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Episode 492: Show Me The Money · Words & Numbers

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Coming up next on words and numbers, precious metals.
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The right to an attorney. Melania Trump the movie.
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And the great wealth transfer. All this and more coming up next
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on Words and Numbers, Civil original production.
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Check us out at civil.com. That's C ivl.com.
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Hi, I'm James. And I'm Anthony and this.
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Is words and numbers. And.
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What's new and exciting in your world this week?
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I have an interesting story. In 1961, Clarence Earl Gideon, a
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man with an eighth grade education, picked up a pencil in
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his prison cell and inadvertently changed American
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history. Gideon was a drifter who bounced
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from town to town, doing odd jobs and occasionally spending
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time in jail for minor offenses. In August of 1961, he was
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accused of breaking into a pool hall.
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The evidence against him was thin.
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Gideon swore he was innocent, but few were going to believe a
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God like him anyway. His trial begins.
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Gideon asks the judge to appoint counsel as he's poor and can't
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afford a lawyer. At the time, the state of
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Florida only appointed counsel for those charged with capital
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offenses. The law required Gideon, a man
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who didn't finish middle school, to defend himself against
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trained prosecutors. So Gideon does his best, but
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unsurprisingly, the jury finds him guilty.
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He's sentenced to five years in prison, But he doesn't give up.
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In the prison library, surrounded by law books he
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couldn't understand, Gideon begins to read.
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Slowly, painfully, he teaches himself about the Constitution.
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He discovers the 6th Amendment's promise of assistance of counsel
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and the 14th Amendment's guarantee of due process.
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How could justice exist, Gideon wondered, when rich defendants
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got lawyers but poor ones faced prosecutors alone?
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So Gideon files a petition with the Florida Supreme Court.
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The court rejects it. Not to be dissuaded, Gideon, a
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man with an eighth grade education, handwrites A5 page
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letter to the United States Supreme Court, where the court
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agreed to hear Gideon's appeal. Not only did it agree to hear
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his appeal, they the Supreme Court picked a lawyer to defend
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him, Abe Fortas, who was one of the premier lawyers in the
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country at the time and would later go on to become a Supreme
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Court Justice. 63 years ago last week, Fortas presented a
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devastating argument to the court.
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He said, quote, if Clarence Darrow, the greatest criminal
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attorney in American history, hired a lawyer when he was
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charged with a crime, how could a man with an eighth grade
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education possibly defend himself?
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A month later, the Supreme Court handed down the unanimous
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decision that the right to counsel was fundamental and
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essential to a fair trial. Gideon's case is sent back to
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Florida for a new trial, this time in front of the same judge
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facing the same charges, given the same evidence, but with a
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lawyer representing him. Gideon was acquitted.
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One man's handwritten petition fundamentally transformed the
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American justice system. Today, the words You have the
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right to an attorney and if you cannot afford 11 will be
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appointed to You exist because one person, lacking wealth,
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lacking status, lacking education, refused to accept
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that poor people should face justice alone.
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And for those, those of you out there who want to go look up
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that's case, it's Gideon versus Wainwright.
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And I suggest you do actually, it's a fascinating case.
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Well decided. I, I, I honestly believe so.
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And I want to get us from that rather high note to another kind
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of high note. I don't know if you've been
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paying attention to the precious metals markets lately, but as as
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of today, and I say as of today, and I should be clear, it's
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January 26th, as we record this, as of today, gold is at about
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$5100.00 an ounce and silver's well over 100.
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Yeah, what in what in God's green earth is going on?
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This is where you, the economist, tell us what's going
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on. Oh, that was not rhetorical, no.
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Yet typically people flee to commodities, gold, silver, when
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they're fearing inflation. I don't know what would have
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changed in the past six months to 'cause this of course, I
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having said that, I don't know how for how long this run UPS
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been occurring, but but nonetheless, I've said for a
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long time that we're we're in for a higher baseline inflation.
5:32
I think we already have it now, but worst case scenario, I think
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it's going to be like one percentage point.
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So instead of 1 1/2% baseline inflation, now it's going to be
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2 1/2 percent? I don't.
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It doesn't seem, it doesn't seem to make sense to me that that
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amount of inflation would cause a what, tenfold increase in the
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price of silver from the last time I looked at it?
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Well, I mean, silver a couple of three years ago was $22.00 or so
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an ounce. Yeah.
