would make a package at a VAT and sell that as a security. So what you were investing in wasn’t even a real mortgage, you were investing in the sort of mirrored revenue flow, somebody else’s work, which is which is crazy, you know, and that’s it. That’s how all these artificial losses

Jason Hartman 21:02
appeared out of nowhere. Yeah, yeah, you know, this is the derivative scam. And I call derivatives The thing about the thing, right. And the amazing thing is, it’s not just the thing about the thing, it’s a thing about the thing about the thing about the thing about the thing about the thing, you know, it’s 39 levels deep deal, you got to something real. And by the time you get to something real, as you peel back that onion, you know, the real asset is worth nothing compared to the value of all those derivatives that have been sold. They’re pegged to the real asset. Right?

Matt Taibbi 21:35
Right. Yeah, exactly. And the structures of those vehicles can be so complicated that even the people that are writing zzS can have a hard time sorting it out. Right, like the they’ll have a hard time actually tracing where the original asset is, or, or who owns what or what or what, what the risks are. I mean, that was a huge problem with all of us. Yeah,

Jason Hartman 21:57
yeah, it certainly is. Okay, look, we’ve all spent over A lot of time in the last 10 years talking about the great recession. Okay, so maybe we can just kind of shift gears and let’s go to the broader kind of macro view about the bubble machine, okay? And just look at the big, maybe a longer period of history, because the great recession is fascinating how it all happened. It was terrible, obviously. But what sort of happened over the decades if you will, you know, create the bubble, and then offload the assets to other people. And then you know, the assets will crash, right. It’s like a top hot potato game of musical chairs game, you know, either one, and then you buy those assets back on sale after the crash. Right? What about that side of the cycle?

Matt Taibbi 22:44
Yeah. You can also you can also bet against the instrument on its way down, which was another thing that happened a lot.

Jason Hartman 22:52
Oh, yeah. You know, you see all these different interviews with these various congressmen where they’re interviewing one of these financial execs, I mean, they’ve all been on the hot seat Did you know you were selling your customers one thing and then betting against your own customers at the same time?

Matt Taibbi 23:07
Exactly.

Jason Hartman 23:08
You can’t make this stuff up, folks. It’s unbelievable. It’s disgusting.

Matt Taibbi 23:12
It was it was genius that in a way, I mean, some of them Goldman was probably the best example because they were the bank that realized the earliest that they had to get out of the subprime game. And there’s an extraordinary because of the senate investigation, there’s an extraordinary record of all these emails, you know, where they’re saying things like, we’ve got to sell all these cats and dogs and what they would do is they would sort of go around the world looking for for suckers, that they could unload this stuff, too. And meanwhile, you know, they’re creating bets against against their own product.

Jason Hartman 23:43
everybody listening if they haven’t seen it already should definitely see the movie margin call, Matt. I’m sure you’ve seen it, right. Yeah, definitely a very good movie. It was an excellent movie. What do we buy the assets back, talk to us about the entire cycle, you know, and everybody listening. Think of this like You’re looking at a graph, right? And you’re looking at this graph on one axis is time on the other axis is value. And the graph has this run up, and you see the the Hill Road sort of running up like a like a hill or a mountain, maybe a hockey stick even. And then it goes to the top, and then it crashes after that, and you see it on the way down. And there are peaks and there are troughs, peaks and valleys. What happens on the other side,

Matt Taibbi 24:28
this all becomes about the access to capital, right? So, you know, everybody knows that they wait out the market long enough that these big bubbles are going to, they’re going to inflate burst. And then once everybody rushes for the exits, there’s going to be a whole bunch of distressed assets which you can then go in and buy, provided you have the capital to do it. And that’s that’s why the, the access to fed largest becomes so important in all these cycles, whether it was 87 whether it was 2001, was or 2008. When they had to go to extraordinary measures with the quantitative easing, all these banks were able to borrow massive sums from the public Treasury. Well, I’m not the Treasury from from the Fed, right, and essentially go out and get themselves Well, again, by buying up all this stuff that was now worth fractions of what it once had been. Right. So here

