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Sept. 30, 2023 - Blood Money
34:07
Blood Money PODCAST Episode 4 - Bestselling Author Carol Roth "Covid Slaughter of Small Business"
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Welcome to this new episode of Blood Money.
We have Carol Roth, a bestselling author, the author of The War on Small Business.
She's a recovering investment banker and she has her own action figure.
And Carol, we actually met when I was producing television shows in Hollywood and we were working on a great television show concept.
Yes, nice to see you again, Vem.
We've known each other for quite some time, and it's fun to be able to play with you like this.
Awesome, awesome. So, this show is called Blood Money, and the first question we use at Jumping Off Point to riff on is, Carol, what does blood money mean to you?
Well, fortunately, I don't have a lot of personal experience with blood money.
I often think of it in the context of Money that is paid by a killer or a group to the family or the group of somebody who's been killed is sort of a, here's some money for what's happened to you.
Obviously, almost insulting, like, you know, here's some money to go away, even though we've taken something precious from you.
And that really kind of sticks with me in the time period that we're in now, given the The sort of crumbs that were given to small businesses after murdering many of them and maiming many others.
The crumbs that were given as sort of COVID relief payments to people as wealth was transferred from Main Street to Wall Street.
So I guess the way that I kind of think about it in the most literal sense has a lot of applications.
You know, in a more figurative sense right now.
So, yes, there's definitely been a slaughter of small business and you would be an expert on that considering you have a bestselling book.
What's been going on with small business and where is this all heading to?
Yeah, it's been a really challenging time for small businesses for a really long period of time, but the last two years in particular have been an incredible challenge.
Obviously, the decisions that were made on who to shut down, Who was essential versus non-essential?
Who could survive versus who would thrive?
Those kinds of things were all made not based on data and science, but based on political clout and connections.
And obviously the small businesses, even though they are about half the economy, And at this point, number about 31.7 million, they just don't have that centralized clout and connections.
They don't give the government that level of compliance.
They certainly don't give them campaign contributions.
And so they were amongst the first that were targeted.
They were targeted the hardest and the longest.
They got a fraction of the compensation that was needed For the subjugation of their property rights.
And then on the tail end of this, all of the compounding decisions that were made, things that impacted the labor force, the supply chain, inflation, while they impact everybody, the small business owner is really challenged by that in an outside manner.
So we're at a point where as of July-ish 2020, About 400,000 small businesses had been completely murdered.
That number had been picked up by the Biden administration.
So that's, you know, obviously a fairly solid number.
Probably, you know, when it all settles down, it's going to be in the millions of small businesses that were murdered.
And that will be covered up by the fact that a lot of people quit their jobs to day trade and get into crypto and those kinds of things.
A challenge for a significant percentage of the small businesses, not only in this country, but around the world.
What kind of impact does that have on society going forward?
So it really goes into a sort of discussion about the consolidation of power.
If you think about capitalism in the context that I defined it, which is freedom, choice, transparency with the guardrails of property rights.
Versus a handful of people making decisions using force, control, coercion, and usually a lot of transparency.
The more that we move away from that, the worse off everybody is.
Not only does it take away wealth creation opportunities from the average American, but it also lowers the amount of choice that you have as a consumer or Or as a job seeker, it impacts innovation.
And then you end up in this cronyism situation, which we've seen getting worse and worse, where just a cadre of people are making more and more economic decisions.
And that continues to concentrate the wealth and opportunity in the hands of the few instead of in the hands of the many.
And so do you think this was just gross incompetence or was this intentional?
So I always kind of say this is like a choose-your-own-adventure book.
I love those books, by the way.
Everybody does, right?
You decide which route you want to go down.
And so I always present the facts.
The reality is, if you were trying to do this intentionally, there's not much that you would have done differently.
But whether you think that it was intentional, whether you think it was incompetent, whether you think that small businesses are I always come back to, like, it kind of doesn't matter.
Intentions don't matter.
Outcomes do. And so whether or not you believe one side or the other, like, too much of our time is spent arguing over that versus what's the outcome.
And the outcome Based on human nature, based on centralized power, is that it's always going to impact the people in their circle.
It's going to concentrate the power.
It's going to create worse outcomes, regardless of, you know, it being intentional or not.
And so I'm not super caught up in that because I know the outcome will be the same either way.
Let's talk about the outcome.
I mean, I met with some people, you know, that are actually just yesterday had some great conversations.
With individuals talking about how inflation is going out of hand and we're heading into some really dark financial times and buying a loaf of bread for $100.
I mean, tell me, where do you think this is all going?