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Right. So that's about what we're
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looking at. And I, I have.
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Old increase, yeah. I have looked at the charts just
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recently and I can tell you that it was each each of them, gold
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and silver. They tend to March in lockstep.
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I mean, not completely, but they tend to and they, they were
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increasing at a linear rate, albeit a rather high linear
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rate. And then, I don't know, about a
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month or two ago, it looks like it it turned exponential.
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And the headlines that I'm looking at indicate that at
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least the people reporting on this don't seem to think it's
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because of inflation or the threat thereof.
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They seem to think that it's shelter from global risk.
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Really. Which which might be, if I'm
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reading the room correctly, increasing prices down the road
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because of things like lunacy and Iran, you know, trickling
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into the oil markets and what have you, But that's not exactly
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inflation. Yeah.
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Or that's a, that's a different animal entirely.
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And I think I I wouldn't be the least bit surprised if we saw
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people at once worried about inflation and global risk.
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And I don't think it's any accident that as domestic events
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heat up, shall we say, given the shooting of yet another person
7:38
in Minnesota, which will reserve judgement on from now, although
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not in the same way as we did with Miss Goode, who was shot
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last in Minnesota. People, I think, are becoming a
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little rattled with what life might look like in the next
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couple of years, and when that happens, they rush to to
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precious metals. I was having a conversation with
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somebody recently along these lines about people getting
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losing their minds about Donald Trump and what he's doing.
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And I went back and had a look at his book Art of the Deal,
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which was written back in like the mid 1980s or 1990s, I guess.
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But, but in the book he lays out his negotiating strategy, which
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he says right off he goes in and demands something outrageous to,
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to do a couple of things. One, to give him the room to
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back off. And two, to set people's, it's
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called anchoring, to set your your head at this level so that
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as he backs off from that, you get the impression that you're
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getting something, something good.
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And if you look at the various things he's done internationally
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since he's been president, it follows exactly that model.
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He throws out something that is absolutely ridiculous and then
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backs off from it to get the thing that he actually wanted.
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Yeah, of course this creates all kinds of turbulence all over the
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world, which causes all kinds of trouble.
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Oh yeah. I mean that that's a technique
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that you use in business when you're negotiating business
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deals. It Yeah.
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It has no place in the world of diplomacy.
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That's I think beyond question, right.
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But diplomacy has never been one of his strong suits and and I
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think we're seeing that play out now in in the precious metals
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market. And I you know.
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Going through for a while. Now that now that we're on the
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topic, it seems to me that that strategy, we say it's used in
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business, but let let me put a finer point on it.
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It's not about business versus diplomacy.
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It's a strategy you would use when you don't expect to be
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dealing with the person in the future.
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It's not a strategy that you use when you're when you're
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expecting some long term relationship, which is exactly
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what you have in diplomatic circles, right?
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If I'm negotiating A1 time loan for $10 million to build a
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building or something, I might come in with this because once I
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get the loan, I'm done. I'm not coming back to this
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person again. Yeah, I guess.
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You know, all I can say is we'll see.
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But boy, I say, we'll see an awful lot these days, don't I?
10:43
I'm Anthony Davies, Co host of Words and Numbers.
10:46
James Harrigan and I are proud to be on Civil's network because
10:49
we believe in their unifying principle of human respect,
10:52
which is the idea that our well-being as humans is
10:55
diminished when we employ coercion and that, conversely,
10:58
our happiness and prosperity are maximized when we cooperate.
11:01
If you share this belief, join us at civil.com.
11:04
That's civl.com. This, of course, brings us to
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the foolishness of the weak, and it's Melania Trump.
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Well, at least it's kind of Melania Trump.
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I don't want to malign our Our First Lady unfairly, but are you
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aware that there's a Melania Trump movie that's about to hit
11:28
the theaters? No.
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Yeah, it turns out almost no one else is either.
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And it also turns out that the people who are have exactly no
11:39
interest in seeing it. And this is going to be yet
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another black eye in the PR sense on the the Trump
11:48
administration. So they're pulling out all the
11:51
stops trying to figure out how it is they might get people to
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go see this red hot mess of a movie which apparently documents
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the 20 year the 20 days prior to the second Trump administration.
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I I can't think of a less fascinating thing, no matter how
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hard I try. Yeah.