Jason Hartman 25:18
herein lies the reason that the old saying exists, right? We’ve all heard the old saying, the rich get richer and the poor get poorer, right? Because the rich have access to capital that they can basically borrow from the Federal Reserve when nobody else has access to capital, right. And so that’s when you know the reason bubbles occur is because credit or money supply one or the other, in many ways, the same thing, but not exactly. It expands and contracts right? And the amount of assets in the marketplace expands and contracts so they can do what Jay Paul Getty talked about buy what everybody’s selling and sell when everybody’s buying their own way. Whatever side of that cycle they want to be on, or maybe both sides of the cycle at the same time, aren’t they?

Matt Taibbi 26:05
Right? Yeah, exactly. The name of the game is, you know, as long as there’s activity, and they’re taking out fees as they go, they’re making money on the trade. Either way, they’re making money on the trade either way, it doesn’t matter. As long as there’s a lot of activity. And then, you know, with all these different cycles, whether it whether it was SNL, whether it was tech stocks, whether it was you know, emerging market currencies will or it was subprime mortgages, what, it didn’t matter, as long as they had people flowing into the market and then flowing out. They were able to make fortunes just on the on the pure heat in the market. So they’re always incentivize just just to get people coming in.

Jason Hartman 26:46
Yeah, absolutely. Absolutely. Why do you call Goldman Sachs, the vampire squid wrapped around the face of humanity? I love that, by the way.

Matt Taibbi 26:57
Yeah, I’m rolling. Started has this thing they call wisdoms where they they felt like sometimes if we just do too much exposition and there’s not enough explanation, they say, hey, you need to add a wisdom there. I had been reading this piece and I just wanted an image of something that was ubiquitous and kind of stuck to everything. So I came up with that and it’s so weird. It’s turned into this huge thing like, you know, there are marches in Europe and they have these huge paper Michelle squids and like I hear the EU has investigations into banking corruption, they call vampire squid meeting that was all over occupy so it’s been really weird. I in fact, I hear the golden people even think it’s funny. So that’s, that’s that’s

Jason Hartman 27:44
a good thing. Yeah, well, they’re profiting it from it. So I guess they can have a little fun with it. Right. So I don’t know investment bankers auctioning off America’s infrastructure.

Matt Taibbi 27:54
Oh, well, that’s another really interesting question. I found out about this because I had a friend who worked for the Abu Dhabi Investment Authority, which is like a sovereign wealth fund in the Middle East, and he had been at a pitch meeting where some somebody was trying to sell his the group that he worked for they were trying to sell the Pennsylvania Turnpike. And it turns out that all over the country, what you have are a lot of sort of cash strapped Public Enemies. And what they’re doing is they’re selling the revenue revenue generating public entities that they have. And it could be parking meters, it could be garages at air or its

Jason Hartman 28:30
toll road lot of

Matt Taibbi 28:32
exactly, there was one in

Jason Hartman 28:34
one of those in Indiana, red light cameras, speeding cameras, all all of these represent revenue streams, to municipalities, right, because the government has gone into business against the citizens. Sadly, it’s not about safety or law enforcement anymore. It’s about revenue, revenue revenue. And so now these revenue streams have become very valuable. So a city I mean, this ability can sell off its revenue stream for all It’s parking meters. And guess what the motivation is now to make more parking violations to make parking restrictive, to make it more difficult to park to find a place to park to give out more drunk driving fines and arrest to, you know, give out more red light camera tickets. All of these things are revenue, revenue revenue. And, you know, if you’re a municipality that needs cash, you’re going to look for every way you can to get revenue, and the worst places where the government has gone into business against the citizens, in the worst ways are the most cash strapped places. So you look at California, my former home state, you know, I’ve heard stories of people getting speeding tickets in California that are insane. You know, seven $800 speeding tickets raizy numbers on these tickets. My mother was driving my car once at La X to drop me off at the airport and in many states, they don’t require A front license plate Well, I didn’t ever front license plate on my car. And so the ticket turned out after it, you know, was late being paid to be $600 for not having a front license plate on a car. I mean, can you believe it? It’s insanity. Yeah, no, it’s totally gouging. And that should have been if they cared about the law, that would have been a $10 fix it ticket.

