Dave Collum (Profit From Central Planning And “Money Printing!”)?

Banks are not creating money for loans; they are creating additional bank liabilities, and the dollars in a checking account are just IOUs from the bank, not actual cash, so inflation of bank liabilities is perceived as wealth creation when it's actually just proliferation of promises.

“it's not that we're creating cash for loans we're creating additional bank liabilities so all that number is in your checking account is the bank saying that we owe you an iou because the dollar itself is an iou so it's just all these bank liabilities going back and forth”

From 1800 to 1900 under the gold standard, prices declined by 50% over 100 years, yet nominal wages increased 1% per year, and per capita productivity increased—workers became significantly wealthier despite deflation.

“from 1800 to 1900 prices in the united states went down by 50 percent for a 100 year span it went down gold standard yeah so if i i did some back to the napkin math for a whiteboard video and i just assumed that that let's say back during that time frame the average worker in the time frame i'm saying it's like the 1870s 1880s um they were making a thousand dollars a month or 1500 i think was the number i used working at mcdonald's in today's dollars okay and their but their expenses were fifteen hundred dollars as well if you look at the numbers back then they're about two three percent deflation but nominal wages actually went up by one percent per year per capita so in nominal gdp went up as well”

Although people claim to distrust agencies, they selectively believe statements from those agencies that fit their political narrative or religion, and use statistics from 'enemy' agencies (like Fed data) only when those statistics contradict the agency's own narrative, enabling confirmation bias.

“although no one would admit to an agency they trust it seems as though if that agency says something that fits their political narrative i.e their religion then they do trust what that that person says... if you're say listening to one of the arbitrarily three letter news organizations and they talk about something you know you go less baloney but then the next thing they talk about you don't know you believe them”

Societies need a rules-based structure founded on shared moral principles, and these were historically provided by religion; when religion is abandoned, something else fills the void, and currently it's being replaced by social movements with much worse collective beliefs than traditional religion provided.

“i wrote in defense of religion and i said you got to be careful because if you have a rules-based society that no one's morally sound enough to follow the rules it's not going to work and so i made the case that our whole system really is still based on what are really judeo-christian principles... our society is really glued together by thought processes that really have as a foundation a shared collective belief and and we're losing that now right you can see that huge right riots in the streets... we've replaced religion with with social movements and and they're not any good... shared collective belief and social movements are pretty appalling whereas in religion they get together in church they say you know you don't steal from your neighbor”

Wealth accumulation requires that your purchasing power grow faster than prices; if the Fed cranks the money supply, all you have are more dollars but the same purchasing power (or less), so you haven't accrued real wealth despite nominal gains.

“if if the dollar retains its purchasing power and you accrue more dollars then you have accrued wealth right but but you're not occurring wealth if you accrue more dollars because they're cranking them you know that i know that the fed doesn't seem to understand that”

Wealth creation from 1870-1940 was phenomenal, 1940-1970 was okay, but from 1970 onward it has been flat despite digital innovations, because the digital world is not truly wealth-creating in the transformational way that electricity, phones, airplanes, and cars were.

“i wrote a lot about wealth creation last year i wrote about 20 pages on it and and we are as much as people love the digital world it is not a wealth creating world it it you you you can make a compelling case that you know the the 1870 to 1940 was phenomenal 1940 1970 was was okay and from 70 on it's pretty flat and i i know people love their iphones but um but it's not transformational the way uh bringing electricity and phones and airplanes and cars into the world was”

Small decentralized actors create more wealth than large centralized organizations; growth comes from lower levels of economy, not from mega-cap companies, and the structure of incentives and freedom determines wealth creation, not the size of the organization.

“the small guys working as a gigantic unit of of effort do a much better job of creating wealth and one gigantic big guy and so the growth doesn't come from microsoft the growth doesn't it comes from much lower levels”

GDP accounting incorrectly includes war production as 'value' while ignoring massive depreciation, meaning post-1940 'growth' numbers are inflated and don't reflect real wealth creation—the war output depreciated immediately and wasn't wealth.

“the gdp also included the gdp of the war machine and there's a massive depreciation so the mis the thing that people are missing in terms of both inflation and and gdp is that if you produce something that lasts for 50 years you produce wealth if you produce something in the last 10 minutes you've produced nothing”

Wealth is not synonymous with currency unit count in bank accounts; rather, wealth is measured by the quantity of goods and services a society can produce efficiently.