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And this is apparently Jeff Bezos or Amazon, depending on
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how you read the reporting, paid $40 million to to get this
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going. And by by all estimates, it's
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going to rake in the grand total of about 5 million on its first
12:38
weekend and then just casually disappear.
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But they've also thrown another 35 million at it for
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advertising. And I've seen the commercials on
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TV and I, I just, they are so thoroughly uncompelling.
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And I have nothing, I have nothing bad to say about Melania
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Trump. I know almost nothing about her.
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I have no beef with her and I think the last first lady I had
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no beef with was Laura Bush. But you say it focuses on the 20
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days prior to his second. Term.
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Yes, that's correct. Yeah, that that baffles me
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because the interesting thing to me in his second term had
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nothing to do with with him. It was the the final 20 days of
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Biden and what was going on there actually back it up
13:29
further than that. The final six to nine months of
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Biden would make a fascinating movie.
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But if if you're going to make a movie about the Trump
13:36
administration, the interesting thing is the 20 days prior to
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his first term when he beat Hillary, this guy out of nowhere
13:45
with no political experience, enemies everywhere, largely in
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the business world because again, no political experience.
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He beats a former first lady, former Secretary of State,
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someone who had serious political chops.
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That's an interesting story. Yeah, and, and, you know, let
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let's not forget, Hillary wasn't exactly beloved, but he wasn't
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either. He wasn't either.
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It, it might have been interesting.
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And, and I suspect that's the kind of thing we'll see long
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after the second term is over 'cause it's a hell of a chapter
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in American politics. The second one, you know, people
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would have to be honest about Joe Biden in order for that
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movie to get made. And none of those clowns who
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were in that administration are ever going to be honest about
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it. It just reflects so poorly on
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them if they are. So here we are.
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This is going to be a flop of a movie.
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There's no coming back from this, and I hope everybody just
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shuts up about it real fast. And I hope the commercials come
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off my TV because they play them during the middle of playoff
15:02
football. And I can tell you, man, nobody,
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nobody watching the playoffs cares about who the first lady
15:09
even is, let alone that it's this one.
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Yo. Yo, but my beloved Patriots are
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back once again to the Super Bowl.
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Yeah, how about that? Yay.
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They won a they won a grand total of eight games in the last
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two years combined, and this year they're in the Super Bowl.
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Oh my God, you're saying sports words to me, James.
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I am. It's almost as if this time of
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of year, in certain years, I become a theist.
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You'd think you'd be happy, but Johnny Catholic over there.
15:48
No. All you want to do is cast
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aspersions. Well, OK.
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Shall we move on to something non.
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Sports. Well, given that I'm talking to
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you, that seems to be the only available option.
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I want to talk this episode about what economists called the
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Great Wealth Transfer. That sounds fascinating.
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This is. Can this transfer to me?
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Well, yeah, maybe, maybe, maybe not.
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Maybe not, you know. That that's a topic for a
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moment, but here's what's going on.
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This is something that has been happening for a while, I guess,
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but it's just starting to kick in now.
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The facts are the silent Generation, the generation prior
16:39
to the boomers, is sitting on roughly $20 trillion in wealth.
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And that's what we're, I'm talking only about Americans
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here. The boomers are sitting on
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roughly 85 to $90 trillion in wealth.
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So you put it together and you're over $100 trillion in
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wealth. And when I say wealth, this is
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largely real estate equities, cash will be other stuff as
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well. But you know, basically these
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and yes, this is net wealth. So after you subtract out the,
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the debt, this is what you're left with about $100 trillion.
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And these generations are starting to die off.
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And as they die off, they're leaving these assets to the
17:28
younger generations in interesting things are starting
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to happen. Now, someone who thinks about
17:36
this might come to the conclusion that there should be
17:40
no economic effect because, and there's a decent argument for
17:44
this, which is you're simply taking wealth that is in your
17:48
pocket and moving it to my pocket.
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There shouldn't be any, and there's going to be a tremendous
17:55
economic effect. Well, there there is, but it's
17:59
because of the following and maybe, maybe I, I would say this
18:03
falls under the heading of psychology that the older
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generations who are sitting on this wealth are treating it as
18:10
savings. And as with savings, you live
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off of the, the interest, the dividends, the capital gains,
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that kind of thing. But you preserve the capital.
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Now what happens is, you know, some people burn through the
18:25
capital, other people keep amassing it.
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But on average, on average, retired people will burn
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through, burn through about 1% of the principal per year.