Matt Taibbi 30:23
Right. That’s what it was.

Jason Hartman 30:24
Yeah, that’s what used to be when I was a kid, that type of thing, right? But now, everywhere you can get revenue there, you’re going to get it and they sell those revenue streams to Wall Street. Right. So now it’s it’s just big business. You know, the business is finding people as much as you can. Right.

Matt Taibbi 30:40
Yeah, exactly. And, you know, part of part of that is because politicians don’t want to take the political hit of raising taxes, right.

Jason Hartman 30:46
So they can raise them in these subtle ways that only affect mostly the poor. Right? I mean, rich people, you know, they might be upset that they get a $600 fine, but it’s not going to change their life. Someone living paycheck to That could put them out on the streets, you know,

Matt Taibbi 31:02
you have no idea where that funds going to come you could you could end up with the DMV and a $300 fine for some for registration fine. Or in California for a long time, they were imposing huge draconian fines for being caught driving without a license like way over $1,000. And the idea there partly was about raising revenue, but it was also aimed at undocumented immigrants. The concept basically is we’re not going to just raise taxes, because that’s going to be too unpopular, every other place that we can, or we can squeeze you for something and that’ll be our way. So

Jason Hartman 31:38
here’s the thing, folks, the next time you see one of your city’s finest, you know, the officer dressed in blue, who may be a very well intended wonderful officer that could save your life someday. Remember, that person has also now been deputized as a tax collector. Okay, so that’s the way it is. Sadly, it really is. And then we didn’t even bother to mention the Industrial Complex, did we? Because, because that’s a huge profit making enterprise do. But you know, write a book on that and we’ll do a show on it in the future. Yeah, Wall Street’s in that game too. You know, look, the vast majority of our listeners are real estate investors, and what real estate’s all about is high occupancy and getting as much rent as possible. Well, what could be more profitable than running a prison? And you can ask your occupancy by making more draconian laws. That’s all you need to do.

Matt Taibbi 32:30
Yeah, that’s right. That’s right. Yeah, absolutely.

Jason Hartman 32:32
Absolutely disgusting. Well, what is the lesson from the bubble machine? I mean, look, it’s interesting. everybody listening is interested. It’s an interesting topic. We all know, you know, Wall Street is a modern version of organized crime. But what is the lesson for the typical middle or upper middle class investor? What should they do with that information? If you have any thoughts about that, maybe you don’t I maybe it’s just a you know sort of an academic fun experiment to understand this stuff. But is there any, like practical actionable advice?

Matt Taibbi 33:06
You know, I don’t know. I mean, I came into this completely as a novice and my my main takeaway is that a lot of what’s happened in what we call the financialization era of Wall Street, right? Because is to make money through the traditional way of they would lend businesses

Jason Hartman 33:23
money to build factories, or do repairs or whatever, that was all good. The idea of raising capital capital formation is, you know, what creates lots of progress. We all love that. But uh, that mission has been sidelined, hasn’t it?