Yes. So it's hard to predict a perfect crystal ball because so many decisions that remain to be taken will change the trajectory and it sort of unfolds from there.
I mean, there's no doubt that we're experiencing inflation that we haven't seen in 40 years.
There is no doubt that that will continue.
I think we will continue to have an issue in terms of wages and prices because the reality is a lot of people left the labor market based on the decisions made by the government.
And I don't think that they're coming back at least as quickly as they left to make up that shortfall.
And so it's going to be a good market for at least some period of time if you're an employee.
But what happens is if you're an employee and you have these different options, or even if you're on the sidelines and you want to come back, you're going to demand higher wages.
And the business is then not only going to have to pay your higher wage, but it's going to have to pay the higher wage of all of its suppliers and vendors that are dealing with the same thing.
And everybody else who's in their organization who's going, well, if this person got that much, I want to raise too.
And then they're going to have a higher cost structure.
So ultimately, that means they have to pass that on to the consumer.
And then the consumer goes, well, I don't have enough money.
I need higher wages. And it's this thing that is called an economics, a wage price spiral.
And so I think that is something that's potentially quite likely to happen.
The other issue is that we have a lot of this at the hands of central bankers who are very much a large part to blame for this starting to begin with.
And the idea that they can bring us in for what's called a soft landing, that they're going to time this just perfectly, and they're going to raise interest rates, and it's not going to, you the economy or put us into a recession or have all these other ripple effects is pretty faulty thinking because the Federal Reserve hasn't been able to forecast their way out of a paper bag ever.
So to think they're going to get it just right this time is a little bit challenging.
So I do think there is a scenario where This ends up, you know, as a complete catastrophe right now.
What I always tell people is the thing we have going for us is that we're the skinniest kid at fat camp.
So we're not the only ones who've done this.
Central banks around the world have done this.
We still today remain the world's reserve currency.
Even though, in a way, many of our enemies are rooting for us to fail or trying to assimilate in a way that creates this global structure, there's a lot of powers that be here that don't want to see that happen.
So I think there's at least some level of pushback where...
That's going to keep the system kind of chugging along.
It doesn't solve the structural issues, but it doesn't necessarily mean we end up in Venezuela.
I think that the most likely outcome is that we just keep inching towards looking like Europe, which is not...
They've got some great fashion and things, but they don't import, but I don't want to import their economic policy.
So we end up looking more like them.
But the outside issue is that we do end up like a Venezuela situation.
And if we start moving in that direction, then we probably have, you know, massive civil unrest, war, and then the whole thing just kind of, you know, spirals out of control.
But I think that's probably the outside, you know, unlikely or not impossible, but like if you were handicapping it, like that's not the likeliest outcome, at least right now.
So you don't think like a massive depression or something like that's on the horizon?
I think a significant recession is a very real possibility depending on the decisions that are made and undertaken by the Fed and also the government who keeps trying to spend into this period of time that has already accelerated inflation and keep going, oh, that's going to bring down inflation.
Well, I'm sorry. I went to Wharton and we didn't learn that in our I don't think that's going to happen.
It just depends on some of these decisions and if they back off some of these bad decisions that have been made and let us move more towards a market-based decision model, or if they want to just try and centrally plan our way out of this, the more that they move in that direction, the worse off it is going to be for us.
With all the money printing and how much in debt we are, I mean, how do we get out of this mess?
This is the $30 trillion question, Bem, and it's one that me and many other folks who are nerdy sit around and ponder.
And there's a range of outcomes.
The reality is, and part of the reason we're in the situation that we are in, is that right now, Some crazy amount of money, I think it's like somewhere between 10 and 15 cents of every tax dollar is going to pay for interest on our debt.
So the debt is stuff that we've already bought.
The interest is the financing cost.
So as you're paying in taxes, some slice of that is going to not only pay down the stuff we've already bought for, but pay interest on that.
So taking away from the ability to buy and do new things, so to speak.
As interest rates increase, if they got back to a generally normalized level, the predictions are within a decade that 30 percent, so 30 cents out of every dollar that is taken in for taxes is going to go again, not to pay down the debt, but just for the interest on that debt, which means that we either need to raise taxes.
decrease spending, which obviously we don't think is probably going to happen, or they need to figure out something else.
One other issue is that who owns the debt?
So we have some debt that's owned by China and Japan.
You know, if you were very crafty, you'd be going to China right now and go, you know, you just cost us all this money, like this debt, like we're just taking it back and just, you know, X-ing it off.
I don't know that anybody's going to have the balls to do that, but you could.
Some of it's owned by investors.
You know, you go out and you buy a treasury bonds.
So obviously they have to pay that.
And then a lot of it is owned by us.