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They're preserving this because they're treating it as savings,
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but when they pass it on to the younger generation, the younger
18:46
generation, they'll save some of it.
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There have been studies indicating that they would save
18:52
somewhere around 50% of it. But nonetheless, there's a large
18:56
chunk of it that they will treat the younger generation not as
18:59
savings, but as income, and they'll spend it.
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And that's the interesting part, because it's this wealth that
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was largely sitting in banks, invested in equities, invested
19:14
in real estate that still will be partly invested in that, but
19:19
partly will be spent creating income for other people.
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Now there's all kinds of unknowns here from how much
19:30
wealth is being passed to whom, to how much the younger people
19:35
are going to save versus spend, to what they're going to spend
19:38
it on to what we call the multiplier effect, which is I
19:43
spend money, it becomes income for you.
19:45
So you spend money now that becomes income for another
19:48
person, you get this multiplier effect.
19:50
And there's, it's unclear what the numbers are across the board
19:55
here. However, we can point to some
19:58
things. For example, there are
20:00
economists who have done studies on people's behavior who win the
20:06
lottery. So you win the lottery, how much
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of it do you spend? How much do you save?
20:11
And they've also done studies, interestingly on tax returns and
20:14
not tax returns on tax rebates. You get the tax rebate and what
20:18
do you do with it? You know, people to a certain
20:21
extent pay off debt, to a certain extent save it, to a
20:24
certain extent spend it. But the interesting thing is
20:27
these these bequests, the inheritances that the younger
20:31
generations are going to be receiving, look and smell
20:35
economically a lot like winning the lottery or getting a tax
20:40
rebate. I I think that's right.
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Now I'm going to ask you some hard questions.
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I don't know if you have the answers right.
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We don't discuss these things prior to recording.
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Do you know how many human beings are in those two
20:55
generations who have that kind of money to give to their heirs?
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Do we have any idea how many people we're talking about?
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I've seen the number and I can't recall what it is, but my I
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believe I believe I'm correct. It's going to be north of 10
21:13
million. That would have been.
21:15
North of 10 million, it's probably, it's probably north of
21:18
20 million. I was guessing 40 million, give
21:21
or take. So we're at least in the zip
21:25
code now. How many people are going to
21:28
receive that money? And when we when we say this,
21:34
the people who receive it are by and large going to be in their
21:37
50s and 60s. Yeah, I would say so, probably.
21:42
Do we have any clue how many people are about to win the
21:45
lottery? No, I, I mean, I can look up the
21:49
thing. In fact, what I've done is I've
21:51
gone through and built the demographics and said we there
21:55
are this many Americans who are currently 62, this many who are
21:59
63 and so forth and combined it with their probabilities of
22:02
dying this year. So I've got estimates on how
22:05
much are passing on now. I haven't looked at at how many
22:09
people would be recipients. Of that, because I suspect
22:12
there's going to be an interesting set of circumstances
22:15
when people in their 50s and 60s get this kind of money, they're
22:19
all going to quit their jobs immediately.
22:22
Yeah, there's going to be a lot of early retirement.
22:25
Yep, all kinds. And to to the extent that that's
22:29
true, it's going to open up a batch of jobs that younger
22:34
people were not otherwise entitled to.
22:38
It's so. Do that.
22:40
So you're going to see a lot of people winning as a result of
22:46
this because everybody's going to take a step up that career
22:50
ladder. You know, and the more I think
22:52
about it, we could end up with an with a phenomenon where the
22:59
wealth skips a generation because 50 year olds generally
23:06
on average are doing relatively well in this country relatively.
23:10
You could see a situation where the retirees are leaving it to
23:14
the grandchildren. Yep.
23:15
And then what's going to happen? And there's a a strong line of
23:20
philosophical thought that backs this statement up.
23:24
I'm not just kind of disparaging young people here.
23:28
You're going to you're going to end up with a generation of
23:31
loser grandchildren of very wealthy people who loses all the
23:36
money. Possibly that that's entirely
23:39
possible. There's lots of of anecdote.
23:41
Well, more than anecdotes. There's actual data of people
23:44
who have won the lottery and it just destroying their lives
23:48
because they're not used to having that incident.
23:50
But none the less, there's this wealth that's that's going to be
23:54
passed on. And I've done some calculations
23:58
to estimate what are we talking about here.