“wealth isn't necessarily the number of currency units you have in your bank account... it really boils down to the amount of goods and services the society can create more efficiently as a whole”

In the Renaissance and post-Dark Ages emergence, the productivity increases came from peasants becoming more productive per capita through market incentives and freedom, not from higher wages; the narrative of peasants being 'paid more' reverses the causal chain and misses that per capita productivity had to increase first.

“they talk about how the renaissance everything worked really well because the this the peasants were paid more right that's kind of the working model the peasants were paid more and therefore there was this middle class but but that can't be the story the story must have been that the peasants were more productive per capita and so instead of having some king what i referred to as a king in his wenches and a bunch of peasants who are working really and efficiently they they unleash the peasants to their own devices and once once the market took place the free market took not about paying the peasants more it's about the peasants creating more”

Historical precedent (Roman Empire, Spanish Empire, Japan) shows that extracting precious metals or creating money does not create wealth; it causes inflation and eventual collapse, because gold and currency are stores of value, not wealth itself, and wealth requires production of goods and services.

“when i wrote about it i went back to ancient row and pointed out that they dug gold out of the ground with slaves and what they discovered is it was not wealth it was inflation and then they they chip their coins and you know clip their coins and generated more inflation debase generator more and then you got uh you got the spaniards you got gold from the new world and for for a brief period the spaniards were doing great but that gold's not wealth either it's a store of wealth right the gold bugs love to call it well it's everything's just a store i agree and uh and so the spaniards failed to develop an economy and after the gold ran out and the the um the how do you pronounce the cantalon effect i never know how to is that how you pronounce it okay the catholic effect lasted for a while now spain's kind of a third world country and um and and so that didn't work and and and you know japan had this what they said was a miraculous economy when in fact it was just a huge debt bubble yeah right and so it never works you you don't create wealth by creating money”

The claim that low inflation hurts consumers is cockeyeded, because during 1870-1940 there was absolutely zero inflation yet the industrial revolution occurred, proving inflation is not necessary for growth and is a Fed-invented construct with no economic foundation.

“the idea that we need inflation to drive the economy as more cock-eyed cock-eyed lies coming out of the fed right there anyone who says that you say oh yeah yeah that's true but you have to sort of ignore that awkward little period from 1870 to 1940 where there was absolutely zero inflation and we witnessed the industrial revolution yeah right and so you say oh what happened when there was no inflation and we rocked we rocked so this is a fed construct they they make up these fibs the two percent inflation target came right out of a dark orifice right they just pulled it out of nowhere they invented it now everyone thinks it's some sort of magical number some some constant of the universe like you know planks constant or something”

Only asset prices decline during deflation, not consumption of goods and services; people continue to buy food, medicine, cars, and daily necessities regardless of falling prices, so the Fed's deflationary collapse theory only applies to speculative financial assets.

“it's really if you think about it the only thing that people won't buy are assets right that's it it's assets it's it's not stuff you buy daily”

Government intervention through stimulus and forbearance creates economic distortions that prevent normal market clearing and recovery; if fewer goods and services are being produced due to work disincentives, future productivity will be lower, not higher.

“by the government intervening and doing this stimulus check and creating all of these programs uh to combat any micro downturn in the economy or more importantly in asset prices they're creating an environment where there is no economic recovery because if you if you think about the economy in terms of goods and services are we producing more or less now and as a result of what has been done by the central planners in 2020 are we going to be producing more or less in the future”

The 2% inflation target is not based on economic science but was arbitrarily pulled out of nowhere by the Fed—it's now treated like a physical constant like Planck's constant when it's just a construct.

“the two percent inflation target came right out of a dark orifice right they just pulled it out of nowhere they invented it now everyone thinks it's some sort of magical number some some constant of the universe like you know planks constant or something”

The United States didn't create any wealth in 2020—there was no increase in productive capacity—yet markets rose 49% because of pure monetary and fiscal stimulus, creating an illusion of wealth for equity holders who were simultaneously locked down and unable to exercise their newfound purchasing power.

“i can't make that case i can't get near that case um i think we could roar into some period where there's some spending um of some kind but but but we didn't create any wealth right... the s p is up 49 over the last year and i said wasn't this the year of our lord 2020 where where we had a catastrophic lockdown and and so people feel much richer because their equities went up 49 percent but there's nothing about 2020 that was a productive right there's nothing about 2020 it was productive”

Asset bubbles like Tesla, GameStop, and Bitcoin may be driven partly by people seeking tribal belonging and shared belief systems in place of religion; they want to believe in something and find community with other believers, which explains cult-like fervor in speculative assets.