So there is this discussion of, you know, is there a world agreement where we all just kind of go, well, we've all done this bad stuff.
It sucks, but it's going to be really bad if we kind of get it to this point.
So let's all have a global like reduction in debt and everybody agrees.
And It just kind of moves from there.
So I don't know.
But there are, you know, implications of that, your continued money printing, the move towards a potential digital dollar by the Fed, and all these things that really could destroy the value of our currency, which is why it's really important for people to own assets that appreciate in value and not just hold money in cash.
Let's talk about some of those assets.
As a business consultant, what advice would you give to people in this day and age in terms of trying to protect themselves against future depression?
Obviously, this is not financial advice.
I have to say that or else I get sanctioned by the SEC. You're giving me opinions.
Yeah. But, you know, just a general tenet is that wealth is created by how you invest and by having ownership.
You know, we always heard the word equity in this kind of like creating the same outcomes for everybody.
But like financial people, we talk about equity as ownership.
Right. Ownership of assets and valuable assets.
And so that's the equity I want people to focus on is to own things.
So there are a number of ways you can do that.
Certainly, you know, land and homes is one way to do it, whether it's your own or renting it out to other people, which It has its own issues in this day and age.
I'm not going to say any of this is easy, but we need to start somewhere.
Building your own business where you have value that you've created.
Again, more challenging today.
They're really trying to make all this very challenging for you.
It's so important.
Owning an equity stake in somebody else's business.
So if you are a job seeker, if you're an employee right now, it is the time you have probably the most leverage that you will ever have in your lifetime.
And so trying to find a job where you can get stock options or you can get an equity share or at a minimum, they match your 401k so that you're participating either in the business that you're helping to build or at least into the greater stock markets.
And again, just investing in the types of stocks that you think are solid business models and have values that align with you and you think are still going to be around and kicking, you know, 10, 15 years from now.
So those are the kinds of things that you can do.
That's what the wealthy people are doing.
And so, you know, you can't be enjoying it.
So, okay. I've talked to some people that are obviously looking at the really like severe doomsday scenarios and they're investing in things like, you know, Middle of nowhere farms and they got their own wells and able to grow their own food because they think, you know, the shit's really going to hit the fan.
But what do you think about that?
So I am a preparation person, right?
Fail to prepare, prepare to fail.
And so I always think it's a good idea.
If stuff really goes down, guns and ammunition are always going to have value in a trading scenario, having seeds and the ability to grow your own food.
Access to water is something that's going to be, I think, important in our lifetimes.
You have a lot of wealthy people who are investing in land rights that have water rights underneath them.
That's always a head-scratcher.
So I would be thinking about that.
But again, I think that's the contingency plan.
I don't think it's the main plan.
And so it's something that...
Is prudent to do and to be thinking through and to have that in case of emergency, but you don't want to live your life as an emergency, I guess, is the best way to say it.
And then there's also alternative assets.
I know a lot of people are into commodities, crypto, all these kinds of things.
And again, talk to your financial advisor.
I feel like alternatives are an important part of a diversified portfolio and diversification is important because if one thing goes south, you haven't sort of killed the whole portfolio.
But you have to treat them as alternatives because that's just the risk level that you're taking on.
And obviously the amount of alternatives depends on your own risk profile and age and all those other factors.
If you were in government and you had all the power in the world, what would you do to save us from the worst?
What are the actionable steps that smart politicians, and I use that in quotation marks, would have to enact in order for us to be saved from the worst scenarios?
All right. Well, this is big fantasy time because I'm not a narcissistic sociopath.
Therefore, I do not qualify.
This is just obviously just a pure fantasy.
I love your honesty, by the way.
I just got to say the fact that they are narcissistic sociopaths.
I mean, given the way, given what it takes to run and what people, what the media puts you through, like if you couldn't be a normal person and want to live your life that way.
So as I said, I don't qualify.
But if I did, first thing I would do is I would rein in the Federal Reserve.
I think that the idea of...
That this semi-quasi-independent body that gets its mandate from Congress, but is sort of owned by these private banks, but then gets its profits back to the Treasury cluster to manage the monetary policy of this huge, huge country that has 21 trillion plus in GDP, whatever it is, post-COVID. Is insane.
I think I would take back those powers.
I would, you know, limit it, go back to something like a Milton Friedman suggestion where the money supply, you know, increases in some sort of a formula related to increase of GDP or productivity because obviously that's what money is meant to represent.
You increase it when productivity increases.
You don't want to keep devaluing it.
Although, given the amount of money we have, you wouldn't have to increase the money supply ever, so I don't even know why we need the Fed.