24:01
And I'm getting numbers in the and this, this confirms this is
24:08
an agreement with numbers I've seen elsewhere.
24:11
I'm getting numbers in the range of three to $4 trillion per year
24:17
for at least the next decade. That's a lot of money.
24:21
That is a gargantuan amount of money.
24:23
It is so much money that it starts to have a measurable
24:29
effect on the economy. So again, going back to there
24:34
are all kinds of unknowns here, But if we take averages and we
24:37
be conservative to the extent that we can be here, it may well
24:42
be the case that this transfer of, let's say, 4 trillion a year
24:47
for each of the next 10 years could boost the economy anywhere
24:52
from half a percentage point to two percentage points per year.
24:57
Now, that doesn't sound like much, but half a percentage
25:01
point to two percentage point tailwind on the economy, that's
25:05
enough to turn a mild recession into stagnation, to turn
25:10
stagnation into growth, to turn growth into a booming economy.
25:16
And it makes me wonder, economists have noted the past
25:22
five years have been very strange.
25:25
We have gone through in five years, five of the major
25:31
economic upheavals of the past century.
25:33
The well it was in the 1920's, the influenza epidemic.
25:38
We have COVID. The the unemployment of the
25:42
Great Depression. We had double digit unemployment
25:48
during the COVID lockdowns. The high interest rates of the
25:52
70s, we have that going on now. The inflation of the 80s, we
25:57
have that in 2022. All of these major economic
26:02
upheavals, we've had five of them in the past five years, any
26:07
one of which should have thrown us into recession.
26:10
There's no recession. It's possible the it's this
26:15
tailwind already at work. As money gets passed down, it's
26:20
giving a boost to the economy. And I mean economy.
26:23
As I've said it before, the economy doesn't look great, but
26:26
it doesn't look anything like recession either.
26:29
Yeah, so we've got a bulwark against all kinds of horrible
26:33
outcomes. Yeah.
26:35
Isn't that something? It's very interesting now.
26:40
Let me throw another. Let me throw a wrench in the
26:42
gears before we move on. Yeah, this is going to be, very
26:48
generally speaking, demographically speaking, a
26:53
white person's game. Yes.
26:57
And that is going to leave any number of other very large
27:02
groups of people sitting on the sidelines yet again.
27:07
And there's going to be all kinds of ill feeling as a result
27:12
of this. And I would submit that we're
27:15
going to get further and more immediate causes for calls for
27:20
redistribution along racial lines because of what's about to
27:25
happen. Yeah, that it's going to happen
27:29
in the numbers. I don't have them in front of
27:31
me, but I've seen them net wealth by race.
27:37
And you know, blacks on average, again, these are all on average
27:42
have the least net worth. I believe whites are next.
27:46
Asians are the highest. Asians are the highest native.
27:50
Hispanics and Americans, I don't.
27:52
Know it. Being the blacks and and whites,
27:55
I'm sorry, Hispanics are between blacks and whites.
27:58
Hispanics are between blacks and whites and they've been
28:00
accelerating on on all fronts over the past couple decades.
28:05
Yeah, but there, there, there will be that.
28:07
Now, of course, the counter argument is, well, but you have
28:11
this wealth because you saved over time and this is the
28:16
result. And I don't know that that
28:19
argument hits the emotion properly, but.
28:24
It's. Factual.
28:25
Yeah, well, it's factual, but it's a very easy point to make
28:31
is that, yeah, you saved because you had enough to save.
28:35
Yeah, I'd, I'd look, you and I have talked about these numbers
28:39
before. It's very easy to show that
28:42
somebody with a high school education can retire a
28:48
millionaire, adjusted for inflation.
28:51
What it takes is discipline savings and not a huge amount
28:54
either. It's also very easy to show that
28:58
all else equals skin color equals massive difference in
29:02
outcome. Yeah, I I think there's there's
29:07
good reason to point to correlation instead of causation
29:11
or or maybe perhaps a different way, there's a third variable
29:14
effect. Perhaps, but in politics,
29:18
correlation is all you ever need.
29:20
Yeah, yeah. And I I'm just saying that these
29:24
are the arguments that are going to be made.
29:28
And let me admit right off, it's hard for a couple of white guys
29:34
to talk about this, right? But I don't think people are
29:37
interested. I don't think we're not going to
29:38
go into it, but if you're interested in this I highly
29:41
recommend look up and you can find his videos on on YouTube.