“would lead to the question are some of these asset bubbles potentially a result of that need for religion or need for tribalism or community uh such as tesla gamestop so do you see that the cross over there as well i think that's right i think that so people want to believe and then and then if you challenge i don't challenge the hodlers because i don't know if they're right or wrong”

Collum wrote in defense of religion despite being an atheist and pro-choice, arguing that a rules-based society requires either moral soundness or a strong foundational belief system to function.

“about two or three years ago i wrote in defense of religion and i said you got to be careful because if you have a rules-based society that no one's morally sound enough to follow the rules it's not going to work and so i made the case that our whole system really is still based on what are really judeo-christian principles”

Cancel culture is the most repugnant social invention of the younger generation because it attempts to destroy people's livelihoods and existences over disagreements; the person doing the canceling may be protected but vulnerable people (teachers, professors, low-level employees) are destroyed.

“cancel culture you want to cancel someone have a ball but i hate your guts for doing it canceling trying to destroy people's lives because you disagree with them is the most repugnant thing that the younger generation could possibly have invented... the cancel culture the very premise of it is to take away not only to make the person to denounce them but to take away their livelihood to take away their their existence to squash them like a bug”

The Fed keeps this massive bubble afloat through confidence management, but confidence doesn't need the Fed—average people naturally seek innovation and improvement without central bank cheerleading.

“they're right at one level keeping this massive bubble afloat blown up with confidence right they talk about confidence like if we don't have confidence we'll end up in some valley of death somewhere and and confidence is self-creating we don't need them to make us confident the average person through just you know like a surf who's finally liberated will go out and change the world by inventing a new plow or something we don't need the federal reserve to be to be acting as cheerleaders um they are acting as cheerleaders to keep their um i don't think this is hyperbolic anymore their ponzi scheme going right”

The Fed has made major investment decisions very difficult over the past 10 years because it appears willing to destroy the currency to keep markets afloat, forcing investors to chase increasingly risky assets rather than sit on cash.

“the fed has made the the major decision i would have made about 10 years ago very difficult so i was you know 809 which i did see coming as did thousands... it's become clear to me that now the fed believes that they can do anything without paying a price and so now it's very difficult to sit on cash and to try to figure out and to wait patiently because they they seem determined to if necessary to destroy the currency to keep the markets afloat”

A service economy is something you only get to enjoy after you've created wealth; services are a luxury that requires underlying goods production, and the idea of a 70% service economy is backwards because you cannot consume services without first creating goods.

“they say we're a 70 service economy to me services are something you get to do after you create wealth and so after you create wealth then you get to go have your lawn mowed then you get the gut right you get to pay people to do stuff but but it's it's the wealth creation um part it gets a little vague because some services are kind of wealth gracious they free you up to do other things um but but the the idea that we're a service economy”

Amazon is not transformational compared to the Sears catalog, which allowed customers to order thousands of items weeks in advance; Amazon merely made that same function faster by a few days, which is incremental not transformational, and Amazon's value proposition ultimately depends on selling goods that would be sold anyway.

“was the sears robot catalog that was transformational and the sears robot catalog took you from from buying stuff at the country store out of barrels to be able to order anything you wanted thousands upon thousands of items and some number of weeks later it arrived you could buy prefab houses from the sears robot catalog at the turn of the century this is amazon except for it took weeks instead of a day that's incremental gain that's incremental it's not that's not transformational and it still goes back to what is amazon selling right they're selling goods like if they're if there weren't it would have been sold anyways there would be no amazon”

Equity markets are currently 100%+ overvalued by every metric, and there is mathematically no pain-free way back to equilibrium—either a fast 50% crash or a 25-year grind where nominal prices stay flat while GDP grows, or somewhere in between, but either way there is damage.

“i could list 25 metrics that put us well over uh a hundred percent overvalued so let's assume we're 100 overvalued how do you get out of that well on this curve of gdp unitless y-axis you've got this upwardly curving two percent compounding and you're 50 you're a hundred percent too high so you're twice about and you gotta you gotta get back you gotta get back to that curve how do you do it straight down is a fifty percent correction... if you do the math it's real simple math um if you want to just tread water uh and the markets in real dollars don't change and then and and the market cap has to get back to that curve of the the gdp 35 years... if the fed achieves what it wants to achieve it wants us to grow and have the gdp catch us so it wants the asset prices to grow and the gdp if the asset prices grow somewhere under 20 over 50 years the two intersect again so the conclusion you draw is whether you rip the bandit off fast or incredibly slow there's no pain free root out once you're 100 overvalued there is no pain-free trip back to equilibrium”

Single-family housing is a terrible business model for developers to maximize profit; rectangular buildings with 500 units are the profit-maximizing structure, so institutional capital buying single-family homes is pursuing low-return assets, which suggests ulterior motives beyond yield.