But taking back those powers, and then that goes hand in hand with basically burning down the federal government and returning most of the powers to the states, and getting back to what it is that the government should be doing, which is the I would spend more time empowering people.
All of the programs.
I mean, Social Security could be restructured to like a Providence Fund, kind of like they do in Singapore, where it's either compulsory or you opt out of it, but at least you own the money and you can invest it in a way that you see fit.
So even if the government feels like you need to force people to save for the future, you can still do it in a way where you actually own something and you're getting a return.
Rather than giving it to the government who uses it in a Ponzi scheme mechanism, which, by the way, is actually really what happens.
This isn't just talking points, and I don't want anyone coming back on me on that one, because that's literally what it is.
A Ponzi scheme, a big-time Ponzi scheme, which never works out.
No, by definition.
Scheme, yeah. So, I mean, I'm sure there was a lot of...
We didn't just get here overnight.
There was a lot of historical mistakes that were made in government bad policy.
What were the historical mistakes, I mean, literally starting from the inception of this country that you think have led us to this juncture where we're even having these conversations?
Okay, so just to be fair, I'm not a historian.
I am a... I'm a common sense money person, and even there, I'm more of a layperson, like the people's economist.
I'm not like, oh, let me tell you what Ludwig van Wiesel said on the face, that kind of thing, although I have studied all of them.
I think, obviously, the creation of the Federal Reserve was a mistake, but it really kind of went off the rails in a couple different points in time.
Greenspan opened the door.
When we had that big crash back in the late 80s and said, we're going to be here to support the markets.
That was kind of the first time the Fed like overstepped its bounds.
And then during the Great Recession Financial Crisis, Bernanke and Yellen just like And they're the ones that created this long-term zero interest rate policy and the huge support, although the amount that we've done in recent times pales into comparison to what they started, but they opened that door.
So from a sound money standpoint, that's one piece.
It also ties into going off the gold standard, which the speculation is that we were cheating.
We didn't actually have all of the gold to back us up, and France called our BS. And so that was kind of the way to get out of this scenario that we really weren't backing the money.
I also think our interactions with China, and I dedicate a whole chapter of this in my book Because I think it's so incredible.
And it's probably the area as a free market capitalist that I've come around the most on, like the place where I've really shifted my views.
You know, I used to say, oh, free markets, and we should be able to trade.
But the reality is, as I spent time as a student of this You can't have capitalism with a partner who's not capitalist.
You can't have a communist partner and somebody who doesn't believe in individual rights, and particularly property rights, and expect that you're going to get the benefits of this.
And so our relationship with China exported capitalism to them in a way that really benefited China and it imported central planning to us in a way that really screwed us over.
And we're the ones that made them a superpower.
I mean, we walked them into the World Trade Organization and we normalized trade relations with them.
And, you know, we created this opportunity, which, again, lifted, you know, A billion people-ish out of poverty in a very short period of time, extreme poverty even.
But it really didn't create a good and fair playing field, one where we've benefited.
And I think it's going to have major implications, you know, in terms of, you know, not only what happens in the future of this country, but in the rest of the world.
So those are some of the key things that have gone awry.
And then obviously just the explosion in government spending.
I mean, if you go back to like the time when Clinton was Before COVID, since COVID has gone up the rails, but before COVID, we grew the spending 140% at a time when the population only increased 15% over the same period.
So there's literally no justification.
It's just this huge growth of what the central federal government did in terms of spending a purview.
And then now since COVID, I mean, that's just been obliterated.
You mentioned going off the gold standard and opening the doors to China.
That was done by Nixon, both of those things, right?
So, Nixon was going off the gold standard, yes.
And the normalization of trade relations, Nixon kind of opened the door, I think, to those discussions.
But really, it was kind of a slow build.
And then the one who really sealed the fate was Clinton, actually.
Bill Clinton, wow. So it started, it was like kind of in that period of time.
So this is not a partisan thing.
Like everybody who's in big government has played a role in where we are today.
And obviously they have sort of different minds and the parties look very different today than they did even 20 or 30 years ago.
But, you know, big governments at the end of the day, you know, one party is super honest about the fact that, like, we're going in and we're going to try and make it more central.
The other one lies until they get in power and then they spend.
So, you know, I don't know.
They both suck. It sounds like limiting the powers of the federal government and letting the states almost be their own republics in a way, like, might be a positive step forward.
It's huge. I mean, think about how stupid the whole thing is.
So we pay taxes to the federal government, who then has, like, you know, their own game show, and then decides how much they're giving back to each state and each of these programs, like, for the benefit...
I could just give it to my state without the middleman, without the dance, and then I don't have to worry about who the hell is getting elected to Senate in Georgia, which shouldn't concern me anyway.