29:45
Look up Thomas Sowell. He talks a lot about this racial
29:50
differences in in income and wealth.
29:53
And he's he's a famous, famous economist.
29:57
He's a black economist and that enables that puts him in a
30:00
position that you and I aren't in.
30:01
He could talk about these things well.
30:04
It puts him in a position we weren't in 20 years ago.
30:07
We're we're old men at this point.
30:10
I'm going to say whatever the hell I want.
30:13
Well, yeah, except that people aren't going to listen, is my
30:15
point. Well, they.
30:16
And they they might not, but that's on them, not on me.
30:20
James and I are delighted to be working with Civil.
30:22
For years we've been pushing people to think about how we can
30:25
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30:50
It's an interesting period that we're we're walking into and
30:54
we're kind of walking in with our eyes closed.
30:57
We are about to have I, I think what has to be adjusted for
31:03
inflation and whatever else you'd like to adjust for the
31:06
biggest wealth shift in the history of humankind.
31:10
Oh, it is, it is the largest shifting of wealth that Homo
31:14
sapiens have ever experienced. And I suppose this is where this
31:19
is where I start to become concerned about the the business
31:24
of people getting agitated. And they would step in and say,
31:28
look, the government needs to do something and redistribute
31:30
wealth here. And I would caution people be
31:32
very, very careful about that because this is not a one shot
31:37
deal. This will be an on, not just
31:41
ongoing. It'll get bigger and bigger.
31:43
This generation we're talking about, whatever it is, $100
31:47
trillion being passed down to generations from now, it'll be
31:51
$500 trillion being passed down. What you want to avoid, avoid a
31:56
situation in which you send a signal to people that is not
31:59
worth it to save and invest. Because if you do, the
32:03
government will turn around and take it away from you.
32:06
Well, what what you're going to end up seeing is what you always
32:10
see when governments become too confiscatory with taxation,
32:14
especially in terms of a death tax or an inheritance tax,
32:18
anything of this sort. People are just going to find
32:22
clever and creative ways to give money to their family members
32:27
that don't show up on the books. Right.
32:31
Yeah. And that's just how it's going
32:33
to go. You know, and now that you
32:35
mention it, what comes to mind is an argument that I've heard
32:39
many people. I used to do a lot of research
32:41
in public publishing on the estate tax.
32:43
Something people often say is that, yeah, yeah, it's right
32:47
that the government should confiscate people's wealth when
32:50
they die because the people would leave it to their kids and
32:54
their kids didn't earn it. And that sounds good until you
32:56
realize. But wait a minute, what you're
32:58
arguing is the government should take it away from this guy who
33:01
would otherwise give it to his kids and give it to you.
33:03
You didn't earn it either. You didn't earn it.
33:06
You didn't earn it either. But you know, when you think
33:09
about these things, it's just to give a, a very basic,
33:14
straightforward example, Rich man A is going to go out and buy
33:20
a very fabulously expensive piece of art and he's going to
33:25
hand it to his son and say, well, why don't you hold on to
33:28
this for me? And the son can go and sell it
33:32
whenever he feels like it. And that's that.
33:36
And it's if you don't like art, think stamp collection, think
33:40
baseball cards. It doesn't matter.
33:42
Anything that maintains wealth is all that matters, right?
33:47
Something that you could turn around and sell pretty quickly
33:50
later gets you around all of these taxes.
33:55
Now, are you supposed to report these things of?
33:57
Of course you are. Do people?
33:59
Of course they don't. Well, and there's all sorts of
34:02
ways to get around the state tax.
34:05
And now estate taxes aren't, aren't onerous at the moment.
34:09
But again, I would, I would issue a warning that if in light
34:14
of this great wealth transfer, people start to get agitated and
34:17
say, well, the government should tax this inheritance.
34:21
Congress will dutifully write laws that tax that tax
34:26
inheritance like this. But they will write it because
34:30
remember, the members of Congress largely are rich
34:33
people. They will write in loopholes
34:37
that you can access if you have enough money.
34:41
Who it's going to really hit are the middle class, the people who
34:43
are just starting. They just built up a nest egg,
34:47
right? And I'm going to leave this to
34:48
my kid and help them along so they can build a better nest
34:51
egg. That's the people who are going
34:53
to get hit. And you see that already estates
34:57
are starting to become more common, you know, not states,
35:01
trusts, set up a trust to shield your assets from the government.