“you search for yan single family housing is a terrible business model you want to make money you build a rectangular building and stuff 500 people in it that's how you make money yeah you know make money having them to scale is very very difficult”

The Great Depression didn't end until after World War II, not because of wartime stimulus, but because Americans maintained austere consumption and built demand while war production was diverted; the war didn't fix the depression, the post-war consumption boom did.

“i did an analysis of gdp i got an argument with i think it was a stanford economist named kennedy and i suggested to him that the great depression didn't end until after the war that the the war didn't end the depression that the the depression that that we maintained an incredibly small footprint an incredibly austere existence and you know building a potential demand for the future while the war was going on”

The Federal Reserve showed in 2008-2009 that they would intervene dramatically to prevent market losses, making it difficult to predict their actions or magnitude—I don't think people predicted QE programs would reach $20+ trillion, even those who saw the crisis coming.

“i haven't paid any attention whatsoever just sort of indexing my way up um and then by mid 98 the market started to look nuts to me i figured out enough to realize that they were crazy...it became clear to me what the fed showed us an 0809 which which a lot of people saw the problem coming i've yet to meet a person who can document that they saw the interventions coming so i don't think people even predict within a decimal point of what central banks would do so i don't think they would have predicted 2 trillion let alone 20 trillion”

Cities will undergo transformational reinvention as companies adopt remote work permanently, eliminating downtown traffic and supporting services, creating 'growing pains like no tomorrow' in the short run.

“companies move to zoom meetings and let you work at home because by the way they don't have to pay for your your office space anymore right so they save money that's going to be a transformational change the cities in the long run might be great but in the short run it's going to be growing pains like like no tomorrow”

Bitcoin's float availability was limited like the dot-coms, where only a small percentage was tradeable due to lockup periods, which artificially elevated prices and created bubbles that deflated when lockups ended.

“this is like the dot-coms where you know 10 of the float was available for trading i had a taxi driver was worth many millions he said but then when the when when the lockout period finally ended it was it wasn't worth anything yeah right so it traded a small percentage of the float kept kept the that kept the price way up and that happened all the dot-coms right”

Real estate market boom post-pandemic cannot be explained by fundamentals alone; future commercial mortgage-backed securities crisis is likely because developers are 'leveraged up to the max' with already-built apartments and declining office usage.

“but it also the untold story therefore is what will happen to the commercial mortgage-backed security world when when all those you know there's not a developer out there it's not leveraged up to the max right so every developer any extra cash they have they get a new loan build a new apartment building and and levered up even more so all those empty apartments are crushing somebody”

Peter Schiff's observation that deflation would not reduce consumption of necessities is proven by credit card usage: people use credit cards (paying interest) to buy things now rather than wait, disproving the claim that dropping prices will cause consumers to postpone purchases.

“schiff made a great point on that he said if that were true no one would ever buy anything using a credit card because you've got an interest payment on the credit card therefore it's uh it's more expensive but you're buying you're risking my expenses you're buying it right now you know”

Keynesians apply supply-and-demand principles selectively: they ignore that higher prices reduce quantity demanded, yet they claim consumers won't purchase goods during deflation, contradicting basic economic theory when it's politically inconvenient.

“they come at it from this demand side of the equation being keynesians but yet they ignore supply and demand when it comes to goods and services so because correct me if i'm wrong but if the price of x y z goes up the demand goes down goes down doesn't it if the price goes down doesn't the demand go up... the other ridiculous thing is this idea that consumers won't consume if there's deflation and i'm going so you won't buy food you won't like gas right you won't buy gas you won't buy medical care”

Wealth creation requires free markets, private property rights, sound money, low taxation, and low regulation—these are the common denominators Collum found in his research that enable prosperity, and anything else is counterproductive.

“you know i wanted to ask you you said you did the study for the research for that 20-page report what are some of the common denominators that lead to wealth creation we talked about it as productivity but how is that done and the research i've done it's it's when you create a free market environment private property rights you have sound money very low taxation and low regulation and let people go out there pursue their own self-interest and bring up society as a whole”

A durable good like a cordless drill ($80) that functions for years creates wealth, while consuming a service like a movie ($80, lasting 2.5 hours) does not, and this distinction is crucial to understanding what GDP should measure.

“if i buy a cordless drill for for 80 bucks i've accrued some sort of wealth right that thing has potential to do a lot of stuff for me if i take my family to the movie for 80 bucks good luck um that that lasted two and a half hours and and so those are very different contributors to gdp”