So going back to the original structure, to this constitutional republic, I think is the direction I'd like to see, you know, it go and really how we were formed.
And we're the only country in the world that was founded on this principle.
And it just pisses me off so much that there's all of these examples of what they're trying to create elsewhere.
So it's like, if you like these other examples, there's so many, like, don't screw up the one unique example in the world.
Just let us have it.
That's the hard part.
That's the hard part. Yeah, I was talking to some people about, like, for example, Nevada apparently has really, like, a lot of gold reserves.
But nonetheless, the government, you know, federal government keeps getting involved.
And so the conversation seems to be going towards the states, you know, seizing a lot more control in all of this.
And whatever shakes up over the next few years, a lot of people seem to want that outcome.
Which brings me to this cool little thing.
Let me show you this. So this over here, do you see that?
Yeah, what is that? So basically, some of the folks I was hanging out with yesterday are really fearful that the dollar...
Oh, did I have it upside down?
I guess it's supposed to be like this, right?
It's an actual gold note.
So some folks that are really worried that the dollar is going to be devalued and we're looking at $100 for a loaf of bread have started totally legally, by the way.
This isn't like, you know, some kind of counterfeit thing or conflicting with the idea of dollars, but this is actually gold plated.
So this is a gold dollar that they've...
Merged together with some kind of plastic thing.
It's got its own patent pending.
And the idea is that, you know, this currency will hold its value.
And should things go bad, you could actually use this to buy a loaf of bread for a dollar, you know?
If the bread is a dollar.
The bread's probably going to be $300.
So you're going to carry your stack of notes this big to go buy your bread.
Yeah, yeah. I think that the gist of this though is that since it's gold, it won't like, or it's like, what is it?
One, one thousandth of 24 gold, 24 karat gold, it would actually hold its value in those times.
You know what holds its value in those times, Ben?
Guns, bullets. Water.
Guns, bullets, seeds of water.
Yeah, yeah, totally. I love the way you think.
It's just, you know, it's very pragmatic, you know?
And it's honest. It's honest in this day and age.
Last question. Let's talk about free crack pipes.
Yes, amazing. What's going on there?
It's going fantastic.
It's come full circle that the war on drugs is going so well that now they're going to use federal funds to give out free crack pipes.
I feel like that's an excellent use of our tax dollars.
Dana Lash, who's a good friend of mine and is absolutely hilarious, was like, okay, so let me get this straight.
If you give a crack pipe to somebody else, it's illegal, but the government can take your money and give it to somebody, and it's totally legal.
I just think the whole thing doesn't make any sense.
Hilarious for the very...
There's satirical reasons coming out of the Biden administration, given the fact that he was the one who put in place all these very harsh penalties for drugs, and the fact that his son is a known addict.
It's almost too satirical to even make fun of at this point in time.
I mean, what is the logic there?
I don't understand. It doesn't make sense.
Is it really $30 million worth of crack pipes that they want to give out?
That's the reports that I've seen, which means if they're reporting that it's probably more than that, right?
They always cut the numbers.
The idea, I think, did you ever see The Wire?
Yeah. Great show.
Do you remember Amsterdam?
Season two, yeah. Amsterdam is this part of the city where they're like, you know, it's easier for us to control the drugs if we just say, here's the zone where you can freely trade it.
We're going to give you clean needles so that you're not using dirty needles.
And we're going to say, this isn't a good thing, but we're going to try to at least control it and put some parameters around it.
And I kind of think that's the intention.
I think the intention is like an Amsterdam thing.
Like, oh, well, they're using...
And again, this is not my area of expertise.
Crack is... I don't even drink alcohol.
This is not my area of expertise.
But I think the idea is if, you know, from doing drugs, these people are experiencing and getting all these other illnesses, which are then putting them in hospitals and creating more dollars, that like maybe this is, but again, this is the way government solved problems, instead of being like, okay, well, like, how do we address the root of the addiction problems and create, you know, like longer lasting solutions?
So I do, I do, with all the jokes aside, my guess is that it came from this like Amsterdam, like good place, like let's try to, you know, at least stem part of the problem.
But, you know, it's, again, a little bit far.
It's a parody. Carol, thank you so much.
This has been awesome.
It's always a great conversation with you.
And yeah, I look forward to, you know, hopefully speaking in the future and maybe we could create some awesome TV shows.
That's what I'm counting on.
As everybody knows, everyone I talk to, I really want to be a game show host.
That's all I want at this point.
That's the one thing I haven't done that I really want to do.
We've got to get cracking on that.
Thank you for being on Blood Money.
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