35:06
They're starting to become a popular thing.
35:07
People know what these things are.
35:09
But when I first started writing about this 1520 years ago, only
35:15
rich people knew what trusts were, and they were a way that
35:18
you could put your money to the side.
35:21
So the government can't get it. It was perfectly legal, but it's
35:24
built that way because why? It benefits the rich people and
35:28
who's in Congress? Well, rich people who are
35:30
writing laws. Yeah, come to find out, for
35:34
every action there is an equal and opposite reaction.
35:38
Can't really be helped. And so I don't want to live in a
35:41
world in which it could be. Let me go through some changes
35:46
that I see coming first. First off, there's a big
35:50
difference across the states. And again, there's all kinds of
35:57
estimation that has to go on here.
35:58
So what I'm going to try and address is which states are
36:03
going, which states people are going to be receiving more of
36:07
the of this great wealth transfer.
36:10
And the flies in the ointment are the best we can do at the
36:15
moment is look at people's wealth, the wealth of retirees
36:20
within the various states. Because you got problems of if I
36:24
live in Florida and I leave it to my kids who are in New York,
36:29
my numbers as I'm about to report them are going to show up
36:33
that the wealth is in Florida. It's not going to show New York.
36:35
But nonetheless, it gives you a little bit of an idea.
36:38
But what you see here is some and we could put the, we'll put
36:42
the map in the up on the video so you can take a look at it.
36:45
The states that are likely, and I say likely going to be winners
36:50
when it comes to inheriting this great wealth transfer.
36:54
The biggest is Washington state. Their median household net
36:58
wealth is highest there. California's big, Utah is Utah's
37:02
probably number two or three. The western states, Midwestern
37:06
states are all pretty high. The low states, states in which
37:11
there's there's little in terms of median household net wealth.
37:15
Louisiana, Alabama, Mississippi, West Virginia.
37:19
The norm states that you would normally suspect Eastern
37:22
seaboard kind of middling. Virginia Middling.
37:25
North Carolina. South Carolina middling Georgia
37:28
little bit less than middling, who interestingly has a low
37:33
median household net wealth. New York.
37:36
State. Yeah, well, New York State is
37:40
New York City surrounded by. New York City, right?
37:44
Right. Hundreds and hundreds of miles
37:46
of Alabama. Yep.
37:49
I I lived in New York State for for quite some time and it it's
37:53
not particularly well heeled. Hmm.
37:57
So let's talk about some changes that I see coming in addition to
38:01
the to this half a percent to 2% economic tailwind each of the
38:07
years for the next at least the next 10 years, possibly 20
38:12
years, possibly ongoing, who knows.
38:15
One of the things it's going to do is put upward pressure on
38:17
interest rates because as these older people take the money out
38:25
of largely savings, pass it on to younger people, the younger
38:28
people will put some of it into savings, they'll spend a whole
38:31
bunch of it, but the net result is there's less savings going
38:34
on. That's going to put upward
38:35
pressure on interest rates. You're going to get upward
38:38
pressure on inflation because why?
38:40
Again, the younger people are receiving this chunk of money, a
38:43
decent chunk of it they're going to be spending.
38:45
That spending is going to put upward pressure on prices.
38:49
There was a study recently that found that younger people are
38:53
much more interested in social justice type things when it
38:59
comes to investing. There's an acronym for it.
39:01
Maybe you know this ESG, environment, Social and
39:05
governance, Environment, Social and governance.
39:07
They're the younger people, when they look to invest, they're
39:11
interested, yes, in the profits and expected dividends and all
39:15
that stuff, but they're also interested in the company's
39:19
positioning in terms of its environmental practices, its
39:23
social practices, its internal governance, that sort of thing.
39:26
So none the less, if that's what younger people are interested
39:30
in, as this money passes down, you're going to see the savings
39:35
part of it more so than with older people directed to ESG
39:39
type investing. Yeah, right up until they
39:42
realize they can make a better return somewhere else.
39:46
Well, look, you know, I'm not saying that they shouldn't be
39:49
concerned with it, but you'll understand that if to the extent
39:54
that you're concerned about it to the exclusion of return,
39:58
you're necessarily going to get a lesser return.
40:00
I'm not saying that's a bad thing, it's just a trade off.