Matt Taibbi 33:37
Right. Yeah. And that’s really what the sort of junk bond revolution was all about in the 80s that it was the realization that they could generate capital so quickly and so instantly that they were now you could now make more money just through pure paper transactions than you could by investing and waiting for later returns, right? A lot of what Wall Street does Now, is there really essentially asset stripping schemes? You know whether if you take, for instance, the example of subprime mortgages, I think what they really did is they looked out over the landscape and they said, Where’s most of the money in this country? Well, most of its in people’s houses. And so how are we going to monetize that? And let’s find a way and they, you know, they did, they got lots and lots of people into loans, they resold those loans, they moved a lot of paper around. I think for ordinary people that it’s just it’s a caution, like, Don’t get caught up. And it’s sort of quick fixes that promise you short term returns that turns out to be false gold for a lot of people and my own experience. I’ve become a lot more conservative about how I deal with money since since

Jason Hartman 34:42
I had to cover this. I couldn’t agree more, you know, oh, anybody really needs to do is follow a few basic principles. If you’ve been wooed and lost a fortune in the cryptocurrency game or precious metals or Wall Street, especially in non dividend paying stock, I define an investment. It’s really a simple definition. In my mind, here’s what an investment is. It’s something that has a real asset that produces real income, period. That’s right. That’s an investment. Anything else is a speculation. It’s just gambling. Investing is the legitimate process of creating value over time. And your capital can create value by doing something real in the world. That’s why I like real estate so much. And I like the direct ownership of real estate. Because it’s a real thing. You know, it’s sticks and bricks, it provides housing to people who need it. And you know, you’re not going to hit a home run in a month or a year. But hey, you know, you wait five, seven years and you’re going to be surprised at how rich you’ll be.

Matt Taibbi 35:48
Yeah, I totally agree with you. I think that’s the way to go. And, and, you know, just be wary. Right, you know, like, we don’t know exactly what you’re getting into, right?

Jason Hartman 35:57
Absolutely. Yeah, good stuff, man. Really interesting conversation. give out your website, tell people where they can find your books and so forth.

Matt Taibbi 36:05
Yeah, you can find me at AB dot substract calm or at WWW dot Rolling Stone. com

Jason Hartman 36:11
spell your last name for the listeners.

Matt Taibbi 36:13
It’s ti BB, ti BBI.

Jason Hartman 36:17
Matt, thank you so much for joining us. And we really appreciate having you on the

Matt Taibbi 36:21
show. Alright, thanks a lot, Jason. Take care.

Jason Hartman 36:23
As many of you know, Jason has been podcasting for many, many years delivering a lot of value to his audience, and providing thousands of episodes of free education. And he brought me onto the team a couple of months ago, to help him dive into the world of video in order to expand his educational platforms. So we recently launched a new YouTube channel that is now the official YouTube channel of Jason Hartman and his company. And you’ll find a couple of older channels on YouTube that are specifically for some of Jason’s podcast shows. But this new channel is exclusively for original educational content, all about income property investing, it will include a select amount of a few full podcast episodes that are the most popular. But for the most part, it’ll just be clips from podcasts and original videos. The channel is just Jason’s name, Jason Hartman. And the channel setup is almost like an online course where you have playlists that are categorized into key areas that cover the whole gamut of real estate investing. And that way you can easily find content about specific topics that are relevant to you. And so subscribing to this YouTube channel will be like attending an income property investing school. If you’re a beginner, you’ll find value there if you’re a veteran, you’ll find value there. The categories of education that you’ll get to enjoy in this channel include my 10 commandments of successful investing and your most of you are probably aware of his 10 commandments. He goes into some depth and the series that we have on that channel, finding the right markets and properties, analyzing real estate deals, managing your properties and tenants, current laws and rules for income, property investing, debt, taxes, and how those two things affect real estate, economics and current trends related to real estate investing, financial freedom mindset and inspiration, and popular podcast episodes, and then clips from different events. Those are the kinds of things you can expect from this channel. And you’ll also get some short clips of some key training that was pulled from specific podcast episodes that are within those different categories that I mentioned. So I encourage you to go subscribe now. The link to the channel will be in the show notes. But for now, you can just search Jason Hartman channel on YouTube, and then scroll down to where you see Jason’s name with his face. And the blurb for the channel reads, we provide real estate investors with education, research resources and technology. deal with all areas of their income property needs.

Matt Taibbi 39:03
And so once you see that description Oh no, that’s the right channel. So we hope to see you there.

Jason Hartman 39:09
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