https://youtubetranscript.com/?v=iwO1U78pzAQ
Inflation is probably a bigger threat now than it’s ever been, and therefore it’s an even bigger factor in determining everything that we do and ultimately what the rewards are going to be, or the returns from your investments. And the reason I think that inflation is a bigger problem now than it’s been in the past is because of the fiscal predicament that most of the major governments have put themselves in. And the fact that all politicians, unfortunately, and this is a fatal flaw in democracy, is that politicians first and foremost care about themselves and their own political career and their own reelection. That’s what they do for a living. They are career politicians. And so, like anybody else, they’re concerned about perpetuating their career. And most people who are in politics, they really enjoy it. They like all the perks that come with it. You get a lot of respect if you’re a United States, you’re a congressman, you’re a senator. It’s a career that a lot of people would aspire to. And once you get there, once you get to Washington, and I’m sure this is true in every country in Europe and all around the world, you like it. You like the lifestyle, you like the prestige that comes with being a government official. So you want to stay there. Well, how do you stay in office? Well, you got to keep getting elected. In the United States, we get elections every two years. So politicians are very concerned about the polls. And they’re constantly got their finger in the air, seeing where the winds are blowing. And they don’t want to say anything or do anything that might jeopardize their reelection. And of course, one of the most important things that you need to get reelected is you need a lot of money. You need to spend money on advertising, on television, which is expensive. And so you tend to cater to donors, whether it’s a corporation or a union, anyone that can provide a lot of money. You need to do things that are in their interest. And so what is usually sacrificed by these politicians is the national interest. Doing what’s right for the country is secondary to doing what’s right for themselves. And also, in order to be successful as a politician, you have to be a really good liar. And that’s probably why a lot of lawyers go into politics, because lawyers, they’re paid the lie. I mean, you have to argue your client’s case, even if you know they’re wrong, right? And you have to put on a defense or whatever it is. And so lawyers are generally pretty good liars. And so they become politicians. Because if you’re honest and you tell the truth, you’re not going to have a career in politics. Even if you manage to get elected telling the truth, you’re not going to stay in office telling the truth. So you’ve got to lie. So here’s the situation. So you’ve had decades of politicians buying their reelection by promising voters something for nothing. Because unfortunately, that’s what a lot of voters want. They want something from the government. So if you’re running for office, like I ran for office in 2010, I once in Connecticut. But all I promised was more freedom. I’m going to leave you alone. I’m going to repeal government laws, regulations. I’m going to leave you free to do what you want. And I’m not going to interfere with you. Some people like that message. But a lot of people, that’s not what they want. They don’t want to be free. They want to be taken care of. They want to know what are you going to give me? What stuff am I going to get if I vote for you? Right? What free stuff? And so- Yeah, well, that’s attractive in the short term, especially if you’re not paying attention, right? And lots of people don’t pay that much attention to political discourse. And so if you offer something tangible and immediate, that’s grip short term attention. And that can be an effective strategy. And so it’s this proclivity to gift in this manner that drives inflation. Do you want to define inflation for- Yeah, I will in a sec. … exactly what we’re talking about? Yeah. Yeah, I will. I’m getting there. And it’s even worse when it comes to trying to take away something. Like if you want to cut a program, spending, that’s even worse. Because once a voter has something, nobody wants to take it away. In fact, even some of the politicians, let’s say Republicans in the United States that might have opposed certain government welfare type programs when they started, once they’re in place, even those people won’t vote to take them away. That’s how dangerous it is. So the situation is you’ve had all these politicians who have promised so much stuff that the taxpayers can’t deliver. And of course, when politicians want to give voters something, they don’t want them to pay for it. So they want to spend money, but they don’t want to raise taxes because governments don’t have any money. They only have the money they take. They have to take money from the people in order to give money back to the people. And so if the government’s taking your money, that you don’t like. So with paper money, which unfortunately we have now Fiat Currency, where governments don’t need gold, real money, they could just create paper money out of thin air, right? They could just manufacture it digitally and there it is. That enables governments to spend without collecting taxes. They run these large deficits and they’re able to print the difference and hand out that money so they can give people money without also taking the money away. And now they don’t mind taking money away from rich people because there’s not as many of those, right? So they don’t lose as many votes, although certain rich people can donate a lot to their campaigns, which often prevents the taxes from getting too high. But inflation, yes, for the definition, inflation is really just another tax because governments create inflation. And inflation is also probably one of the most misunderstood words in the English language and deliberately so. I think governments around the world kind of led the campaign to redefine inflation. So if you go back to the origin of the word and if you have a dictionary, even from the 1980s, a Webster’s dictionary, you’ll get the real definition of inflation. So inflation is an expansion of the money supply. That’s all it is. Deflation is a contraction of the money supply. So if you even think about the word inflate, inflate is to expand like a balloon. If you fill a balloon with air, it expands. So with inflation, what’s being expanded is the money supply. And who expands the money supply? Governments. Or they do it generally now through a central bank, but it’s the central banks of these governments that are expanding the money supply. Now, when you expand the money supply, you have more money. Well, if you have more money, but you don’t have more stuff to buy, well, the price of everything goes up. That’s just basic economic supply and demand. The more money there is, the less each individual monetary unit is worth. And now prices go up. Now, what governments have done is they’ve said, price is going up. That’s inflation. No, it’s not. That is the consequence of inflation because prices don’t expand. Prices go up and down as a result of inflation. Now, what happens is sometimes prices don’t go up, but you still have inflation. And that’s because without that inflation, prices would have gone down. And if prices don’t go down because government creates inflation, that still represents a loss to the people because they lost the benefit of lower prices. Because in capitalism, the tendency of capitalism is to reduce prices. That’s why it’s so good because you keep coming up with better ways of producing, more efficient ways, economies of scale. If you look at the CPI, for example, in the United States in 1800, and then you look at the same CPI in 1900, and they have the data, prices were cut in half. You had a 100-year period where you had deflation or prices falling for 100 years. And that was a good thing. All the politicians now tell us that we need prices to go up, that we must have inflation the way they define it of 2% a year. Why? Why do prices have to go up every year? Why can’t they go down every year? Isn’t that better if stuff gets cheaper? If the cost of living goes down, of course it is. But these politicians are trying to sell this lie to the public that rising prices are somehow necessary for prosperity, that if prices don’t go up. So let me sum up what you’ve said. So the first thing you said that I think is worthy of note for people to remember is that the price of something is a function of the ratio of the money available to the goods available. And so if you make money twice as available, then things cost twice as much. And then you defined inflation in that regard. You said inflation isn’t prices going up, inflation is the value of money going down. And so it isn’t because things are becoming more expensive, it’s because there’s more money chasing the same amount or fewer items. Now you could imagine an inflation in a particular sector that would emerge because that thing has become more scarce. But general inflation is a reflection of the inflation of the money supply. Right. Then you said, well, here’s the, let me just finish the summary. You said there’s drivers of that inflation of the money supply. And the basic driver is that because we have a fiat currency that isn’t paid to something permanent, let’s say like gold, and because politicians can create money by printing it, they’re incentivized to do so because they can offer people who aren’t paying much attention cheap gifts for nothing. And the fastest way to pay for that because they don’t want to raise taxes is to increase the money supply.