40:02
It's a thing. Yeah, and I I suspect it's a
40:06
trade off people will refuse to make once they realize what it
40:11
actually means. Possibly, possibly or or they'll
40:16
double down and say I don't care.
40:18
But none the less that's that's a shift in this.
40:21
One of the interesting things is housing prices.
40:23
I don't know what's going to happen housing prices because
40:26
we've got 2 contradictory forces going on.
40:31
On the one hand, you've got the older generations who live in
40:37
houses, they die, they leave the houses to the young people.
40:41
Some of the young people will move into the houses.
40:43
My guess is most of them will sell them.
40:46
So all of a sudden you're going to have an increase in the
40:48
supply of housing, which would put downward pressure on housing
40:52
prices. But on the other hand, the
40:55
younger generations are inheriting a bunch of money,
40:58
which makes it makes them more able to purchase houses.
41:02
So you're going to get an increase in demand for housing.
41:05
Now, which of those effects is stronger, I don't know.
41:07
But you've got one effect pushing housing prices down, the
41:10
other one pushing them up. Well, you're going to get the
41:13
sale of one kind of house and the purchase of another kind of
41:17
house. Possibly so.
41:20
Big, expensive houses are going to get more expensive, and
41:23
smaller, more modest houses are going to go well, they're just
41:28
going to get knocked over. That's possible.
41:33
I think one of the things that's going to happen is it's going to
41:35
put downward pressure on rental prices.
41:38
Yeah, I think that's got that goes without saying.
41:41
And that's kind of interesting because rental prices and
41:44
housing prices tend to move in the same direction, but for the
41:47
first. Time now, necessarily.
41:49
Not necessarily, but we're going to have a situation where rental
41:52
prices clearly will be going down, but housing prices, we
41:55
don't know. Yeah.
41:57
And you know, we're going to get a starting with the realization
42:04
that this massive amount of wealth is about to be
42:07
transferred. You have to realize that we're
42:11
going to get all manner of strange outcomes that we've
42:15
never seen before. And and where it shakes out is
42:20
anybody's guess. You can have a pretty well
42:23
informed opinion on the matter, but you could very easily be
42:27
wrong. Yeah, it's just we're going to
42:30
have to wait and see what actually happens here.
42:34
I'm, I'm interested in seeing it.
42:36
I I suspect it will happen over so long a period that you and I
42:40
are not going to see it fully. I think it's the reverse.
42:44
I think it's going to happen and keep happening to a greater and
42:48
greater degree as the years go by because these young people
42:52
that are receiving all this inheritance, 20 years from now,
42:54
they're going to be old people. 30 years from now, they'll be
42:57
leaving it to their kids. And it'll be even more than the
43:01
100 trillion that they're passing down now.
43:04
This, this may end up becoming the thing that, yes, you know,
43:10
100 years from now, people had get income from their jobs, but
43:14
largely everybody's got a trust fund, everybody.
43:18
It it's interesting yet that I say we probably won't see this.
43:22
And you see, of course we will. It'll only be 30 years.
43:25
I what, what? What makes you think you're
43:27
living another 30 years for crying out loud?
43:32
So one last thing I'll throw out here.
43:35
Surveys of older people have indicated that there's going to
43:41
be a substantial surge in charitable giving.
43:44
Yeah. Large chunk, this 100 trillion
43:47
is going to be going to charities.
43:49
And boy, is that going to piss off a bunch of children and
43:52
grandchildren. Well, it's, it's a nice, it's a
43:56
nice way to remind people, because we forget this, that
44:02
Americans give voluntarily A tremendous amount.
44:06
We give voluntarily. We give more than the entire set
44:12
of money the government spends on welfare programs.
44:15
Yeah, Jackie Chan, I don't know if you saw this in the news,
44:19
just in the last 2-3 days, gave $400 million to various
44:24
charities and $0.00 to his children.
44:30
And he he said, well, if if my son can't make any money, why
44:35
should he have any of mine? And that's where we're going to
44:41
be for a while, right? I don't know how all this shakes
44:44
up, but it's going to be fun to watch.
44:48
It is. This is what happens when you,
44:51
largely speaking, leave an economy alone.
44:54
You enforce property rights, you make sure people are protected,
44:57
but you let the markets do their thing.
45:00
They create wealth, in this case more wealth than the human race
45:05
has ever seen prior to this. And probably more than it will
45:10
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45:12
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